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  1. 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 shareholdersversuscost and benefit of a leap-of-faith

  3. Convergence Towards “Bricks & Clicks” 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 Today’s Focus .com Bricks & Mortar “Bricks & Clicks ”

  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?

  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

  8. 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

  9. eBusiness Growth by Industry Source: Cap Gemini Ernst & Young, 1999

  10. 1999 2000 2001 2002 2003 • 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 Business to Business $ 2,000B $ 1,000B

  11. 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

  12. Step 2. eStrategy sets the Business Context A proliferation of web sites and “skunkworks” drives organizations to develop an eBusiness Strategy Web Design eCommerce Strategic Strategy eTechnology Architecture eSecurity Merger Program Management Tactical Company Company Product Job Postings Online Manuals Financials Reports Literature Internal External Source: Cap Gemini Ernst & Young

  13. Step 3. 2-Way Transactions Begin To Appear Initial customer based transactions are extensions of existing business processes Web Design eCommerce Strategic Strategy eTechnology Architecture eSecurity Merger Program Management eProcurement Product Sales eCatalog eOrdering ePayments Credit Payment eInvoicing Service Orders Load Analysis Energy Audit Consumption Analysis Tactical Account eBill Presentment Maintenance AMR Company Company Product Job Postings Online Manuals Financials Reports Literature Internal External Source: Cap Gemini Ernst & Young

  14. Employee Internet / Communications Backoffice Integration Employee Employee HR Self- Travel Service Services eTime & eControls Expense Management Training Registration Job Postings Online Manuals Step 4. Cost Reductions via Employee Self Service Success with Customer transactions spurs interest in creating employee services on-line. Web Design eCommerce Strategic Strategy eTechnology Architecture eSecurity Merger Program Management eShared Services eProcurement Product eCatalog Sales eOrdering ePayments eTraining eInvoicing Service Orders Consumption Analysis Tactical Energy Audit Load Analysis Account eBill Presentment Maintenance AMR Company Company Product Financials Reports Literature External Internal Source: Cap Gemini Ernst & Young

  15. 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 www.energymarketplace.com Design eCommerce Strategic Work Management Home Automation Strategy Auctions Performance Energy Trading eTechnology Management Architecture Surplus Inventory Auctions Sales Force Automation eSecurity Merger Program www.utility.com Management Infrastructure Services eShared Services eProcurement Employee eTraining Internet / eCatalog Communications Backoffice eOrdering ePayments Product eInvoicing Integration Employee Sales Travel Employee HR Self-Service Services Consumption Analysis Tactical Energy Audit eTime & eControls Load Analysis Expense Account eBill Presentment Management Training Maintenance AMR Registration Company Company Product Job Postings Online Manuals Financials Reports Literature Internal External Source: Cap Gemini Ernst & Young

  16. Integration with Front Office and Back Office Systems is Critical! Supply Chain Management Planning Records Drafting Customer AMFM WMS MM Customer Service Reps Materials & Services Orders Energy Materials & Services Delivered CCC AMFM WMS & PM Field Closing & As-Built Data Customer Centric Website Customer Appointments Maintenance & Inspection Planning MDT Mobile Dispatch Field Crews Complete Work Integrated Resource Management MWFM Job Status and Completion data

  17. BC Gas E-Business Model • Business to Supply Chain • Energy Procurement • Materials Procurement • Work Management • Business to Customers • Residential & Small Commercial • Industrial & Large Commercial • Municipal • Developers & Builders Regulated Non-Regulated • Business to • Internal Clients • Employees • Contractors • Business to Stakeholders • & Investors • Investors • Gatekeepers • Influencers

  18. Customer Centric Website eProcurement Product Sales eCatalog EBPP eOrdering Service Orders ePayments Account Maintenance eInvoicing eBusiness Strategy Implementation: November 2000 • 2000 eBusiness Budget • “Seed Capital” - $ 800K • Projected Costs - $ 5.5M • Other Projects: • bcg SERVICES CRM • BC Energy On-line eBusiness Strategy Strategic eTechnology Architecture Completion Pipeline Evolution eMail Rationalization CI AMR Security Project Collaboration Applications Employee Self Service Data Services Load Analysis Networks Organization Chart Consumption Analysis Tactical Internal External

