Business/Technology Partnerships` Success
By C.D. Hobbs
The electric utility industry has been aggressively reshaping its information technology (IT) organizations for some time now. With a global utility client base, Energy Information Strategies (EIS) advisors see IT shops around the world. And, to be honest, most are committed to the same objectives and initiatives: run more like a business or like an internal vendor; get close to the client; abandon the development business and become an effective integrator; and make the client more competitive.
From watching deregulation, privatization or liberalization around the world, it is clear that one of the differentiating core competencies of the future industry leaders will be effectiveness in using technology to reshape the energy business. Look at the Amway/Columbia Energy partnership. A company with strong customer relationship management and a unique market channel teamed with an `ex`-utility, now energy company, experienced in energy sales and service. Considering the difficulty of changing from a product-oriented to a customer-oriented culture, it is difficult to say whether Amway or Columbia Energy is the more brilliant for the partnership. Within EIS, we have maintained for some time that it is more difficult to learn to be customer-centric than it is to learn to market energy.
Among EIS`s published trends and predictions for 1999 is that electronic commerce will redefine energy business processes (2000-04), with aggressive new market entrants (examples include North American Power, Amway, Costco and Shell Oil). These entrants will capitalize on the transactional cost advantage of Web-based technologies to capture energy customers where utilities are not proactive.
In a global review of utility Web sites in late 1998, EIS measured the effective use of the Web by global sector. One of the six criteria used was the availability on the Web site of a truly interactive activity with the energy browser. Only six utility Web sites in the world had this capability in November of last year. As a matter of fact, most of the sites were benign, one-way (the wrong way!) communication with the customer. These were propaganda sites with less than 10 percent offering an opportunity for customers to review their usage or pay their utility bills.
EIS has often been asked whether technology is an enabler or a driver of change in the utility industry. We labored with this question, made presentations on the topic, discussed it with experts, and finally reached a conclusion. Information technology is an enabler–of strategy, of competitive advantage and of market leadership–for industry leaders. But information technology is most definitely a driver for the followers. At the last annual EIS conference, the audience was asked: “When will the following companies or industries (15 or so companies were listed) enter the electric or gas business?” The unanimous answer for Amway, one of the choices, was never. This preceded the Amway/Columbia Energy announcement by three months at most.
So if technology is integral to competitive success, what should the electric industry be doing to integrate technology with the business? There`s no shortage of printed positions on this issue, and they all aim at the same target–the IT organization. IT has to become more client-centric, trim the sails and reduce cost, respond more rapidly to the client, act like an outsourcer, and so forth. Of course, this is true. But, unless you`ve had your head in the sand, you are aware that most energy IT shops have made significant strides toward these goals in the past six or seven years. However, the frustration with IT and technologists remains. Why?
Another EIS prognostication is that success in the newly forming energy utility business segments will be increasingly determined by the business/technology partnership`s success in deploying technology to create and sustain competitive advantage. We believe this partnership is making a difference among the industry leaders, and we observe other utilities struggling with how to make technology a core competence.
What the leaders are doing differently is recognizing that it is not only IT that must change its spots if a strong business/technology partnership is to be effective. I`m not taking IT organizations off the hook, because some have not changed a whit. However, most technologists have been evolving since the early 1990s. On the other hand, there has been little or no change in how the business leaders and operators approach technology.
Let`s segment IT for a moment. Information, the “I”, is not the accountability of the technologist; it is the accountability of the business. Business is to define what information it needs to execute strategy, when it is needed, what its quality must be, how it must be delivered, and so forth. The failure of the business to do so materially depreciates the business/technology partnership and, in a competitive market, puts the business at a competitive disadvantage. Getting the right information will depend on a technologist guessing what that information is by observing the business flounder around looking for it. If what I mean by business isn`t clear, think GENCO, pipes or wires, energy trading or retail energy marketing.
Technology, the “T”, is most definitely the accountability of the technologist. Given a clear statement of the information required, the information technologist is in the position to outline the alternatives for getting the information and the costs of those alternatives, and to implement the solution that provides the best cost-benefit to the business. Sound good? It is good! And when the business/technology partnership is working, watch out. You will see a very aggressive and responsive competitor whether it`s in the energy business or any other industry.
We hold the technologist accountable for rapid application development (RAD) and for minimizing time-to-market. The technologist plays a critical role in delivering both advantages. This role is played out, for the technologist, by designing the applications and technical architecture that forms the IT foundation for doing business. Adaptability and agility in reconfiguring these architectures is crucial to rapid anything–but particularly rapid response to new information requirements of their business clients. But let`s not forget that this begins by a clear request for information required to execute business strategy, and this request will never come from the technologist. Specifying the information requirements to execute strategy lies solely in the province of the business leaders. Developing, or acquiring, this talent among the leaders of the emerging energy business segments will be a critical differentiator of successful CEOs and their energy businesses in the competitive markets of the millennium. n
C.D. Hobbs is META Group Inc.`s Energy Information Strategies (EIS) vice president and director. META Group is an independent market assessment company providing advisory services and research in information technology to more than 1,100 clients in 23 countries. META Group`s Energy practice serves the electric, gas, water and petroleum industries with a focus on business and technology strategy and leveraging technology to meet the challenges of the changing energy markets. Questions or comments may be directed to Mr. Hobbs at (802) 872-7332, (802) 872-7399 fax or firstname.lastname@example.org (email).