Profitability Through Core Competency
The new road map of utility industry deregulation drives tremendous structural changes, creating new opportunities for both operators and their suppliers. On the super highway of new automation technologies many opportunities to buy new products are available to electrical utilities, and for their development and sale by utility market suppliers. During the present period of rapid advancement in our industry that creates diverse product choices, business strategies that match supplier and operator core competencies will lead to optimal product decision-making and profit maximization.
A business strategy defines both the area and means by which a business will compete. For any utility company, its scope of operation is defined by its internal resources and external environment: human resources, capital, market perception, corporate culture, market share and competition. Within all business models, there exists a very simple construct that can provide the basis for product decisions no matter what business strategy is employed: core competency.
Identifying an organization`s core competencies requires some serious thought. Competencies are not always evident and are often buried deep within work processes, technology and people. Sometimes they will spring from a combination of all of these elements. Strengths do not necessarily define a company`s core competencies, as lists of strengths often represent nothing more than the basic model that all competitors must offer in order to get the customer on the road in the first place.
Of course, the identification of a core competency is only the first challenge. Developing it, integrating it with a customer`s present capabilities, and continuously improving it by anticipating industry directions and evolving customer competencies, is the ongoing product development cycle in which we live. An example of how a core competency was identified and used as the basis for an effective business strategy can be found in the automotive industry. Honda realized very early on that its core competency resided not in creating the best body styles or in acclaimed manufacturing, but was powered in its design and production of superior engines. Today Honda engines are applied in a diverse range of products, from racing cars and sport motorcycles to lawnmowers and generators. Honda has identified its core competency and has used it as the basis for a very effective business strategy.
Closer to home many electrical utilities are rewriting their mission statements. Are we a supply company? Do we have a core competency in nuclear generation? Can we produce power more efficiently and cheaper than other energy companies? Some utilities will decide that they are a wires company. They have identified that they have a core competency in managing their distribution networks. Recently, a regional utility decided that its core competency centered in its ability to manage and dispatch field crews. Following its business strategy, it bought companies and created services where good field force management would give it a competitive advantage. By matching its core competency with those of other companies, it can now offer regular services at lower cost, or high-octane services at a premium, depending on diverse customer requirements.
This business practice is important, not only for the utility, but also for its suppliers. Suppliers must understand and promote their core competencies so that they can supply utilities with products that will become integral parts of their daily workflow. Software vendors must be especially careful, as they can easily get run over by “software is software” type thinking. More than ever software vendors need to be intimately aware of utility work processes and multi-divisional requirements. Software development that does not focus on core competencies will stretch many suppliers too thin, reducing the quality of their products and services.
Both vendors and operators should use core competencies as the basis for creating new products and for driving home new corporate directions to employees and customers. As utilities define their core competencies they will adopt business strategies that will ignite software vendors to power-up adaptive solutions. If utilities and their suppliers communicate their distinct competencies and strategies, they can focus their energy and resources towards ensuring a profitable outcome.
Patrick Courtin is President and CEO of M3i Systems, a company specializing in outage management and workforce management systems for utilities. With more than 25 years experience in technology-related companies, he has managed organizations facing changes induced by technology and by deregulation and privatization.