How Can BPM Transform the Utility Industry

Every year senior management, and especially CEO’s, are faced with the daunting dilemma, “How do I cut costs, increase profits, and keep my customers & stakeholders delighted while simultaneously satisfying the need and pressures to go green?”

This article will discuss some of the unique challenges Utility companies face and consider how BPM (Business Process Management) and EA (Enterprise Architecture) can not only enable but dramatically transform the industry…

Utility Industry Challenges
Below are some of the more pressing challenges facing the industry today:

  • Aging workforce
  • Legacy IT systems
  • Poorly performing business processes
  • Unions

Aging Workforce
Once an individual has been employed by an organization for most, if not all, of their working life the loss of that person to retirement is widely felt. The knowledge and experience such an individual possesses is extremely hard to replace, especially in the short term.

Imagine the negative impact on a Utility company upon losing 10 – 20 such individuals per year for the next 10 years – frightening!

Legacy IT Systems
Legacy IT systems are on their last legs. Aging technology is hard to maintain – both from a human capital as well as a hardware perspective. These old systems typically filled a divisional / departmental need – such as: The Finance or HR system. Legacy systems certainly did not span the organization, handling a process from end-to-end.

An example of an end-to-end process is Order to Cash. The software handles the entire lifecycle of an order – from the taking of the order, to the delivery of the product, to the billing of the customer. Legacy systems typically do not do this, and hence tend to be more headache than asset.

Also, with continuing deregulation, Utility companies need updated systems in order to comply.

Poorly Performing Business Processes
It is common amongst all organizations (yes Utility companies are in good company here) to have business processes that focus on a particular business function within an enterprise – also known as a functional silo.

Hence we have many business processes that run well on their own, but looking at the business as a whole and how it flows is nigh on impossible. And only a few ‘heroes’ are able to work miracles and keep dysfunctional processes & IT systems ticking over.

A good way to discern the maturity of a company’s process maturity is by calling that company and asking a question about something. Typically if you get passed from one person to the next (and sometimes after a few hand-offs end up with original person you started off with) then you know everyone is looking at the issue only from their functional silo perspective.

Unions
It is not the purpose of this article to discuss the pros and cons on Unions. But one huge differentiating factor between consulting to a typical Fortune 500 company versus a utility company with a strong Union presence is that few utility companies have the will (or power) to reduce their workforce. And as a result end up with employees underutilized and frequently leaving them feeling frustrated and unfulfilled.

 

Focus Areas
In light of the above challenges, it is clear that Utility companies should be focused on improving:

  • Staff productivity and retaining business knowledge
  • Business process effectiveness
  • IT systems

How Can BPM Help?
BPM (Business Process Management) is a global phenomenon enabling 21st century organizations to transform the way they conduct their business operations by eliminating waste, improving profitability, focusing on core competencies, thus ensuring customers continue to return thereby enthralling stakeholders.

Let’s consider how BPM can enable the Utility Industry by returning to the three focus areas mentioned above:
Improving Staff Productivity and Retaining Business Knowledge
A key activity in preventing loss of business knowledge to the retiring workforce is to create graphical ‘pictures’ of what they know and do. This is called business process modeling. With the use of a modeling platform, such as ARIS, experts are able to facilitate this knowledge transfer from brain to machine in special workshops. The process is quick and reliable. The information is presented in the form of an internationally accepted standard, thereby allowing other workers to easily, repeatedly and exactly duplicate what an outgoing individual used to perform.

For those Utility companies that have a powerful Union presence and are unable to let unproductive human resources go, an effective strategy is to identify core business processes (more about this later in the article), how these are performing and to reallocate these resources to those processes that need attention. This will ensure that customer satisfaction will amplify due to improved business process performance, response times and quality of work, without the need to increase cost of services.

Business Process Effectiveness
For over 100 years companies strived to adopt the principles laid out at the advent of the industrial revolution – the division of labor. Jobs were created where simple and repeatable tasks were focused on. It was believed that this would improve productivity, and would enable organizations to profit despite using an unskilled and uneducated workforce.

Today however the picture is dramatically different. Workers are highly educated. Information technology is incredibly advanced. Customers are fickle and empowered – if they do not receive a certain standard of service and treatment – they will leave in droves to the competition.

If a Utility company thinks for one moment that their dysfunctional and disjointed processes will serve them well into the 21st century, they are in for a rude awakening.

Today processes have to be highly efficient. They need to implement the strategy as defined by their senior management. They need to span the lifecycle of a business process, and not cut it into small redundant chunks thereby losing total visibility and control. Such processes need to be modeled, implemented, measured and managed. Knowledge workers need to be empowered to deal with customers so as to ensure satisfactory outcomes, and management need to realize that incentives result only if processes perform according to their pre-agreed upon performance criteria.

All of these goals are met by defining an integrated business architecture consisting of core, management and supporting end-to-end process chains which are broken down into sophisticated and integrated business models. These models define who does what, when, where, using which data, systems products and services thus describing exactly how the process performs.

With these well articulated process models, it is now possible to measure how well the company performs and when and where necessary, proactively make changes so as to further increase the organizations performance and profitability thereby making it more agile.

IT Systems
An IT system is purchased and used so as to enable a business process, which in turn is performed to meet a strategic objective. In today’s age, an IT system should never be a standalone entity enabling some isolated process. Typically ERP systems are used so as to capitalize on enterprise wide processes and an integrated database using a common database and development language/s.

Using Enterprise Architecture principles, an organization needs to evaluate its IT system offerings and define an exit strategy for poorly performing or redundant systems. A road map needs to be put in place to show where the organization stands today in relation to its IT systems inventory and where it needs to go so as to meet the organizations long term objectives, including any strategic objectives to deregulate.

Similarly the Business Architecture needs to produce a road map to define how it will move from a functional silo perspective to an end-to-end integrated picture. The IT road map will use this plan as an input so as to ensure they meet the long term business architecture objectives.

Using an integrated Enterprise Architecture platform (like ARIS), IT architects build out not only the Application Architecture, but also the Data/Information Architecture as well as the Infrastructure Architecture.

With all this information housed within the repository, architects will be able to effectively manage not only the utility company’s IT systems, but also their data, technical infrastructure – further enabling the strategic and effective transition to Smart Grids and use of social media & mobile apps.

Conclusion
It is our experience at Confiance that by adopting Business Process Management and Enterprise Architecture principles, Utility companies will greatly benefit. Today the focus must be on the customer. In order to survive the future an organization needs to be able to evolve into an agile entity, to move from an introspective organization into one that is able to meet its challenges. Using BPM and EA are the two principle mechanisms to do so.