This document discusses the need for utilities to adopt capabilities-driven strategies to redefine their business models for a changing energy environment. It advocates that utilities assess their strategic capabilities, focus on differentiated capabilities that support their strategy, and develop an organizational culture and processes that enable strong performance. Utilities face pressures from environmental initiatives, new technologies, and economic constraints, requiring decisive changes. Leading utilities will transform themselves into more performance-oriented, technically diverse organizations by realigning their capabilities with emerging opportunities and demands.
Applying an outcome driven design approach to strategy and protect delivery ensures the right things are delivered at the right place and time. This presentation shows how you can change your mindset to deliver the things that bring maximum value to the business and its customers, no matter the industry.
Unicom 2014 - Staying relevant in the digital ecomonyMike Clark
The step towards customer experience architecture - Enterprises are attempting to incorporate multi-channels, new customer insights and a much faster rate of change into their business models. In an attempt to tackle this complexity and dynamics of an evolving enterprise, the Enterprise and Business Architecture disciplines have continued to emerge, enabling the organisation to bring all the various moving parts together. Business capabilities and the term “business model” have slowly become part of everyday language amongst stakeholders. Yet even with these successes the disciplines are still too big a pill for management to swallow, and it’s value often gets lost. The challenge of collaboratively exploring potential futures with relevant stakeholders and practitioners of related disciplines still remains.
The shift in focus to digital channels requires a new way of using and leveraging architectures.
Using Business Architecture to enable customer experience and digital strategyCraig Martin
Digital disruption is shifting business model design from a focus on product profitability to a stronger focus on customer experience and lifetime value.
The presentation looks at environmental pressures caused by digital disruption and identifies how to use business architecture and business design to address these changes.
It covers business architecture for digital strategy, customer-driven value chains, re-writing of the 4Ps of the marketing mix, and the nine laws of disruption and how they affect business model design.Craig also investigates the changes afoot with strategic business planning and Enterprise Architecture, which are experiencing their own form of disruption. Will Enterprise Architecture as we know it become a commodity too?
This presentation was delivered as an OpenGroup webinar and is available for viewing from the www.enterprisearchitects.com web site.
The document is an introduction to the BIZBOK® Guide, which provides a framework and best practices for business architecture. It defines business architecture as a blueprint that provides a common understanding of an organization used to align strategic objectives and tactical demands. The guide represents various business concepts, disciplines, and best practices in an overall framework. It establishes standards for building, deploying, and leveraging business architecture. Business architecture represents real-world aspects of a business and how they interact to help executives answer questions about the business. Blueprints are abstract representations of the business that allow different viewpoints to be visualized.
In this session we are going to consider some lessons that Business Architecture practitioners might learn from Lean. Business Architecture has traditionally delivered ivory tower models which are slow to generate, hard to understand, and require heavy maintenance.
We'll start with a '101' level introduction to Business Architecture, discussing both the process of defining a Business Architecture and also some of the models that Business Architecture produces. We'll also try to understand the value of Business Architecture.
We'll then start to map some Lean Principles to Business Architecture and try and understand how we could potentially optimise the value stream. We'll consider where Business Architecture can be wasteful, discussing the diminishing value of information and the concept of analysis paralysis.
Finally I'll introduce you to a leaner approach to Business Architecture that focusses on rapid techniques for model generation and heavier engagement of system actors in both the development and the maintenance of models. I'll also share my technique for rapid enterprise modelling which can help you to build a capability model in hours rather than weeks/months.
Kevin Ingram has over 20 years of experience in business management, project management, change management, and leadership roles in the telecommunications industry. He has a proven track record of delivering strategic business change and technology transformations through innovative solutions. His strengths include relationship management, commercial acumen, and people leadership. Recent contract roles include project manager at ANZ implementing a voice biometrics solution, senior consultant at Public Trust supporting a technology transformation, and business transition manager at Inland Revenue delivering digital channels.
The document provides an overview of business architecture and business models. It discusses how business models can be used to capture business concepts, develop strategies and plans, and integrate goals across business units. The document then focuses on the Business Model Canvas framework, explaining each of the nine building blocks. It emphasizes that business models describe how an organization creates, delivers, and captures value. Finally, it discusses how business models and operating models relate, with business models focusing on value creation and operating models focusing on implementation.
Slides from a presentation given by Paul Turner to meetings of IIBA UK on 16 July and 12 August 2014.
Much has been written about technical and solution architectures, without due attention being given to how these work together with the Business Architecture.
It is easy to believe that those who are involved in business analysis, requirements definition and systems modelling do not need to consider the Business Architecture at all. This could not be further from the truth. This talk explains the rationale behind Business Architecture, what its main components are and why Business Analysts should ensure that they understand it and the influence it is likely to have on their work.
Applying an outcome driven design approach to strategy and protect delivery ensures the right things are delivered at the right place and time. This presentation shows how you can change your mindset to deliver the things that bring maximum value to the business and its customers, no matter the industry.
Unicom 2014 - Staying relevant in the digital ecomonyMike Clark
The step towards customer experience architecture - Enterprises are attempting to incorporate multi-channels, new customer insights and a much faster rate of change into their business models. In an attempt to tackle this complexity and dynamics of an evolving enterprise, the Enterprise and Business Architecture disciplines have continued to emerge, enabling the organisation to bring all the various moving parts together. Business capabilities and the term “business model” have slowly become part of everyday language amongst stakeholders. Yet even with these successes the disciplines are still too big a pill for management to swallow, and it’s value often gets lost. The challenge of collaboratively exploring potential futures with relevant stakeholders and practitioners of related disciplines still remains.
The shift in focus to digital channels requires a new way of using and leveraging architectures.
Using Business Architecture to enable customer experience and digital strategyCraig Martin
Digital disruption is shifting business model design from a focus on product profitability to a stronger focus on customer experience and lifetime value.
The presentation looks at environmental pressures caused by digital disruption and identifies how to use business architecture and business design to address these changes.
It covers business architecture for digital strategy, customer-driven value chains, re-writing of the 4Ps of the marketing mix, and the nine laws of disruption and how they affect business model design.Craig also investigates the changes afoot with strategic business planning and Enterprise Architecture, which are experiencing their own form of disruption. Will Enterprise Architecture as we know it become a commodity too?
This presentation was delivered as an OpenGroup webinar and is available for viewing from the www.enterprisearchitects.com web site.
The document is an introduction to the BIZBOK® Guide, which provides a framework and best practices for business architecture. It defines business architecture as a blueprint that provides a common understanding of an organization used to align strategic objectives and tactical demands. The guide represents various business concepts, disciplines, and best practices in an overall framework. It establishes standards for building, deploying, and leveraging business architecture. Business architecture represents real-world aspects of a business and how they interact to help executives answer questions about the business. Blueprints are abstract representations of the business that allow different viewpoints to be visualized.
In this session we are going to consider some lessons that Business Architecture practitioners might learn from Lean. Business Architecture has traditionally delivered ivory tower models which are slow to generate, hard to understand, and require heavy maintenance.
We'll start with a '101' level introduction to Business Architecture, discussing both the process of defining a Business Architecture and also some of the models that Business Architecture produces. We'll also try to understand the value of Business Architecture.
We'll then start to map some Lean Principles to Business Architecture and try and understand how we could potentially optimise the value stream. We'll consider where Business Architecture can be wasteful, discussing the diminishing value of information and the concept of analysis paralysis.
Finally I'll introduce you to a leaner approach to Business Architecture that focusses on rapid techniques for model generation and heavier engagement of system actors in both the development and the maintenance of models. I'll also share my technique for rapid enterprise modelling which can help you to build a capability model in hours rather than weeks/months.
Kevin Ingram has over 20 years of experience in business management, project management, change management, and leadership roles in the telecommunications industry. He has a proven track record of delivering strategic business change and technology transformations through innovative solutions. His strengths include relationship management, commercial acumen, and people leadership. Recent contract roles include project manager at ANZ implementing a voice biometrics solution, senior consultant at Public Trust supporting a technology transformation, and business transition manager at Inland Revenue delivering digital channels.
