Business Level Strategy
Xcel’s Corporate-level strategy has placed it squarely within the electric and
natural gas utility industry. The corporate strategy has made clear that Xcel will invest in
generation, transmission, and distribution of electric and natural gas services. Mid-level
management must now institute business-level strategies to support these goals.
Because of the nature of the utility business, differentiation is not a strong
business-level strategy; there is no difference in the electricity the consumer gets from
Xcel versus a competitor. Instead, Xcel must focus on cost leadership. Since Xcel is
going through a phase of heavy construction right now, this is a prime focus of the cost
containment efforts.
One of the business strategies Xcel has developed is called “Transmission
Resource Optimization.” The primary goal of this strategy is to streamline the current
construction process and make it more efficient in handling a high volume of projects.45
By improving this process it will give management the ability to better predict future
spending and avoid critical cost overruns by addressing potential problems as they come
up. Since Xcel is restricted in the rate increases it can pass along to customers, keeping
capital costs inline is critical to margin.
To help with this process Xcel has initiated development of a new software
program called “Project Management Optimization System” to bring together all the
functions of the transmission process. It is hoped that this new software program can
keep all the necessary data related to current projects in one place, eliminating many of
the older systems that were used to store different parts of the data.45
Xcel is also developing an aggressive reliability plan designed to ensure asset
lifecycle and maintenance is monitored accurately. Improving these two competencies
will enable Xcel to more proactively deal with infrastructure concerns, thereby reducing
the number of electrical outages. This will increase customer satisfaction and reduce the
number of complaints to the Public Utilities Commission, which is core to Xcel’s
regulatory environment management efforts.
The business-level strategies described above, and other like them, will help Xcel
to carry out its corporate-level strategies as efficiently and effectively as possible.
References:
45. Xcel Energy Inc. (2006). Transmission Resource Optimization – TRO Executive
Summary September 2006. (Internally Distributed Corporate Document)