Decision Interface

Oracle EBS 12.1: A Recipe for Success

2011-05-14T13:57:00.000-07:00

A business strategy in today’s fast-paced economic environment is a constantly changing process. To remain competitive, an organization’s packaged enterprise application infrastructure must provide a level of adoptability that supports this dynamism. When business challenges warrant enhancing existing information systems, mission-critical packaged enterprise applications must be upgraded to ensure that these business processes will remain consistently linked to customer requirements.

In order to remain competitive, demands to reduce costs are being made with the added expectation of no loss or impact on business process. As a result of corporations becoming Global and due to M&A activities, companies are managing business processes and IT operations across multiple business unites and locations.

Therefore organizations have to meet global and local regulatory compliance requirements and mitigate risks across the enterprise.

More internal IT organizations have started feeling the strain from demands for more detailed, timely information as a result of an expected rise in government oversight as well as a heightened regulatory compliance environment.

Companies are realizing that the only way that they can achieve sustainable cost reductions and meet most of the above challenges of being a Global Organization is through standardization and simplification of the processes. This can be achieved using the new features and functionality of Oracle EBS 12.1.

To do or not to do – that IS the question

The upgrade can impact various facets of your organization. Hence, it is imperative to access the impact that the upgrade would have on your Business and Operations, Finance, IT strategies, Manufacturing and Inventory Management. The success of any upgrade would depend upon two key factors: how well defined an upgrade strategy is and a solid, flawless execution.

Determine Drivers for Upgrade

Following are the Key Drivers one should think when Upgrade is needed:

a) Establish common business processes and standards
· Simplification – reduce complexity of the local processes
· Standardization/Automation – Use or Oracle EBS 12 and best of breed technologies to standardize processes

b) Support Global reporting needs
· Financial reporting – the baseline for every organization (External, internal, Multi GAAP, SOX, etc.)
· Managerial reporting – Delivering information to the management team (Operational reports, HR reports, IT performance reports, etc.)
· Composite reporting – Delivering Business Analytics (Profitability analysis, Budget to actualcomparisons, Risk analysis, etc.)
· Business performance and risk reporting – Linking Strategy and execution (Planning/Forecasting, etc.)

c) Shared Services – Delivering Financial process in a consistent and quality manner at the lowest possible internal cost. Many organizations are establishing shared service centers to optimize their cost structure and reduce risk.
· Management re-focuses on the real drivers of value and their core businesses
· Resources freed up to do what they do best
· Higher service levels – failures in routine processes do not get in the way of business performance
· Costs are reduced in Accounting, Finance, and other functions
· IT support complexity is reduced
· Short term arbitrage benefits
· Improved visibility of the effectiveness and efficiency of non-core processes
· Better control of the cost of business support services
· Reduced business risk/increased visibility of controls

d) Meet Global and local regulatory requirements
· IFRS and Tax Compliance – Accounting Standards worldwide moving towards IFRS to have a common set of reporting and tax compliance. Many countries are adopting it. Conversions to IFRS are therefore mandatory for the organization pushing for an Upgrade need

e) Reduce total cost of ownership (TCO) of Oracle EBS by analyzing
· Multiple Instances – Resulting in infrastructure costs, resources, customizations, interfaces, application integration, support maintenance and upgrades
· Data Quality – resulting in ongoing transformations for analytics, inconsistencies in customers, suppliers and employees
· User Training and Adoption

f) Time, Cost, R12.1 Skills and ROI – Traditional, upgrade initiatives have been looked at as periodical transactional events and are not included as part of the overall IT strategy of the organization. However, with the diminishing budgets and the emphasis on quantifiable ROI, the CIOs need to find the right consulting partner, who has the capability to provide a predictable upgrade roadmap with correct time and cost estimates, as well as have the required expertise skills. To derive the maximum value out of your upgrade initiative investments, the partner should offer advice on areas of the applications that have not yet been leveraged for the process improvements and new technology areas that can be leveraged.

