6.1.a. ERMUSR 11-18-2014 - Laserfiche WebLink

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Effective Utility Model 3-5 Year Markets and Geography BUSINESS MODEL Financial Core Functions(D,T,G) Performance Targets Customers&Regulators REVENUES Core Business Process OPERATING MODEL Operational infrastructure and technology People&Culture Management COSTS Organizational structure, governance and risk controls Measures information and key 9 & performance indications Incentives and dashboards t Transformation and Your Core Business An effective transformation program typically starts by articulating leadership's 3-5 year financial and performance Key to a successful strategy is to identify, aspirations. This foundation allows for a discussion of, analyze, and focus on the key elements of and ultimately agreement on, the trade-offs between yoi_ir core hi ISineSS growth, cost efficiency, profitability, available capital, An example may highlight some of the issues. return parameters and risk appetite as well as implications If you identify energy delivery as a key function of your for the business and operating models. business, it is important to identify the separate the The "business model" drives the essence of how a core and non core elements of this business. For many company will make money in the business-what the target companies, this function faces mounting challenges due geographic market footprint should be, what functions will to aging and obsolete infrastructure, increasing distributed constitute the core assets (i.e., generation, distribution and/ and intermittent generation sources, outdated rate or transmission), who are the key customers, regulators making paradigms, and increasing customer expectations. and other stakeholders, degree of integration across the How do you refresh your definition of core business to value chain (if any), and any unique core asset business now include investments in services and infrastructure extensions (i.e., energy storage, renewable energy, oil & needed to enable new forms of energy supply emerging gas production, and/or gas transmission)that will be invest- off the traditional electric grid? Further, how do you go ed in and/or developed.These choices will be articulated, about differentiating your core operation activites from evaluated and prioritized by materiality and criticality. noncore activities. For example, how much of customer As the business model options crystallize, the focus turns service operations is noncore and can be outsourced to to optimization. Each of the operating model elements providers with greater economies of scale? is assessed to identify initiatives that can be executed to In KPMG's experience, a successful transformation begins optimize the performance of the business. For example, by taking a fresh look at your business starting with a the need to transform an aging delivery business originally review of your strategy, followed by designing aligned set up to deliver energy from mass scale power plants business and operating models and finishing with into a more agile business which enables a multitude of developing the mechanisms needed to support ongoing energy sources and services requires a realignment of execution. The framework we use to support clients in key processes, rationalization of technologies, this approach is the nine-lever framework, which reassessment of risk, and robust change management rigorously links the strategy through execution, thought plans. Such operating model initiatives are captured in a process and design process. KPMG The Agile Utility-Forces at Work Changing the Industry in North America 8 106