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Chapter 11. Views from the Edge—Conversa... > Executive Interview #3: Power Utilit...

Executive Interview #3: Power Utility

Florida Power & Light


CIO: Mr. Dennis Klinger


FPL Group, Inc., provides electricity-related service. Florida Power & Light (FPL), one of the company's main subsidiaries, is engaged in the generation, transmission, distribution, and sale of electrical energy throughout most of the east and lower west coasts of Florida. More than half of the company's business is derived from residential customers, and the balance is generated from commercial and industrial clients.

Plant:What I was hoping was that you could give me some of your thoughts on what are the main challenges that lie ahead for e-commerce strategists, perhaps in your industry but more in general across the board—what people are really facing, as they mount an e-commerce strategy going forward in the next 18 months to 2 years. What are the issues? Is it too late to come into the electronic marketplace?
Klinger:I don't think it is too late to come into the e-marketplace, but digital markets are certainly starting to explode now. The challenges are large and complex. I think of these challenges in two major groupings. First, how can we use e-commerce to give our company an advantage either by improving internal operations and cost structure or by increasing revenue through e-commerce-related products and services? In either case, it is likely many different partners and partnership structures should be considered, which adds to the complexity. Second, what could a competitor, including competitors from totally new areas including pure dot-com, do to us to change the competitive balance or totally change the game? Issues I think about often are how to help our company think, decide, and act at Web speed and how to source, reward, and retain the kind of people required to compete and succeed in this new environment. Partners clearly play a part in the sourcing decision.
Plant:That's interesting, and it's interesting in that people now think more about retaliatory moves than they used to; it used to be just go ahead and do what you can, but now it's about thinking much more directionally.
Klinger:I don't know if "retaliatory" captures the whole thought. With the capabilities of e-commerce and the speed with which things can happen, you need to think about more than just responding to a competitor's move. You need to think about structural changes to your whole marketplace including who and what your competitors are.
Plant:Oh absolutely. I think your industry is very interesting because of the government regulatory framework that was put in place, and it really stimulated the environments—your environment—which traditionally we would think of as being quite staid. As one of the leading areas, really, how do you see government and regulatory policy moving forward in the sense of its impact?
Klinger:At this point, regulation is a consideration in e-commerce as it impacts the currently regulated component of our business. The issue is not so much that regulation impacts e-commerce directly, but rather it limits who can sell what to whom, including e-commerce. We will move at the pace regulation will permit and take advantage of opportunities that present themselves. There is no doubt in my mind that electricity could be sold profitably on the Web. This is already happening where allowed, although I don't think any money is being made yet. Moreover, it could be sold by nontraditional players such as retail stores with exciting portals, specialized digital marketplaces, or very customer-friendly dot-com businesses with no bricks and mortar at all. You will probably see what I would call a virtual utility with no physical assets. I would guess that we and a host of others are now getting all the right capabilities in place so that, when regulation allows, we hit the ground running.
Plant:In terms of the unfolding e-commerce marketplace, perhaps you could describe the issuers and relationships as you see them in the residential and business consumer channels.
Klinger:We are certainly looking at both B2C and B2B. In the B2B space I see two thrusts. The first is where we are the buyer. In this case, we are looking at buying consortiums that include partnerships with other buyers to leverage volume, partnerships with sellers to gain special deals, and partnerships with technology providers so we can move fast in this area without worrying about reinventing the wheel. The second is where we are the seller. In this case, we are trying to use e-commerce techniques and capabilities to make it easy and rewarding for our customers to do business with us. We can and will exploit the buy side immediately. The sell side of B2B and B2C can be practiced in some situations and in unregulated states now, and we will move as appropriate within our overall business strategy in this case. We will be ready when Florida opens up.
Plant:As far as the industrial consumer is concerned—the Wal-Marts, the Goodyears—they presumably will be interacting with you more and more, growing a business-to-business relationship.
Klinger:That is true. We have an e-commerce offering we call EDMpro.com that focuses on providing value-added products and services to large commercial customers now. When we are allowed to sell the commodity through this medium, we will be ready.
Plant:So in reality then, having the vision to understand how those changes are going to impact your organization is key; for example, deregulation…
Klinger:The deregulation initiatives in our industry and the changes that e-commerce could bring are separate and unrelated in their original intent. However, I think with the proper vision, the relationship or, maybe better said, the opportunities and threats are large. As an example, today companies cannot sell retail electricity against us in our territory because of regulation. However, as soon as there is deregulation, e-commerce will make it possible for anyone, not just an electric utility, to sell against us, and they will have totally different cost structures.
Plant:As a CIO, a manager of technical issues and a large organization internally, what have been the challenges that you have faced there and how are they moving forward? Is it a human resources issue? Is it a keeping-up-with-the-technology issue?
Klinger:As a CIO I have always been the focal point of technology for the companies I have worked for. However, as the chief technologist, I have always said people and not technology are the number one critical success factor. Applying people and technology to making the business successful has always been key. I think e-business causes things to move at tremendous speed, but the same things are still key. In summary, I think that the companies with the best people and intellectual capital will win.
Plant:Yes—attempting to employ the best people, with a shortage of talent available…
Klinger:Good people have always been in short supply. Now, with the speed of e-business and the need to be out of the box all the time, that is even more true. We will need to source, reward, and develop in more aggressive and more creative ways. We will also have to partner to fill appropriate gaps.
Plant:Do you find that partnerships are really the only solution to understanding and growing through all of the technologies that are out there?
Klinger:Partnerships are not the only answer, but they are certainly a part of the answer. I think this is true for at least two reasons. One is that it is almost impossible to have all the skill and talent you need as quickly as these things change and as quickly as we must move. Also, business structures will morph continuously. I see partnerships as a way to easily build, disassemble, and rebuild businesses quickly, which I believe will be mandatory. The concept of virtual companies is going to become even more clear as we move forward. E-business allows the business structure behind the scenes to change without impacting the customer.
Plant:Thank you for sharing your insights.



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