Last week the Obama administration made news with their climate change initiatives. The impacts on utilities are clear – as coal-burning power plants produce up to 40% of the CO2 emissions in this country alone – retiring the dirty ones and making new ones comply with sensible emission controls makes lots of sense.
Utility CEOs are currently focused on understanding the impacts of these regulations on their business operations. But as noted in my blog last week, the business models for electric utilities are changing – regardless of what the Environmental Protection Agency (EPA) does about carbon emissions. Disruptions are occurring via Smart Grid technologies; local, state, and federal regulations; and new methods of financing that open up markets to residential and commercial prosumers participation in generation.
Learning to live like a startup business is not just a good intellectual exercise for utility CEOs – it’s a necessity. I covered five valuable pieces of advice last week derived from a veteran of many startups. Here are the remaining five of the ten startup tips for utility CEOs.
6. Ideas are not as valuable as good execution. Digital Equipment Corporation was a leading minicomputer company led by a CEO who firmly believed that the technology would sell itself. Sales and marketing wasn’t really necessary. For a while, it worked that way – until competitors arrived. Digital’s technology sat on the shelf because these competitors executed sales and marketing activities much better, and today the company doesn’t exist. Don’t let your corporate track record blind you to understanding your utilities strengths and weaknesses. Address the weak execution points.
7. Give the dog the food it enjoys. If you assume that customers only want safe, reliable and cheap electricity, you might be wrong. Some of them might want 100% uptime or electricity fully supplied by renewable means. Fewer and fewer of them want electricity coming from sources that pollute our environment. One true thing we know about consumers – they really like to have choices.
8. Assemble a management team that can stomach ups and downs in the business. This is critical, and points to importing talent from outside the electric sector. The utility business has been remarkably staid for the last 25 years. You need executive talent that has experience in adapting to massive, game-changing business transformations.
9. Expect change every two hours. The high you feel now may be dashed in two hours by some unexpected news that has negative impacts to your business. This particular piece of private enterprise advice has to be tempered for investor-owned utilities, where change is paced by regulators. Change may not be as fast for regulated utilities as it is for private enterprise, but then again, competitors operating outside the regulated sector won’t have this constraint. Leverage your utility strengths to overcome the fact that you can’t necessarily pivot like a small startup can.
10. Learn to manage stress. You’re going to lead your organization through significant changes to a business model that accommodates transactive energy, uses Smart Grid technologies that improve your ability to deliver customer satisfaction, and deal with all the stakeholders (regulators, policy-makers and consumer advocates; Wall Street; and your customers). That’s stressful. Make sure you keep business in perspective, and you will if you have a good team, entrust them to make decisions, and have the organization focused on the megatrends.
Like noted last week, failure is an option for utility CEOs that do not prepare and lead their organizations through significant business model transformations. Let’s hope that doesn’t happen, because utilities that end up as roadkill on that transformation highway could be detrimental to many stakeholders.