Transcript eBusiness Implementation in a “Bricks & Mortar” Company

eBusiness Implementation in a “Bricks &
Mortar” Company.
A Progress Report on BC Gas Inc.
November 17, 2000
Old Economy in Major Transition
Utility sector in the throes of complex
deregulation/restructuring
Energy commodities under supply/demand pressure
The organizational struggle to adopt and adapt to
e-Economy performance measurements
Earnings-per-share commitments to shareholders
versus
cost and benefit of a leap-of-faith
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Convergence Towards “Bricks & Clicks”
Today’s
Focus
.com
Bricks & Mortar

BC Gas Inc.
Revenues - $1B in 1999
Natural Gas Distribution
Petroleum Transportation
 Other - Non-regulated businesses


“Bricks & Clicks ”
1700 Employees
BC and Alberta
 1999 Earnings per share - $ 2.12


3
Overall Trends in Gas Utility Industry
“Success” of deregulation questionable - consumers do not understand
energy price fluctuations - “sticker shock” may pressure governments
to abandon deregulation
81% of natural gas consumes in the US can now be purchased from
sources other than the local distribution utility
Deregulation is accelerating pace of mergers, acquisitions and joint
ventures
As the cost of natural gas rises the Canadian Arctic is primary source (Aboriginal leaders reconsider development of MacKenzie Valley
Pipeline)
Distributed generation and residential fuel cells could rapidly
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transform the industry
Natural Gas: What’s Behind that Heating Bill?
Supply
Demand
 US Production – flat since 1994
 Canadian production increases have
been meeting incremental US demand
Positives
 Higher prices bringing renewed interest to
exploratory and frontier development
 US active rig count at 1020 vs. 600 in 1999
 Gulf of Mexico rigs at 120 vs. 40 in 1999
 9500 gas wells to be connected tis year vs.
7500 in 1999
Negatives
 New production has lower productivity and
higher initial decline rates
 Solution
 Need deep water and frontier region
development to catch up
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 Up 3% in 2000
 BC now competes directly with
Chicago and California for the same
molecules
 US gas demand for power
generation up 1.5 Bcf/day this
summer and expected to increase
 US storage inventory is low
 US economy continues to be strong
Utility Restructuring
•Competition/restructuring rather than deregulation
•Commodity is only the starting point
•Georgia has completely deregulated gas marketplace - customer
billing is HUGE problem
•Centrica, a UK-based gas and home services group has recently
bought Calgary-based Direct Energy and is now the leading Ontario
supplier
•Ontario and Alberta will have electricity competition in Jan 2001
•BC to have energy unbundling by Nov 2002
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E-Business Trends in the Gas Utility Industry
The rise of web-based utility intermediaries
(Utility.com) - that provide service ordering, bill
payment, usage monitoring, competitive pricing (and
ISP services to boot).
New models for customer relationships and
procurement management
Enron, Williams and Reliant are seriously adopting ebusiness models that incorporate telecom rights-ofway into their business models
Smart metering - machine-to-machine communications
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Companies follow four major waves in their
eBusiness transformation
eInformation
‘Brochureware”
 On-line catalogs
 Company/Produ
ct information
 FAQ’s
 Electronic
coupons

eCommerce
eCompany
Companies move
business
transactions on-line
 On-line customer
orders
 On- line quotes
 On-line product
config..
 Order Settlement
Most or all key
company processes
are on-line
 Virtual
sales/Distribution
 Open enterprise to
customers/suppliers
 Flow through
ordering
 Loyalty Programs


