Tag: Cary Harmon

The Smart Grid Maturity Model

The software industry has been using maturity models to define and measure software development capabilities for decades. These models have helped the industry create a shared vision for these capabilities. They also have driven individual software development organizations to set and pursue aggressive capabilities goals while allowing these groups to measure progress in reaching those objectives along the way.

As the utility industry embarks on the complex and ambitious transformation of the outdated power grid to the new smart grid, it has struggled to develop a shared vision for the smart grid end-state and the path to its development and deployment. Now, the smart grid maturity model (SGMM) is helping the industry overcome these challenges by presenting a consensus vision of the smart grid, the benefits it can bring and the various levels of smart grid development and deployment maturity. SGMM is helping numerous utilities worldwide develop targets for their smart grid strategy, and build roadmaps of the activities, investments and best practices that will lead them to their future smart grid state.

IBM worked closely with members of the Intelligent Utility Network Coalition (IUNC) to develop, discuss and revise several drafts of the SGMM. This team was assisted by APQC, a member-based nonprofit organization that provides benchmarking and best-practice research for approximately 500 organizations worldwide. The goal in the development process was to ensure the SGMM reflects a consensus industry vision for the smart grid, and brings together a wide range of industry experts to define the technical, organizational and process details supporting that vision.

APQC has a long history of benchmarking, performance measurement and maturity definition, and was therefore able to provide critical experience to drive development of a clear, measureable maturity model. IBM has worked on smart grid initiatives with numerous utilities around the world, and provided guidance and some initial structure to help start the development process. But the most important contributors to the SGMM were utilities themselves, as they brought a wealth of deep technical and strategic knowledge to build a shared vision of the smart grid and the various stages of maturity that could be achieved.

Because of this consensus development process, the SGMM reflects a broad industry vision for the smart grid, and it now gives utilities a tool for both strategic and tactical use to guide, measure and assess a utility’s smart grid transformation:

Strategic uses of the SGMM:

  • Establish a shared vision for the smart grid journey;
  • Communicate the smart grid vision, both internally and externally;
  • Use as a strategic framework for evaluating smart grid business and investment objectives;
  • Plan for technological, regulatory, and organizational readiness; and
  • Benchmark and learn from others

Tactical uses of the SGMM:

  • Guide development of a specific smart grid roadmap or blueprint;
  • Assess and prioritize current smart grid opportunities and projects;
  • Use as a decision-making framework for smart grid investments;
  • Assess resource needs to move from one smart grid level to another; and
  • Measure smart grid progress using key performance indicators (KPIs).

The SGMM structure is based on three fundamental concepts:

Domains: eight logical groupings of functional components of a smart grid transformation implementation;

Maturity Levels: five sets of defined characteristics and outcomes; and

Characteristics: descriptions of over 200 capabilities that are expected at each stage of the smart grid journey.

As Figure 1 shows, the domains span eight areas covering people, technology, and process, and comprise all of the fundamental components of smart grid capabilities.

Maturity levels range from an entry level of 1, up to a top level of 5, and can be summarized as follows:

Level 1 – Exploring and Initiating: contemplating smart grid transformation; may have a vision, but no strategy yet; exploring options; evaluating business cases and technologies; may have some smart grid elements already deployed.

Level 2 – Functional Investing: making decisions, at least at a functional level; business cases in place and investments being made; one or more functional deployments under way with value being realized; strategy in place.

Level 3 – Integrating Cross Functional: smart grid spreading; operational linkages established between two or more functional areas; management ensuring decisions span functional interests, resulting in cross-functional benefits.

Level 4 – Optimizing Enterprise-Wide: smart grid functionality and benefits realized; management and operational systems rely on and take full advantage of observability and integrated control, both across and between enterprise functions.

Level 5 – Innovating Next Wave of Improvements: new business, operational, environmental, and societal opportunities present themselves, and the capability exists to take advantage of them.

It is important to note that a utility may not choose to target maturity level 5 in every domain – in fact, it may not target level 5 for any domain. Instead, each utility using the SGMM must consider its own strategic direction and performance goals, and then decide on the levels of smart grid maturity that will support those goals to determine the target maturity in each domain. For example, a utility that is strategically focused on the retail side of the business may want to achieve relatively high maturity in the customer management and experience domain, but have a much lower target for maturity in the grid operations domain.

