Achieving Excellence in Energy Networks

Achieving Excellence in Energy Networks

          
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Achieving Excellence in Energy Networks

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  • A Holistic Approach to Achieving Excellence in Network Operations

    On the basis of its experience and research, BCG has developed a holistic approach to implementing an operational-excellence program that is robust across geographic regions.

    Energy Network Optimization: Achieving Cost Efficiency and Quality Improvement. Network companies normally struggle to address the tradeoffs between operating expenditure and capex and quality. For example, if a company increases network automation, thus incurring additional capex, operating expenditure is expected to decrease as a consequence of the diminished need for field services. But a sustained reduction in capex will translate into an increased need for preventive and corrective maintenance (higher operating expenditure). At the same time, either of the two previously mentioned strategies will have an impact on quality as measured on the basis of the average outage duration per customer and the number of interruptions per customer. As a result, focus on one of the levers is usually achieved at the expense of the other.

    BCG has determined that it is possible to establish a complete operational-excellence program that addresses both cost efficiency and quality improvement and is consistent with a standard set of processes worldwide. (See Exhibit 4.)

    exhibit

    Process-Based Approach: The Preferred Solution. BCG has found that a standardized process-based approach is superior to a function-based approach for assessing operational excellence. (See Exhibit 5.) While functions and organizations are highly influenced by the local, regional, and country market environment, processes involved in energy network companies are standardized on a worldwide scale. Thus, this approach allows network operators to perform a systematic review of standard processes that can be compared with a possible target model.

    exhibit

    In-Depth Data Analysis: Assessing the Current Situation and Identifying the Areas with the Greatest Potential for Improvement. Combined quantitative and qualitative benchmarking is necessary to obtain a quick assessment of a utility’s situation relative to operational excellence. BCG has developed a step-by-step methodology for analyzing and benchmarking key processes. This methodology allows for the determination of the current status, as well as opportunities for improvement, through a combination of a qualitative and a quantitative benchmarking analysis of critical KPIs.

    Best Practices Across Key Processes. By applying industry best practices to the redesign of critical processes, network operators can boost their operational excellence. Some operating conditions may vary across countries and regions, but a number of solutions can be applied to network operations everywhere.

    Most traditional approaches focus on a very specific cost-reduction program such as optimizing the field force to reduce spending. However, succeeding in the new environment and taking advantage of all potential opportunities require tapping into the key levers throughout the workflow process. BCG’s repository of best practices includes a toolbox for identifying the best solution for the specific improvement opportunity.

    Client Engagement and Stakeholder Impact: Key to Implementation Success and Enduring Results. Changes in processes mean that there will be both internal and external impacts. In order to ensure a successful implementation, companies need to address how these changes affect different stakeholders and respond with the necessary measures.

    For instance, BCG experience shows that a successful procurement strategy leverages the strength of the relationship with providers into a distinct competitive advantage. Additionally, client enablement is critical for achieving sustainable savings. Training should be initiated to ensure that workers understand and are able to execute the defined changes.


    Energy network operators everywhere are realizing that traditional approaches to achieving cost reductions are falling short. In particular, there is increasing regulatory pressure to improve efficiency with respect to operating expenditure and capex, as well as effectiveness in terms of quality. Succeeding in today’s challenging environment requires companies to develop an operational-excellence program that simultaneously tackles efficiency and effectiveness by focusing comprehensively across all critical processes.

    In our experience, many network operators have executed well on some of the levers discussed. However, few have developed a comprehensive program that lets them excel in all the parameters. BCG’s holistic approach provides a proven path for regulated energy companies to gain sustainable competitive advantage, become best-in-class networks, and reduce operations expenditure by as much as 15 percent. Key steps along this path include focusing on the end-to-end process rather than narrow functions to identify the levers needed to create efficient operations, leveraging data to gain visibility and qualitative and quantitative benchmarks against best practice, and engaging the entire workforce in achieving effective implementation and sustainable operational excellence.

    Achieving operational excellence is not easy, and it takes time. But when companies make it work, they create a virtuous circle: excelling operations enable companies to reduce costs and increase service quality significantly. This translates into outperforming peers and the expectations of regulators, leading to an increase in regulated revenues. The end result is that all stakeholders benefit: shareholders are happier and more committed, and customers and employees are satisfied.