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eConomy
Communities of
virtual
organizations
 Channel
Portfolio
Optimization
 CRM for market
 Market Loyalty
program

eBusiness Growth by Industry
Life Sciences
eInformation
Petroleum & Chemicals
eInformation
Insurance
eCommerce
eInformation
Utilities
eCommerce
eInformation
Health Care
eCommerce
eInformation
Telecom
Retail
eInformation
eCommerce
eCommerce
eInformation
eCommerce
Manufacturing
eInformation
eCommerce
Retail Banking
eInformation
eCommerce
Transportation
Travel
Capital Markets
eCommerce
eInformation
eCommerce
eInformation
eInformation
1995
eCommerce
eCompany
eCommerce
1996
1997
Source: Cap Gemini Ernst & Young, 1999
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1998
eCompany
1999
2000
2001
2002
Global Web-Based Commerce Revenue Projections
The magnitude of change confronting “Bricks and Mortar”
companies over the next 3 - 5 years is enormous!
$ 4,000B
Business
to
Consumer
$ 3,000B
$ 2,000B
Business
to
Business
$ 1,000B
1999
2000
2001
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2002
2003
Step 1. Static Web Pages usually come 1st
Initial company web sites provide information to customers and employees - “brochure ware”.
Job Postings
Online Manuals
Source: Cap Gemini Ernst & Young
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Step 2. eStrategy sets the Business Context
A proliferation of web sites and “skunkworks” drives organizations to develop an eBusiness Strategy
Web
Design
eCommerce
Strategy
Strategic
eTechnology
Architecture
eSecurity
Merger Program
Management
Tactical
Job Postings
Company
Financials
Online Manuals
Internal
Company
Reports
Product
Literature
External
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Source: Cap Gemini Ernst & Young
Step 3. 2-Way Transactions Begin To Appear
Initial customer based transactions are extensions of existing business processes
Web
Design
eCommerce
Strategy
Strategic
eTechnology
Architecture
Merger Program
Management
eSecurity
eProcurement
Product
Sales
eCatalog
eOrdering
ePayments
Credit Payment
eInvoicing
Service Orders
Load Analysis
Energy Audit
Consumption Analysis
Tactical
Account
Maintenance
Job Postings
Online Manuals
Internal
Company
Financials
eBill Presentment
AMR
Company
Reports
Product
Literature
External
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Source: Cap Gemini Ernst & Young
Step 4. Cost Reductions via Employee Self Service
Success with Customer transactions spurs interest in creating employee services on-line.
Web
Design
eCommerce
Strategy
Strategic
eTechnology
Architecture
eSecurity
Merger Program
Management
eShared Services
Tactical
Employee
Internet /
Communications Backoffice
Integration
eTraining
Employee
Employee HR SelfTravel
Service
Services
eTime &
Expense
Management
eControls
Job Postings
Training
Registration
Online Manuals
eProcurement
Product
Sales
eCatalog
eOrdering
ePayments
eInvoicing
Service Orders
Consumption Analysis
Energy Audit
Load Analysis
Account
Maintenance
Company
Financials
eBill Presentment
Company
Reports
AMR
Product
Literature
External
Internal
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Source: Cap Gemini Ernst & Young
Step 5. Breakthrough Business Ideas Begin
to Emerge
As employees gain confidence in using the Internet, they come forward with new growth opportunities.
Knowledge Management
Electronic Bulletin Boards
Web
Design
www.energymarketplace.com
eCommerce
Strategy
Strategic
Performance
Management
eTechnology
Architecture
Merger Program
Management
Energy Trading
Surplus Inventory Auctions
Sales Force Automation
www.utility.com
Infrastructure Services
eSecurity
eShared Services
Employee
Communications
Employee
Travel
Services
Tactical
Work Management
Auctions
Home Automation
Internet /
Backoffice
Integration
eProcurement
eTraining
Product
Sales
Employee HR Self-Service
eCatalog
eOrdering
ePayments
eInvoicing
Consumption Analysis
Energy Audit
eTime &
Expense
Management
eControls
Job Postings
Training
Registration
Online Manuals
Internal
Account
Maintenance
Company
Financials
Load Analysis
eBill Presentment
AMR
Company
Reports
Product
Literature
External
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Source: Cap Gemini Ernst & Young
Integration with Front Office and Back Office
Supply Chain Management
Systems is Critical!
Gas Utilities Buying Group
Planning
Records
Drafting
Customer
Customer Service
Reps
AMFM
WMS
MM
Buy
Plan


Supplier 4
Make
Logistics
Sell
Contracts
Purchase Orders
Transactions
Logistics
Settlements
Materials &
Services
Delivered
Field Closing &
As-Built Data
Maintenance &
Inspection Planning
Mobile Dispatch
Integrated
Resource
Management
Not a Legal Entity

