Building on strengths a competitive edge for utility companies

17 February 2020 5 min. read

Utilities around the world are facing unprecedented transformation, both in the core value chain and most supporting functions such as technology, back-office, regulatory management and governance. Ian McRae, a senior advisor at State of Matter, reflects on how utility companies can stay ahead of competition in today’s disruptive environment.

This is certainly true in Australia where utility companies are challenged to bring the organisation’s strengths together to meet strategic objectives in this type of environment. In a recent analysis by Horvath & Partners [a German-origin consulting firm and like State of Matter a member of Cordence Worldwide], the firm’s authors argue that becoming better is all about aligning all the organisation’s strengths.

This approach is an alternative to traditional approaches focusing on areas where the utility may consider itself to be weaker than its peers. The idea that transformation should focus on an organisation’s strengths seems, to us at State of Matter, to be a more attractive alternative.

The execution advantage

Companies that have the power to implement consistently meet their customers’ needs more successfully than the competition – or provide them with what they need at lower cost. In short, they are able to outperform their competitors – or be ‘better’ – in the key elements of their core value proposition to their customers. To be better, an organisation’s strengths must work together, specifically targeting the right strategic objectives. 

Utilities are facing unprecedented transformation

Being better means being ahead of the competition in selected areas – and not just pulling level or even settling for less good performance. There are many areas in which organisations can outperform the market, including quality, trustworthiness, flexibility, service, reliability, professionalism, likeability, and credibility. Given that it is not possible to be ahead of the competition in all competition-relevant areas, the selection of specific areas in which to be better takes on strategic importance, to avoid the risk of companies spreading themselves too thin and having an unclear profile.

Companies that are able to align the interplay of their internal strengths towards achieving specific strategic objectives will outperform their peers. 

Optimising everyday routines

It is important to know that being better is not a quick and easy task. Being better requires everyone in the company to pull together. Where being distinct requires brilliant decisions by motivating visionaries, being better is about many forces working together.

Being able to align the interplay of all internal forces towards achieving specific strategic objectives is the purest embodiment of the power to implement. It crystallizes over the course of infinite individual actions in everyday working life.

Typically, companies become better when many people are involved in the process and when improvements are anchored in daily routines. For this reason, management instruments such as organizational design, strategic objectives, planning, budgeting, reporting, remuneration systems, teambuilding, and communication all support companies in developing their power to implement. 

The power to implement

But how can utility companies systematically become better than their competitors, and stay better than them? Various aspects need to be taken into account when it comes to establishing the power to implement. The linchpin is the strategic target system, because clear objectives and actions mean that the power to implement is directed in a manner that all energies in the company can be focused on.

“Only companies that are continually becoming better can maintain success on the market. Strategies should be steered to improvements.”
– Ian McRae, State of Matter

Two parallel spheres drive the process of becoming better on this basis: configuration and collaboration. Configuration consists of the company’s structural alignment. This includes how the organisational structure is designed, the consistent cascading of objectives and tasks (alignment) and the distribution of resources (planning).

Collaboration, on the other hand, optimises personal behaviour in the company. This includes ensuring that managers act as role models and that employees are willing to approach their work energetically, as well as interaction in the context of analysis and evaluation of results. 

Both spheres play a crucial role with respect to the power to implement. They focus the company’s strengths and avoid companies spreading their abilities too thin. Without the correct configurations in place, roles and responsibilities remain unclear, actions are not coherently coordinated, and resources are incorrectly allocated. But without positive collaboration, becoming better is doomed to failure.

If managers are not united, or if they do not act as effective role models, or if employees are not prepared to contribute to success, or if there is insufficient dialog as to whether and how goals will be achieved, companies cannot be better than the competition.

Only companies that are continually becoming better can maintain success on the market. To prevent this becoming a platitude, strategies must be aimed at ensuring that energy and resources are steered, in every case, to areas in which improvements yield significantly positive effects on the market – even if this requires the company to undergo a fundamental transformation.