The document provides an overview of business architecture and business models. It discusses how business models can be used to capture business concepts, develop strategies and plans, and integrate goals across business units. The document then focuses on the Business Model Canvas framework, explaining each of the nine building blocks. It emphasizes that business models describe how an organization creates, delivers, and captures value. Finally, it discusses how business models and operating models relate, with business models focusing on value creation and operating models focusing on implementation.
Slides from a presentation given by Paul Turner to meetings of IIBA UK on 16 July and 12 August 2014.
Much has been written about technical and solution architectures, without due attention being given to how these work together with the Business Architecture.
It is easy to believe that those who are involved in business analysis, requirements definition and systems modelling do not need to consider the Business Architecture at all. This could not be further from the truth. This talk explains the rationale behind Business Architecture, what its main components are and why Business Analysts should ensure that they understand it and the influence it is likely to have on their work.
Bridging business analysis and business architecture - The Open Group webinarCraig Martin
The document discusses bridging business analysis and business architecture. It notes that lines of responsibility around enterprise cohesion and business architecture are often unclear in large organizations. Business stakeholders are seeking more value from business architecture but often receive more complexity. The value and skills required of business analysis and business architecture roles depends on the mandate from the business, whether it is to improve projects, programs/portfolios, business performance, or products/services. A lack of opportunity exists currently for these roles to operate at a high strategic level due to various organizational and political factors. Strategies are discussed for moving these roles up the curve to open more opportunities, such as aligning more closely to planning, providing strategic insights, creating unified cross-discipline teams,
Business Driven Architecture for Strategic TransformationDavid Baker
Business driven architecture is an approach to strategic transformation that involves confirming the business strategy context, understanding how the business wants to operate through its business model and operating model, and performing impact analysis to understand how changes will affect business capabilities. The approach bundles proposed changes into initiatives, builds a case for change and risk for each, and develops a sequenced multi-year roadmap. It requires collaboration between business and technology experts to ensure strategic objectives are properly translated into operations and technology.
Building a more cohesive organisation using business architectureCraig Martin
In shifting the focus away from enterprise architecture being seen purely as an IT discipline, organizations are beginning to formalise the development of business architecture practices and business architecture outcomes.
The OpenGroup has made the differentiation between business, IT and enterprise architects through their various working groups and certification tracks.
However, industry at present is grappling to try and understand where the discipline of business architecture resides in the business and what value it can provide separate of the traditional project based business analysis focus.
This presentation will take the audience through an overview of some of the critical questions being asked by business and how these are addressed through the discipline of business architecture.
Using both method as well as case study examples, I will show the audience an approach to building more cohesion across the business landscape using business architecture techniques and artefacts.
The presentation will focus on using business motivation models, strategic scenario planning and capability based planning techniques to provide input into the strategic planning process.
It will also highlight some of the outputs through examples from engagements.
Business Value Measurements and the Solution Design FrameworkLeo Barella
The presentation covers a process and artifacts to establish better communication between business and IT and improve the quality and consistency of solutions. It also includes a tool to measure business value of the solutions that are being proposed and allows the business audience to make educated choices based on overall IT Business impact.
The 7-step process outlined in the document provides a method for organizations to implement business architecture. The steps include:
1. Creating buy-in and understanding business objectives and culture.
2. Capturing existing business information and using a framework to classify and store it centrally.
3. Connecting different business units and functions by linking related information to improve alignment.
4. Enabling collaboration by making information accessible and usable for employees.
5. Coordinating processes, people and technology to better serve customers.
6. Leveraging the centralized information for governance, risk and compliance activities to reduce costs.
7. Using the business architecture to enable smarter decision making and compete
Business architecture business modeling only webinarJudithOja_Gillam
This document discusses business architecture and business modeling. It provides an overview of how modeling the business can drive business based on industry best practices rather than being constrained by technology. Business modeling aims to focus on business objectives, align business processes to strategy, and effect improved company performance. Benefits of business modeling include cost reduction, standardization, stakeholder clarity, and supporting future state design. The document also includes examples of business architecture models like a blueprint and process architecture decomposition.
Re-Positioning the value of the architecture practiceCraig Martin
This document discusses challenges facing enterprise architecture practices and opportunities to reposition their value. It notes a gap emerging between the utility and differentiation aspects of business as unique offerings become commonplace. Additionally, there is often unclear ownership around enterprise cohesion and an undefined business architecture mandate. The document argues that properly aligning strategic, business, and IT architecture disciplines can help address these issues and improve business performance.
A Business Interoperability Framework for Government by Christine StephensonCraig Martin
Despite the focus on eGovernment and the delivery of seamless services to citizens, Government continues to be challenged to deliver business interoperability goals. Interviews with Government Enterprise Architecture stakeholder and a search of the literature suggests why government has failed to achieve seamless service delivery. It appears that interoperability in government is largely a combination of bottom-up, standards or application design based approaches. These result in Information Systems solutions that achieve interoperability within the application and technology domains, but not the business domain. Consequently, the public sector operates as a fractured collection of departments, with much complexity and bureaucracy reducing the effectiveness and efficiency of service delivery. The Business Interoperability Framework (BIF) draws from three disciplines of management practice and applies industry standards. These practice areas are; Enterprise Architecture; Service Oriented Architecture; and Business Process Management. The frameworks, standards/specifications that will be referenced are ISO/IEC 10746 (RM-ODP), TOGAF®, OASIS, UMM, BMM, BPMN and ISO 15000.
Key takeaways:
-- How to achieve top-down business interoperability outcomes
-- An architected framework for business success
-- Methods and tools that can be used to deliver business/IT alignment
Products are created to provide value to customers and are composed of goods and services. Product mapping involves defining relationships between products, product lines, and families to provide visibility into a company's product ecosystem. It also includes cross-mapping products to other business architecture domains like strategies, capabilities, value streams, and business units. Maintaining accurate product mappings requires governance to ensure changes are reflected.
Capability-based Business Model TransformationIlia Bider
1) The document proposes a capability-based approach to modeling organizations and transforming business models. It defines an organization as a recursive structure of capabilities that use resources.
2) A two-step approach is described: 1) uncover the current organizational structure by mapping main and supporting capabilities and their resource dependencies, and 2) transform the structure using patterns that restructure capabilities to implement a new business model.
3) An example case applies the approach to a software company transforming from consulting to a product vendor by identifying its current capabilities, resources, and applying a pattern to add value to an existing capability.
The document defines business architecture as a blueprint that aligns strategic objectives with tactical actions. It outlines the phases an organization must go through to achieve its strategic goals by changing organizational design, systems architecture, and technical architecture. Business architecture is necessary because many projects fail due to unclear requirements and planning. It works by designing strategy, a target operating model, portfolio, and project scoping to successfully deliver projects on time and on budget.
The document outlines Microsoft's Innovation Management Framework, which provides best practices and a technology roadmap for managing innovation. The framework addresses innovation challenges through processes like Envision, Engage, Evolve, Evaluate and Execute. It also discusses the importance of leadership, culture and formalizing innovation processes. Case studies and technologies are presented to illustrate how companies can improve innovation performance. The framework is intended to help companies develop comprehensive strategies for managing innovation.
Business architecture provides a blueprint of an organization that creates a common understanding used to align strategic objectives and tactical demands. It includes models like business models, operating models, value chain models, and capability models. Business architecture aligns strategic objectives and tactical demands by linking execution to strategy through tools like a VMOST model and by associating capabilities to strategy pillars. The benefits of business architecture include linking execution to strategy, providing a 360 degree enterprise view, fostering a common language, better defining the business, enabling reuse of IT assets, and breaking down business and IT silos.
Article discussing key trends in technology and considerations for leaders looking for strategies to achieve competitive advantage without taking years and millions of dollars. Offers up the question of legacy system replacement tradeoffs and alternatives.
The document discusses the need for utilities to shift to a performance-based operating model to adapt to changing market conditions. It outlines characteristics of a performance-based model, including having people ready to compete innovatively, codeblocks that tell the full transaction story, and finance processes focused on business outcomes. It questions if utilities' back-office capabilities are optimized for this new structure.
The document discusses how financial services firms can adapt to a customer-centric world undergoing digital transformation. It outlines several key components for a successful digital transformation strategy, including commitment from top leadership, developing a large-scale customer-led vision, adopting the right organizational structure, building a team of diverse digital leaders, developing a compelling talent strategy, and aligning company culture around innovation. The overall goal is for financial institutions to attract and retain top digital talent that can help reinvent customer experience and compete against new digital disruptors.