AMFM
WMS &
PM
Customer
Appointments
Commodity N

CCC
Supplier 3
Commodity 3

Materials &
Services
Orders
Supplier 2
Distributor 1
Commodity 2
EnB
Design
Energy
Customer
Centric
Website
Steel Fittings
TCPL
BCG
Supplier 1
Contract Negotiation
Standardiza tion
Aggregation
Strategic
Procurement
WEI
MDT
Field Crews
Complete Work
MWFM
Job Status and Completion data
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BC Gas E-Business Model
Business to Customers
Business to Supply Chain
• Residential & Small
Commercial
• Industrial & Large Commercial
• Municipal
• Developers & Builders
• Energy Procurement
• Materials Procurement
• Work Management
Business to
Internal Clients
Business to Stakeholders
& Investors
• Employees
• Contractors
• Investors
• Gatekeepers
• Influencers
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eBusiness Strategy Implementation:
November 2000
2000 eBusiness Budget
Strategic
eBusiness
Strategy
eTechnology
Architecture
Completion
Security
Tactical
• “Seed Capital” - $ 800K
• Projected Costs - $ 5.5M
• Other Projects:
Applications
Data Services
Networks
• bcg SERVICES CRM
• BC Energy On-line
Customer Centric
Website
Product Sales
EBPP
Service Orders
AMR
Account
Maintenance
Pipeline Evolution
eMail Rationalization CI
Project Collaboration
Employee Self Service
Load Analysis
Organization Chart
Consumption Analysis
Internal
External
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eProcurement
eCatalog
eOrdering ePayments
eInvoicing
Current Corporate Website
Business Processes

No formalized business processes in place!

“Content” created by various departments across BC Gas Inc.

No accountability for web site operations or content changes/additions

Approximately 90% of information published is text

Other content includes graphics, small applications and audio/video

Team /
Organization

Enabling IT
Web Publishing handled by “Desktop” Department
 2 full-time designers
 2 part-time writers
 2 part-time support clerks
 Approximately 50% of time to update; 50% for new projects
 Does not “own” the corporate website
Webmaster e-mail handled by Desktop
 In the case where desktop answers the e-mail, the turnaround is one day
 In other cases, it is up to the individual departments to determine
response time

MS Site Server (IIS), MS Frontpage for HTML Edit, webscan, firewall

ISMBC - server administration, security & network support

Internal IT Department - application selection & limited support
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Value Drivers
Supply Chain - eProcurement
Build a Community
Value Calculation
Supplier Communication
• Share and leverage knowledge with Buying
Partners and Suppliers

Reduce Costs
Supplier Process Integration
• Data to suppliers to optimize production
Standards Harmonization
• Collaborate with Industry and Suppliers
Reduce Transaction Costs
• Data to suppliers to optimize production
Share Technology Costs
• Collaborate on DMP configuration
Outsource Catalogue Mgmt.

Build new
capabilities
incrementally
with significant
back-end
system
integration
• Suppliers & service providers maintain
Reduce Spend Costs
• Cost savings from on-line transactions
Reduce “Maverick” Spend
• Enable access to Corporate Deals
Focus on enabling key
Supply Chain
Business Process
Grow Revenues
Founding Member of a
Digital Marketplace
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
Value Calculations to date are for the
proposed Buying Group with WEI and
TMPL
Internal Supply Chain analysis now
underway will identify process and IT
value propositions
Scope of Process Savings:
Transactions
RFQs
POs
Contracts
Deliveries
Invoices
TOTAL

1999
Vol.
995
4,387
190
25,649
Unit
Cost
Savings
Potential
$100+
$25-50
Net
Saving
251,189
Internal Analysis project will develop
metrics and costs
$
eProcurement is in its Nascent Stage
•Costs passed through to customer
•Low cost-reduction potential because of past
aggressive efforts
Direct - 66%
Internet B-to-B Purchases
•Products readily catalogues
•Some market inefficiencies
•Reductions remain in the range of 3 - 7%
Standard - 20%
Non-Direct - 34%
Non-standard - 80%
•Complex products, not as readily “e-able”
•Sizable market inefficiencies
•Reduction potential in the range of 15 20%
Source: Mitchell Madison Group
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Value Drivers
Customer Centric Website
Build a Community
Value Calculation
Customer Communication
• Extend 2-way communication with key
customer groups