The key point is that the SGMM is not a report card with those utilities reaching the highest maturity levels "winning the game." Instead, each utility uses the SGMM to understand how the smart grid can help optimize its planning and investment to achieve its aspirations.

With over 200 characteristics describing the capabilities for each domain and maturity level, it is not possible to describe them here, but an example of a typical characteristic shown in Figure 2 provides a good sense of the level of detail in each characteristic of the SGMM.

Taken together, the domains, maturity levels, and characteristics form a detailed matrix that describes smart grid maturity across all critical areas.

Evaluating Smart Grid Maturity

A utility uses two surveys in conjunction with the SGMM structure described above to: assess its smart grid maturity; and track its progress and the resulting benefits during deployment. The first survey is the maturity assessment, which asks a series of about 40 questions that cover the current state of the utility’s smart grid strategy and spending, and the current penetration of smart grid capabilities into various areas of the business. The assessment yields a detailed report, providing the results for each domain, as well as higher-level reports that show the broader view of the utility’s current state and aspirations for the smart grid.

In this example, the utility’s current smart grid maturity is shown by the green circles, while its maturity aspirations are shown by the yellow circles. This highlevel view can be very useful as support for detailed plans on how to get from current state to aspirational state. It is also helpful for conveying maturity concepts and results to various stakeholders – both inside and outside the utility.

The second survey is the opportunity and results survey, which focuses on KPIs that track progress in smart grid deployment, as well as realization of the resulting benefits. For example, many questions in the survey cover grid operations, with the focus on cost, reliability and penetration of smart grid capabilities into the "daily life" of grid operations. The survey is expected to be completed annually, allowing each utility using the SGMM to track its deployment progress and benefits realization.

Using SGMM Results

The results from the SGMM can be applied in many ways to gauge a utility’s smart grid progress. From a practical management standpoint, the following important indicators can be derived directly from the SGMM process:

  • How the utility compares to other survey participants overall;
  • Where the utility has deficiencies in one domain that may adversely affect other domains;
  • Effects of being potentially projectoriented rather than program-driven, resulting in a jagged, "peaks and valleys" maturity profile with uneven advancement;
  • Indications that some domains are too far ahead of others, resulting in the risk of putting the "cart before the horse;" and
  • Confirmation of progress in domains that have been given particular focus by the utility, and indications of domains that may require increased focus.

More broadly, completion of the SGMM surveys provide a utility with the information needed to establish a shared smart grid vision with both internal and external stakeholders, mesh that vision with the utility’s overall business strategy to set maturity targets, and then build a detailed roadmap for closing the gaps between the current and target maturity levels.

Transition of SGMM Stewardship

IBM has been pleased to work with APQC and members of the IUNC to support definition and early roll-out of the SGMM. But as an important and evolving industry tool, IBM believes that the SGMM should be supported and maintained by a broader group. Therefore, we are planning to transition to a stewardship model with three organizations each playing a critical role:

  • Governance, Management, and Growth: the Carnegie Mellon Software Engineering Institute will govern the SGMM, working in conjunction with Carnegie Mellon University and the Carnegie Mellon Electricity Industry Center. The institute and its 500 employees will leverage its 20 years of experience as stewards of the Capability Maturity Model for software development.
  • Global Stakeholder Representation and Advocacy: the World Energy Council will provide representation for stakeholders around the globe. The council was established in 1923, represents 95 member countries and regularly hosts the World Energy Congress. Its mission is to promote the sustainable supply and use of energy for the greatest benefit of all people. This mission fits well with the development of the smart grid and the expanding use of the SGMM.
  • Data Collection and Reporting: APQC will provide further support for the SGMM survey process. With over 30 years of quality and process improvement research, APQC will continue the work it has done to date to assist utilities in assessing their smart grid maturity and tracking their progress during deployment.

Summary

All utilities should consider using the SGMM as they develop their vision for the smart grid and begin to plan and execute the projects that will take them on the journey. The SGMM represents the best strategic and technical thinking of a broad cross-section of the utility industry. We believe that the SGMM will continue to represent a thoughtful and consensus view as the smart grid – and the technology that supports it – evolves over the next few years.

