Although the most basic operational benefits of an advanced metering infrastructure (AMI) initiative can be achieved by simply implementing standard technological features and revamping existing processes, this approach fails to leverage the full potential of AMI to redefine the customer experience and transform the utility operating model. In addition to the obvious operational benefits – including a significant reduction in field personnel and a decrease in peak load on the system – AMI solutions have the potential to achieve broader strategic, environmental and regulatory benefits by redefining the utility-customer relationship. To capture these broader benefits, however, utilities must view AMI as a transformation initiative, not simply a technology implementation project. Utilities must couple their AMI implementations with a broader operational overhaul and take a structured approach to applying the operating capabilities required to take advantage of AMI’s vast opportunities. One key step in this structured approach to transformation is enterprise-wide business process design.
WHY “AS IS” PROCESSES WON’T WORK FOR AMI
Due to the antiquated and fragmented nature of utility processes and systems, adapting “as is” processes alone will not be sufficient to realize the full range of AMI benefits. Multiple decades of industry consolidation have resulted in utilities with diverse business processes reflecting multiple legacy company operating practices. Associated with these diverse business processes is a redundant set of largely homegrown applications resulting in operational inefficiencies that may impact customer service and reliability, and prevent utilities from adapting to new strategic initiatives (such as AMI) as they emerge.
For example, in the as-is environment, utilities are often slow to react to changes in customer preferences and require multiple functional areas to respond to a simple customer request. A request by a customer to enroll in a new program, for example, will involve at least three organizations within the utility: the call center initially handles the customer request; the field services group manages changing or reprogramming the customer’s meter to support the new program; and the billing group processes the request to ensure that the customer is correctly enrolled in the program and is billed accordingly. In most cases, a simple request like this can result in long delays to the customer due to disjointed processes with multiple hand-off points.
WHY USE AMI AS THE CATALYST FOR OPERATIONAL TRANSFORMATION?
The revolutionary nature of AMI technology and its potential for application to multiple areas of the utility makes an AMI implementation the perfect opportunity to adapt the utility operating structure. To use AMI as a platform for operational transformation, utilities must shift their thought paradigm from functionally based to enterprise-wide, process-centric environments. This approach will ensure that utilities take full advantage of AMI’s technological capabilities without being constrained by existing processes and organizational structures.
If the utility is to offer new programs and services as well as respond to shifting external demands, it must anticipate and respond quickly to changes in behaviors. Rapid information dissemination and quick response to changes in business, environmental and economic situations are essential for utilities that wish to encourage customers to think of energy in a new way and proactively manage their usage through participation in time-of-use and real-time demand response programs. This transition requires that system and organizational hand-offs be integrated to create a seamless and flexible work flow. Without this integration, utilities cannot proactively and quickly adapt processes to satisfy ever-increasing customer expectations. In essence, AMI fails if “smart meters” and “smart systems” are implemented without “smart processes” to support them.
DESIGNING SMART PROCESSES
Designing smart future state business processes to support transformational initiatives such as AMI involves more than just rearranging existing works flows. Instead, a utility must adopt a comprehensive approach to business process design – one that engages stakeholders throughout the organization and that enables them to design processes from the ground up. The utility must also design flexible processes that can adapt to changing customer, technology, business and regulatory expectations while avoiding the pitfalls of the current organization and process structure. As part of a utility’s business process design effort, it must also redefine jobs more broadly, increase training to support those jobs, enable decision making by front-line personnel and redirect rewards systems to focus on processes as well as outcomes. Utilities must also reshape organizational cultures to emphasize teamwork, personnel accountability and the customer’s importance; to redefine roles and responsibilities so that managers oversee processes instead of activities and develop people rather then supervise them; and to realign information system so that they help cross-functional processes work smoothly rather than simply support individual functional areas.
BUSINESS PROCESS DESIGN FRAMEWORK
IBM’s enterprise-wide business process design framework provides a structured approach to the development of the future state processes that support operational transformations and the complexities of AMI initiatives. This framework empowers utilities to apply business process design as the cornerstone of a broader effort to transition to a customer-centric organization capable of engaging external stakeholders. In addition, this framework also supports corporate decision making and continuous improvement by emphasizing real-time metrics and measurement of operational procedures. The framework is made up of the following five phases (Figure 1):
Phase 1 – As-is functional assessment. During this phase, utilities assess their current state processes and supporting organizations and systems. The goal of this phase is to identify gaps, overlaps and conflicts with existing processes and to identify opportunities to leverage the AMI technology. This assessment requires utility stakeholders to dissect existing process throughout the organization and identify instances where the utility is unable to fully meet customer, environmental and regulatory demands. The final step in this phase is to define a set of “future state” goals to guide process development. These goals must address all of the relevant opportunities to both improve existing processes and perform new functions and services.
