Can an Old Dog Learn New Tricks? by Drew Webster, Purina
Twenty years ago, the electric utility business in many states made a historic transition. Huge swaths of the industry went from a business and regulatory model that had been in place for the better part of a century to an entirely new model. This model was one that was no longer vertically-integrated. Many utilities did not own generation. They had to accommodate competitive retail electricity suppliers.
Utilities across the nation made the transition, proving wrong the old adage “that old dogs can’t learn new tricks.” Utilities adapted. They and their shareholders have thrived.
The utility industry is facing similarly historic shifts today. Distributed and renewable resources are playing an ever greater role on both sides of the meter. Customers’ expectations are rising. New technologies such as smart meters, grid automation, and data analytics are fundamentally reshaping utility infrastructure. Utilities and regulators are debating new rate and pricing designs to fairly refl ect the value of service on a changing grid.
And all the while, investors are looking for earnings growth and stability. These changes present utility executives with challenges equal to any they have faced in the past. Not only do they have to learn new tricks, they are competing with “younger dogs,” who are unencumbered by regulatory obligations, legacy assets and ensconced management practices based on past performance.
So what should they do? As they prepare for the transition to the “utility of the future,” executives would do well to carefully consider how to go about getting their organizations to learn these new tricks. New technologies. Operating paradigms and practices. Process designs, etc. And they would do well to remember the lessons of top dog trainers. Lessons that share a lot of common ground with the best management models.
Leading the Pack
Effective leadership is essential to a successful transition to the utility of the future. And people (like dogs) are pack animals. They respond to strong leadership. Strong leadership means setting clear goals and delegating effectively. The “trick” is to focus on key positions and functions. Regulatory and government affairs are essential for building upon incumbency. Finance helps ensure that spending is appropriate and justified.
A strong IT chief is needed to harness the capabilities of the smart grid and data collection. Superior customer and operations leaders are, of course, critical to strengthening customer engagement. And ensuring that energy delivery remains highly reliable.
Among the top rules of fi rst rate dog trainers are consistency and rewards. People also respond positively to rewards.
The “treats” are different. But the motivations are the same. People want praise. Th ey respond to reinforcement, whether it is public recognition, a raise, or a more prestigious position. But the key is consistency. That means sending clear signals and communicating with well- defined goals and expectations.
The leader’s responsibility also extends to knowing which tricks are teachable. Th e head of a utility in transition must have a realistic view of the possible.
The leader must know the difference between “trying to make elephants fly” and “teaching dogs new tricks.”
Adopting Breeds to Meet Your Needs
Where internal development within the current organization is not achievable, the leader should consider acquiring the needed talent. Th e leader must also bear in mind that a new type of hire might be needed to implement new initiatives.
Many companies have successfully gone this route. Th ey create a separate incubator group to nurture diff erent capabilities. And to develop a business model to participate in new opportunities.
But it is important that the new group gets a fresh start. Often, the best way to do that is to create a truly separate group.
They must create a group that is located in a separate building, possibly away from corporate headquarters. They must bring in new talent to create a new culture. This culture must not depend on existing staff . Nor on existing business practices, compensation models, budgeting and approval processes, cost structure.
Being Judicious with New Toys
Everyone likes a new toy. But too much, or too many, of a good thing can be overwhelming for a canine, as much as for a utility.
Bear in mind that collecting too many “toys,” such as the latest technologies, can be overwhelming. That can lead to a lack of discipline, focus, and process eff ectiveness. Any trainer will tell you this is counter-productive.
Training Before Going Off-leash
Dogs like to run loose. But without proper training, the results can be disastrous. Likewise, utilities need to fully develop ideas and projects before launching them. Recent history is littered with utilities’ failed unregulated businesses. New customer information systems unable to generate bills. IT and generating plant project cost overruns.
These experiences highlight the need for improved risk evaluation, project planning, project management and pre-rollout testing. Utilities should carefully evaluate new technologies. And balance their desire to move quickly, with the possibility of being a fast follower rather than a buggy beta site.
Sometimes it is better to take the time to train the dog in the yard before letting it wander freely. Old dogs can learn new tricks. An incumbent utility can become the utility of the future. Th e old dogs learned new tricks in the past. With proper training, they can do it again.
This article was published in Public Utilities Fortnightly, September 2016. Copyright PUR Inc. (www.fortnightly.com). Used by permission of the publisher.