The utility industry is being led down a new path littered with obstacles. But who will lead the companies themselves? Surrounded by threats from the shift to renewable energy, increasing regulation, and an aging grid, utility companies know that the future is now. The first major hurdle is identifying the talent that will usher in the new age.
Shedding off the cobwebs to turn a heavily regulated energy company into a fast-paced digital utility is no small feat. For many utility companies, this transformation has been difficult to manage, and slower than industry analysts and insiders would like. There is good reason for the delay, though: the incredibly vast array of moving parts makes it difficult to create a new paradigm.
Adding to the complexity, a global talent shortage in engineering translates into a lack of specialized skills, along with the impending departure of baby boomers who will take their hard-earned operational knowledge with them.Adding to the challenge, studies¹ project tenure of just under 24 months for many of the next generation – an impossible time frame in which to acquire and improve upon difficult operational skills.
Without new talent to develop, utility companies struggle to create a progressive brand; without a progressive brand, newly acquired talent remains largely at risk. The cycle continues, and a leadership void opens.
It is a critical time to find leaders that can break the cycle and launch utility companies into the new environment. Without creative leaders to identify paths to change and profitability, utility companies will enter into an “adapt or die” environment without the direction they need to thrive. Lacking brand strength to attract top talent in both engineering and technology areas, utility companies will run the risk of falling behind emerging technologies and innovation.
Bloomberg Businessweek framed the outlook well. “Regulators set rates; utilities get guaranteed returns; investors get sure-thing dividends. It’s a model that hasn’t changed much since Thomas Edison invented the light bulb. And it’s doomed to obsolescence,” the magazine wrote in 2013. “The Edison Electric Institute (EEI)…warned members that distributed generation and companion factors have essentially put them in the same position as airlines and the telecommunications industry in the late 1970s.”
A changing model does not necessarily mean the collapse of an industry, of course. Forward-thinking utility businesses have already proven that they can thrive as the new environment unfolds. It all depends on finding the right talent to take a company in a quickly evolving direction.
The next generation of leaders in the utility industry will have two key characteristics: they will come from outside the industry and they will be collaborative.
The prevailing mindset in the utility industry has been that the best way to tackle transmission challenges is to hire people with transmissions backgrounds. Sound reasoning as long as the traditional model was intact. As that model breaks down, however, leaders who have excelled in other industries will have a different set of solutions from which to draw.
Utility companies looking to break out will therefore look to top executives from other sectors, ideally those that have faced similar shifts. Outsiders will have a better chance of breaking the vicious cycle that is holding utility companies back from effective change.
Perhaps the first requirement (leaders from outside utilities) will lead to the second, as executives brought in from other sectors will gather information from trusted experts in their organizations as well as other networks. They must care more about facilitating and bringing smart people and entities together to solve problems. They must engage talent from a level of interest, motivational perspective and traditional skills.
To nurture these leaders, development programs will need to consider and collaborate across the different perspectives found at country and regional levels. Each developmental activity requires the strengthening of cross-sector and cross-cultural leadership while ensuring that all stakeholders are involved in the process of developing talent.
As these changes are made to find near-term leaders, utility businesses must put youth in the driver’s seat to ensure they also have long-term leadership in mind. At present, 50% of the available talent in the world is under the age of 25. These are the real stakeholders of the future and are the foundation for the next generation of talented leaders.
Leadership in the modern world is the capacity of a system or a community to co-create its future as it evolves. The utility industry typifies this reality, as it moves from a staid, predictable climate to one defined by VUCCA (volatile, uncertain, complex, chaotic, ambiguous). The linear business model of utilities is changing, and companies that cultivate the right leaders will have the firepower needed to separate from the pack.