Capabilities-driven strategy: Redefining utility leadership for a new environment

Published: February 16, 2009

Executive summary

The energy debate — over issues from climate change to energy sustainability to new generation to smart grid — will change how people think of energy and of the role of the utility as a provider. Regulators and consumers are spurring demands for new investments; significant choices must be made, many of which ultimately will erode shareholder value. While instinct is leading some industry participants down the same worn-out path to temporary cutbacks, a new crop of “architect CEOs” are recognizing the need to realign their companies’ capabilities and performance models with this emerging market, to both meet these new demands and take advantage of emerging market opportunities. These emerging capabilities-driven models seek to optimize overall performance, not necessarily to minimize costs, by building the operating model around those key capabilities most required for strategic success.

Executives at leading utilities are reassessing their competitive strengths, from generation to distribution to marketing to corporate services, and engaging in necessary trade-offs to focus on value-added capabilities and de-emphasize those that are easily commoditized. At the same time, they are addressing underlying strategic and foundational fissures to help ensure that their performance gains last. Removing organizational snags such as unclear decision rights and weak performance management structures is enabling employees in every facet of the business to move quickly and efficiently to support the CEO’s strategic blueprint.

The utility of the future that emerges from this program of step transformation will be leaner, more performance-oriented, technically diverse, and able to drive changes in the market rather than merely reacting to them.

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Capabilities-driven strategy: Redefining utility leadership for a new environment