A Midwest US electric & gas utility serving over 850,000 customers.
The company was looking to implement a software tool to help them accomplish several key outcomes in determining their optimal investment portfolio. These outcomes included:
- Achieving the highest value based on company strategy,
- Making the project evaluation process across the utility standard and more robust, and
- Increasing transparency of project valuations and the resulting optimized portfolio.
The short term goal was a common process and platform across all business units with individual business unit optimization – determining the project mix for each business unit would be done separately. The slightly longer term goal was to create one utility-wide budget, optimizing projects across business units as one portfolio.
“As a result of our Phase 2 effort, we felt we achieved around a 90% objectivity level across business units. The Phase 3 project helped improve that even further to above a 90% objectivity level.”
– Director, Asset Management
Phase 1 Approach
UMS Group was engaged to implement the Spend Optimization Suite (SOS) across all business units (Electric Distribution, Transmission, Generation, Fleet, Facilities, and IT) in order to have it operational in time to use it for that years process to set the following years budget. The UMS Group team worked with a core team and executive leadership to fine tune the business value framework (company Strategic Objectives and Success Criteria, or KPIs, and their relative priorities), and then engaged key representatives from each business unit to define the company-specific methodologies for evaluating projects and programs in terms of value and risk. Once UMS Group configured the SOS according to these specifications, the company was able to run tests and score sample projects, making tweaks where needed and verifying the results. The final stage was user and administrator training, setting the company up to begin scoring projects right away.
Phase 1 Outcome
The involved and committed core team lent a consistent presence and credibility to the process, helping with change management and getting the end user base trained very quickly. The company scored all their projects and ran various optimization scenarios to set the following years budget. Through this first cycle, users were able to gain comfort with the application and results, starting to embed the SOS in the company process.
Phase 2 Approach
After the first cycle, the company was ready to pursue the next goal of optimizing across the utility. There were some lessons learned from the first cycle, both in terms of process and areas they identified for scoring adjustments based on looking at the results for the different business units. UMS Group was engaged to further analyze the data, make recommendations, and implement changes to achieve consistent and fair scoring across all the business units. The process involved several iterations of deep scoring analysis, results analysis, and adjustment, as well as adding new scoring measures to account for project types / factors that weren’t getting as much credit as deserved.
Note: The above represent example analyses on individual scoring measure and portfolio levels.
Phase 2 Outcome
The teams from each business unit gained a significant level of comfort from the beginning of the process to the end, seeing the relative scores across business units move from large gaps to a fairly even distribution. The company felt they were at a “90% objectivity” level across business units, and would greatly benefit from this process being run one more time after their first cycle of cross-business unit optimization. In addition, a new business unit was incorporated into the process (for which scoring was added and also analyzed), and scoring expanded for an existing business unit for improved analysis. Through this process, they also added a new cost data collection features, eliminating an older database tool that was a duplicate entry point, thereby streamlining the process for users. The development of custom reports also sped up analysis time and preparation for results presentation/communication.
Phase 3 Approach
Prior to the following budget cycle, UMS Group was again engaged to run a “Phase 3” analysis cycle, as company investment planning leadership felt that the business unit investment scoring could be further refined. They decided to move ahead with this third phase to get >90% objectivity across business units and, in particular, further improve the balance of risk of deferral scoring across business units.
A 2-pronged approach was employed:
- UMS Group ran score distribution analyses across each individual Success Criteria to see if there were any areas where it was too easy (or too hard) to get a high consequence score and identify areas for adjustment, with input from company core business unit representatives.
- UMS Group and company core business unit representatives performed optimization analyses across the business units to see the profile of risk scores across the Strategic Objectives and where the driving risk scores were coming from, determining any recommended adjustments.
Phase 3 Approach
As a result of this analysis and implementation of identified adjustments, an even greater level of investment scoring and analysis comfort was achieved across existing business units. Company investment planning and optimization teams now feel fully confident that the scoring questions and calculations accurately represent “real world” expectations and effectively produce the optimal combination of investments to fund across all of the business units.
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