ebusiness implementation in a “bricks & mortar” company. a progress report on bc gas inc

eBusiness Implementation in a “Bricks & Mortar” Company.

A Progress Report on BC Gas Inc.

November 17, 2000

2

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 shareholdersversus

cost and benefit of a leap-of-faith

3

“Bricks & Clicks ”

Convergence Towards “Bricks & Clicks”

Bricks & Mortar .com

Today’sFocus

BC Gas Inc. Revenues - $1B in 1999

Natural Gas Distribution Petroleum Transportation Other - Non-regulated businesses

1700 Employees BC and Alberta 1999 Earnings per share - $ 2.12

4

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 transform the industry

5

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 f rontier 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 f rontier region

development to catch up

Up 3% in 2000 BC now competes directly with

Chicago and Calif ornia f or the samemolecules

US gas demand f or powergeneration up 1.5 Bcf / day thissummer and expected to increase

US storage inventory is low US economy continues to be strong

6

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

7

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 e-business models that incorporate telecom rights-of-way into their business models

Smart metering - machine-to-machine communications

13

Companies follow four major waves in their eBusiness transformation

eInformation eCommerce eCompany eConomy

‘Brochureware” On-line catalogs Company/

Product information

FAQ’s Electronic

coupons

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

Communities of virtual organizations

Channel Portfolio Optimization

CRM for market Market Loyalty

program

14

eBusiness Growth by Industry

Source: Cap Gemini Ernst & Young, 1999

Life Sciences eInformation eCommerce

Petroleum & Chemicals eInformation eCommerce

Insurance eInformation eCommerce

Utilities eInformation eCommerce

Health Care eInformation eCommerce

Telecom eInformation eCommerce

Retail eInformation eCommerce

Manufacturing eInformation eCommerce

Retail Banking eInformation eCommerce

Transportation eInformation eCommerce

Travel eInformation eCommerce eCompany

Capital Markets eInformation eCommerce eCompany

1995 1996 1997 1998 1999 2000 2001 2002

15

$ 1,000B

$ 2,000B

$ 3,000B

$ 4,000B

1999 2000 2001 2002 2003

Business to

Business

Business to

Consumer

Global Web-Based Commerce Revenue Projections

The magnitude of change confronting “Bricks and Mortar” companies over the next 3 - 5 years is enormous!

16

Step 1. Static Web Pages usually come 1st

Strategic

Tactical

Internal External

CompanyReports

CompanyFinancials

ProductLiterature

Job Postings Online Manuals

Initial company web sites provide information to customers and employees - “brochure ware”.

Source: Cap Gemini Ernst & Young

17

Step 2. eStrategy sets the Business Context

eCommerceStrategy

Strategic

Tactical

eTechnologyArchitecture

eSecurity

CompanyFinancials

CompanyReports

ProductLiterature

WebDesign

Internal External

Merger ProgramManagement


A proliferation of web sites and “skunkworks” drives organizations to develop an eBusiness Strategy


18

Step 3. 2-Way Transactions Begin To Appear

eCommerceStrategy

Strategic

Tactical


eSecurityMerger ProgramManagement

Job Postings Online ManualsCompanyFinancials

CompanyReports

ProductLiterature

WebDesign

Internal External

eCatalogeOrdering ePayments

eInvoicing

eProcurement

eBill PresentmentAccountMaintenance

Energy AuditLoad Analysis

Service Orders

Consumption Analysis

ProductSales

AMR

Credit Payment

Initial customer based transactions are extensions of existing business processes


19

Step 4. Cost Reductions via Employee Self Service

eCommerceStrategy

Strategic

Tactical



eOrdering ePayments

eInvoicing


CompanyFinancials

CompanyReports

ProductLiterature

WebDesign

Energy AuditConsumption Analysis

Service Orders

Internal External

Internet /BackofficeIntegration

EmployeeTravel

ServicesEmployee HR Self-

Service


eTime &Expense

Management TrainingRegistration

eControls

EmployeeCommunications

eTraining

ProductSales

AMR

Load Analysis

eShared Services

eCatalog

eProcurement

Success with Customer transactions spurs interest in creating employee services on-line.


20

Step 5. Breakthrough Business Ideas Begin to Emerge

eCommerceStrategy

Strategic

Tactical



Home Automation

eOrderingeInvoicing

eTrainingEmployeeCommunications

Internet /BackofficeIntegrationEmployee

TravelServices Employee HR Self-Service


eTime &Expense

Management TrainingRegistration


CompanyFinancials

CompanyReports

ProductLiterature

WebDesign

PerformanceManagement

eControls

Work ManagementAuctions

Energy AuditConsumption Analysis

Internal External

Knowledge Management

www.utility.com

www.energymarketplace.com

AMR

ProductSales

Load Analysis

Energy Trading

Sales Force Automation

Infrastructure Services

Electronic Bulletin Boards

Surplus Inventory Auctions

eCatalogeProcurementeShared Services

ePayments

As employees gain confidence in using the Internet, they come forward with new growth opportunities.


21

Integration with Front Office and Back Office

Systems is Critical!

