How Energy & Utilities Must Adopt Intelligence Best Practices to Compete Against Disruptive Developments
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How Energy & Utilities Must Adopt Intelligence Best Practices to Compete Against Disruptive Developments. This episode of the IntelCollab webinar series aired on May 25, 2016.
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How Energy & Utilities Must Adopt Intelligence Best Practices to Compete Against Disruptive Developments
- 1. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by How Energy & Utilities Must Adopt Intelligence Best Practices to Compete Against Disruptive Developments A Complimentary Webinar from Aurora WDC 12:00 Noon Eastern /// Wednesday 25 May 2016 ~ featuring ~ Kathryn Valdez Dr. Craig Fleisher
- 2. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by Kathryn Valdez Kathryn Valdez serves as an advisor to clients in the Energy & Utilities sector. She is also the Principal and Founder of Mapleton & Sloan, LLC an energy consulting company focused on energy issues for the electric and gas sectors. She has a wide range of experience in environmental policy, strategy development and implementation, energy technology strategy, fuel supply management and logistics, and strategic intelligence gathering and assessment. Previously Kathryn spent 11 years with Xcel Energy in various leadership positions including managing corporate strategy development, expert witness for numerous regulatory filings, developer of innovative clean energy programs, and lead strategic planner for compliance with new environmental regulations. Email: Kvaldez@mapletonsloan.com The Intelligence Collaborative is the online learning and networking community powered by Aurora WDC, our clients, partners and other friends and dedicated to exploring how to apply intelligence methods to solve real- world business problems. Apply for a free 30-day trial membership at http://IntelCollab.com or learn more about Aurora at http://AuroraWDC.com – see you next time!
- 3. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by α Use the Questions pane on your GoToWebinar control panel and all questions will be answered in the second half of the hour. α You are welcome to tweet any comments on Twitter where we are monitoring the hashtag #IntelCollab or eavesdrop via http://tweetchat.com/room/IntelCollab α Slides will be available after the webinar for embedding and sharing via http://slideshare.net/IntelCollab α To view the recording and download the PPT file, please register for a trial membership at http://IntelCollab.com. Questions, Commentary & Content
- 4. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by Today’s Discussion Part 1 Not your Dad’s utility business. The need for strategic intelligence Accelerated energy sector evolution Part 2 Formation of a strategic intelligence function Intelligence methods and tools including assumption development and business model analysis Requirements for future success for energy utilities
- 5. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by Electric Utility Sector Performance A happy alternative in a low interest rate environment Steady stock price appreciation over the last decade Disruption may not be evident in this trend Source: Fidelity Investments S&P 500 Index of Electric Utility Stocks
- 6. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by Not your Dad’s Utility 0 5000 10000 15000 20000 25000 2010 2011 2012 2013 2014 2015 Electric Consumption by Type (Trillion Btus) – EIA data 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Fossil Fuels Nuclear Renewable Less Hydro 55% increase 6% decrease
- 7. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by Business Evolution Acceleration Technology, customer preferences, and price are threatening certainty of the electric utility business model Electric utilities facing new competition and its not just solar Several years of discussion of the “utility death spiral”
- 8. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by Wanted: Strategic Intelligence Sales Price Price 180.00 190.00 200.00 210.00 220.00 230.00 240.00 7.00 8.00 9.00 10.00 11.00 12.00 13.00 14.00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Cents per KWh CPI-U ElectricityPrice(allcustomerclasses) CPI-U
- 9. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by Strategic Intelligence Function Necessity How do you keep executives informed of the important business developments and why they matter when so much is changing? How do you answer questions from your executives? Who do they always ask for those answers? How do you provide better answers and make answering these questions more efficient, collaborative, creative and complete? Answer: Implement a thoughtful strategic intelligence process
- 10. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by Finalized Strategic Assumptions Began with 46+ “beliefs” Narrowed down to ~20 tied to four 5-year corporate Initiatives Executive team selected 4 assumptions linked to corporate initiatives and 2 underlying assumptions
- 11. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by Strategic Assumption Qualifications Are: Tied to 5-10 year corporate strategy and goals Include beliefs about customer preferences Include beliefs about regulatory landscape Include technology performance and cost expectations Primarily externally focused Measureable Are Not: Interest rate assumptions Sales forecasts Weather trends Based upon company initiatives around culture Open ended or without a time horizon Too obvious
- 12. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by Collaborative Subject Matter Experts SME networks established for each assumption SME networks included the known company “go-to” people and additional nominated members that are up and comers/high potentials Each of the six assumptions was given a project plan for validation and a desired frequency of revalidation
- 13. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by Challenges of Assumption Proving Specific definitions within the assumptions: What measurements to use to assess impacts of changes? Timeline for which assumption is expected to hold true Key Intelligence Topic and Question development: balancing the importance of thoroughness with analysis that is “good enough” No burdens. Only engaging and valuable work allowed.