Leveraging Key Oracle R12 Functionality and Benefits

a) Establish common business processes and standards
· Sub-ledger Accounting allows organizations to operate under accounting policies and rules throughout the enterprise
· e-Business Tax offers an organization to consistently process and regulate numerous taxes
· New ledger system allows an organization to store financial transactions easily and have easier user access
· Oracle Payments allows an organization to centrally credit and debit payments
· Single point of access allows efficient management of bank accounts and numerous banks
· Simplify inter-account reconciliation for key business flows such as procure-to-pay or order-to-cash

b) Support Global reporting needs
· Sub-ledger Accounting allows organizations to report financial transactions in multiple ways to meet local and global reporting needs
· Increase the efficiency of reporting across operating units and ledgers
· Streamline reporting and inquiries by leveraging a common and consistent data model across all sub-ledger applications

c) Shared Services
· Increase the efficiency of shared services and single database operations with streamlined ACCESS, processing and reporting across operating units

d) Meet Global and local regulatory requirements
· Endure both corporate visibility and local compliance by automatically creating accounting for all legal entities and multiple accounting representation
· Document test, monitor and certify ongoing compliance with Sarbanes-Oxley, JSOX, HIPA and other global regulations using GRC (Governance, Risk and Compliance)

e) Reduce total cost of ownership (TCO) of Oracle EBS 12.1
· Reduction in TCO by system consolidation and administrating fewer systems
· Reduction in TCO by shared support model

Why traditional approaches are not sufficient

Most of the existing solutions for Oracle EBS upgrades do not incorporate structured assessment processes. There is a lack of comprehensive upgrade planning. Upgrades are points in time of the application lifecycle that provide a friendly trigger to enable the organization to consider the available options. These options emanate from the consideration of the future state of the business and opportunities for realizing the business objectives as well as reducing IT costs.

If the initial assessments are not adequate or rigorous, organizations will be unable to adopt a long term focus while planning their upgrade strategy. This often results in upgrades being more technical exercises, where the assessment offers little or no focus on the functional or transformational aspects of the upgrade. Organizations are therefore unable to plan for long term decoupling of the technology and process layers. Such assessments are theoretical exercises rather than enablers for planning, executing and stabilizing the upgrade effort.

Decision Interface’s experience suggests that a major reason why organizations fail to optimally extract value from their upgrade initiatives is due to a common perception that upgrades are isolated initiatives and should not be tied to overall business strategy. Business should adopt a holistic approach to enterprise application upgrades and ensure a long term focus on the goals associated with the functional and transformational aspects of the upgrade, especially when upgrade to something like the Oracle EBS 12.1 environment.

The Delivery Process for the Enterprise applications upgrade

Based on our industry experience, Decision Interface recommends that the organization should have an integrated upgrade strategy to align it with their strategic initiatives in order to derive maximum value from their incremental investments in Enterprise Applications.
To achieve this goal, there are three key elements in the upgrade strategy that must be considered.

1) Alignment with Strategic Initiatives of the Organization: Instead of treating the upgrade as an isolated initiative, organizations should view the upgrade process as an integral activity closely aligned with the business objectives of the organization. As business requirements and business environment changes, the processes and related applications will need to change and the modifications made to support the functional value. Organizations that are able to overcome this hurdle can turn the upgrade process into a positive opportunity and achieve a competitive advantage, improving business processes, compliance to the regulatory needs and creating cost efficiencies.

2) Use an Upgrade Assessment based approach to create and complete upgrade roadmap: Before conducting a mission critical application upgrade, organizations should embark on a comprehensive assessment to:

a. Discover whether Oracle EBS 12.1 will help achieve the business goals – before investing significant time and money
b. Learn ways to streamline the work, tighten controls and automate manual processes
c. Find out which problems Oracle EBS 12.1 will solve and which it won’t
d. Understand the right timing for the EBS 12.1 upgrade based on the needs assessment

3) Use an experienced and trusted partner: Not all organizations need to partner with a third-party implementation team. However, all organizations need an experienced leader. Whether done “in-house” or teamed with third-party providers, experience is the key – not with the product but with the process.

Decision Interface’s upgrade methodology, ManageIT, consists of four separate stages, Assessment, Envision, Deliver, and Optimize. The ManageIT process provides specific phases, tasks, and deliverables needed to deliver the upgrade/reimplementation project to the client.

The stages are unique in the phases/tasks they offer but can overlap durations where multiple stages can be in process at the same time. This allows clients the flexibility to:

1. Assess the business environment and project needs to develop a common strategy.
2. Envision the user’s requirements and identify key future business processes and workflows to devise if, when, and how to implement business, system, and technical needs.
3. Deliver a completed solution based on the plan identified during the Envision phase.
4. Optimize a system by auditing its performance. This allows the organization to identify any additional project needs to be addressed via another project or change request.

Conclusion

Organizations have traditionally viewed Enterprise application upgrade initiatives as transactional events with no or minimal strategic importance. They often do not have an upgrade strategy or if there is one, it is hardly aligned with the strategic objectives of the business.

