Internet of Things - Technology focus

The Utility Death Spiral:  Declining usage, increasing costs, and distributed energy resources challenge the traditional utility business model fashioned on monopoly services in an environment of perpetual economic growth. To avoid the clichéd “utility death spiral,” the industry needs real solutions that address resilience, customer engagement, digitalization, and attracting the workforce of the future. A centralized electric grid will always be needed to provide reliable and affordable electricity, but all utilities will not survive this disruption. Those that do survive will be the ones that can innovate and adjust rapidly to our evolving environment. Buzzwords won’t cut it.  Many utilities have launched innovation incubators to collaborate with technology companies and develop solutions for common challenges. While there are worthy reasons to collaborate with outside organizations, this won’t provide the necessary industry solutions. Creating innovative ideas to bring back to the organization is one thing, but fundamentally creating an innovative organization is much more difficult.  I recently spoke with organizational and business strategy expert, Dr. John Aplin, who has bought more than 200 companies and served on over 30 boards during his career. Aplin’s extensive and unique business experience has helped him develop an organizational cycles model, which describes the characteristics and challenges of organizations throughout various stages of development.

In short, there are creative and maintenance models of an organization. Immature companies experience an intensely creative and entrepreneurial phase. However, success during an organizational phase inevitably produces a crisis that constrains progress and growth. Thus, the creative phase is followed by a control crisis. Following the resolution of the control crisis, the more mature organization enters a maintenance phase. Organizations in the maintenance phase are not unlike utilities. They are stable, rational, analytical, and have an evaluative ethos. They are also management heavy, have a bureaucratic structure, threatened by change, and have low motivation. Throughout time, these mature organizations must work through what Aplin calls a “stagnation crisis” to get back into a re-creative phase.

The utility industry is currently experiencing a stagnation crisis. I asked if highly regulated companies, like utilities, were capable of being creative organizations? He agreed that it is very hard. “It is a system intended to prevent radical change and to ensure that certain things happen. A maintenance organization will tolerate inefficiencies to avoid unpredictable situations.” Parts of the utility organization really do need to be highly regulated. Aplin said the key is not being either a maintenance or creative organization, but rather being both. Utilities should strive to be organizations that provide predictability and consistency while also being forward-thinking, creative, and innovative. Semi-autonomous business units, without interference and intrusion by the traditional organization, are one way for utilities to achieve this result.