Business transformation and the cio roleSalisu Borodo
The document discusses a report by Harvard Business Review Analytic Services on business transformation and the CIO role. It finds that some companies called "Innovation Accelerators" are accelerating business transformation through IT-enabled innovation. These companies share six common traits: 1) innovation leadership starts at the top with the CEO; 2) they take a structured approach to innovation but value speed over perfection; 3) they collaborate across functions and boundaries to gain diverse perspectives; 4) their CIOs focus more on strategic activities; 5) IT actively contributes to innovation; and 6) they invest more in and reward innovation. The report provides examples of how Innovation Accelerators are using technologies like analytics and mobility to transform customer engagement, business
Minefield? Or Greenfield? Challenges and Opportunities for Mid-Tier Sourcing ...Stanton Jones
This document discusses challenges and opportunities for mid-sized companies outsourcing IT systems and business processes. It notes that while outsourcing can provide benefits like cost reductions, increased agility and focus on core competencies, mid-sized companies often lack experience managing outsourcing relationships. The document provides advice on developing a sourcing strategy, understanding existing environments, managing providers, and leveraging outsourcing to enable growth. It also discusses opportunities in cloud computing, business process outsourcing and procurement outsourcing for mid-sized companies.
Bridging business analysis and business architecture - The Open Group webinarCraig Martin
The document discusses bridging business analysis and business architecture. It notes that lines of responsibility around enterprise cohesion and business architecture are often unclear in large organizations. Business stakeholders are seeking more value from business architecture but often receive more complexity. The value and skills required of business analysis and business architecture roles depends on the mandate from the business, whether it is to improve projects, programs/portfolios, business performance, or products/services. A lack of opportunity exists currently for these roles to operate at a high strategic level due to various organizational and political factors. Strategies are discussed for moving these roles up the curve to open more opportunities, such as aligning more closely to planning, providing strategic insights, creating unified cross-discipline teams,
Business Driven Architecture for Strategic TransformationDavid Baker
Business driven architecture is an approach to strategic transformation that involves confirming the business strategy context, understanding how the business wants to operate through its business model and operating model, and performing impact analysis to understand how changes will affect business capabilities. The approach bundles proposed changes into initiatives, builds a case for change and risk for each, and develops a sequenced multi-year roadmap. It requires collaboration between business and technology experts to ensure strategic objectives are properly translated into operations and technology.
Building a more cohesive organisation using business architectureCraig Martin
In shifting the focus away from enterprise architecture being seen purely as an IT discipline, organizations are beginning to formalise the development of business architecture practices and business architecture outcomes.
The OpenGroup has made the differentiation between business, IT and enterprise architects through their various working groups and certification tracks.
However, industry at present is grappling to try and understand where the discipline of business architecture resides in the business and what value it can provide separate of the traditional project based business analysis focus.
This presentation will take the audience through an overview of some of the critical questions being asked by business and how these are addressed through the discipline of business architecture.
Using both method as well as case study examples, I will show the audience an approach to building more cohesion across the business landscape using business architecture techniques and artefacts.
The presentation will focus on using business motivation models, strategic scenario planning and capability based planning techniques to provide input into the strategic planning process.
It will also highlight some of the outputs through examples from engagements.
Business Value Measurements and the Solution Design FrameworkLeo Barella
The presentation covers a process and artifacts to establish better communication between business and IT and improve the quality and consistency of solutions. It also includes a tool to measure business value of the solutions that are being proposed and allows the business audience to make educated choices based on overall IT Business impact.
The 7-step process outlined in the document provides a method for organizations to implement business architecture. The steps include:
1. Creating buy-in and understanding business objectives and culture.
2. Capturing existing business information and using a framework to classify and store it centrally.
3. Connecting different business units and functions by linking related information to improve alignment.
4. Enabling collaboration by making information accessible and usable for employees.
5. Coordinating processes, people and technology to better serve customers.
6. Leveraging the centralized information for governance, risk and compliance activities to reduce costs.
7. Using the business architecture to enable smarter decision making and compete
Business architecture business modeling only webinarJudithOja_Gillam
This document discusses business architecture and business modeling. It provides an overview of how modeling the business can drive business based on industry best practices rather than being constrained by technology. Business modeling aims to focus on business objectives, align business processes to strategy, and effect improved company performance. Benefits of business modeling include cost reduction, standardization, stakeholder clarity, and supporting future state design. The document also includes examples of business architecture models like a blueprint and process architecture decomposition.
Re-Positioning the value of the architecture practiceCraig Martin
This document discusses challenges facing enterprise architecture practices and opportunities to reposition their value. It notes a gap emerging between the utility and differentiation aspects of business as unique offerings become commonplace. Additionally, there is often unclear ownership around enterprise cohesion and an undefined business architecture mandate. The document argues that properly aligning strategic, business, and IT architecture disciplines can help address these issues and improve business performance.
A Business Interoperability Framework for Government by Christine StephensonCraig Martin
Despite the focus on eGovernment and the delivery of seamless services to citizens, Government continues to be challenged to deliver business interoperability goals. Interviews with Government Enterprise Architecture stakeholder and a search of the literature suggests why government has failed to achieve seamless service delivery. It appears that interoperability in government is largely a combination of bottom-up, standards or application design based approaches. These result in Information Systems solutions that achieve interoperability within the application and technology domains, but not the business domain. Consequently, the public sector operates as a fractured collection of departments, with much complexity and bureaucracy reducing the effectiveness and efficiency of service delivery. The Business Interoperability Framework (BIF) draws from three disciplines of management practice and applies industry standards. These practice areas are; Enterprise Architecture; Service Oriented Architecture; and Business Process Management. The frameworks, standards/specifications that will be referenced are ISO/IEC 10746 (RM-ODP), TOGAF®, OASIS, UMM, BMM, BPMN and ISO 15000.
Key takeaways:
-- How to achieve top-down business interoperability outcomes
-- An architected framework for business success
-- Methods and tools that can be used to deliver business/IT alignment
Products are created to provide value to customers and are composed of goods and services. Product mapping involves defining relationships between products, product lines, and families to provide visibility into a company's product ecosystem. It also includes cross-mapping products to other business architecture domains like strategies, capabilities, value streams, and business units. Maintaining accurate product mappings requires governance to ensure changes are reflected.
Capability-based Business Model TransformationIlia Bider
1) The document proposes a capability-based approach to modeling organizations and transforming business models. It defines an organization as a recursive structure of capabilities that use resources.
2) A two-step approach is described: 1) uncover the current organizational structure by mapping main and supporting capabilities and their resource dependencies, and 2) transform the structure using patterns that restructure capabilities to implement a new business model.
3) An example case applies the approach to a software company transforming from consulting to a product vendor by identifying its current capabilities, resources, and applying a pattern to add value to an existing capability.
The document defines business architecture as a blueprint that aligns strategic objectives with tactical actions. It outlines the phases an organization must go through to achieve its strategic goals by changing organizational design, systems architecture, and technical architecture. Business architecture is necessary because many projects fail due to unclear requirements and planning. It works by designing strategy, a target operating model, portfolio, and project scoping to successfully deliver projects on time and on budget.
The document outlines Microsoft's Innovation Management Framework, which provides best practices and a technology roadmap for managing innovation. The framework addresses innovation challenges through processes like Envision, Engage, Evolve, Evaluate and Execute. It also discusses the importance of leadership, culture and formalizing innovation processes. Case studies and technologies are presented to illustrate how companies can improve innovation performance. The framework is intended to help companies develop comprehensive strategies for managing innovation.
Business architecture provides a blueprint of an organization that creates a common understanding used to align strategic objectives and tactical demands. It includes models like business models, operating models, value chain models, and capability models. Business architecture aligns strategic objectives and tactical demands by linking execution to strategy through tools like a VMOST model and by associating capabilities to strategy pillars. The benefits of business architecture include linking execution to strategy, providing a 360 degree enterprise view, fostering a common language, better defining the business, enabling reuse of IT assets, and breaking down business and IT silos.
Article discussing key trends in technology and considerations for leaders looking for strategies to achieve competitive advantage without taking years and millions of dollars. Offers up the question of legacy system replacement tradeoffs and alternatives.