Phase 2 – Future state process analysis. During this phase, utilities design end-to-end processes that meet the future state goals defined in Phase 1. To complete this effort, utilities must synthesize components from multiple functional areas and think outside the current organizational hierarchy. This phase requires engagement from participants throughout the utility organization, and participants should be encouraged to envision all relevant opportunities for using AMI to improve the utility’s relationship with customers, regulators and the environment. At the conclusion of this phase, all processes should be assessed in terms of their ability to alleviate the current state issues and to meet the future state goals defined in Phase 1.
Phase 3 – Impact identification. During this phase, utilities identify the organizational structure and corporate initiatives necessary to “operationalize” the future state processes. Key questions answered during this phase include how will utilities transition from current to future state? How will each functional area absorb the necessary changes? And what are the new organizations, roles and skills needed? This phase requires the utility to think outside of the current organizational structure to identify the optimal way to support the processes designed in Phase 2. During the impact identification phase of business, it’s crucial that process be positioned as the dominant organizational axis. Because process-organized utilities are not bound to a conventional hierarchy or fixed organizational structure, they can be customer-centric, make flexible use of their resources and respond rapidly to new business situations.
Phase 4 – Socialization. During this phase, utilities focus on obtaining ownership and buy-in from the impacted organizations and broader group of internal and external stakeholders. This phase often involves piloting the new processes and technology in a test environment and reaching out to a small set of customers to solicit feedback. This phase is also marked by the transition of the products from the first three phases of the business process design effort to the teams affected by the new processes – namely the impacted business areas as well as the organizational change management and information technology teams.
Phase 5 – Implementation and measurement. During the final phase of the business process design framework, the utility transitions from planning and design to implementation. The first step of this phase is to define the metrics and key performance indicators (KPIs) that will be used to measure the success of the new processes – necessary if organizations and managers are to be held responsible for the new processes, and for guiding continuous refinement and improvement. After these metrics have been established, the new organizational structure is put in place and the new processes are introduced to this structure.
BENEFITS AND CHALLENGES OF BUSINESS PROCESS DESIGN
The business process design framework outlined above facilitates the permeation of the utility goals and objectives throughout the entire organization. This effort does not succeed, though, without significant participation from internal stakeholders and strong sponsorship from key executives.
The benefits of this approach include the following:
- It facilitates ownership. Because the management team is engaged at the beginning of the AMI transformation, managers are encouraged to own future state processes from initial design through implementation.
- It identifies key issues. A comprehensive business design effort allows for earlier visibility into key integration issues and provides ample time to resolve them prior to rolling out the technologies to the field.
- It promotes additional capabilities. The business process framework enables the utility to develop innovative ways to apply the AMI technology and ensures that future state processes are aligned to business outcomes.
- It puts the focus on customers. A thorough business process effort ensures that the necessary processes and functional groups are put in place to empower and inform the utility customer.
The challenges of this approach include the following:
- It entails a complex transition. The utility must manage the complexities and ambiguities of shifting from functional-based operations to process-based management and decision making.
- It can lead to high expectations. The utility must also manage stakeholder expectations and be clear that change will be slow and painful. Revolutionary change is made through evolutionary steps – meaning that utilities cannot expect to take very large steps at any point in the process.
- There may be technological limitations. Throughout the business process design effort, utilities will identify new ways to improve customer satisfaction through the use of AMI technology. The standard technology, however, may not always support these visions; thus, utilities must be prepared to work with vendors to support the new processes.
Although execution of future state business process design undoubtedly requires a high degree of effort, a successful operational transformation is necessary to truly leverage the features of AMI technology. If utilities expect to achieve broad-reaching benefits, they must put in place the operational and organization structures to support the transformational initiatives. Utilities cannot afford to think of AMI as a standard technology implementation or to jump immediately to the definition of system and technology requirements. This approach will inevitably limit the impact of AMI solutions and leave utilities implementing cutting-edge technology with fragmented processes and inflexible, functionally based organizational structures.