Developing a Customer Value Transformation Road Map

Historically, utility customers have had limited interactions with their electric or gas utilities, except to start or stop service, report outages, and pay bills or resolve billing questions. This situation is changing as the result of factors that include rising energy prices, increasing concerns about the environment and trends toward more customer interaction and control among other service providers – such as cell phone companies. Over the next five to 10 years, we expect utility customers to continue seeking improvements in three key areas:

  • Increased communication with their utility company, through a greater variety of media;
  • Improved understanding of and control over their own energy use; and
  • More accurate and timely information on outage events and service restoration.

Moreover, as the generations that have grown up with cell phones, the Internet, MP3 players and other digital devices move into adulthood, they will expect utilities to keep pace with their own technological sophistication. These new customers will assume that they can customize the nature of their communications with both friends and businesses. Utilities that can provide these capabilities will unlock new sources of revenue and be better able to retain customers when faced with competition.

The intelligent utility network (IUN) will be a key enabler of these new customer capabilities and services. But not all customers will want all of the new capabilities, so utilities need to understand and carefully analyze the value of each among various customer segments. This will require utilities to prepare sound business cases and prioritize their plans for meeting future customer needs.

One of the first initiatives that utilities launching an IUN program should undertake is the development of a “customer value transformation road map.” The road map approach allows utilities to establish the types of capabilities and services that customers will want, to identify and define the gaps in current processes and systems that must be overcome to meet these needs, and to develop plans to close those gaps.

TRANSFORMATION ROAD MAP DEVELOPMENT APPROACH

Our approach for developing the customer value transformation road map includes four tasks, as depicted in Figure 1.

Task 1: Customer Requirements

The primary challenge facing utilities in defining customer requirements is the need to anticipate their desires and preferences at least five to 10 years into the future. Developing this predictive vision can be difficult for managers because they’re often “locked into” their current views of customers, and their expectations are based largely on historical experience. To overcome this, utilities can learn from other industries that are already traveling this path.

The telecommunications providers, as one example, have made substantial progress in meeting evolving customer needs over the last decade. While more changes lie ahead for telecommunications, the industry has significantly enhanced the customer experience, created differentiated capabilities for various customer segments and succeeded in developing many of these capabilities into profit-generating services. This progress can serve as both an inspiration and a guide as utilities start down a similar path.

The first step in defining future customer requirements is to segment the customer base into the various customer groups that are likely to have different needs. Although these segments will likely vary for each utility, we believe that the following seven major customer segments serve as a useful starting point for this work:

  • Residential – tech savvy. These are customers who want many different electronic communication pathways but don’t necessarily want to develop a detailed understanding of the trends and patterns in their energy usage.
  • Residential – low tech. These customers prefer traditional, less high tech ways of communicating, but may want to perform analysis of their usage.
  • Residential – low income. These are customers who want to understand what’s driving their energy expenditures and how to reduce their bills; many of these customers are also tech savvy.
  • Special needs. These customers, often elderly, may live on fixed incomes and are accustomed to careful planning, and want no surprises in their interactions with providers of utility services. They frequently need help from others to manage their daily activities.
  • Small business. These commercial customers are typically very cost-conscious and highly adaptable and seek creative but relatively simple solutions to their energy management challenges.
  • Large commercial. These are customers who are cost-conscious and capable of investing substantial time and money in order to analyze and reduce their energy use in sophisticated ways.
  • Industrial. These very large customers are sophisticated, cost-conscious and increasingly focused on environmental issues.

The next step in defining future customer requirements is to understand the points in the utility value chain at which customers will interact with their utility. Based on recent trends for both utilities and other industries, the following “touch point” areas are a good starting point:

  • Reliability and restoration;
  • Billing;
  • Customer service;
  • Energy information and control; and
  • Environment.

Not all of these requirements will be important to all customer segments. It is essential to establish the most important requirements for each segment and each touch point. Figure 2 provides one example of a preliminary assessment of the relative importance of selected customer requirements for the reliability and restoration category, across the seven specified customer segments. Each customer need is assigned a high (H), medium (M) or low (L) rank.

Once this preliminary assessment is completed, utilities should consider conducting several workshops with participants from various functional departments. The goal of these workshops is to obtain feedback, to evaluate even more thoroughly the importance of each potential requirement and to begin to secure internal acceptance of the customer requirements that are determined to be worth pursuing. Departments that should participate in such workshops include those focused on regulatory requirements, billing, corporate communications, demand-side management, customer operations, complaint resolution and outage management.