The document discusses the need for utilities to shift to a performance-based operating model to adapt to changing market conditions. It outlines characteristics of a performance-based model, including having people ready to compete innovatively, codeblocks that tell the full transaction story, and finance processes focused on business outcomes. It questions if utilities' back-office capabilities are optimized for this new structure.
The document discusses how financial services firms can adapt to a customer-centric world undergoing digital transformation. It outlines several key components for a successful digital transformation strategy, including commitment from top leadership, developing a large-scale customer-led vision, adopting the right organizational structure, building a team of diverse digital leaders, developing a compelling talent strategy, and aligning company culture around innovation. The overall goal is for financial institutions to attract and retain top digital talent that can help reinvent customer experience and compete against new digital disruptors.
Business transformation and the cio roleSalisu Borodo
The document discusses a report by Harvard Business Review Analytic Services on business transformation and the CIO role. It finds that some companies called "Innovation Accelerators" are accelerating business transformation through IT-enabled innovation. These companies share six common traits: 1) innovation leadership starts at the top with the CEO; 2) they take a structured approach to innovation but value speed over perfection; 3) they collaborate across functions and boundaries to gain diverse perspectives; 4) their CIOs focus more on strategic activities; 5) IT actively contributes to innovation; and 6) they invest more in and reward innovation. The report provides examples of how Innovation Accelerators are using technologies like analytics and mobility to transform customer engagement, business
Minefield? Or Greenfield? Challenges and Opportunities for Mid-Tier Sourcing ...Stanton Jones
This document discusses challenges and opportunities for mid-sized companies outsourcing IT systems and business processes. It notes that while outsourcing can provide benefits like cost reductions, increased agility and focus on core competencies, mid-sized companies often lack experience managing outsourcing relationships. The document provides advice on developing a sourcing strategy, understanding existing environments, managing providers, and leveraging outsourcing to enable growth. It also discusses opportunities in cloud computing, business process outsourcing and procurement outsourcing for mid-sized companies.
This ISG white paper assesses recent trends in the mid-tier sourcing marketplace, and basic considerations faced by buyer organizations with
differing levels of outsourcing experience. Risks and opportunities are discussed, and potential sourcing strategy options and key success factors
are outlined.
A Portfolio Strategy To Execute Digital TransformationCapgemini
Senior Executives in pretty much all industries have now elevated digital transformation to the top of their strategic agenda. And they’re right to do so. The risk of falling behind the curve is so great that senior leaders are not debating whether digital technologies will affect their competitive position, but rather how to conduct an effective digital transformation and how fast it can be done.
However, an organization’s determination to get on the front foot with a bold digital strategy often falters when it comes up against the multi-dimensional complexity of the questions it faces and the risks it must manage. Should we prioritize short-term improvements at the expense of potentially larger strategic shifts? How fast will our industry be disrupted: months, years, or even decades? What level of risk are we willing to take on innovative new business models? Can we deliver our digital strategy in house or do we need to partner?
Join In The Race Or Be Left Behind: How ‘Change’ Is Changing The Competitive ...Accenture Insurance
While financial services firms have proven themselves capable of making small changes that increase effectiveness and better manage risk, in today’s competitive environment success hinges on a broader, multi-disciplinary transformation that affects the entire fabric of the industry. “Change fitness”—an organization’s ability to quickly and effectively drive all sorts of change—has become a core competency.
“Join In The Race Or Be Left Behind: How ‘Change’ Is Changing The Competitive Landscape In Financial Services” explains how data analytics can reveal strengths and weaknesses within a financial services firm that, when addressed effectively, can improve change fitness and help drive the kind of large scale change that will sustain competitiveness for the long term.
Next generation IT outsourcing and the global enterprise model (GEM)WGroup
Disruptive technologies such as cloud computing and the “as-a-service” model for software, infrastructure and platforms have led to fundamental changes in how IT services are organized, managed and delivered—whether they are outsourced, insourced or a combination. The reality that IT services can be delivered to anywhere on the globe via the “Cloud” has accelerated the commoditization of IT. Ubiquitous access to IT services has lessened business units’ dependency on internal IT and shifted the IT organization’s prime role from process excellence to technology and service innovation. This article discusses through WGroup's perspective how outsourcing can create value through changing the way business is done.
ESG, Sustainability, Compliance and cognitive sourcingTomas Wiemer
The document discusses how procurement organizations can leverage environmental, social and governance (ESG) principles and cognitive sourcing technologies like artificial intelligence to drive business value creation through more efficient compliance, risk management, and relationship building with suppliers and customers. It outlines how emerging data marketplaces and cognitive sourcing solutions can integrate diverse ESG and regulatory data sources to provide procurement teams new insights and opportunities for optimizing supply chains and enhancing trust.
Article discussing the potential for realignment of insurance strategies to focus on differentiating factors that may or may not include legacy systems replacement. Should legacy systems be outsourced and insurance resources reapplied to strategically unique areas?
- The document discusses a report by Harvard Business Review Analytic Services on how IT-enabled innovation is transforming businesses and the role of the CIO.
- It finds that about a third of surveyed companies are "Innovation Accelerators" that pursue technology-driven business innovation throughout the organization.
- Innovation Accelerators are more likely to see significant changes to how they engage with customers, their business models, products/services, and employee processes over the next three years compared to other companies.
Cisco Systems ranked number one in the Gartner Supply Chain Top 25 for 2021 due to considerable revenue growth, strength in ESG initiatives, and recognition as a supply chain leader. Colgate-Palmolive retained the number two spot by transforming its supply chain through customer segmentation, embracing new business models, and investing in digital capabilities. Johnson & Johnson remained number three due to demonstrating supply chain resilience during the pandemic, making progress on sustainability goals, and leveraging partnerships and 3D printing to address ventilator shortages.
The document discusses how energy has become a strategic issue for businesses and an area that requires a unified strategy approach from senior executives. It outlines how factors such as new technologies, transparency demands, climate change concerns, and demographic shifts are putting pressure on companies to proactively manage their energy use and carbon emissions. However, most companies currently lack the resources and expertise to develop an effective energy strategy. The document introduces a unified approach to energy transformation that can help companies capitalize on energy opportunities and position themselves to thrive in a changing environment.
Keep on SMACking: Taking Social, Mobile, Analytics and Cloud to the Bottom LineCognizant
Winning organizations have programs in place to identify, understand, prioritize and overcome emerging SMAC challenges and have established 'Big Rules' for business and IT leaders to work through governance and technological roadblocks.
Reincarnating traditional infrastructure outsourcingNIIT Technologies
The document summarizes the decline of traditional infrastructure outsourcing models and the rise of next generation outsourcing providers. Specifically:
- Traditional outsourcing is declining due to dissatisfaction with rigid contracts and finger-pointing between vendors. New customers expect more flexibility and agility from providers.
- Next generation providers are adapting to new technologies and customer expectations by offering flexible, pay-per-use models focused on business value over strict service level agreements.
- A case study example shows how one IT provider delivered a mobile solution that improved a manufacturing client's productivity and customer satisfaction through real-time invoice processing.
Gov Business Review : For more than one industry, the pandemic coexisted with and catalyzed societal shifts, galvanizing a method reset. In order to rethink how organizations will be on track, government leaders must tackle these six changes.
Manufacturing Value Streams and Supply ChainsLucas Group
Manufacturers of all sizes now realize that there are profits to be made from an efficient and effective value chain. While the challenges are significant, the benefits of analyzing and improving your value stream are beyond debate.