Decision Interface, based on our past experiences in managing end-to-end upgrade initiatives for various enterprise applications, believes that the Decision Interface upgrade methodology, ManageIT, will help organizations to change the perspective and establish an enterprise application strategy as a critical component of their business, operations and IT strategy. Why do we believe this? It has worked and it will work.

Oracle EBS 12.1: To Do or Not To DO

2011-05-06T09:50:00.000-07:00

To do or not to do

It was just three years ago. I was leading an Oracle upgrade project. We were debating whether to upgrade from Oracle 11i11.8 to either 11.10 or 12. It was obvious that 12 was the bleeding edge. Thus, we reimplemented to 11.5.10 with the intent of waiting for Oracle Fusion for the next upgrade. One caveat was that we knew we would have to move through 12 to get to Fusion. Well, it’s time to make the move to 12.1. Let’s take a closer look as to why, when and with whom.

Oracle E-Business Suite (EBS) 12.1 is the go-to release for EBS users, and, so far, feedback indicates it is a better-quality release than EBS 12. EBS 11i users need to plan their upgrades, being aware that it is still a major upgrade, and that the availability of skills and resources will remain patchy in the short term.

Key Findings

Only a small percentage of EBS users have upgrades to EBS 12.1, but momentum is increasing. This means EBS 12.1 skills will be in high demand in the Oracle ecosystem.

Several larger organizations are re-implementing, rather than upgrading. They are changing the conceptual designs of their implementations, because their businesses have changed since the original implementations, and a move to EBS 12 enables them to take advantage of the new capabilities in Oracle Financials to optimize their setups.

EBS 12.1 has fewer quality issues than EBS 12, although users have experienced some critical issues in EBS 12.1’s new functionality. Customers that have a positive working relationship with Oracle and the appropriate escalation path have found these to be important to resolving problems quickly and effectively.

Recommendations

Multinational organizations with Oracle Financials should approach the move to EBS 12.1 with the mind-set of a reimplementation, rather than an upgrade.

Allocate more functional, technical and capital resources to this upgrade than for a point release upgrade on EBS 11i.

Establish good communication lines to Oracle executives and Oracle development to allow you to escalate problems quickly if they can’t be resolved through normal support channels.

Secure required third-party skills early on, because they are likely to be under demand pressure for at least the next 2 years.

What You Need to Know

EBS 12.1 is a major release with substantial new areas of functionality, but does not appear to suffer from the same level of quality issues that created challenges for users upgrading to early releases of EBS 12. Consequently, EBS 12.1 is the go-to release for Oracle EBS customers that are strategically committed to Oracle applications. Although there have been far fewer major issues reported by organizations upgrading to EBS 12.1 (compared with EBS 12), there are still some potential issues in the areas of new functionality of EBS 12.1.

Only a small number of EBS 12.1 upgrades have been completed, so experience among support staff, consultants and service providers is limited. Oracle and its partners are addressing this. However, the increasing numbers of organizations that are initiating EBS 12.1 upgrade projects means these skills are likely to be in demand for at least the next 2 years. Consequently, good project planning and appropriate internal resourcing are important for success with EBS 12.1 upgrades.

Analysis

EBS 12 was a significant release in the life cycle of EBS and is deployed by all new customers of Oracle. However, only a minority of users (at present, approximately 5%) have completed the upgrade to EBS 12 or EBS 12.1. Several organizations that upgraded to EBS 12 in 2008 and 2009 experienced many issues, and Gartner advised a cautionary approach to upgrades. However, in May 2009, Oracle released EBS 12.1 and the experience of organizations upgrading to EBS 12.1 has been more positive than with early versions of EBS 12. Thus, organizations on EBS 11i should plan their upgrade strategies accordingly.

The main elements of EBS 12 were a significant re-architecting of Oracle Financials (including the new sub-ledger accounting capability and a global tax engine), and some significant technology changes (see “Planning for Oracle E-Business Suite Release 12”). EBS 12.1 includes all of these changes, but adds new functionality in many other areas of EBS, including:

Enhancements to strategic sourcing, including two-stage RFP evaluation, flexible price tier structures and award-based cost factors

The full implementation of the converged inventory system for discrete and process manufacturing, along with enhancements to manufacturing operations functionality, improvements to warehouse management and a new Landed Cost Management module

Human capital management with a focus on strengthening Oracle’s talent management capabilities; there are enhancements to incentive compensation, iRecruitment, workforce life cycle management and performance management, plus new core HR management system integrations with organization charting, resume parsing, background checking and job board posting vendors. EBS 12.1 also provides an extended multi-tenancy model in EBS HR that better supports business process outsourcing.

