Expanding Beyond Regulation.

As you well know, companies in a governmentally or quasi-governmentally regulated industry have been operating under shared monopolistic control of their markets. This has provided them with a cushion of safety that will disappear as the full brunt of deregulation hits these companies. Telecommunications and utilities companies, in all of their various formats, will have to deal with the same hard core issues that transportation and banking companies did in the '80s.

Ignoring the potential moves of one's competitors is a recipe for disaster. Any company and any CEO, given the opportunity to take business away from you, will do so. You must understand that you not only have to be prepared to battle your next door neighbor in this new competitive arena, but you may also have to battle competitors from hundreds of thousands of miles away. You have two choices in preparing for tomorrow, which in fact is already here today. First, you can shore up your company and prepare to defend what you have. Or, you can prepare to expand your company and take an offensive approach to the business world.

Classic Case

In 1982, the GTE Corporation was about three times the size of the NEC Corporation. GTE had sales of 9.98 billion with cash flow at 1.73 billion. NEC had 3.8 billion in sales. During the next six years, GTE grew to 16.46 billion in sales while NEC grew to an astounding 21.89 billion in sales. The difference: NEC better positioned themselves to compete for the future while GTE positioned themselves to manage what they knew best. NEC paid much greater attention to their Core Competencies in both product/service selection widgets and even more importantly, to the development of a true professional Human Resource model.

Outrageous results can also be seen by observing the growth of Canon as they grew by 264% and Honda at 200% and then contrasting their growth with what happened to Xerox and Chrysler.

You, as the CEO or top HR Executive, must now choose for your companies: A competitive expanding future or a retrenching defensive future.

How Do We Change?

This bright new competitive future is fraught with road blocks and mud bogs. For instance, how do you change your employee's mindset to deal with the new competitive environment? How do you build a competitive workforce to deal with your known and unknown external competitors while building a cooperative workforce for internal use? How are you going to examine your corporate culture objectively and then develop a new competitive/cooperative culture when you, yourself, are a part of the old culture?

Remember, IBM got run over by competition in the PC market even though they owned 100% of that market, initially. They brought the very first PC to the marketplace. No industry has seen as much growth and dramatic change over the past two decades as the computer industry. Thousands of upstart hardware and software firms have developed new products, challenged each other as well as the long-established firms for consumer loyalty. Today, almost all the leading companies in the computer field did not even exist in 1977. Twenty years has dramatically changed the face of the computer marketplace as well as the face of business throughout the world. Will this be true for electric utilities in the USA in the year 2017. Literally, your future is now.

Success in the future will depend upon your strategic thinking and the team dynamics you put in place today. You will need to engage in strategic planning and forecasting in conjunction with competitive intelligence in all of your business units: accounting, finance, marketing, production, management information systems, operations technology and most important of all, Human Resources. You must view each of your business areas performance as central to your future success.

We Will Feel The Impact

Your company can and will be impacted by corporate, national and inter- national conditions and competitors. You must prepare for it through flexible training, creativity in thinking, and strategic, tactical, and operational planning within a continuous roll over module. Remember, if you wish to be the best, you must attract the best people and this starts with your CEO and the top HR executive in the company.

Competition could become a major factor in the bankruptcies of those who cannot compete successfully in the future. The costs of maintaining overlapping areas, departments and frequent changes, could make it impossible to be price and service competitive with your competitors. You must be sure that you are lean and mean and ready for the competition. Weekend warriors will not survive under the new rules against those who become true competitors in the workplace.

The successful companies of tomorrow will create a framework that offers significant opportunities for service improvements and efficiencies for their customers, empowerment, growth and development for their employees, and significant operating benefits for all of their stakeholders. This, in turn, leads to faster, more reliable, safer and more profitable service. Integrating and cross training will create numerous additional benefits in all areas of your business. There are three key ingredients in successfully competing. They are the maximization of financial capital, equipment and facilities capital, and most important of all, human capital.

Focused use of capital resources will allow the company to make capital investments in continued service, quality improvements, and in capacity expansion to meet the growing needs of the nation's economy. Deregulation will make it possible for the enlightened company to increase capacity and service quality while making a profit. Most customers use power today at a greater level then ever before and this trend will only continue in the future.