CCC

Maintenance &Inspection Planning

PlanningRecordsDrafting

IntegratedResourceManagement

Energy

AMFMWMSMM

MDT

MWFM

Field Closing &As-Built Data

AMFMWMS &PM

Job Status and Completion data

CustomerAppointments

Customer

Customer ServiceReps

Field CrewsComplete Work

Materials &Services Delivered

Customer CentricWebsite

Mobile Dispatch

Gas Utilities Buying Group

Not a Legal Entity

WEI

TCPL

EnB

BCGDesign Plan

StrategicProcurement

Make Logist ics Sell

Steel Fittings

Commodity 2

Commodity 3

Commodity N

Supplier 1

Distributor 1

Supplier 2

Supplier 3

Supplier 4

Cont racts Purchase Orders Transactions Logist ics Settlement s

Contract Negotiat ionStandardization

Aggregation

Buy

Materials &Services Orders

Supply Chain Management

22

BC Gas E-Business Model

Business to Supply Chain

• Energy Procurement• Materials Procurement• Work Management

Business to Supply Chain

• Energy Procurement• Materials Procurement• Work Management

Business to Internal Clients

• Employees• Contractors

Business to Internal Clients

• Employees• Contractors

Business to Customers

• Residential & Small Commercial

• Industrial & Large Commercial• Municipal• Developers & Builders

Business to Customers

• Residential & Small Commercial

• Industrial & Large Commercial• Municipal• Developers & Builders

Business to Stakeholders & Investors

• Investors• Gatekeepers• Influencers

Business to Stakeholders & Investors

• Investors• Gatekeepers• Influencers

Non-Regulated

Regulated

23

eBusiness Strategy Implementation: November 2000

Str

ateg

ic

Tac

tica

l

Internal External

Load Analysis

eCatalogeOrdering ePayments

eInvoicing

eProcurement

Consumption Analysis

AMR

eBusiness Strategy

EBPPService OrdersProduct Sales

AccountMaintenance

Customer CentricWebsite

Pipeline Evolution

eTechnology ArchitectureCompletion

2000 eBusiness Budget

• “Seed Capital” - $ 800K• Projected Costs - $ 5.5M• Other Projects:

• bcg SERVICES CRM• BC Energy On-line

eMail Rationalization

Organization Chart

Project CollaborationEmployee Self Service

CISecurity ApplicationsData Services

Networks

24

Current Corporate Website

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

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

Business Processes

Team / Organization

Enabling IT

25

Supplier Communication• Share and leverage knowledge with Buying

Partners and Suppliers

Value DriversSupply Chain - eProcurement

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 1999 Unit SavingsNetVol. Cost Potential

Saving

RFQs 995

POs 4,387 $100+ $25-50

Contracts 190

Deliveries 25,649

Invoices 251,189

TOTAL $

Internal Analysis project will develop metrics and costs

Build new capabilities incrementally with significant back-end system integration

Reduce Transaction Costs• Data to suppliers to optimize production

Standards Harmonization• Collaborate with Industry and Suppliers

Share Technology Costs• Collaborate on DMP configuration

Founding Member of a Digital Marketplace

Build a Community

Reduce Costs

Grow Revenues

Outsource Catalogue Mgmt.• Suppliers & service providers maintain

Reduce Spend Costs• Cost savings from on-line transactions

Reduce “Maverick” Spend• Enable access to Corporate Deals

Value Calculation

Focus on enabling keySupply Chain

Business Process

Supplier Process Integration• Data to suppliers to optimize production

26

eProcurement is in its Nascent Stage

Internet B-to-B Purchases

Direct - 66%

Non-Direct - 34%

Standard - 20%

Non-standard - 80%

•Costs passed through to customer•Low cost-reduction potential because of past

aggressive efforts

•Products readily catalogues•Some market inefficiencies•Reductions remain in the range of 3 - 7%

•Complex products, not as readily “e-able”•Sizable market inefficiencies•Reduction potential in the range of 15 - 20%

Source: Mitchell Madison Group

27

Customer Communication• Extend 2-way communication with key

customer groups

Value DriversCustomer Centric Website

Re-allocating marketing $ to maximize residential market coverage

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 - ?

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 $ 1.56 / min. Kiosk $ 1.05 /

transaction IVR $ 0.35 - 0.56 /

transaction Internet $ 0.01 /

transaction(Note - cost per channel varies with functionality)

Integrate the Customer

Centric Web site with Existing

Customer Channels

Improve Customer Service• Improve customer response. 7 x 24.

Build Brand & Image• Coordinate Branding across Channels

Reduce Transaction Costs• Shift low potential customers to Internet

Reduce Marketing Costs• Shift marketing to lower cost channels

Customer Self Service• Customers complete transactions unaided

Products/Services On-line• Implement eStores - bcg SERVICES,

Commercial/Industrial customers

From Channel Push to Pull• Provide a compelling customer “offer”

Build a Community

Reduce Costs

Grow Revenues

Value Calculation

Reduce Billing Costs• Reduce paper bills - postage, paper, ...