There are a number of industry enhancements, and Oracle has also packaged several analytical applications (built using Oracle Business Intelligence Enterprise Edition (OBIEE)) with EBS 12.1, including project analytics, HR analytics, procurement and spend analytics, Oracle Manufacturing Operations Center, and a number of value chain planning analytic applications. Some of these were available prior to EBS 12.1, but are now packaged as part of the release. However users will need to purchase these analytic applications. One manufacturing organization that upgrades to EBS 12.1 and did not add these analytic applications felt that it had lost functionality as a result.

EBS 12.1 Upgrade Momentum is Accelerating

Uptake of EBS 12 was slow among the EBS user base. There were two reasons for this: 1) Many organizations were taking a “wait and see” approach, based on the potential impact of Oracle Fusion Applications and the lack of clarity over its delivery, and 2) the functionality improvements were mainly in the financial applications, and, even then, were primarily of value to large, complex multinationals. Many organizations that were on EBS 11i10 did not see major value in upgrading to EBS 12.

EBS 12.1 has a far wider range of functional enhancements that will help build the business case for an upgrade from an end-user perspective, while Oracle has now announced that the first release of Oracle Fusion Applications will be in late 2011.This has resolved the uncertainty about Oracle Fusion Applications. Gartner believes that Oracle Fusion Applications will not be a logical migration path for most EBS users for at least 2-3 years or longer.

Decision Interface’s position is that Oracle Fusion Applications will not be a viable full-ERP replacement for EBS until at least 2013, although some technically aggressive early adopters could consider replacing EBS financial (and, possibly, HR) applications with Oracle Fusion Applications from 2012. However, this will be a small number of early adopters. Consequently, as EBS 11i9 is already on sustaining support, and standard support for EBS 11i10 ends in November 2011 (Oracle waived the fee for the first year of extended support), many EBS users are planning to upgrade to EBS 12.1 prior to moving to Oracle Fusion Applications, as this give them a good window of support, while Oracle Fusion Applications become proven in the market.
This has been borne out by a number of client inquiries by both Gartner and Decision Interface. The volume of inquiries from users considering an upgrade to EBS 12.1 has increased steadily during the past six months. Oracle does not disclose detailed user numbers or upgrade statistics; however, it claims that the uptake of EBS 12.1 is approaching twice the rate of EBS 12 adoption.

Only a minority of the EBS user base has completed an upgrade to EBS 12.1. Consequently, this increasing momentum of EBS 12.1 adoption will put pressure on the availability of EBS 12.1 skills in the Oracle ecosystem in the next 2 years. However, despite this increased momentum, many organizations on EBS 11i10 may struggle to justify the upgrade to EBS 12.1, due to its complexity, especially if they have extensive customizations. Organizations in this situation need to do initial upgrade planning to identify if they can eliminate customizations as part of the upgrade to EBS 12.1, to help support the business case.

Early Upgrade Adopter Feedback on EBS 12.1

The biggest challenge facing early adopters of EBS 12 was product quality. Early releases had significant quality issues in a number of areas, and many upgrade projects stalled or were halted while the issues were addressed. Three reference customers of Oracle, that completed the upgrade to EBS 12.1, commend this releases quality over EBS 12. There have still been issues: Two of the three references encountered a small number of critical issues in manufacturing, warehouse management and inventory that delayed their go-lives and required escalation to Oracle R&D to get the issues resolved (which they were). Despite these issues, all the references said, overall, they were happy with the quality of EBS 12.1 that reinforces the findings of the Gartner Group. These findings were that the number of clients reporting issues with EBS 12.1 upgrades is lower than for EBS 12.

Generally, the more significant issues tend to be in the areas with new functionality, while the financial applications are now relatively stable. Some 12.1 clients had issues with general ledger reporting: however, these were not deemed significant. Also, system integrations working on EBS 12.1 projects have said they encountered fewer issues compared with the EBS 12 release.
Although product quality has improved, organizations upgrading to EBS 12.1 have still encountered some general issues. This is to be expected with any major release, and the following common themes have emerged:

Custom object upgrade – Several organizations reported that customer objects were not well-handled by the upgrade scripts. Users found that the upgrade process did not flag that some custom objects had not been upgraded that, subsequently, required additional testing activities.