Tradeshows - in 1999, BC Gas spent $325K to
reach 6,000 people
 TV - $ 140K in 2000 to reach OLA audience with
new cooking show (100,000 people in BC)
 Internet - ?
Improve Customer Service

• Improve customer response. 7 x 24.
Build Brand & Image
• Coordinate Branding across Channels
Reduce Costs
Reduce Transaction Costs
• Shift low potential customers to Internet
Reduce Marketing Costs
• Shift marketing to lower cost channels
Reduce Billing Costs
Integrate the
Customer
Centric Web
site with
Existing
Customer
Channels
• Reduce paper bills - postage, paper, ...
Customer Self Service
• Customers complete transactions unaided
Grow Revenues
Re-allocating marketing $ to maximize
residential market coverage

Reducing Transaction Costs:
Call Centre - est. 120,000 calls in 2000
 Calls shifted to Internet:
 Cost per Call:
 Cost savings = $ __________


Channel Cost Benchmarks:
Call Centre
 Kiosk
 IVR
 Internet

Extend existing
Customer Service
Processes to the
Internet
Products/Services On-line
• Implement eStores - bcg SERVICES,
Commercial/Industrial customers
From Channel Push to Pull
• Provide a compelling customer “offer”
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$ 1.56 / min.
$ 1.05 / transaction
$ 0.35 - 0.56 / transaction
$ 0.01 / transaction
(Note - cost per channel varies with functionality)
Implementing a “Customer Centric Website”

Look at the requirements for:
Team /
Organization
Business Processes


2000
Enabling IT
Current State?
Phased Implementation of web site functionality over the
next 12 to 18 months!
Q3
Q4
Product &
Service
Information
2001
Q1
Q2
Billing &
Payment
Enquiries
Q3
Limited
Customer
Transactions
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Q4
Customer
Self
Service
Value Drivers
Employee Portal
Build a Community
Value Calculation
Project Collaboration
• Improve communication & decisionmaking
Calculations to date show productivity
improvements but have not quantified
tangible savings

“Line of Sight” Management
• Send/receive info. on performance
Efficient Search Capability
60 employees re-key timesheets into SAP
each week
 Travel expenses, document search, …
 Project Mobilization
• Right information about BC Gas to do job

Telework
• Shift to work anywhere / anytime
Reduce Costs
eMail “Glut” Reduction
• Reduce time to manage email & Outlook
Reduce Transaction Costs
Building a
High
Productivity
Desktop
• Less hours to do timesheets, expenses,...
Reduce Travel Costs
• Reduce Face to face meeting costs
eProcesses start
within the organization
and grow outward
Service Partners
• Use external service providers - Clarica
Grow Revenues
External Service Offering
• Provide Knowledge based and employee
transaction services to other
organizations
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
eMail “glut” Reduction:
1200 X 48 hrs/year X $65/hr = $3.7M
employees

