In organizations that are responsible for delivering utility services, the business side of the equation is often overshadowed by the technical and operational components. The reason is simple: customers notice when the lights go out or water stops flowing, but rarely take the time to question the effectiveness of the business behind the utility. That is, until there is a rate increase or some other event that prompts investigation.
For this reason, many utilities are slow to change and often harbor basic inefficiencies that impede everything from procurement to maintenance to customer service delivery. But in today's increasingly demanding environment, utilities of all types and sizes are recognizing the need to address the less visible business issues that underlie organizational effectiveness before a critical need for action arises.
By partnering with clients, we help them discover and articulate these issues and develop a clear framework for affecting change. Using a wide variety of methods - from strategic planning to leadership development to risk management - we develop solutions to their most difficult business and organizational challenges. By focusing on the sustainability of our work efforts, we impart tangible change in client organizations that permanently improves their business performance.
Delivering Business Side Results
We recently had the opportunity to apply our business insight on an engagement with Colorado Springs Utilities (SU), a multi-service utility in Colorado. SU leadership had determined that their organization must reduce the cost structure over five years to reach its strategic destination. To achieve this, SU looked to implement a Capital and Labor Resource Optimization Program with the stated objective to identify and achieve significant savings in the near term that could be leveraged to reach the five-year goals. R. W. Beck was selected to prepare a Capital Optimization Study that would identify strategies and techniques that could be applied to achieve sustainable savings.
Our study found that truly sustainable savings could only come from implementing improvements to the underlying processes and procedures used in development of their CIP and not from reducing specific project costs, as was generally assumed. So, rather than merely being a cost-cutting exercise, the program focused on a broader, value-maximization strategy. The study provided recommendations for implementing a long-term approach that optimizes the use of capital resources by ensuring that all capital expenditures seek to optimize value for the utility service, for SU as an enterprise, and most importantly for the customers.
The result was a focus on process improvements and finding sustainable, continuous and measurable means to improve optimum deployment of capital resources. However, measuring optimization success proved to be problematic. To overcome this, a definition of optimization was crafted that included three factors that must converge for an effort to be deemed successful:
- Utility Performance and Customer Service
- Process Alignment and Consistency
- Rate Strategy and Strategic Destination
The optimization model developed for SU is based on the convergence of three factors that will help the utility make capital decisions that have lasting value to their organization and their customers.
Using this model, capital decisions could then be made under a consistent framework, with these factors as a filter. Because the framework is based on finding sustainable means for improving processes, it will have a lasting impact on SU and allow the utility to achieve its capital optimization goals long into the future.
In this case, the resulting set of recommendations from our study was focused and powerful. With its new set of business tools, SU has already begun to enhance the value of their capital investments by implementing their CIP in a more streamlined fashion while moving toward their overall goal of optimizing the total capital investment.
If your enterprise is in need of a business assessment or simply seems misaligned with its vision, it may be time to consider the type of solutions-oriented strategic business consulting that we have delivered to numerous utilities across the country.
For more information on this project and other R. W. Beck expertise, please contact:
Contact:
Steve Gates
Senior Vice President
PH 508.935.1884
email
|