Multiple upgrade iterations – All the reference clients highlighted that they needed more upgrade iterations than originally planned, especially organizations that were implementing new functionality in EBS 12.1 in areas outside Oracle Financials. This varied between two and five upgrade iterations among the reference customers. Although running through multiple iterations is part of any upgrade process, organizations moving to EBS 12.1 should plan for at least one more upgrade iteration than they did for point release upgrades in EBS 11i.

User Testing – EBS 12.1 has a lot of new functionality across the range of EBS (in addition to the major architecture changes introduced in EBS 12 for Oracle Financials). Organizations that had completed the upgrade emphasized the importance of end-user training and change management. One project leader specifically recommended that unit testing was not enough, and that full process testing was required. This was because the combination of new functionality, coupled with user interface (UI) changes, could have a broader impact on the process flow from an end-user perspective.

Skills availability – All the organizations reported a lack of knowledge about EBS 12.1 among Oracle support staff and third-party service providers. None of the organizations could find any service providers with EBS 12.1 upgrade skills, and all felt that the Oracle support team was not fully conversant in EBS 12.1. However, these organizations undertook the upgrades in the second half of 2009 and the first quarter of 2010. Knowledge of EBS 12.1 and skills availability is improving. It is still likely to remain patchy for at least the next 2 years.

Planning an EBS 12.1 Upgrade

Although EBS 12.1 is an improvement over EBS 12 in terms of quality, much of our original advice regarding upgrading to EBS 12 remains valid. The following guidelines should be followed in planning such an upgrade:

Don’t wait for Oracle Fusion Applications before upgrading to EBS 12.1, unless you are 1) on EBS 11.5.10, 2) have an Oracle Financials-only implementation, 3) are a very aggressive adopter of new technology and 4) have a very positive relationship with Oracle. The key word in this last sentence was the “and”. Oracle Fusion Applications have yet to be delivered to the market and moving to EBS 12.1 gives you a support window that will allow you to pick the right time to consider moving to Oracle Fusion Applications.

Allocate more functional, technical and testing resources to this upgrade than you did for a point release upgrade on EBS 11i. For example, the new sub-ledger accounting and global tax engine can add significant time to the upgrade project. Multi-national companies or any customers using Oracle’s “multi-org” functionality should budget extra time and resources to understand these new features, and consider how they may impact financial processes and management reporting. Also, financial staff will need extensive education and training to understand the concepts and capabilities, and all end users will need training in the new UI and functionality. The extent of this training will depend on the breadth of your EBS implementation and the quality and capabilities of your user base.

Plan for multiple upgrade iterations. Although the release quality with EBS 12.1 (and many of the critical issues reported by early adopters will be patched in EBS 12.1.2 and subsequent releases), plan resourcing to support at least one more upgrade iteration than you did for a point release upgrade in EBS 11i (e.g., upgrading from EBS 11.5.9 to EBS 11.5.10). Ensure that you undertake full process retesting in areas of new functionality, rather than just unit testing.

Decide if you will reimplement or upgrade if you are moving from EBS 11i. The rearchitecting of financial applications in EBS 12 means that many organizations are reimplementing their EBS systems (i.e., changing the instance strategy or conceptual design). Larger and more-complex organizations (typically multi-nationals) that use EBS Financials should approach EBS 12.1 upgrades with the mind-set of a reimplementation, rather than simple upgrades of their environments. However, existing Financials configurations can be migrated as-is, if desired. Smaller organizations, and those in the public sector or the no-for-profit area, should consider a move to EBS 12.1 to be a major upgrade.

Ensure that you have good communication lines to Oracle executives and Oracle development, to allow you to escalate any problems quickly if they cannot be resolved through normal support channels, especially if you are one of the early adopters in you region of operations or your implementation includes functionality outside Financials. Organizations that encountered critical issues with EBS 12.1 upgrades still needed to involve Oracle’s development organization and senior executives to get these issues resolved. Skills and knowledge in EBS 12.1 are still building in the Oracle ecosystem, and the new areas of functionality mean that new critical issues may emerge. Having a clear and agreed-on escalation path will ensure that you can get these issues resolved if they arise.

Identify and secure any required EBS 12.1 skills early in the project. Skills in EBS 12.1 remain in relatively short supply, and demand is ramping up. System integrators are developing upgrade tools to allow them to deliver cost-effective upgrades, but these take time to mature. Consequently, the availability of third-party skills will remain patchy for at least the next couple of years. Also, consider investing more in training your personnel in EBS 12.1, because this is a major change in EBS, and these skills will prove to be valuable over the lifetime of your investment.

