Case study of Xcel Energy

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1. Name of organization: Xcel Energy
URL: www.xcelenergy.com
Collaboration partners:
IBM www.ibm.com ,
Indus www.ventyx.com,
Itron www.itron.com ,
SPL WorldGroup ,
Mercury www.kobian.com

2. Business scenario/situation before collaborating
For utilities and businesses in general, the challenge to do more with less is greater than ever. Capital is reduced; business costs are rising; government regulation and the demand for better customer service are increasing. In few places one would find greater evidence of this than in the utility industry, which is searching for new ways to meet these challenges in a post-deregulatory world. Many utilities have adopted a "back-to-basics" strategy, which often means fewer opportunities for adding revenue.
Business Needs for Xcel Energy:

• To deliver added shareholder value by leveraging technology to optimize core processes, develop new ones and increase customer responsiveness. In the process, be able to meet Wall Street expectations and attract investor dollars.
• Xcel Energy is expected to meet the requirements of The Energy Policy Act of 2005, which asks utilities to find efficiencies in operations and increase reliability and improve customer service.
• Another major challenge Xcel Energy faces is that many of its knowledge workers are eligible for retirement in the next five to eight years, and the company needs to lessen the blow of that upcoming workforce shift
• Increase the pace of technology adoption across the company

3. Innovation strategy
In January 2004, Xcel Energy brought together its leading technology partners to create the Utility Innovations initiative. The initiative was a visionary project that leveraged the power of partnership and collaboration to drive innovation. The motivation for the collaborative innovation was to transform its business processes into an industry leadership position, increasing customer satisfaction while providing reliable power at a low cost.
Xcel Energy understood that it could create new value for the company, its employees, partners and customers by utilizing the minds and efforts of many, rather than relying on a business-as-usual approach of attempting to find new solutions on its own. It admired and recognized its partners for their tremendous intellectual capital, commitment towards client as well as the utility industry and the much needed funds to create collective value for all the stake holders.
By combining individual partner company strengths in hardware, software and utility industry expertise, Xcel Energy aims to develop significant synergies and advancements to benefit utility customers. Taking the best ideas of diverse companies, Utility Innovations looks for solutions to help transform business by improving operations and customer satisfaction through enhanced system reliability and efficiencies in cost structure.

Methodology

The UI Program Approach

• CEO-driven initiative
  
• One year rotational Executive Director
  
• Top-down and bottom-up project proposals
  
• Partner-retained Intellectual Property, joint investment
  
• Invitation to challenge Status-quo
  
• Multiple Points of Views
  
• Acceptance of risk of failure
  
• Focus on difficult problems
  
• Closed meetings focused on confidential topics, e.g. strategy, growth opportunities, management challenges
  

While getting started, rather than just discussing theoretical possibilities, the Utility Innovations team spent three months in 2004 testing innovative processes in an actual Xcel Energy service area in Arvada, Colorado. Focus was on studying real world improvements, operating in real time, to serve real customers.
All the program prototypes were selected from ideas submitted by Xcel Energy employees or by the partners themselves, reflecting a company culture that values employee experience and the practical application of technology investments with targeted business improvement objectives. Xcel Energy asked that the team only deliver solutions that could be deployed using rapid application development techniques, because it was believed by the Xcel management that “To achieve innovation, speed is an absolute prerequisite. If one doesn’t apply new technology in a reasonably timely fashion, the technology moves on and one loses the competitive advantage.”

4. Summary description and milestones'

Joining Xcel Energy in the Utility Innovations partnership:
• IBM, the provider of deep industry expertise, broad-base technology and software solutions, as well as project management and systems integration;
• Indus, the provider of Indus Asset Suite, the company's work management and supply chain system, and also Indus Service Suite, which provides resource optimization, scheduling and mobility solutions;
• Itron, the provider of meters and meter reading automation in Xcel Energy South, as well as the provider of software applications in meter data management, billing and asset management areas;
• SPL WorldGroup, the provider of Outage Management (OMS) and Distribution Management (DMS) systems that leverage existing technology for improved outage response and restoration time, operational efficiency and safety precautions for utility workers and the public;
• Mercury, the provider of IT Governance Center software, which monitors IT demand and optimizes related spending to improve business performance and drive competitive advantage.
The so- called microcosm focused on using technology to:

• Automatically monitor the condition of grid components;
• Improve outage detection and verification;
• Improve mobile communication with field crews;
• Improve deployment of crews to smooth workflow and expedite service restoration;
• Improve communication with customers;
• Reduce the possibility of energy theft, minimizing a cost borne by customers.
  

