Real-time strategy implementation in the electricity industry

This study focuses on the electricity industry with specific reference to the manner in which organisations in the industry implement strategic plans. The electricity industry was chosen in particular as it operates in an increasingly complex and volatile environment. Restructuring and deregulation are phenomena that occur currently in electricity markets across the world. Organisations that once functioned in a protected, monopolistic environment are now entering the era of full competition. In their traditional approach to strategic planning, electricity organisations generally utilise one-year planning cycles. This study focuses particularly on testing the concept of realtime strategy implementation in electricity organisations as an alternative to using planning cycles. The empirical research for the study was conducted in the United States of America. Included in the sample were four of the largest electricity holding companies in that country. The United States of America was specifically chosen because the electricity industry in that country was one of the first in the world to introduce a competitive market for electricity. Through this study a number of gaps were identified between strategic planning and strategy implementation in the electricity industry. These gaps led increasingly to the general perception that strategic planning is ineffective in the industry. In summary these gaps are: (a) The problem of responding to isolated and unpredictable issues that arise in a volatile and complex industry situation and that have the potential to erode the current competitive position of the electricity utility. (b) The restructuring of the industry and the subsequent unbundling of the vertically integrated nature of many electricity utilities, giving rise to conflict between business units and corporate strategy issues. This tends to reduce strategic planning to the level of a business review process. (c) The associated issue where the strategic planning process employed is often too time-intensive for senior management to participate in, or it cannot provide the leverage required to get maximum value from the time that senior personnel are able to invest in the process. (d) Despite the existence of strategic instruments like industry analysis and competitor analysis, most of the strategic planning processes in electricity utilities remain highly introspective of nature. (e) A general problem of linking the resulting strategy with explicit measures of success and associated tracking systems. The following are the most important recommendations based on the results of this study: (a) Top management should build a solid foundation for the implementation of strategy in real-time. This should be done through their visible commitment and voluntary involvement in strategic planning and strategy implementation, building the strategic capabilities of the organisation and implanting strategic autonomy throughout the organisation. (b) Real-time strategic planning processes need to be initiated, including intensive and ongoing situation analysis and implementing initiatives to resolve strategic issues at market speed. (c) Effective strategy support systems and processes need to be implemented. This includes information support as well as ensuring effective integration of strategy throughout the entire organisation. (d) Effective strategic alignment of the entire organisation is required. This includes the linking of effective performance management processes to the strategy of the organisation and multi-level involvement of as many employees as possible in strategic planning and strategy implementation. Further recommendations for the implementation of real-time strategic planning systems include the following guidelines: (a) Involvement of top management in strategic planning and strategy implementation is a prerequisite for strategic success. (b) Organisations should allow for autonomy in strategic decisions by lower levels of employees and departments. (c) Real-time strategy systems should be designed as effective information systems. (d) Strategic objectives and strategies should be reviewed on a real-time basis. (e) Strategic planning cycles should be discarded to allow for realtime strategy implementation (f) Performance contracts should be negotiated on a consensus basis, including aspects of performance expectations from both the subordinate and the manager, and between different departments. (g) The use of comprehensive and complex written strategic planning documents should be discarded. (h) Strategic control should be implemented through the use of a balanced scorecard.