Tactical Guidelines

Allocate more internal resources than you would for an EBS 11i point release upgrade. Significant areas of new functionality across all areas of EBS in 12.1 will require functional design and testing, as well as end-user training -- plan for a minimum of four upgrade iterations.

Develop a positive working relationship with Oracle, including an escalation path to an appropriate executive, if you are planning to upgrade to EBS 12 during the next 2 years.

If you are working with service providers, ensure that they have suitable EBS 12.1 upgrade experience. Be aware that skills may be in limited supply during the next 2 years, as increasing numbers of EBS users initiate upgrade projects.

Smart Grid Features and Functions

2010-11-22T15:27:00.000-08:00

Smart Grid Features and Functions

Before examining particular technologies, a proposal can be understood in terms of what it is being required to do. The governments and utilities funding development of grid modernization have defined the functions required for smart grids. According to the United States Department of Energy's Modern Grid Initiative report[24], a modern smart grid must:

Be able to heal itself

Motivate consumers to actively participate in operations of the grid

Resist attack

Provide higher quality power that will save money wasted from outages

Accommodate all generation and storage options

Enable electricity markets to flourish

Run more efficiently

Enable higher penetration of intermittent power generation sources

Self-healing

Using real-time information from embedded sensors and automated controls to anticipate, detect, and respond to system problems, a smart grid can automatically avoid or mitigate power outages, power quality problems, and service disruptions.

As applied to distribution networks, there is no such thing as a "self healing" network. If there is a failure of an overhead power line, given that these tend to operate on a radial basis (for the most part) there is an inevitable loss of power. In the case of urban/city networks that for the most part are fed using underground cables, networks can be designed (through the use of interconnected topologies) such that failure of one part of the network will result in no loss of supply to end users. A fine example of an interconnected network using zoned protection is that of the Merseyside and North Wales Electricity Board (MANWEB).

It is envisioned that the smart grid will likely have a control system that analyzes its performance using distributed, autonomous reinforcement learning controllers that have learned successful strategies to govern the behavior of the grid in the face of an ever changing environment such as equipment failures. Such a system might be used to control electronic switches that are tied to multiple substations with varying costs of generation and reliability.[25]

Consumer participation

A smart grid, is, in essence, an attempt to require consumers to change their behavior around variable electric rates or to pay vastly increased rates for the privilege of reliable electrical service during high-demand conditions. Historically, the intelligence of the grid in North America has been demonstrated by the utilities operating it in the spirit of public service and shared responsibility, ensuring constant availability of electricity at a constant price, day in and day out, in the face of any and all hazards and changing conditions. A smart grid incorporates consumer equipment and behavior in grid design, operation, and communication. This enables consumers to better control (or be controlled by) “smart appliances” and “intelligent equipment” in homes and businesses, interconnecting energy management systems in “smart buildings” and enabling consumers to better manage energy use and reduce energy costs. Advanced communications capabilities equip customers with tools to exploit real-time electricity pricing, incentive-based load reduction signals, or emergency load reduction signals.

There is marketing evidence of consumer demand for greater choice. A survey conducted in the summer of 2007 interviewed almost 100 utility executives and sought the opinions of 1,900 households and small businesses from the U.S., Germany, Netherlands, England, Japan and Australia[26]. Among the findings:

83% of those who cannot yet choose their utility provider would welcome that option

Roughly two-thirds of the customers that do not yet have renewable power options would like the choice

Almost two-thirds are interested in operating their own generation, provided they can sell power back to the utility

And as already noted, in the UK where the experiment has been running longest, 80% have no interest in change (source: National Grid).

The real-time, two-way communications available in a smart grid will enable consumers to be compensated for their efforts to save energy and to sell energy back to the grid through net-metering. By enabling distributed generation resources like residential solar panels, small wind and plug-in hybrid, smart grid will spark a revolution in the energy industry by allowing small players like individual homes and small businesses to sell power to their neighbors or back to the grid. The same will hold true for larger commercial businesses that have renewable or back-up power systems that can provide power for a price during peak demand events, typically in the summer when air condition units place a strain on the grid. This participation by smaller entities has been called the "democratization of energy"—it is similar to former Vice President Al Gore's vision for a Unified Smart Grid.

Resist attack

Smart grid technologies better identify and respond to man-made or natural disruptions. Real-time information enables grid operators to isolate affected areas and redirect power flows around damaged facilities.

One of the most important issues of resist attack is the smart monitoring of power grids that is the basis of control and management of smart grids to avoid or mitigate the system-wide disruptions like blackouts. The traditional monitoring is based on weighted least square (WLS) that is very weak and prone to fail when gross errors (including topology errors, measurement errors or parameter errors) are present. New technology of state monitor is needed to achieve the goals of the smart grids.