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2. Contact Information
Dallas
Thomas Flaherty
Senior Partner
214-746-6553
tom.flaherty@booz.com
Houston
Herve Wilcynski
Partner
713-650-4134
herve.wilczynski@booz.com
Donald Dawson
Partner
214-746-6503
donald.dawson@booz.com
McLean, VA
Eric Spiegel
Senior Partner
703-902-3813
eric.spiegel@booz.com
Todd Jirovec
Partner
214-746-6525
todd.jirovec@booz.com
Detroit
Robert Robinson
Partner
248-680-3103
robert.robinson@booz.com
James C. Hendrickson
Partner
703-377-5096
james.hendrickson@booz.com
Joseph Van den Berg
Partner
703-902-3828
joseph.vandenberg@booz.com
Booz & Company
3. EXECUTIVE
SUMMARY
The energy debate—over issues from climate change to energy
sustainability to new generation to smart grid—will change how
people think of energy and of the role of the utility as a provider. Regulators and consumers are spurring demands for new
investments; significant choices must be made, many of which
ultimately will erode shareholder value. While instinct is leading some industry participants down the same worn-out path
to temporary cutbacks, a new crop of “architect CEOs” are
recognizing the need to realign their companies’ capabilities and
performance models with this emerging market, to both meet
these new demands and take advantage of emerging market
opportunities. These emerging capabilities-driven models seek
to optimize overall performance, not necessarily to minimize
costs, by building the operating model around those key capabilities most required for strategic success.
Executives at leading utilities are
reassessing their competitive strengths,
from generation to distribution to
marketing to corporate services, and
engaging in necessary trade-offs to
focus on value-added capabilities
and de-emphasize those that are
easily commoditized. At the same
time, they are addressing underlying
strategic and foundational fissures to
help ensure that their performance
gains last. Removing organizational
snags such as unclear decision rights
Booz & Company
and weak performance management
structures is enabling employees in
every facet of the business to move
quickly and efficiently to support the
CEO’s strategic blueprint.
The utility of the future that emerges
from this program of step transformation will be leaner, more performanceoriented, technically diverse, and able
to drive changes in the market rather
than merely reacting to them.
1
4. THE
PERFORMANCE
LEADERSHIP
CHALLENGE
The changing market is challenging
the way utilities operate, thrusting
new capabilities to the forefront
and creating a permanent need for
fundamental performance improvement. It seems that every facet of
the utility business model is under
siege. The carbon reduction agenda is
ratcheting up pressure on companies
to diversify generation portfolios,
upgrade transmission networks, and
engage consumers in demand-side
management programs. New digital
technologies offer the prospect of an
increasingly intelligent grid and workplace. Customers are becoming more
sophisticated than they have ever
been. And talent requirements are
changing as a massive generational
shift occurs in the workforce.
Taking an innovative approach to
revising ingrained ways of doing
business, and successfully building the
capabilities that will be needed to meet
these challenges, will require executives to develop a refocused vision of
their utility enterprises—one in which
2
new performance models dominate.
They will increasingly strive to differentiate their performance from their
competitors’ by embracing capabilities-driven strategies.
Research and our experience suggest
that long-term leaders in all industries
inevitably excel in a small number
of core capabilities that are aligned
with their strategy. This focus on
capabilities sets them apart from their
peers in terms of shareholder value
performance. The establishment of
capabilities-driven leadership rests
on three fundamental elements that
predict leading performance.
• Strategic clarity and flexibility:
Leaders have clear, concise strategies that are seamlessly translated
into action throughout the organization. They possess superior market
insight, financial management, and
integrated planning capabilities that
allow them to respond to market
change before their peers do.
Booz Company
5. • ifferentiated capabilities: Leaders
D
focus their resources on a small
number of key market-oriented
capabilities that directly support
their strategies and differentiate
them competitively. They do not
make commitments to noncore or
low-value activities.
• trong organizational DNA:
S
Leaders possess responsive governance structures, effective decisionmaking processes, and cultures
that reward performance. They
enable performance with strong
talent, accountability, and incentive
processes.
The presence of these three corporate
characteristics strongly indicates
sustainable performance leadership.
All three are necessary; no single
characteristic is sufficient. Embedding
these performance characteristics in
a company, however, requires more
than traditional, incremental changes
to the business. It demands no less
than a fundamental transformation
of the business model. To be effective,
such a transformation must be
driven by senior management, with
rigorous discipline around its design
and execution. It will, and should,
create discomfort in the organization.
It is not easy, and few achieve it.
But the rewards are substantial.
Operating benefits in the range of
15 to 20 percent of total operation
and maintenance (OM) and
capital spending are typical. But,
most important, the focus on key
capabilities will allow positioning as a
sustainable industry leader over time
and across market cycles.
Although there exists a natural
instinct to manage conservatively
during a downturn, today’s unique
combination of environmental
initiatives, new technologies, and
economic constraints calls for
decisiveness in redefining and
improving performance. Aspiring
leaders will break from the cycle of
budget freezes, layoffs, rate hikes,
and other knee-jerk actions typically
employed to sustain profit during
downturns. Instead, they will create
lasting platforms for change. Those
utilities that get it right will retain
or improve their financial health and
grow. Those that get it wrong will
face declining operating margins,
stranded capacity stemming from CO2
constraints, and potential acquisition
by stronger rivals.
Today’s unique combination of
environmental initiatives, new
technologies, and economic constraints
calls for decisiveness in redefining
and improving performance.
Booz Company
3
6. MARKET
DISRUPTION:
THE TRANS
FORMATION
OF THE
BUSINESS MODEL
Ultimately, the utility of the future
will be a fundamentally different
company—more performanceoriented, more technically diverse,
larger in scale, leaner, and more
analytically driven. The performance
bar will rise materially.
Data, and its application to increasingly intelligent decision making and
network control, will form the foundation of redefined performance in the
utility industry. The industry will be
redefined as we evolve from “dumb”
assets and operations to intelligent
automation and control. This explosion in information will be accompanied by more sophisticated analytic
and decision-making models. Expertise
capabilities, including performance
and financial analysis, will expand to
support predictive and foresight-driven
analytics, allowing greater long-term
capital/asset efficiency, improved
workforce productivity, and increased
reliability and responsiveness to service
events. Asset management is a key
example of an area in which improved
performance data will permit more
accurate and extended asset lifetime
analysis and the eventual transition
from preventive to predictive management cultures.
Leading utilities will come to abandon the traditional one-size-fits-all
The industry will be redefined
as we evolve from “dumb”
assets and operations to intelligent
automation and control.
4
Booz Company
7. business model in favor of organizations that better align and support
their strategies, whether environmental stewardship or nuclear development. The challenge will be defining
the right mix of capabilities and
bringing about the necessary level of
change to effectively support strategic
execution. Success will create a more
nimble, internally aligned organization that effectively blends 21stcentury assets and capabilities with
the ability to anticipate and quickly
respond to shifting priorities and
mandates (see Exhibit 1). Each part
of the business will be redefined:
• The corporate center and corporate
services: Corporate functions will
increasingly shift into the role
of strategic partner as utilities
evolve from a largely operatingoriented management model to a
model characterized by broader
strategic management and analytic
capabilities.
• Generation and supply: Despite
starts and stops, generation will
continue its evolution to a “smart”
market-oriented focus, demanding
an increasing focus on a fundamentals-based portfolio strategy, project
development skills, and into-themarket commercial capabilities.
• Network delivery: Smart technolo
gies will usher in the era of digital
intelligence, creating opportunities
to dramatically improve productivity and the way in which utilities
relate to customers in real time.
• ustomer and retail: The customer
C
organization will increasingly
become a strategic lever for the company, integrating with supply planning and bringing to bear greater
expertise in core marketing, channel
management, and customer service.
Exhibit 1
The Redefined Utility Business Model
Governance Structure
Corporate Center
Corporate Planning
Capital Allocation Asset Management
Strategic Management
Performance Management
Business Services
Facilities
Administration
Human
Resources
Supply
Chain
External
Affairs
Regulatory
Legal
IT
Expertise vs.
“Factory” Clarity
Technology Platform
Integrated Portfolio
Optimization
Generation
Supply
Customer/
Retail
Network
Delivery
Intelligent
Control
Customer as Strategic Lever
Source: Booz Company
Booz Company
5
8. Where Do You Stand?
Utilities executives must ask themselves a few key questions during this
tumultuous period:
General Strategy
• s my company positioned for sustainable, long-term leadership? Is our
I
strategy clear, and is my team committed to its realization?
• re we overemphasizing capabilities that do not support our strategic
A
value proposition?
Generation and Supply
• ave we formulated long-term, scenario-based wholesale market forecasts?
H
• ow accurate are our predictive models in reflecting integrated market
H
dynamics? Can we dynamically assess the interaction of such elements as
carbon, SOx/NoX, and forced renewables?
• re we optimizing our assets into and out of the market as we should—both in
A
the long and the short term?