A large amount of data is amassed and analyzed on an ongoing basis. Utility Innovations project gives partners access to a real-world laboratorywhich helps each partner in making better product development decisions; encourages teamwork that transcends competitive boundaries.

One of the first initiatives, workforce optimization, is being planned at Xcel Energy service centers. With its emphasis on system reliability through information technology, Utility Innovations will help Xcel Energy meet provisions of The Energy Policy Act of 2005. This set of federal regulations asks utilities to develop innovative technologies, find efficiencies in operations, increase reliability and improve customer service.
Today, the initiative has evolved into an Xcel Energy program staffed by project managers who continue to work with Utility Innovations partners. Some of the participants have changed as new companies have joined to begin work on different initiatives. Other partners, their work complete, have left.

5. Types of Collaborative Innovation

• Services
  
• Operational Processes
  

6. Participants in collaboration Select all that apply

IBM (ISV, Consultant, technology partner)
Indus (Consultant, technology partner)
Itron (ISV, supplier, technology partner)
SPL WorldGroup (Consultant, technology partner)
Mercury (ISV)
Partnership open to include more members

7. Describe the degree to which collaboration was “open” vs closed.

The collaboration partners retained Intellectual Property created in the process

8. How was technology an enabler? If applicable, describe the technology and its role in this collaboration.

Collaboration with the technology partners was key to the best technology being leveraged to attain desired business results. Moreover, joint initiatives necessitated open standards and minimizing integration challenges.

Technology is acting as an enabler across issues here like Business Integration, Business Intelligence, Business Performance Transformation, Business Process Management, Data Warehouse, IT infrastructure and Knowledge Management

9. Difficulties encountered and how they were resolved

• Issues related to internal alignment
  

o To be included

• Issues related to management across external boundaries
  

o To bring all the partners together to contribute and start from the basics
o Acknowledging and appreciating unique value each partner brought to the table while ensuring partner blended in the group well and remained committed to collective effort
o Funding pattern akin to Venture Capital investment for projects
o Selecting projects which are the best for creation of long term financial gains

• Challenges faced in winning and sustaining organizational commitment
  

o To be included

10. Benefits achieved

-Tangible or quantitative

During the Utility Innovations pilot at the Arvada Service Center, Xcel Energy saw marked productivity improvements in its work crews and assets. The utility was able to reduce overtime situations and reliance on contract labor to meet the workload demand. Based on the results in the pilot related to design, construction, maintenance and inspection activities, Xcel Energy can realize:

• Increase in field distribution design work productivity by about 26 percent
• Increase in construction productivity by 35 percent
• Reduce unnecessary crew trips by approximately 50 to 80 percent
• Reduce complaints by approximately 19 percent
• Productivity improvement in maintenance and inspections by 10 percent
  

-Intangible or qualitative

Improvements in:

• Outage detection, restoration notification, distribution asset management and revenue assurance, operational efficiency, cost reduction, meeting current and future goals with fewer resources, deployment of new supporting technologies and getting the most return out of their existing base of assets
  
• Meeting provisions of The Energy Policy Act of 2005 and gain compliance with other federal regulations
  

11. Key learnings and best practices

• It really helps if one keeps an open mind and is willing to both learn and unlearn.
  
• It’s okay if “You did not know what you did not know”
  

The Utility Innovation has been recognized as an industry best practice which leverages collaboration between business partners to generate value for all the stake holders and works towards creating a better run business of the future fuelled by sustained collective effort.

12. Other information

As the 2005 projects were completed, Utility Innovations evolved once again as new initiatives were selected for 2006. As it is a best practice in the industry for aligning information technology investments with targeted business improvement objectives, Utility Innovations is poised to continue to add value for its partners and customers. There are attempts to now expand the collaboration ecosystem for innovation in days to come.

13. References

www.xcelenergy.com
www.itron.com/pages/xcelenergyui.asp
www.indus.com/pdf/utility-innovations-optimizing-work.pdf
www.eei.org/meetings/nonav_2006-06-18-jh/SchurrEEI06Conferencefinal.pdf
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