Extend existingCustomer ServiceProcesses to the

Internet

28

Implementing a “Customer Centric Website”

Look at the requirements for:

Current State?

Phased Implementation of web site functionality over the next 12 to 18 months!

2000 Q3 Q4 2001 Q1 Q2 Q3 Q4

Product &ServiceInformation

Billing & PaymentEnquiries

Limited CustomerTransactions

CustomerSelf Service

Business ProcessesTeam /

Organization Enabling IT

29

Project Collaboration• Improve communication & decisionmaking

Value DriversEmployee Portal

Calculations to date show productivity improvements but have not quantified tangible savings

60 employees re-key timesheets into SAP each week

Travel expenses, document search, … Project Mobilization

eMail “glut” Reduction:

1200 X 48 hrs/year X $65/hr = $3.7Memployees

How can we realize this potential saving?

Building a High

Productivity Desktop

“Line of Sight” Management• Send/receive info. on performance

Efficient Search Capability• Right information about BC Gas to do job

eMail “Glut” Reduction• Reduce time to manage email & Outlook

Reduce Transaction Costs• Less hours to do timesheets, expenses,...

Reduce Travel Costs• Reduce Face to face meeting costs

External Service Offering• Provide Knowledge based and employee

transaction services to other organizations

Build a Community

Reduce Costs

Grow Revenues

Telework• Shift to work anywhere / anytime

Value Calculation

Service Partners• Use external service providers - Clarica

eProcesses start within the organization

and grow outward

30

Implementing an Employee Portal :

Change the Culture

Pro-active, Results-based, Collaborative

Wrestle Info-glut: From Information Management

to Knowledge Utility

Realize productivity improvements

and cost-savings

Reorganize workconsistent with

process-driven structures

Bridge discontinuityacross business units

and geography

Work anytime, anywhere,

with anyone

Support business rulesthat reinforce

just-do-it authority and responsibility

31

•Knowledge Accessinternal & external news, Internet-based research, bulletin boards, market intelligence

•Document Accessbusiness analysis, best practices, engineering drawings, policies & procedures

•Content Publishing and Management•Employee Self-Serve Transactionstravel arrangements, expense claims, timesheets,workflow-driven applications

•Human Resourcesforms, online partnerships with benefits providers, etc.

•Collaboration Tools and Project Support•Business IntelligenceAccess to data from disparate corporate systems

•Just-in-time Learning •Directories

Employee Portal Applications

32

Web Solutions Are Now Focusing On Application Servers As The Integration Point

AdServer

ContentComponent

CommerceComponent

CommunicationComponents

WebServer

Traditional Approach Emerging Approach

AdServer

ContentServer

CommerceServer

CommunicationServer

WebServer

LegacySystems

ApplicationServer

LegacySystems

33

Customer Centric WebsiteTechnology Integration Challenges

Billing & PaymentEnquiries

Limited Customer Transactions

Product &ServiceInformation

CustomerSelf Service

Dreamweaver

Internet BC Gas Network

Web Server (NT)

BC GasCIS

BC HydroCIS

Internet Index Server

Site Server

StagingServer

TestServer

Content Management

WebContent

SecurityServer

Application Server(Business Logic)

Servlet / JSP /EJB

JMS

MOM TX Series

JDBC

DB M/WJNDI

JTS

DBMS

DB M/W

Data Server

DirectoryServer

LegacyApplication

Legacy Data

MQ TX Series

LegacySystems

DB2Connect

More Data & LegacySystems Integration!

34

eBusiness Pitfalls to AvoidLessons Learned from projects in other companies...

Strategy

Technology

Organization

Process

Content

Physical Environment

Not tying solution to business goals, objectives,

and measurable benefits

Individual pages patchworked together with no cohesive goal

“Hard coded” Web pages that must be

maintained manually

Not properly addressing

security/tax/legal issues

A one-time effort, not an ongoing change initiative to

transform into an eCompany

Using technology for its appeal, not enabling business processes

Not taking full advantage of interaction and transaction

opportunities

Overlooking impact on facilities and

equipment

“Stand-alone” Web sites that are not

integrated with other systems

Providing only a one-way communication

by publishing information

Not addressing required changes in

culture, structure and competency

35

Implementing Change Requires...Levers for eBusiness Alignment, Commitment & Sustainability

SponsorshipClear management

alignment and commitment across stakeholder groups

Feedback andReinforcement

Performance management and

compensation systems aligned

with targeted business results

Capability DevelopmentEmployees are fully effective

users of the new technology and

business processes

Organizational DesignRedefined organization

structure, roles and competencies

eBusinessChange Mgmt

Levers

Communication

Broadly communicated change imperative,

vision and path forward including employee

feedback

Staffing RealignmentA plan for migrating

employees to the new processes, roles and

technology

Managerial Effectiveness

Leaders able to manage in a rapidly changing environment

Value PropositionA concise explanation showing how business value with be created

36

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

37

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

38

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.

ebusiness implementation in a “bricks & mortar” company. a progress report on bc gas inc

Documents

industrynatural gas

gas wells

cost of natural gas

faith bc gas

ukbased gas

molecules us gas demand

low us economy

us storage inventory