High quality power

Outages and power quality issues cost US businesses more than $100 billion on average each year[27]. It is asserted that assuring more stable power provided by smart grid technologies will reduce downtime and prevent such high losses.

Accommodate generation options

As smart grids continue to support traditional power loads they also seamlessly interconnect fuel cells, renewables, microturbines, and other distributed generation technologies at local and regional levels. Integration of small-scale, localized, or on-site power generation allows residential, commercial, and industrial customers to self-generate and sell excess power to the grid with minimal technical or regulatory barriers. This also improves reliability and power quality, reduces electricity costs, and offers more customer choice.

Enable electricity market

Significant increases in bulk transmission capacity will require improvements in transmission grid management. Such improvements are aimed at creating an open marketplace where alternative energy sources from geographically distant locations can easily be sold to customers wherever they are located.

Intelligence in distribution grids will enable small producers to generate and sell electricity at the local level using alternative sources such as rooftop-mounted photo voltaic panels, small-scale wind turbines, and micro hydro generators. Without the additional intelligence provided by sensors and software designed to react instantaneously to imbalances caused by intermittent sources, such distributed generation can degrade system quality.

Optimize assets

A smart grid can optimize capital assets while minimizing operations and maintenance costs. Optimized power flows reduce waste and maximize use of lowest-cost generation resources. Harmonizing local distribution with interregional energy flows and transmission traffic improves use of existing grid assets and reduces grid congestion and bottlenecks that can ultimately produce consumer savings.

Enable high penetration of intermittent generation sources

Climate change and environmental concerns will increase the amount of renewable energy resources. These are for the most part intermittent in nature. Smart Grid technologies will enable power systems to operate with larger amounts of such energy resources since they enable both the suppliers and consumers to compensate for such intermittency.

Features

Existing and planned implementations of smart grids provide a wide range of features to perform the required functions.

Load adjustment

The total load connected to the power grid can vary significantly over time. Although the total load is the sum of many individual choices of the clients, the overall load is not a stable, slow varying, average power consumption. Imagine the increment of the load if a popular television program starts and millions of televisions will draw current instantly. Traditionally, to respond to a rapid increase in power consumption, faster than the start-up time of a large generator, some spare generators are put on a dissipative standby mode. A smart grid may warn all individual television sets, or another larger customer, to reduce the load temporarily (to allow time to start up a larger generator) or continuously (in the case of limited resources). Using mathematical prediction algorithms it is possible to predict how many standby generators need to be used, to reach a certain failure rate. In the traditional grid, the failure rate can only be reduced at the cost of more standby generators. In a smart grid, the load reduction by even a small portion of the clients may eliminate the problem.

Demand response support

Demand response support allows generators and loads to interact in an automated fashion in real time, coordinating demand to flatten spikes. Eliminating the fraction of demand that occurs in these spikes eliminates the cost of adding reserve generators, cuts wear and tear and extends the life of equipment, and allows users to cut their energy bills by telling low priority devices to use energy only when it is cheapest[28].

Currently, power grid systems have varying degrees of communication within control systems for their high value assets, such as in generating plants, transmission lines, substations and major energy users. In general information flows one way, from the users and the loads they control back to the utilities. The utilities attempt to meet the demand and succeed or fail to varying degrees (brownout, rolling blackout, uncontrolled blackout). The total amount of power demand by the users can have a very wide probability distribution that requires spare generating plants in standby mode to respond to the rapidly changing power usage. This one-way flow of information is expensive; the last 10% of generating capacity may be required as little as 1% of the time, and brownouts and outages can be costly to consumers.

Greater resilience to loading

Although multiple routes are touted as a feature of the smart grid, the old grid also featured multiple routes. Initial power lines in the grid were built using a radial model, later connectivity was guaranteed via multiple routes, referred to as a network structure. However, this created a new problem: if the current flow or related effects across the network exceed the limits of any particular network element, it could fail, and the current would be shunted to other network elements that eventually may fail also, causing a domino effect. See power outage. A technique to prevent this is load shedding by rolling blackout or voltage reduction (brownout).

Decentralization of power generation

Another element of fault tolerance of smart grids is decentralized power generation. Distributed generation allows individual consumers to generate power onsite, using whatever generation method they find appropriate. This allows individual loads to tailor their generation directly to their load, making them independent from grid power failures. Classic grids were designed for one-way flow of electricity, but if a local sub-network generates more power than it is consuming, the reverse flow can raise safety and reliability issues. A smart grid can manage these situations.

