The product/service offerings based on business intelligence have come a long way since its inception. Utilities worldwide have realized the potential of this technology and have made significant investments into harnessing the benefit of these technology offerings. By leveraging analytics, utilities have been able to harness key information out of the operational processes. Taking a moment to analyze some of the utility companies and their usage of business intelligence (BI) products, one will find them in different quadrants of maturity.

The forces that have dictated this maturity positioning are numerous, be they regulatory pressures or operational efficiency concerns or environmental concerns or the mere appetite to absorb high risk on the part of the enterprise. This article examines some of the key usage positioning in the quadrants and the quantum leaps that are being taken by the companies to make more effective use of the service/product offerings.

Additionally, this article examines how business performance management (BPM) has been positioned as a key strategic offering in the world of utilities by elucidating the process of energy efficiency programs and integration with other key processes.

Figure 1: Capability Maturity Model

Early Adopters (Quadrant 1)

The organizations in this quadrant have played a visionary role in their industry vertical with regard to the usage of business intelligence and analytics. Typically, these organizations have a history of adopting new technology offerings and making the most of it by working with the product/service provider to adopt the technology to its maximum benefit. In the SAP area, such ramp-up customers can be seen in a wide variety of areas. The players have often collaborated with the technology company to produce outstanding solutions that oftentimes become the benchmark.

They are continuously trying to harness value by creative techniques from the portfolio of products that they have. When other organizations are still grappling with the idea of value-based analytics, these organizations are already tinkering with service offerings in the BPM arena. They are in the process of using the latest levers in the area of analytics such as predictive analytics, data mining and accelerators to seek further value from their investments. An example here is the early adoption of SAP Strategy Management offerings by PG&E to connect their operational planning and drivers with key strategy plans.

Pragmatists (Quadrant 2)

The organizations in this quadrant have waited patiently to see how the technology plays out in their vertical. They have conducted very careful studies to see the cost/benefit associated with the investment in business intelligence. Quite often, they have included business intelligence as a part of their total transformation program, such as a major ERP program. These companies have followed the best practices route after carefully mitigating any risks associated with their investment. They have effectively partnered with big consulting system integrators to carefully define the processes and see where they can use business intelligence to provide value. One of the value drivers in this quadrant is that data warehousing and analytical reporting reduce the cost in producing and maintaining reports out of the transaction systems. The data warehousing tool provides an easier way to associate data from one functional area such as finance with other areas such as inventory without hiring teams of programmers to write complicated reports. Another common theme of the entities in this quadrant is that they have often taken advantage of economies of scale in product maturity. In the case of SAP Business Intelligence, the data warehousing structures such as cubes, operational data stores and transformation rules have already been created for major functional areas; and this is a part of the product known as business content. You will find a large number of organizations in this segment. They are currently using Cognos, SAP, Business Objects and other established products to harness value of their transactional systems.

One of the drawbacks in this approach is that this establishes merely a reporting organization. The delivery model here is to extract the transactional data into powerful data warehouses and produce reports that look nice and are easy to develop and maintain. Very often, the output of the reports is not utilized back in the operational systems to provide value from the business analytics. An example here is Southern California Edison, which is spearheading a major transformation process by adopting SAP.

Conservatives (Quadrant 3)

The members of this quadrant are highly risk averse. They have burned their fingers in the past while investing in new technology transformation programs and have ever since been very shy about investing into non-critical products or methodologies. These organizations wait until most people have made the switch and only if it becomes really inconvenient to stay in the older technology. Assume that you are in the deregulated market. The ability to understand your customers’ needs before the competition does is highly critical. If your competition has a very mature customer analytics portfolio, you will be at a loss without investing in the technology. In this case, business intelligence becomes a competitive strength; and not making use of it not only becomes an inconvenience, but also a handicap in trying to get an upper hand in the market.

They also obtain the most cost benefit in the industry. Since products and offerings have matured by the time they decide to implement, they can readily access products and resources at a cheaper cost. The tradeoff is the cheaper cost versus benefits of early adoption. This can be significant given the market, regulatory and operational pressures that are on the organization.

Entrenched (Quadrant 4)

By far, this segment is smallest. In this segment, the organizations are always in the battle to put out day-to-day operational fires. They do not have the luxury or the budget to invest in strategic products. It is very difficult for them to even maintain their current systems without large investments and without many problems. The organizations in this quadrant may be undergoing critical disruptions in the way they perform business. The energy crisis in California was such an event when companies like Southern California Edison were engulfed in merely trying to raise money to survive. Another key event that comes to mind in the late ‘90s was the Y2K conversion. Companies “had to” invest money in this in order to survive. Another reason is potential mergers/acquisitions in the horizon. Companies often choose to wait until the organizational restructuring is complete before they invest into new tools and service offerings.

Positioning your Business Intelligence/Business Performance Management Initiatives

It is very tempting to say from the above analysis that it is always best to be in the second quadrant where the risk/benefits ratio is the lowest, thereby making it the safest bet.

Figure 2

Unfortunately, it is not that easy. The gap between quadrant 1 and quadrant 2 is the place where a lot of development is happening and change is constant. Utilities need to realize this mini-gap and make quantum adjustments so that they can utilize the available service/product offerings in both the quadrants to make the best risk/benefit investments. Early adoption techniques can prove to be very beneficial in many cases. In some cases, companies need to drive the design of technologies in order to achieve the maximum benefits. In the world of business intelligence and analytics, if BI was the stepping stone to harvest meaningful analytics out of operational data, BPM (business performance management) is the next area to derive value out of the data warehouse infrastructures.
  
