Leadership requires alignment between performance measurement and strategic priorities.
Jim Hendrickson is a partner with Accenture. He leads the Utilities Strategy, Business Transformation, and M&A practice for North America. Andre Begosso is a senior manager in Accenture’s Strategy practice.
What defines high performance in the utilities industry? Who will be the winners? And what factors suggest long-term, sustainable leadership? These are tough questions—the seminal questions of business.
In a stable, relatively homogeneous regulated market, measuring performance leadership is somewhat predictable. In today’s changing market, however, it’s become complex, opaque, and the fodder for endless debate. More important, measuring performance has become as misleading as it is illuminating, typically failing to provide much insight on future performance, long-term potential or looming performance threats. While analysts attempt to sort this out for investors, the question remains: What really matters?
In the end, there is no short and simple answer. However, there are a few themes to keep in mind when evaluating industry performance assessments:
• Market sub-segments exist, and the definition of leadership varies among them;
• A spectrum of measures is better than one measure, providing reinforcing and countervailing indicators;
• Because they best align with your strategy and value-creation model, over-weight measures;
• A future versus historical bias should be maintained, e.g., trend metrics that “suggest” future performance; and
• Metrics should indicate actions—strategic changes and capability gaps to fill.