• re we operating our assets to optimize availability and utilization? Have we
A
thought about redeploying OM and capital spend to different assets based
on our long-term view of their value under the “green” regulatory agenda?
Transmission and Distribution
• o we have the capabilities in-house to expand and maintain transmission at
D
the levels required to support renewables development?
• re we leveraging our operating practices and technologies to realize the level
A
of increased “wrench time” we expect?
• o we have the long-term operating model and skills strategy to support
D
the transition to an increasingly digital grid—and manage on an increasingly
real-time basis?
Customer and Retail
• o we have the resources needed to understand, develop, and market prodD
ucts and solutions to help meet new mandates for energy use?
• re we using technology wherever applicable to leverage predictive analytics
A
to improve reliability?
• o we have a clear view of the trade-offs between near and behind-the-meter
D
smart grid functionality and net smart grid-dependent benefits?
The Corporate Center and Corporate Services
• o we have a tight governance regime with clear decision rights and
D
issue resolution?
• o we have a performance-oriented culture that motivates and rewards
D
the workforce?
• o we have the capacity to analyze performance and plan in an integrated
D
manner?
• Are our transactional functions exploiting scale and efficiency potential?
6
Booz Company
9. DESIGNING A
CAPABILITIESDRIVEN
STRATEGY
they will realize the aspirations of the
blueprint—how they will get from
here to there. The process of creating
the blueprint must be enterprisewide and continuous. The blueprint
should be written in pencil so that
it can be updated and realigned as
the market changes. It can be neither
rigid nor monolithic.
The changes in each of these areas
represent a fundamental transformation of the business rather than simple
incremental performance improvements. Successfully navigating this
transformation begins by understanding your strategy and what it will take
to attain leadership in the future.
It requires utilities to create a new
blueprint for their business, based
on strategically aligned capabilities and performance enablers, and
then rebuild the business in order
to execute that vision (see Exhibit
2). The blueprint should be a clear
articulation of which capabilities will
be emphasized and which will not. It
should include an explicit definition
of the desired level of capability and
performance outcomes, supported by
a well-considered skills and staffing
plan. Finally, utilities must develop
an overall road map outlining how
Companies must look to their strategies to isolate those capabilities with
the greatest potential to create value.
This requires strategic clarity and
specificity. For example, a company
looking to become a green power
generator might need to strengthen
or add capabilities related to the
ability to build and link alternative
generation sites to urban communities, such as generation and transmission development; emission trading
skills to manage the monetization
of renewable energy certificates; and
Exhibit 2
The Building Blocks of Organizational DNA Underpin Strategy and Capabilities
Align
Market Trends
Operating
Model
Operating Capabilities
Performance
Enabling
Change
Management
n
Al
ig
n
Organizational DNA
Information, decision rights,
motivators, and structure enable
the strategy and operating model.
Performance
Culture
Differentiated
Competencies
ig
Design differentiated capabilities
and operating mechanisms to
realize that value proposition.
Business Challenges
Strategy
Al
Strategic Clarity
Define what you want
to be and your
market value proposition.
Culture
Challenges
Source: Booz Company
Booz Company
7
10. regulatory advocacy skills to manage
siting, subsidies, etc. On the other
hand, if its focus is not on renewables
but on demand management, critical
skills might be smart grid application
development and consumer marketing. In all cases, nonstrategic capabilities would be de-emphasized in favor
of the capabilities that better support
the company’s strategy.
A capabilities-driven transformation
is aggressive, setting performance
aspirations that essentially redefine
the performance frontier (see Exhibit
3). It is more than a traditional or
process-oriented change program, in
which gains are incremental, performance aspirations are modest, and
the elements that enable performance
improvement are often missing.
The definition of strategic capabilities,
and particularly the target proficiency
(for example, distinguished, leading,
or just average) of each, forms the
basis of an enterprise-wide capability
model. This model is the foundation
of a unifying business architecture
around which senior management
should have consensus and ownership. It addresses all aspects of the
enterprise—business model structure,
integrated process and technology
architectures, operating practices, and
people and culture—and balances
long-term capability building against
short-term operational requirements.
As with a building’s blueprint, it
establishes the structural requirements
for ultimate execution, ensuring integration and an explicit understanding
of constraints and trade-offs.
Executives are increasingly focusing
on these elements of success.
Business, in general, is in the era of
the architect CEO. It is a role that
requires focus and discipline. Trying
to be all things to all people, shying
away from tough decisions, and
succumbing to internal push-back
are all ingredients of failure. Those
who get it right have established the
architectural foundation for success.
In the end, leaders realize that a poor
strategy executed well is often better
than a great strategy executed poorly.
Exhibit 3
The Future of Performance Will Be Driven by Redefined Capabilities
STR
Higher
ILLU
ATIV
E
Novice
Future
Performance
Frontier
CrossIndustry Leaders
Today
Current Utility
Industry Median
Evolving
Best
Practice
Best
in Class
Groundbreaking
Generation
Development
Laggards
Effectiveness
Asset
Management
Network
Operations
Customer
Interface
Lower
Performance
Management
Higher
Efficiency
Lower
Today
Tomorrow
Source: Booz Company
8
Booz Company
11. ORGANIZATIONAL
DNA: THE
FOUNDATION
THAT
SUSTAINS
PERFORMANCE
While the translation of strategy
into a differentiated capabilities
model is vital—and challenging—it
is not enough. Market success and
performance sustainability rely as
much on underlying organizational
enablers as they do on core capabilities. Organizational enablers include
elements such as governance and decision-making processes, performance
management, and talent management.
These and other elements make up
what we refer to as a company’s
organizational DNA: areas that companies often neglect, yet are the glue
that hold together and empower the
diverse capabilities of the enterprise,
determining whether it is sustainable,
flexible, and responsive or temporary,
inflexible, and static.
The building blocks of organizational
DNA are essentially performance
enablers that support the optimal
functioning of core strategic capabilities by ensuring strong planning
and resource allocation processes,
decision-rights clarity, talent alignment, and long-term—not shortterm—motivation. In essence, these
building blocks create a dynamic governance and management framework
Organizational DNA determines
whether an enterprise is sustainable,
flexible, and responsive or temporary,
inflexible, and static.
Booz Company
9
12. (see Exhibit 4). Enabling performance
is the most difficult aspect of any
performance transformation—and the
easiest to neglect. We break performance enablers down into two types.
• trategic: Governance, management
S
decision-making, and performancemanagement elements that
drive sustainability and market
responsiveness.
• oundational: The people, culture,
F
and technology elements that enable
core differentiated capabilities.
In terms of strategic enablers, our
research shows that the fundamentals
of good execution start with
clarifying decision rights and making
sure information flows where it
needs to go. The four building blocks
of strategic execution—decision
rights, information, structure,
and motivators—are inextricably
linked. If you get decision rights
and information in line, the correct
structure and motivators often
become obvious. Unclear decision
rights not only paralyze decision
making but also impede information
flow, divorce performance from
rewards, and prompt workarounds
that subvert formal reporting lines.
Blocking information results in poor
decisions, limited career development,
Exhibit 4
The Root Causes of Organizational Effectiveness
Decision Rights
Clear
decision authority
Information
Minimized
checks and balances
on decisions
Effective
decision-making
processes
Clear
conflict-resolution
mechanisms
Effective use of metrics to
measure performance
Good vertical
flow of information
Sufficient information
to support effective
decision making
Good horizontal flow
of information
Effective organization
Workforce and
succession planning
Strong links between
performance and rewards
and consequences
Motivators
Performance
differentiation
Effective setting
cascading of
objectives goals
Sufficient use
of nonfinancial
incentives
Few management
layers
Information
sharing forums
mechanisms
Narrow spans
of control
Effective use of structural
integrating mechanisms
• Quick, responsive decision making
• Lower cost
• Harvests opportunities
• Healthy culture
Structure
Source: Booz Company
10
Booz Company
13. and a reinforcement of structural
silos. Organizations with strong
strategic-enabling processes typically
exhibit five key traits.
• veryone has a good idea of the
E
decisions and actions for which he
or she is responsible.
• mportant information about the
I
competitive environment gets to
corporate quickly.
• nce made, decisions are rarely
O
second-guessed.
