Navigant Research Blog

Exploiting Continuous Improvement to Achieve Transformation and Efficiency Goals: Part 2

— June 21, 2018

In my last blog, I discussed the forces at play that are fundamentally transforming the utility industry. At the center of this transformation is the shift in the way electricity is generated and distributed, and the evolution of the traditional relationship among stakeholders across the electrical grid, particularly between utilities and their customers.

In this environment, many utilities are adopting programs focused on innovation, understanding that new and bold thinking is required to successfully address these forces of transformation. In a recent survey, the ability to “market new energy and products and services” and to “radically improve ability to innovate” were among the top-ranked capabilities that utilities should develop to meet future challenges.

How Can Utilities Implement Innovation?

However, while many utilities have a familiarity with and muscle memory for Continuous Improvement and the pursuit of incremental quality, fewer are comfortable with the process of rapid innovation. Historically, utilities have not been paid for innovation; the legacy utility business model and regulatory framework has emphasized stability and risk aversion, exemplified by the rate of return financial construct. While the need to deliver safe, reliable, and cost-effective services will always remain at the core of every utility’s responsibility, how those objectives are achieved is undergoing a fundamental evolution that will require innovation in multiple dimensions.

There is much that utilities can learn from companies in the automotive, consumer electronics, publishing, and other sectors when considering how best to successfully adopt innovation practices. The speed of transformation in these and other sectors confirms that innovation efforts must be designed, deployed, and yield real benefits within a new business model. Because adopting an innovation practice is a question of culture change, it is important for utilities to consider the internal resources it has available when seeking to implement an innovation process. And here is the linkage between Continuous Improvement and innovation: Continuous Improvement practitioners can be a driving force for successful adoption of new innovation practices. Here’s how:

(Source: Navigant)

The core tool kit of Continuous Improvement practitioners can be essential to the design, development, and integration of innovation practices into utility operations—and can help those programs yield results.

In my next blog, I will consider how Continuous Improvement in utilities will need to evolve to meet the demands of a rapidly changing sector. Change management, agile, scrum, “outside in,” and other techniques and ways of thinking will be required to ensure success. These and other topics will be considered at the Change Management for Utilities (West) and Process Excellence for Utilities (West) Conferences.

 

Exploiting Continuous Improvement to Achieve Transformation and Efficiency Goals: Part 1

— May 22, 2018

Utilities are facing a complex set of challenges in today’s environment. Aging infrastructure (and the resulting requirement of large-scale capital investment), increasingly stringent regulatory requirements, growing cyber and physical security concerns, and resistance to rate increases are prominent examples of factors that influence utility planning and decision-making.

At the same time, the sector is undergoing a significant and unprecedented transformation, facilitated by the introduction of new and disruptive technologies and the consideration of new and innovative business and revenue models. At the center of this transformation is the fundamental shift in how electricity is generated and distributed, and the evolution of the traditional relationship among stakeholders across the electrical grid, particularly between utilities and their customers. Linear value chains supporting one-way power flow from centralized generation to end customers will give way to a more sustainable, highly digitized, and dynamic energy system. Moving toward a multidirectional network of networks and away from a linear hub-and-spoke model, this system will support two-way energy flows in which customer choice (optionality), clean energy, innovation, and agility command a premium.

Redefining How Utilities Work

Transforming the business to deliver on both objectives is presenting decision makers with a challenge. Importantly, both strategic transformation initiatives and operational efficiency programs necessarily impact and redefine a utility’s “ways of working.” How these dual objectives are achieved is critical, given that a utility’s core services, its stakeholders, business processes, organizational design, workforce and talent management, and other facets of human capital are altered as a result of these efforts.

In this environment, utilities must be able to continuously improve performance, while also identifying and successfully delivering on programs that achieve the desired transformation results across all planning horizons. The discipline of Continuous Improvement will play a significant role in helping utilities to do more with less—and also in helping them transform to address new technologies, regulations, and other disruptive forces. Existing Continuous Improvement teams, methods, and infrastructure can help utilities address key transformation questions, including:

  • Identification: What set of initiatives are required?
  • Prioritization: Which initiatives are most critical?
  • Coordination: What is the proper phasing of our efforts?
  • Integration: How do we integrate the new—and ongoing—initiatives?
  • Change: How do we introduce change techniques across the portfolio of initiatives?

Join Navigant at the Process Excellence and Continuous Improvement for Utilities Conference (West) to learn more. During the conference, we will discuss the role of change management in successfully implementing business process and technology innovations (among other topics). Meanwhile, look for our next blog, in which we will discuss the differences—and linkages—between Innovation and Continuous Improvement.

 

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