How can we realize this potential
saving?
Implementing an Employee Portal :
Change the Culture
Pro-active, Results-based, Collaborative
Support business rules
Realize
that reinforce
productivity improvements
just-do-it
and cost-savings
authority and responsibility
Bridge discontinuity
across business units
and geography
Reorganize work
Wrestle Info-glut:
consistent with
From Information Management
process-driven structures
Work anytime,
to Knowledge Utility
anywhere,
with anyone
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Employee Portal Applications
•Knowledge Access
internal & external news, Internet-based research, bulletin boards, market
intelligence
•Document Access
business analysis, best practices, engineering drawings, policies & procedures
•Content Publishing and Management
•Employee Self-Serve Transactions
travel arrangements, expense claims, timesheets,workflow-driven applications
•Human Resources
forms, online partnerships with benefits providers, etc.
•Collaboration Tools and Project Support
•Business Intelligence
Access to data from disparate corporate systems
•Just-in-time Learning
•Directories
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Web Solutions Are Now Focusing On Application
Servers As The Integration Point
Traditional Approach
Emerging Approach
Legacy
Systems
Legacy
Systems
Content
Server
Ad
Server
Content
Component
Commerce
Server
Web
Server
Ad
Server
Communication
Server
Commerce
Component
Application
Server
Web
Server
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Communication
Components
Customer Centric Website
Technology Integration Challenges
Product &
Service
Information
Billing &
Payment
Enquiries
Limited
Customer
Transactions
Customer
Self Service
Data Server
BC Hydro
CIS
Security
Server
BC Gas
CIS
DBMS
Directory
Server
Web
Content
Web Server (NT)
BC Gas
Network
Internet
More Data &
Legacy
Systems
Integration!
Internet Index Server
DB M/W
JNDI
Site Server
DB M/W
MOM
TX Series
JDBC
JMS
JTS
Servlet / JSP /EJB
Application Server
(Business Logic)
Staging
Server
Test
Server
Dreamweaver
Legacy
Data
Legacy
Systems
Content Management
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DB2
Connect
Legacy
Application
MQ
TX Series
eBusiness Pitfalls to Avoid
Lessons Learned from projects in other companies...
A one-time effort, not an
ongoing change initiative to
transform into an
eCompany
Not tying solution to
business goals, objectives,
and measurable benefits
Strategy
Overlooking impact
on facilities and
equipment
Individual pages
patchworked together
with no cohesive goal
Physical
Environment
Technology
Content
Organization
“Stand-alone” Web
sites that are not
integrated with other
systems
Providing only a oneway communication
by publishing
information
Using technology for its
appeal, not enabling
business processes
Process
Not properly
addressing
security/tax/legal
issues
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“Hard coded” Web
pages that must be
maintained manually
Not addressing
required changes in
culture, structure
and competency
Not taking full advantage of
interaction and transaction
opportunities
Implementing Change Requires...
Levers for eBusiness Alignment, Commitment & Sustainability
Sponsorship
Clear management
alignment and
commitment across
stakeholder groups
Value Proposition
A concise explanation
showing how business
value with be created
eBusiness
Change Mgmt
Levers
Organizational Design
Redefined organization
structure, roles and
competencies
Managerial
Effectiveness
Leaders able to manage in a
rapidly changing environment
Staffing Realignment
A plan for migrating
employees to the new
processes, roles and
technology
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Communication
Broadly communicated
change imperative,
vision and path forward
including employee
feedback
Feedback and
Reinforcement
Performance
management and
compensation
systems aligned
with targeted
business results
Capability
Development
Employees are
fully effective
users of the new
technology and
business
processes
The Utility e-Challenge
Utilities face many of the same problems that they have
been wrestling with for years:
•A workforce that rejects or doesn’t understand the corporate strategy
•Demands of customers, suppliers and employees that may outpace the ability
to deliver services over the web
•The need to implement radically new business processes, organizational
models and Information Technology to succeed in harnessing the Web as a
successful channel
•Lack of recognition of technology as a strategic capital investment
•An information technology infrastructure that is one step behind what
workers need to do their jobs
•A performance management system that fails to reward and retain the best
talent
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FastForward Responses Needed for
Utility e-Challenge
Accepting that strategy may need to be implemented even
before it is articulated.
Building an information technology infrastructure which is
mission critical in the ‘sense and respond’ environment of
today’s business world.
Insisting on a performance management system linked to
workers’ career management and personal lifestyles so it
can become an employer-of-choice in today’s competitive
employment market
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The Contradictions of Organizational Change:
The Future is Today
Employees don’t need to be empowered they already are.
People don’t need the clearly articulated strategy and
implementation plan –
by the time it’s prepared it’s obsolete.
Employees don’t need the promise of a secure job –
they’d rather be free agents anyway.
Inter-departmental cooperation isn’t a corporate goal –
it’s a basic requirement of today’s business processes
to serve the customer.
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