The Hunted Or The Hunter

For those companies who do not get it, they may come face to face with the same bitter truth that many companies in the Health Care field faced during the past five years. Radical change overtook the whole of health care delivery in the United States. Consolidations of facilities through start ups, failures, mergers and acquisitions are continuing at a swift pace. Do you want to be one of the companies that fails or is acquired, or do you want to be the hunter? If you do not make the choice, there is a good chance that competition will make it for you.

Since the breakup of the Bell System, competition has increased for a variety of telephone services in the United States. Long-distance service has become less concentrated, and the regional Bell operating companies have begun to face some stiff local competition from competitive access providers, cable television companies, and inter-exchange carriers. Cellular telephony has become a major business, and entry by new mobile services using digital technologies has begun.

Deregulation, coupled with competition, creates new universal service goals and obligations for all companies. The success of telecommunications companies and electric utility companies in the future will depend upon how well they build their model for competing. Remember, privatization of government enterprises, especially telecommunications and electric utilities, is an increasingly common practice throughout the world. Policy makers view this option as a means of simultaneously breaking the industry's link to the national budget and improving service availability and quality. It will also mean new competitors for US-based companies, which is yet another factor to be considered.

Switching

Deregulation and competition are changing the way electric utilities do business The prediction is for a major shift in the business climate of utilities, and energy companies, as both are searching for new ways to weather the storm of deregulation while competition heats up. Switching suppliers, for either electricity or gas, will be a very simple process indeed. This in not new information, just the same old question -- how are you and your employees going to deal with this situation?

Deregulation will allow new entrants to the market, and while this should be good news for the customers, many companies will not view it as good news. Remember, competition will increase the intensity of work. Decisions will have greater impact and will be viewed more critically by management who wilt be more closely scrutinized by executives who in turn will be more heavily watched by the shareholders and the Board of Directors. Pressure and stress increases dramatically on a person as the stakes are raised. Individuals who worked for regulated companies felt they had a real security blanket when they made a mistake, There was a belief that they would not get fired That mindset wilt not work against the new competitors that are emerging.

The concept that whoever builds the best product/service for the lowest price "should' win. We all know that is not true, just ask Sony about the Beta or IBM about the PC. In reality, there's an entire field called "corporate strategy" which is all about how to win through other aspects of the system: locking up distribution channels, building switching costs, tying competitors up in court until they go out of business, buying up patents for substitute products and the list can go on. However, the best way to win is to do it with the best players on the best team outperforming the competition. Rarely does the underdog win. Success almost always goes to the company who did the best job in all areas. So, if you want to win in the long run, you must pay strict attention to two factors: competition and the skills of your employees, starting with the CEO at the top.

Bill Gates was an underdog who won. He followed the principles that have been discussed and today, Microsoft is one of the best managed companies in the world. Bill Gates brought in the best talent in ever' area of the business: engineering, finance, human resources, marketing, operations, and software development. It is no accident that Bill Gates and Microsoft are where they are today.

International Trade

Growing international trade is providing new challenges and opportunities. It has stimulated competition among many nations' industries. Corporations with international sales face not only new competition but also an array of constraints such as import relief investigations, market share arrangements, export controls, and trade law revisions. International customers could grow into a large market for some of our US electric utilities, but only to those who sharpen their competitive teeth. The potential growth opportunities in the developing world are staggering. As more US companies move off shore for production of our goods, they create a greater demand for electricity to produce even more goods.

Independent Counsel

Executives frequently face problems requiring technical skills that are not available within their organization. Or, in many cases, an outside analyst is needed to provide an objective assessment of a strategy or problem. This is especially true for companies facing turbulent competitive environments or particularly unusual strategic problems.

The electric utilities face several problems that are new to them and unique to periods of deregulation. First, they need objective analysis of their organization's strengths, weaknesses and most importantly their culture and climate. Second, they need to move their employee base (including management) from the mental set of a regulated industry to the open competitive environment of deregulation Teaching people how to compete externally while getting them to cooperate internally during a time of fear and turbulence is a nifty trick, but one that must be accomplished.

Lou Salin is an independent Management Consultant.