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
A Complimentary Webinar from Aurora WDC
12:00 Noon Eastern /// Wednesday 25 May 2016
~ featuring ~
Kathryn Valdez Dr. Craig Fleisher
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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
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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!
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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
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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
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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
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6000
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10000
12000
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16000
18000
1965
1966
1967
1968
1969
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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
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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”
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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
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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
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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
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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
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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.
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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
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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
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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
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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 del 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