• nformation flows freely across
I
organizational boundaries.
• ield and line employees usually
F
have the information they need to
understand the bottom-line impact
of day-to-day choices.
Booz Company
Foundational performance enablers
are more familiar but no less difficult
to put in place. Utilities in particular
face a steep challenge. At the
core of foundational performance
enabling is the transformation of
the enterprise from an entitlement
culture to a performance culture.
Leading organizations establish
the right motivators to cultivate
talent. In particular, human capital
capabilities are under great pressure
in the utilities industry to address
not only the growing demand for
broader expertise but also the
generational change looming as the
workforce ages. To this end, they are
incorporating best practices put to use
in other industries, such as proactive
talent management, reinvigorated
training programs, personalized
performance measures and awards,
nonmonetary rewards for exceptional
performers, and the encouragement of
lateral moves and rotations.
While there is no single performance
model that is right for every utility,
it is safe to say that no part of the
business is immune from potentially
radical redefinition. New market
and regulatory requirements, new
technologies, and more sophisticated
customers are all working in tandem
to redefine what utilities do and how
they do it. Every management team
will be challenged to build new skills
and organizational capabilities across
the value chain to meet these new
market challenges—and to tie them
seamlessly into their capability model.
11
14. GENERATION:
A NEW ERA
OF ASSET
DEVELOPMENT
AND
OPTIMIZATION
The utility industry is entering a new
era of aggressive supply build-out and
optimization, characterized by increasing focus on fundamental market
forecasting, regulatory-savvy portfolio
planning, project development, and
market and plant operating optimization (see Exhibit 5). Regardless of the
hesitancy stemming from memories of
the last market boom-bust cycle, current capabilities and tolerance for risk
are largely inadequate. Much more
sophisticated forecasting and decisionmaking capabilities are needed to
insightfully assess how power, gas,
and emission markets interact in an
environment likely to be increasingly
distorted by regulation. Five capability
themes are emerging.
• Market forecasting: Increasing
emphasis on more sophisticated
fundamental market analysis
and more insightful analysis of
interactions and trade-offs.
• ortfolio strategy: A formal, continP
uous re-rationalization of upstream/
downstream assets and contracts,
including MA.
• Generation operating performance:
Increasing focus on core
performance to generate improved
internal cash flows.
• Project development and
management: A decreased
reliance on outsourcing of new
generation capacity development
and the downward management of
contractual and execution risks.
• Asset optimization: An expansion
of capabilities to monetize positions
and create appropriate supply and
banking strategies around energy
commodities, emissions, and various
renewable credits.
Exhibit 5
The Pillars of Wholesale Value Generation
Understanding
the Market
Fundamental
Market Perspective
Making
Choices
Optimize the
Existing Portfolio
Asset
Optimization
Restructure
the Portfolio
Managing
Risk
Portfolio
Growth
Strategy
Extend
the Portfolio
Risk
Management
Operating Leadership
• Commodities
• Customers
• Regulation
• Technology
Porfolio Optimization
Leverage Markets
• Generation optimization—
VOM, availability
• cquisitions/divestitures
A
• Central generation
• nregulated and
U
new market entry
• Capabilities—financial
and operational
• Commercial optimization
and dispatch
• Project management
• Pricing strategies
• Contract types
• Fuel integration
• Hedging
• Capital allocation and
management
• Emission infrastructure
• DG deployment
• Demand data—
aggregation and analysis
• Risk tolerance (VaR)
• Fuel management
• Outage management
• Supply chain
• Transmission
• Energy efficiency/services
• overnance
G
and measurement
• Proprietary trading;
e.g., emissions
Source: Booz Company
12
Booz Company
15. Portfolio strategy decisions, in
particular, will have large impacts
on shareholder value and prove
particularly complex. The market
uncertainty underlying climate
change, pressures in the commodity
fuel market, and new generation and
demand-management technologies
will put an increasing premium
on integrated decision making to
achieve supply diversity and balance.
Utilities will need to more insightfully
assess which assets to build, sell,
and maintain in generation and
transmission, as well as on the
demand side. This process will have
to advance beyond physical integrated
resource planning to more integrated,
scenario-based portfolio planning
based on total economic optimization.
Crafting a winning strategy will
require a much more dynamic and
fundamentals-driven approach to economic optimization than is typically
available from traditional deterministic, dispatch-oriented wholesale
models. In addition, utilities will have
to rebuild their ability to oversee
large-scale capital projects in order to
manage execution risk and make the
best use of project financing.
Perhaps somewhat controversially,
we anticipate an increasing emphasis
on commercially oriented asset
optimization capabilities, such as
limited proprietary trading, fuel
hedging, and wholesale origination,
to extract additional value from the
supply portfolio. Despite the fears
of the merchant years, most utilities
require a base level of merchant
commercial capabilities to eliminate
the “leakage” of asset value into and
out of the market and to monetize
increasingly fungible emissions and
renewables credits that will be trading
in the market.
With mounting pressure on earnings,
operating performance will also
regain prominence. Generation
is the single biggest expenditure
for a typical utility, eating up
more than half of all OM and
capital spending budgets. There is
significant operational variability
across and within fleets; best
practice transference in areas
such as reliability analysis, outage
planning, heat rate optimization,
and the increased use of predictive
maintenance can trim OM and
capital spending by 5 to 15 percent.
Utilities will need to more
insightfully assess which assets
to build, sell, and maintain in
generation and transmission,
as well as on the demand side.
Booz Company
13
16. NETWORK
DELIVERY:
THE EMERGENCE
OF THE
DIGITAL,
INTELLIGENT
NETWORK
Utilities spend in excess of US$35
billion and use more than 120,000
skilled employees and contractors to
expand, replace, and maintain their
delivery infrastructure each year.
These amounts are poised to increase
rapidly as smart grid functionality
extends the capabilities of backbone
advanced metering (AMI) and distribution automation (DA) infrastructure. Regardless of the actual pace
of this deployment, the core delivery
business is reaching an inflection point
that will transform how utilities leverage and manage the distribution grid.
The digitization of the grid will
radically redefine how utilities
14
operate and the capabilities needed.
One of the most difficult management challenges will be determining
where—and where not—to deploy
new infrastructure and technology.
The temptation to overinvest in the
smart grid is great. Properly assessing the costs and benefits requires a
comprehensive view of how utilities
will operate the network—and how
the impact of benefit duplication and
cannibalization lowers the point of
diminishing returns.
The redefined transmission and distribution business will be characterized
by increasingly predictive capabilities,
as well as improved real-time informa-
Booz Company
17. tion and decision tools (see Exhibit 6).
The opportunity is substantial and will
demand the development or redefinition of capabilities in five key areas.
• sset management: Asset manageA
ment will increasingly be differentiated from field operations, with the
asset management capability evolving to an operating leadership role.
• Process ownership: Increasing
end-to-end process ownership
across geographic organizations
will ensure standardization and best
practice consistency.
• Predictive maintenance: Life
cycle asset management will drive
improved resource targeting using
predictive maintenance practices,
rather than preventive practices.
• The intelligent worker: Better real
time management of workflow will
increase productive wrench time by
as much as 20 percent.
• Customer-aligned service levels:
Field responsiveness will be more
closely tailored to customer expectations as utilities make better use
of customer insights and abandon
one-size-fits-all service models.
Exhibit 6
The Utility of the Future Is Intelligent and Integrated
Tomorrow
Intelligent
Integrated
Optimization
• eal-time monitoring
R
and control
• erformance optimization
P
analytics
Automated,
Integrated
Full
Integration
Enabling
Operations
Excellence
Advanced,
Intelligent
• Self-healing/self-response
• eamless workforce
S
automation
Infrastructure
• ustomer integration and
C
information
• Predictive tools
Enhanced
Core
Measurement
Commitments
External
Stakeholders
• Labor productivity
• Back-office efficiency
Culture
• “Simple” asset management
2008
• Predictive maintenance
• Asset management
• Seamless workforce
• Sensing seeing
• Digital self-configuration/
self-healing
• ntelligent demand-side
I
management
• Quality vs. cost incentives
• Rate decoupling
• Performance cultures
• ynamic personal
D
opportunities
2020+
Time
Source: Booz Company
Booz Company
15
18. CUSTOMER
AND RETAIL:
CUSTOMER
INSIGHT
AND A
MARKETING
RENAISSANCE
Demand-side mandates and the compelling economics of many demandmanagement options will accelerate
the transformation of utilities’ traditional customer-service capabilities
into those more akin to cross-industry
consumer and industrial marketing
organizations. Historically, utilities
have treated all customers in a similar
fashion, characterized by largely
undifferentiated service, few channels,
little customer-specific information,
weak integration with field service
fulfillment, and limited billing and
collection options. Utilities’ forays
into energy services, which have been
mixed at best, highlight the challenge.