  19. 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

  20. Value DriversSupply Chain - eProcurement Build a Community Value Calculation • Supplier Communication • Share and leverage knowledge with Buying Partners and Suppliers • 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: Transactions1999 Unit Savings Net Vol. 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 Reduce Costs • Supplier Process Integration • Data to suppliers to optimize production • Standards Harmonization • Collaborate with Industry and Suppliers Build new capabilities incrementally with significant back-end system integration • Reduce Transaction Costs • Data to suppliers to optimize production • Share Technology Costs • Collaborate on DMP configuration • Outsource Catalogue Mgmt. • Suppliers & service providers maintain • Reduce Spend Costs • Cost savings from on-line transactions Focus on enabling key Supply Chain Business Process • Reduce “Maverick” Spend • Enable access to Corporate Deals Grow Revenues Founding Member of a Digital Marketplace

  21. eProcurement is in its Nascent Stage • Costs passed through to customer • Low cost-reduction potential because of past aggressive efforts Direct - 66% • Products readily catalogues • Some market inefficiencies • Reductions remain in the range of 3 - 7% Internet B-to-B Purchases 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

  22. Value DriversCustomer Centric Website Build a Community Value Calculation • Customer Communication • Extend 2-way communication with key customer groups • 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) • Improve Customer Service • Improve customer response. 7 x 24. • Build Brand & Image • Coordinate Branding across Channels Integrate the Customer Centric Web site with Existing Customer Channels Reduce Costs • Reduce Transaction Costs • Shift low potential customers to Internet • Reduce Marketing Costs • Shift marketing to lower cost channels • Reduce Billing Costs • Reduce paper bills - postage, paper, ... • Customer Self Service • Customers complete transactions unaided Extend existing Customer Service Processes to the Internet Grow Revenues • Products/Services On-line • Implement eStores - bcg SERVICES, Commercial/Industrial customers • From Channel Push to Pull • Provide a compelling customer “offer”

  23. 2000 Q3 Q4 2001 Q1 Q2 Q3 Q4 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! Team / Organization Business Processes Enabling IT Product & Service Information Billing & Payment Enquiries Limited Customer Transactions Customer Self Service

  24. Value DriversEmployee Portal Build a Community Value Calculation • Project Collaboration • Improve communication & decisionmaking • 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 = $3.7M employees • How can we realize this potential saving? • “Line of Sight” Management • Send/receive info. on performance • Efficient Search Capability • Right information about BC Gas to do job • Telework • Shift to work anywhere / anytime Building a High Productivity Desktop Reduce Costs • 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 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

  25. Implementing an Employee Portal : Change the Culture Pro-active, Results-based, Collaborative Realize productivity improvements and cost-savings Support business rules that reinforce just-do-it authority and responsibility Bridge discontinuity across business units and geography Reorganize work consistent with process-driven structures Wrestle Info-glut: From Information Management to Knowledge Utility Work anytime, anywhere, with anyone

  26. 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

  27. Web Solutions Are Now Focusing On Application Servers As The Integration Point Traditional Approach Emerging Approach Legacy Systems Legacy Systems Content Component Commerce Component Content Server Commerce Server Ad Server Application Server Communication Components Ad Server Web Server Communication Server Web Server

  28. Customer Centric WebsiteTechnology Integration Challenges Product & Service Information Billing & Payment Enquiries Limited Customer Transactions Customer Self Service Data Server More Data & Legacy Systems Integration! Security Server BC Hydro CIS DBMS Web Content BC Gas CIS Directory Server DB M/W Internet BC Gas Network Web Server (NT) MOM JNDI DB M/W TX Series Internet Index Server JMS JDBC JTS Site Server Servlet / JSP /EJB Application Server (Business Logic) Staging Server Legacy Data Legacy Systems Test Server DB2 Connect Legacy Application Content Management MQ TX Series Dreamweaver

  29. eBusiness Pitfalls to AvoidLessons 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 Individual pages patchworked together with no cohesive goal Overlooking impact on facilities and equipment Physical Environment Technology “Hard coded” Web pages that must be maintained manually “Stand-alone” Web sites that are not integrated with other systems Not addressing required changes in culture, structure and competency Organization Content Providing only a one-way communication by publishing information Process Not taking full advantage of interaction and transaction opportunities Using technology for its appeal, not enabling business processes Not properly addressing security/tax/legal issues

  30. Implementing Change Requires... Levers for eBusiness Alignment, Commitment & Sustainability Communication Broadly communicated change imperative, vision and path forward including employee feedback Value Proposition A concise explanation showing how business value with be created Sponsorship Clear management alignment and commitment across stakeholder groups Feedback and Reinforcement Performance management and compensation systems aligned with targeted business results eBusiness Change Mgmt Levers Organizational Design Redefined organization structure, roles and competencies Capability Development Employees are fully effective users of the new technology and business processes Staffing Realignment A plan for migrating employees to the new processes, roles and technology Managerial Effectiveness Leaders able to manage in a rapidly changing environment

  31. 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

  32. 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

  33. 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.