Utilities

Sector Perspectives

Corven | Utilities

Achieving frontier performance through the effective management of change

Utilities are facing their biggest challenges since post World War II reconstruction. The sector is struggling to compete for the capital and resources required to deliver unprecedented levels of investment at a time of increased regulatory scrutiny, market reforms and technology innovation. Current estimates for the UK alone indicate the need for more than 200bn of investment by 2025. Such investment relies on delivering attractive returns at a time of volatile economic growth and increased regulatory pressure for shareholders to accept a lower cost of capital. To meet these challenges, utilities must explore every opportunity to drive down costs, improve customer service and find innovative and safer ways of working. This requires a fundamental shift in thinking on how organisations can create value and then engage their management, workforce and partners to ensure excellent implementation. The next five years will shape the industry for decades to come. The ability to manage change successfully over this period will be one of the chief determinants of who will be the frontier performers of the future.

Building and leading an efficient and effective workforce

Challenges such as an ageing skilled workforce, the rapid adoption of new technologies, and more demanding service standards mean utilities need new approaches for developing and managing their workforce capacity. Many initiatives, whether the introduction of improved scheduling and workforce management systems, or the outsourcing of work to contractors, fail to deliver their intended benefits. Corvens research has shown

this failure is not due to any underlying flaws in the business models or technologies adopted. Instead, it results from a failure to address the underlying emotional and political aspects of change. After a period of initial success, this leads to both front line staff and management becoming increasingly demoralised, as performance is not sustained. Corven takes a more holistic approach to improving workforce productivity, engaging the people who do the work in designing the change so that they have a strong sense of ownership for successful implementation. Change is sustained by equipping senior and front line managers with the skills and

tools to tell compelling stories, manage difficult conversations and drive performance. For one client we turned round a failing workforce planning technology implementation to deliver significant, lasting behavioural change. With no increase in staffing, performance improved by between 30-95% on all key indicators; overdue work fell by 69%, direct labour utilisation increased by 31% and outstanding mandatory work fell by 87%.

desired outcomes. Engineers need to recognise the importance of accurate and timely asset data, asset managers need to ensure schemes are developed based on robust unit costs and procurement managers need to seek enhanced value from new suppliers. We have used the Corven Operational Excellence Network to provide insights on how to apply unit cost methodologies, business planning and forecasting techniques used in the manufacturing and oil & gas sectors. Applying these techniques has helped drive efficiencies worth tens of millions of pounds and support regulatory submissions.

Reducing risk and improving safety performance

Utilities are increasingly aware of their responsibilities to protect employees, contractors and the general public. It is widely recognised that personal and process safety incidents can have a devastating effect on corporate reputations and shareholder value. At a time of rising costs to consumers and major capital programmes, trust in utility providers is now as important an asset as their physical infrastructure. Much progress has been made in improving customer service, safety and environmental performance in recent years. However, the resultant compliance issues remain a major issue. For example, UK water companies paid out 130m in fines and rebates during the last regulatory period and several high profile risk related cases continue to impact both electricity and gas distributors. Corvens experience is that these failings in compliance and safety can often be traced back to behavioural and leadership issues rather than processes or controls. We help our clients to align their risk management approach and leadership behaviours to realise quantifiable improvements. Corven recently developed a programme for all 27,000 employees of a major UK utility which halved Lost Time Injury Frequency from 0.65 to 0.35 and was widely recognised as best practice for how to engage and to motivate a workforce.

Optimising asset investment and delivery

The scale of investment facing utilities is unprecedented with some major players needing to spend over 6,000 every minute to meet their proposed capital plans over the next two decades. Corven works with asset management, capital delivery and procurement teams to develop and execute effective contracting and procurement strategies. Through addressing all areas of asset policies, specifications, contract models and demand management, we have been able to develop factbased sourcing plans that have secured annual savings in excess of 100m. Corven has helped utilities open up their supply base to new low cost country sources, for not only commodity items, but also high value engineering systems such as switchgear and transformers. We engage both the operational and strategic engineering communities to understand the barriers they may inadvertently present to new suppliers in terms of standards and specifications. As well as delivering savings of at least 15% in major plant items, we have helped mitigate the financial, operational and technical risks of integrating these new suppliers into existing delivery models, including the use of alliances and new prime and tier two contractors.

Meeting tougher regulatory targets

In a context of rising energy and water costs and new forms of competition, the sector has seen a more aggressive stance from regulators in recent price control reviews. Regulation across all utilities is moving to an output-based approach, focussing on customer satisfaction, unit costs and service stability. As pressure for efficient spending increases, companies will need to assess the trade-offs between revenue and capital expenditure and flex their delivery plans accordingly. For many, this requires a more joined-up approach to business planning and more robust methodologies for demonstrating capital and operational efficiencies. Those who are unable to manage the uncertainty of their workload and demonstrate value for money will become increasingly marginalised. Our experience is that successfully transitioning to this new world requires a significant shift in mindsets. Managers will be judged not only on delivery of the capital plan but also on achieving the

Why Corven?
Corvens Utilities Practice has an unrivalled track record in delivering strategic change initiatives that both drive improved performance and build the capability to manage and sustain ongoing change. Our deep industry expertise gained in both the UK and North America, covers the water, electricity, gas and rail sectors, and spans the whole spectrum from generation and transmission through to distribution and retail.

Working with organisations such as National Grid, Thames Water, E.ON, EDF and Network Rail, we have consistently demonstrated why we are the market leaders in strategic change management. Our approach is to work in partnership with our clients using small experienced teams and proven tools and techniques. This pragmatic and tailored approach is at the core of our long term client relationships.

The Corven Group

Corven is an integrated group of businesses all focussed on creating value from strategic change. We work with the largest companies on their most important management issues, delivering long-term results and building sustainable capability. We operate through the following divisions: Corven Consulting: a global management consulting firm with offices in the UK and North America Corven Networks: an exclusive network of leaders committed to fostering innovation, growth, leadership and operational excellence Corven Ventures: a UK-based activist principal finance investor Working as a single firm, we integrate these capabilities to deliver greater value to our clients and investments. This allows us to offer innovative and tailored solutions that we believe in.

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