Fully realizing demand-management
potential will require the development
of a sophisticated customer marketing
capability (see Exhibit 7). Its importance in the organization will rise,
suggesting the more frequent appointment of chief marketing officers who
will guide marketing and integrate
customer service as a tool of the marketing mission. A number of capability themes will come to the forefront.
Exhibit 7
Customer and Market Operating Models
Performance/Risk
Extension
Customer/Utility Alignment
Franchise
Redefinition/Evolution
Symbiotic
Relationship
Tailored
Solution
Provider
Technology
Innovator
Meets Regulatory
Service Levels
Customer
Centricity
“Pull”
vs.
“Push”
Customer
Awareness
Franchise
Fulfillment
Satisfies
Regulatory
Mandates
Old World
ILLU
Current Model
Emerging World
STR
ATIV
E
Market-Driven Capability Development Needs
Minor (Business
as Usual)
Moderate
(Improve/evolve)
Significant
(Redefine)
• arket/customer strategy
M
• Product service development
• Supply Demand Management
• Marketing execution
• Channel management
• Customer care
• Operations management
Source: Booz Company
16
Booz Company
19. • ustomer insight: Utilities will
C
place an increasing emphasis on
customer knowledge and insight,
beyond the demographic and “firmographic” data typically available
today. They will focus on segmenting buyers by value-based segments
to better understand behavioral
motivation and preference triggers.
• roduct development and
P
management: Utilities will develop
the necessary organization and
resources to create and manage their
product offerings, as well as more
effective pricing and sales strategies
and tactics.
• Marketing effectiveness: Utilities
will increase the diversity and
sophistication of their channels,
including greater use of low-cost
channels, outbound marketing, and
alliance networks.
• ustomer-oriented service: Core
C
customer service will be more
extensively integrated with broader
marketing strategies via crossselling, real-time access to customer
information, and integration with
work scheduling.
In the end, the customer organization
will evolve into a marketing organization, elevating its position within the
utility as a distinct business segment
alongside generation and network
delivery. For years, leading utilities and
energy retailers have been adapting
cross-industry lessons to refine the
customer experience and improve marketing effectiveness. That practice is
only going to expand, and in the notso-distant future, customer marketing
capabilities will become crucial to a
company’s ability to be competitive.
• Integration of marketing and
resource planning: Demand
management will be fully integrated
into resource scenario planning as
utilities abandon the siloed “throw
it over the wall” mentality.
The marketing organization will
elevate its position within the utility as
a distinct business segment alongside
generation and network delivery.
Booz Company
17
20. CORPORATE
SERVICES:
EVOLUTION
TO STRATEGIC
PARTNER
18
As discussed, a fundamental
requirement for sustainable,
leading performance is strong
organizational DNA and associated
performance enablers. Clear roles
and responsibilities, insightful and
responsive decision making, strong
people processes, and the attributes
of a performance-oriented culture are
all important. Utilities, in general,
have historically not placed significant
emphasis on either their strategic
or their foundational performance
enablers. To meet the challenges of
the changing market, however, it is
imperative to break this historical
tendency. To date, the industry has
been relatively slow to respond to the
need for this change in focus.
Corporate services will increasingly
transform from a transactional service
provider to a strategic partner—one
focused on performance analysis and
decision support. The measure of
performance will be how well senior
corporate center executives team up
with the CEO and line organizations
to provide deeper business insight,
more comprehensive strategy and
policy development, and faster,
better-integrated decision making.
The objective will be to shift the
focus from transacting to strategy,
Booz Company
21. increasing corporate services’ focus to
approximately three-quarters decision
support and performance analysis, as
opposed to 20 to 30 percent today.
strategic and expertise activities from
transactional or “factory” activities,
and the adoption of shared-services
management techniques (see Exhibit
8). Corporate services will use simple
service-level agreements (SLAs) to
define their relationships with users,
and will use active demand management and clear cost and pricing sig-
Aspiring leaders will more aggressively leverage leading shared-services
concepts, including end-to-end
process ownership, the separation of
Exhibit 8
Defining the Shared-Services Organization
Strategic Manager Relationship
Sourcing Relationship
Corporate
Center/Process
Owners
Defines
Business
Units/Users
Playing Field between
Buyer Clients and SS
Shared
Services
Service Provider Relationship
Source: Booz Company
Booz Company
19
22. nals to promote transparent business
trade-offs and a better alignment of
demand with economic need. Leading
corporate services organizations have
strong capabilities in eight key areas.
• ustomer orientation: Corporate
C
services should treat business units
like customers, providing them with
the service levels they want, not the
levels the staff thinks they need.
• overnance: Corporate services
G
should be managed like a business,
as opposed to a fixed cost. It should
be an independent unit with senior
executive leadership and clear endto-end process ownership.
• emand management: Corporate
D
services should actively drive demand
destruction, with internal client
demand determining the size of the
function rather than vice versa.
• kill segmentation: There must be
S
a clear delineation between routine,
repeatable factory functions and
expertise functions.
• ervice management: Service levels
S
should be actively managed and
guided with limited, focused SLAs;
performance accountability should
be maintained through key performance indicators and reporting.
• rice transparency: Each service
P
should have its own price, with
clients determining how much service they want at that price; pricing
provides insight into service cost
drivers.
• Efficient delivery: The services foot
print should be consolidated to raise
utilization without service erosion;
scalable delivery models support
flexibility and growth.
• kill-based workforce: Greater
S
emphasis should be placed on analytic
skills in the workforce, with workers
interpreting and assessing rather than
processing and controlling.
Corporate services should be
managed like a business,
as opposed to a fixed cost.
20
Booz Company
23. DEVELOPING
THE TRANSFORMATION
VISION
Utilities need to undergo a radical
shift in the way they think about
performance if they are to fundamentally redefine the standard of competitive leadership in the industry.
Most companies, however, have
addressed this need with narrow,
incremental improvement programs.
They tweak the organization within
a weak framework for the business
and operating model, thus providing
little lasting change. These traditional
approaches focus on historical benchmarking and incremental process
and organizational change. True and
sustainable success, however, depends
on a comprehensive, integrated,
and systematic alignment of the
organization around strategy, capabilities, and performance-enabling
organizational DNA. Failure to
develop any one of these elements
can be fatal in the long term.
Skeptics will say that predicting the
future is an exercise in uncertainty,
while the underlying pursuit of
performance leadership is timeless. In
principle, this is true. Transformation
is not new—but a capabilities-based
approach to redefining performance,
with an eye to the current climate in
the industry and a basis of educated
assumptions about its development,
is a radical innovation (see Exhibit
9). It is not easy. While management
theory has consistently addressed the
question of managing change, most
change programs, large and small,
fail to reach expectations—or fail to
sustain the gains made. With the challenge only getting tougher, utilities
will need to move beyond what they
have tried in the past.
Exhibit 9
Elements of Successful Performance Transformation
Traditional Change Programs
Transformation
• elegated to middle management
D
• ed by committed, active senior executives
L
• ncremental cost reduction and/or
I
revenue enhancement—point ideas
• ocused on lasting, step-changes
F
in value creation—are visionary
• eries of initiatives—many conflicting,
S
disconnected; no unifying vision
• Comprehensive integrated programs—
guided by clear blueprints and action plans
• Decision by committee—no deciders
• ossess tight governance/clear decision making
P
and issue resolution processes
• Hidden from organization—speculation rampant
• hange imposed too quickly—consequences
C
not anticipated, not proactively managed
• ocus narrowly on
F
performance—for example, cost
• Over-communicate
• anage change—pace it to the organization’s
M
capacity to absorb change
• Address all elements of organization performance
Source: Booz Company
Booz Company
21