Freeing Up Innovation Cycles: The Shifting Role of the CIO

Freeing Up Innovation Cycles: The Shifting Role of the CIO

Doug Petitt, CIO & VP of IT, Vectren [NYSE:VVC]

Doug Petitt, CIO & VP of IT, Vectren [NYSE:VVC]

What are the big challenges facing a utility CIO and how are you addressing them?

The speed at which technology is advancing is incredible. We are truly heading into an Internet of Things connected world. At Vectren, we have plans to modernize our electric grid and to grow distribution automation (sensors) to our network. We are currently planning on rolling out two way communication with our customers through smart meters. We are excited about the new capabilities this will provide for our customers. Sensors in the home, or as we say, behind the meter, can integrate with our energy management systems to provide new insights for us, the energy provider, and to the customer. We are also applying advanced analytics to study our gas and electric assets to better understand and operate them.

"Frankly, we were crushed under the weight of custom solution maintenance costs and innovation was dying"

An area that is consuming a lot of our time and resources is the modernization of the software systems necessary to operate in this new world. We need to grow into a future architecture that readily integrates complex business functions and data. This means installing new systems and major upgrades to all current critical systems. We can’t change them all at once, so, we have to think ahead and prioritize.

We have always been pretty good at planning, but this a whole new way of looking at it. We needed to study the market and define what the utility of the future will look like in ten years. This view has made us consider all aspects of our business and introduced several challenges. We had to agree on how budgets are allocated and how we make investment decisions. This meant having a method to ensure all stakeholders are aligned and priorities were agreed to. No longer can we plan for a one, two or even five year horizon. We now have a ten year capital investment plan that allows us to reconcile all large investments. Next, we had to assess market solutions and vendors. The challenge is that the technical solution had to meet our business needs today as well as ten years from now. We had to decide which vendor’s vision best aligned with ours and offered a solution that could grow and adapt to a changing industry and regulatory environment. The last major challenge is building a workforce to successfully implement the new systems and then effectively support them. This meant developing a better understanding of our employees and their needs which would change over time.

So, how do you align stakeholders and decide what investments to make?

There are only so many dollars, so you better have good working relationships with your business partners to make sure those dollars on spent on the right thing.

There will never be enough resources to do all the things that everyone wants to do. Organizations are always faced with tough decisions, and in the past, decision makers had to draw the line between winners and losers. We don’t want winners and losers; we want open dialogue on the best use of funds and smart decisions that move our business forward.

To that end, we have modified our business planning processes and centralized all technology budgets under the CIO cost center. Each year, IT partners with the Performance Management organization to facilitate cross-functional planning sessions with all business units. This helps IT better understand the business strategies and initiatives, and align investment plans with business need. Planning together helps us make better decisions and avoid duplicative technology investments.

To better manage our spend throughout the year, all technology purchases must start with our strategic sourcing group who then engages all the right stakeholders to validate the budget, business plan, vendor selection method and contract terms. If an unplanned, unfunded purchase is initiated, we work as a team to agree to stop it until it can be prioritized against current plans and either adjust plans to accommodate it, or, defer it to the next annual planning process. This approach also has the added benefit of ensuring there aren’t any “rogue”, unsupported applications in our environment. This has become ever more important as cybersecurity risks have escalated.

How are you approaching technology selection?

Historically, our approach was best of breed solutions and then figure out how to integrate them. We installed them in a traditional IT waterfall project approach. The result was that we really didn’t understand the functional gaps until we started using the system. Over time, we found ourselves customizing the system to fill those gaps. Customizations made upgrades more difficult, so we deferred upgrades and missed out on functional advances in the vendor’s product. Frankly, we were crushed under the weight of custom solution maintenance costs and innovation was dying.

To thrive in the next ten year window, we have to grow innovation and minimize maintenance. We need vendors committed to our industry, offering a functional platform that is already integrated, and is making continued investments so they will meet our needs ten years from now. We need functionality that matches how business processes actually work, out of the box. Upgrades need to be seamless non-events. The systems management paradigm has to shift from 90 percent maintenance to 90 percent innovation.

There may be a cultural cost to making a platform vendor decision. These vendors have made great strides building their software around configurable but standard processes. To realize the benefit of low maintenance costs, you must avoid customizations. This may be a bitter pill to swallow and a leap of faith for your internal business partners. We aren’t blazing new territories, as many of our peers have gone ahead of us and have had positive experiences. We are talking to systems integrators with deep industry knowledge and have experience following a team-based agile methodology.

What are the key elements of the workforce challenge?

Workforce design has been one of the more interesting and rewarding planning activities we have gone through. Our business has made significant investment in Performance Management and Lean continuous improvement methodology. At the same time, IT has been going through an IT culture shift to follow the Agile methodology. The two methods complement each other in terms of structure and overall cultural approach. Both benefit from common sense, team work and manageable work efforts, followed by check and adjust.

We wanted to learn more about the needs and attitudes of our employees and what they would like to see change. We are also hiring several new employees, so it was an interesting mix of perspectives. This concept of self-directed teams, and managers as servant leaders, changes the way groups meet, plan, work and have fun. In addition to wanting education and skills development, a key element was the physical workspace. Workspace design was important. This included a standup desk option, glass whiteboards, private spaces and teaming spaces, laptops and tablets. So, we made an investment in a new workspace, a reclaimed train station, with exposed metal support arches and lots of brick. The team had a heavy hand in workspace design. We are also evaluating modernizing the workspaces in our existing buildings.

Another element was the notion of co-located and self-directed teams. This became a critical requirement for any strategic integrator we planned to partner with.

Finally, we just didn’t have enough people to support all the systems we planned to have implemented over the next 3 years, when the majority of new systems are scheduled to be done, and the 5 year window when the major replacements and upgrades would be done. So, beginning with the end in mind, we mapped out what our full complement should be in the future. Of course it was significantly more resources than we had. We came up with a creative solution, which seemed counter-intuitive to business as usual. We ran a financial schedule which demonstrated hiring the future staffing levels now, in time to participate in the project implementation, actually drives overall vendor implementations costs down. This is possible because of the agile methodology and team design. We will be using a strategic integrator for specific skills required for each implementation team and combine them with our own employees. This will allow our employees to ramp up more quickly, develop new skills and be better positioned to support the systems after they go live.

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