- 14. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by Business Model Analysis and Regulatory Intelligence Utility business models generally very transparent, just read their regulatory filings! New entrants in regulated footprints causing discomfort Tweaks to regulatory compacts are small, but compounding Professional services firms can help understanding competitor developments through business model analysis and primary research
- 15. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by German Perspective 2011 to Today: Regulatory Intelligence American disbelief as Germany transformed its energy mix, reducing imported fossil fuels/ nuclear and increasing renewable generation German utilities misread the regulatory landscape; lost tremendous market cap Today, general public acceptance and feeling that “at least the money is going to the farmers” New Wind Turbines near Frankfurt, Germany
- 16. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by Electric Utilities Critical Role to Continue Disruption is not providing something that will replace electricity it is replacing how the power is made and who the customer pays for it Key intelligence areas for utilities to focus on today are in the Business Model and Regulatory Intelligence areas Technology evaluation is important, but competitive success will require more A thoughtful process around intelligence will position a company to act more quickly than their peers Don’t forget to look internationally
- 17. The Intelligence Collaborative http://IntelCollab.com #IntelCollab Powered by Thank you! Now how about a little Q&A? Email: Kvaldez@mapletonsloan.com The Intelligence Collaborative is the online learning and networking community powered by Aurora WDC, our clients, partners and other friends and dedicated to exploring how to apply intelligence methods to solve real- world business problems. Apply for a free 30-day trial membership at http://IntelCollab.com or learn more about Aurora at http://AuroraWDC.com – see you next time!
Notas do Editor
- A little on how I came to work with Aurora… Utility sector ripe for help with competitive intelligence as business models and monopoly utility status is evolving.
- Utility employees comfortable with their regulated monopoly status Competition from solar, other DG, wind, energy storage and all of those with challenges or benefits of low natural gas prices
- Sales are not increasing, utilities used to plan for a steady 3-4% annual sales increase and a predictable investment program. Prices have not risen much in the last decade, but investment was also down and now new investment and price increases are likely. Even the modest price increase that occurred has been hard for utilities to sell to regulators
- What is strategic intelligence for a large, vertically integrated company? An electric and gas utility is made up of at least six businesses that could stand alone and often do No consistent answer which meant everything or nothing was strategic info particularly for an electric and gas utility composed of what could be six standalone businesses Set up an inbox for employees to share their insights and info… too broad! Favorable reaction when the functions purpose was discussed, but fear that it was more work Needed to narrow the scope
- List began with +46 beliefs about the business List shared and discussed with company leaders at the Director and VP level; comments and reactions refined the list Still too broad… Connected the list to the companies four growth/change focus areas Settled on ~4 assumptions in each area for Executive discussion
- Utilities often not that good at understanding their customers, they didn’t really have to “win” them in the first place, so focusing on that is useful
- Not an effort to satisfy executive intellectual curiosity
- NRG- Their news headlines highlight distributed generation, but their assets are mainly central station older fossil plants Sonnen- Their battery technology is going head to head with Tesla, their plan include challenging the regulatory construct SunEdison- Recently declared bankruptcy, but rapid expansion in solar put them in the solar development drivers seat
- Technology evaluation is important, and growing for US utilities through investment funds and demonstration projects, but competitive success will require more than