BPM or business performance management is a holistic management approach that promotes business effectiveness and efficiency while striving for innovation, flexibility and integration with technology. As organizations strive for attainment of their objectives, business performance management attempts to continuously improve processes – the process to define, measure and improve your processes (a process optimization process). Very often in the industry, BPM has become synonymous with financial performance management. However, financials are only one aspect of BPM.

An application of BPM in the world of finance takes advantage of the summarized financial data in the data warehouse and uses it for following processes.

• Integrated operational expense planning
  
  
• Integrated capital investment planning
  
  
• Cash flow planning with long-term view
  
  
• Financial consolidations, both legal and management focused

Figure 3: BPM Application Areas in Utilities

 BPM Application Areas in Utilities

Most BPM vendors have already positioned their products in this space to address the integrated budgeting and planning applications for the utilities. BPM can also be applied to host of other operational issues that utilities deal with. The next section focuses on one of such issues.

The generating power of utilities is limited given the rising pricing pressures of fuel and also environmental concerns. One of the key approaches in the demand management areas is to understand and analyze the demand and initiate programs to effectively promote energy efficiency to its customers. The more we know of customers’ energy usage, the more we can effectively plan our demand. Utility companies are implementing AMI (advanced metering initiatives) to get real-time customer usage data.

For example, in California:

• CA PUC section 454.5 (b) (9) (c): Utilities first meet unmet resource needs through all available energy efficiency and demand reduction resources that are cost effective, reliable and feasible. Also providing a large portion of greenhouse gas emission reductions as part of National Action Plan for Energy Efficiency.
  
  
• California IOU are administrators of ratepayer funded programs and maximize the potential of those programs by engaging in collaborative efforts with the many other entities involved in planning and delivering energy efficiency savings.
  
  
• Move from short-term savings to a more strategic focus on long-term goals including market transformation through continual incorporation of energy efficiency gains into codes and standards, and increasing privatization of cost-effective energy efficiency services in competitive market activities.
  
  
• Three areas of focus: residential new constructions, commercial new construction and HVAC.
  
  
• CEC long goal of zero net energy for new commercial and residential construction.
  
  
• Energy efficiency should be measured at overall portfolio performance rather that individual program performance.
  
  
• Market transformational activities should complement long-term resources acquisitions.
  
  
• Strategic planning will facilitate identifying ways to use energy efficiency programs to better match differing load profiles and will promote longer term energy efficiency measures and activities that reduce peak demand.
  
  
• Need strategies to define when market transformation has occurred so it is obvious when rate payer energy efficiency funding has succeeded or programs no longer need ratepayer subsidies

Application of Business Performance Management/Business Intelligence

The clear focus is on collaborative long-term strategic planning rather than short-term initiatives. No longer can there be a focus on the low hanging fruit of exchanging incandescent lighting with compact fluorescent lighting. There will be a need for sophisticated models that track interval usage data such as with advanced metering infrastructures or smart grids and integrate them into the enterprise decision-making analytics. Energy efficiency success will no longer be defined by program enrollment or cost-effective funding utilization. Commissions and the industry will need to measure and quantify actual load decreased by energy efficiency and demand response.

Customers will require increased access to usage and billing data in order to respond to critical peak pricing events or compare alternative rates or load reductions. BI models for customer rate analysis will have to utilize extensive operational data with what-if modeling scenarios that are web enabled so that customers can be self reliant in choosing what energy efficiency or demand response programs make sense and are cost effective.

The marketplace will look to higher degrees of collaborative planning for designing energy efficiency portfolios and strategic objectives. This will not only include the IOUs but will also include other players in the marketplace, such as metering technologies, HVAC manufacturers, and designers of building standards and codes. Utilities can use the wealth of BI information to analyze new construction tracts with higher efficiency goals, minimizing the need for additional resources. With the potential of additional data sources to be analyzed as a result of collaboration, the expected benefit is greater efficiencies and economies of scale that can be utilized in delivering programs. Insights gained by one collaborative partner can be shared with other players in energy efficiency.

Figure 4

The marketplace has to undergo a transformation – in other words, the energy efficiency technologies and programs have to become self sufficient so they become part of a self-sustaining competitive marketplace rather than a ratepayer subsidized program. Measurement and valuation of the benefits will become crucial in achieving these long-term goals or market transformation. As mentioned before, no longer will success be measured by program enrollment. Today, many customers sign commitments to implement energy efficiency or demand response programs. In the future, tools such as business intelligence will need to monitor customer usage patterns to quantify the exact amounts of avoided or shed consumption. Programs may likely be bundled and targeted such as with any CRM application that looks at market segmentation based on customer preference or socio-economic patterns. The CRM opportunity for the future will be to design program bundles that match changing load profiles to the most cost-effective programs.

Leading-edge companies will develop energy efficiency and demand response dashboards or executive cockpits that will provide real-time or near-real-time data on total system load against total system capacity with available load that can be shed. These companies will also incorporate long-term investment models that factor in strategic energy efficiency and demand response programs as part of their investment plans. There will continue to be a need for cost-effective program administration. Energy efficiency portfolios will require key performance indicators (KPIs) that provide management with the business performance insights that will ensure long-term success. KPIs will have to influence operational processes in order to focus on strategic objectives rather than short-term goals. This will allow for greater innovation and risk taking, so providers of energy efficiency programs can allow one program to be less successful if it provides the portfolio a greater chance for success.

Overall, the portfolios of energy efficiency and demand response will require extensive modeling capabilities leveraging a robust BI-based ecosystem that allows for extensive modeling of “what-if” scenarios. These scenarios will have to provide insights for individual situations as well as entire customer populations such as new residential constructions. Business performance management will provide a systems-thinking approach to access the entire spectrum of programs and their contribution to the complete energy picture going forward.

SOURCE: Business Performance Management – A Road Map for Utilities

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