One way of making the workshop process more “real” and therefore more effective is to develop customer use scenarios that incorporate each potential requirement. For example, the following billing scenarios could be used to illustrate potential customer requirements and to facilitate more effective evaluation of what will be needed for billing:

  • Billing Scenario 1. I want my gas and electric bills to be unified so that I don’t have to spend extra time making multiple payments. Also, I want the choice of paying my bill electronically, by mail or in person, based on what’s convenient for me, not what’s convenient for my utility.
  • Billing Scenario 2. My parents, who are now retired, receive fixed pension checks, and I want their utility to set up a payment plan for them that results in equal payments over the year, rather than high payments in the summer and low payments in the winter. My parents also want the ability to see a summarized version of their bill in large print, so that they can easily read and understand their energy use and costs.
  • Billing Scenario 3. My kids are on their computer nearly all of the time, and the remainder of the time they seem to be playing their video games. Also, they rarely turn off lights, and all of these things are increasing my energy bills. I want my utility to help me set up a balance limit so that if our energy usage reaches a set level, I’m automatically notified and I have the option of taking some corrective actions. I also expect my meter readings to be accurate rather than simply rough estimates, because I want to understand exactly how much energy I am consuming and what it’s costing me.

In addition to assessing the value of each requirement to customers, it is also important to rank these requirements based on other factors, such as their impacts on the utility. Financial costs and benefits, for example, clearly need to be estimated and considered when evaluating a requirement, regardless of how important the requirement will be to customers. To draw all of these assessments together, it is useful to assign weights to each assessment area – for example, a weight of 35 percent for customer importance, 30 percent for utility costs/benefits and 35 percent for the value that regulators will perceive. Once an appropriate weighting scheme is applied, the utility can rank the requirements and develop a list of those with the highest priority.

Task 2: Gaps

To assess gaps in current capabilities that could prevent a utility from meeting important and valuable customer requirements, the utility should next identify the business processes, organizations and technologies that will “deliver” those requirements. This requires a careful analysis of current and planned process, organizational and technology capabilities, which can be challenging because other initiatives will be affecting these areas even as customer requirements evolve. Moreover, many utilities do not have accurate, detailed documentation of current processes and systems. Therefore, a series of workshops and interviews with functional and technology leaders and staff is necessary. The results of these workshops should be supplemented by analysis of planned systems and process transformations, in order to assess current gaps and to determine whether those gaps will be closed – based on plans that are already in place. If such gaps remain, new projects and capital investments may be required to close
them and to meet expected customer requirements.

During the gap assessment process, it’s critical that the customer value team work closely with other IUN teams to ensure that the customer value gap analysis is coordinated with the broader gap analysis for the IUN program. Important areas to coordinate include automated meter information, demand-side management, outage management and asset management.

Task 3: Business Case Support

While conducting the first two tasks, the assessment team should be able to develop a deep understanding of the costs required to meet the important customer requirements as well as the financial benefits. Because it’s typical to develop consolidated business cases for the IUN, the customer value team should work with the overall IUN business case team to support business case development by bringing this information into the process.

Task 4: Transformation Road Map

This final task builds on an understanding of both the customer requirements and the gaps in current operations to create the customer value transformation road map. The initiatives in the road map will typically be defined across the following primary areas:

  • Process;
  • Technology;
  • Performance metrics;
  • Organization and training; and
  • Project management.

For each of these areas, the road map will establish the timing and sequence of initiatives to close the gaps, based on:

  • The utility’s strategic priorities and capacity for change;
  • Linkages to the utility’s overall IUN transformation plans; and
  • Technology dependencies and links to other work areas.

    • Figure 3 provides a summary of the initiatives from a typical customer value transformation road map. The detail behind this summary provides a path to transforming the customer-related operations to meet expected customer requirements over the next five to 10 years.

    CONCLUSION

    Our “customer value transformation road map” approach provides utilities with a structured process for identifying, assessing and prioritizing future customer requirements. Utilities that are successful in developing such a road map will be better prepared to build customer needs into their overall IUN transformation plans. These companies will in turn increase the likelihood that their IUN transformation will improve customer satisfaction, reduce customer care costs and lead to new sources of revenue.