PUMMA: EY’s new way of working at Australia’s Western Power
Western Power, a major transmitter and distributor of electricity to Western Australia, has seen an extensive transformation over the past 18 months, led by new CEO Paul Italiano.
- Time for change
- Getting back to basics
- The power of PUMMA
- Developing a new operating model
- Next steps
Time for change
When Italiano became Western Power’s CEO, the company was facing a number of challenges that needed to be tackled in order for the organisation to meet the expectations of its customers, stakeholders and regulators.
Italiano initiated an ambitious program of change designed to improve key operational processes and work practices, and realise cost savings of more than $25 million in the 2012-13 financial year.
Getting back to basics
Italiano realised that Western Power needed a new operating model, but it was also important not to rush headlong into change. He worked with his team to provide a simple definition of Western Power’s key strategic outcomes. These were ultimately defined as:
- It’s role in the community - to connect people with electricity
- It’s measures of success - safe, reliable and affordable
The team was then able to set about designing an operating model that could achieve these aims. Italiano’s back-to-basics approach helped persuade him to bring EY on board. EY’s global reach and extensive range of existing utilities customers were important factors in the decision. But it was EY’s Power and Utilities Maturity Model and Architecture (PUMMA) program that most attracted Western Power.
The power of PUMMA
PUMMA is designed to help large utilities to optimise their process value chains, maturity models, risks and controls, key performance indicators and IT environment. The model offers access to a large volume of constantly updated data that utilities can use to make transformations as cost-effective as possible.
“PUMMA is a process-centric model that has a customer orientation and is functionally aligned. It puts the customer at the centre and it brings through end-to-end processes: the business functions fall out of that,” Ian Rakich, Leading Partner on EY Australia’s engagement with Western Power.
PUMMA aligned with Italiano’s objectives. He believes it works well for Western Power because it tightly describes the processes and functions necessary to run a utility, and it allows the company to see the level of resources other firms around the world allocate to these processes.
Developing a new operating model
The first step in Western Power’s transformation was the strategic plan for 2013-17. Designed to deliver key business outcomes and to show management the scale of the projected transformation, the plan set out three phases of development:
- Improving the organisation’s business structure and processes
- Changing culture and capability
- Building branding and customers
The next step was to design a new operating model, with the focus firmly on the company’s purpose: connecting people with electricity.
Working with EY, Italiano and his team first defined the principles that would underpin the new operating model. These would help to answer key questions about the company’s processes and functions.
Italiano’s approach was to the get the core principles and desired outcomes firmly in place before working on the operating model and the organisational changes. The first step was to define Western Power’s value drivers. During the planning process, it became clear that regulators, customers, employees and other stakeholders were at the heart of value for Western Power. In the end, three key value drivers were settled on:
- Stakeholder management
- Spend management
- Delivery execution
Italiano and his team were able to envisage a value chain that would be tightly aligned to the value drivers. The value chain highlights end-to-end processes that always focus on customers, an integrated business that facilitates rapid responses to external pressure, and the development of common processes that drive low costs to maximise financial return.
Western Power drew up a streamlined, process-centric operating model that would deliver a safe, reliable and affordable supply of electricity and always keep the customer in sight.
To fit with Italiano’s aim of introducing business management techniques and frameworks, the model was designed to focus on the management of the utility as a whole, rather than on particular technical functions. The model had to apply to both Western Power’s transmission and distribution functions in order to provide the economies of scale that would be lost if the functions were separated.
With so many changes made, and so many still ahead, how will the new CEO know when the transformation is complete? More importantly, how will Italiano know his work has been successful?
In keeping with Western Power’s clear new direction, Italiano says that it will not be material tests or complex metrics that ultimately indicate success to him “Like any other company, we will know that we’ve been successful when the customers perceive that they are getting value for money for the service that we offer,” he says.
Read the full article or learn more on EY’s Power and Utilities Maturity Model (PUMMA) program.