Price signaling to consumers

In many countries, including Belgium, the Netherlands and the UK, the electric utilities have installed double tariff electricity meters in many homes to encourage people to use their electric power during night time or weekends, when the overall demand from industry is very low. During off-peak time the price is reduced significantly, primarily for heating storage radiators or heat pumps with a high thermal mass, but also for domestic appliances. This idea will be further explored in a smart grid, where the price could be changing in seconds and electric equipment is given methods to react on that. Also, personal preferences of customers, for example to use only green energy, can be incorporated in such a power grid.

Technology

The bulk of smart grid technologies are already used in other applications such as manufacturing and telecommunications and are being adapted for use in grid operations. In general, smart grid technology can be grouped into five key areas[29]:

Integrated communications

Some communications are up to date, but are not uniform because they have been developed in an incremental fashion and not fully integrated. In most cases, data is being collected via modem rather than direct network connection. Areas for improvement include: substation automation, demand response, distribution automation, supervisory control and data acquisition (SCADA), energy management systems, wireless mesh networks and other technologies, power-line carrier communications, and fiber-optics. Integrated communications will allow for real-time control, information and data exchange to optimize system reliability, asset utilization, and security.

Sensing and measurement

Core duties are evaluating congestion and grid stability, monitoring equipment health, energy theft prevention, and control strategies support. Technologies include: advanced microprocessor meters (smart meter) and meter reading equipment, wide-area monitoring systems, dynamic line rating (typically based on online readings by Distributed temperature sensing combined with Real time thermal rating (RTTR) systems), electromagnetic signature measurement/analysis, time-of-use and real-time pricing tools, advanced switches and cables, backscatter radio technology, and Digital protective relays.

Smart meters

Main article: Smart meter

A smart grid replaces analog mechanical meters with digital meters that record usage in real time. Smart meters are similar to Advanced Metering Infrastructure meters and provide a communication path extending from generation plants to electrical outlets (smart socket) and other smart grid-enabled devices. By customer option, such devices can shut down during times of peak demand.

Phasor measurement units

Main article: Phasor measurement unit

High speed sensors called PMUs distributed throughout their network can be used to monitor power quality and in some cases respond automatically to them. Phasors are representations of the waveforms of alternating current that ideally in real-time, are identical everywhere on the network and conform to the most desirable shape. In the 1980s, it was realized that the clock pulses from global positioning system (GPS) satellites could be used for very precise time measurements in the grid. With large numbers of PMUs and the ability to compare shapes from alternating current readings everywhere on the grid, research suggests that automated systems will be able to revolutionize the management of power systems by responding to system conditions in a rapid, dynamic fashion[30].

A Wide-Area Measurement Systems (WAMS) is a network of PMUS that can provide real-time monitoring on a regional and national scale. Many in the power systems engineering community believe that the Northeast blackout of 2003 would have been contained to a much smaller area if a wide area phasor measurement network was in place.[31]

Advanced Components

Innovations in superconductivity, fault tolerance, storage, power electronics, and diagnostics components are changing fundamental abilities and characteristics of grids. Technologies within these broad R&D categories include: flexible alternating current transmission system devices, high voltage direct current, first and second generation superconducting wire, high temperature superconducting cable, distributed energy generation and storage devices, composite conductors, and “intelligent” appliances.

Advanced control

Power system automation enables rapid diagnosis of and precise solutions to specific grid disruptions or outages. These technologies rely on and contribute to each of the other four key areas. Three technology categories for advanced control methods are: distributed intelligent agents (control systems), analytical tools (software algorithms and high-speed computers), and operational applications (SCADA, substation automation, demand response, etc). Using artificial intelligence programming techniques, Fujian power grid in China created a wide area protection system that is rapidly able to accurately calculate a control strategy and execute it[32]. The Voltage Stability Monitoring & Control (VSMC) software uses a sensitivity-based successive linear programming method to reliably determine the optimal control solution[33].

Improved interfaces and decision support

Information systems that reduce complexity so that operators and managers have tools to effectively and efficiently operate a grid with an increasing number of variables. Technologies include visualization techniques that reduce large quantities of data into easily understood visual formats, software systems that provide multiple options when systems operator actions are required, and simulators for operational training and “what-if” analysis.

Standards and groups

IEC TC57 has created a family of international standards that can be used as part of the smart grid. These standards include IEC61850 that is an architecture for substation automation, and IEC 61970/61968 — the Common Information Model (CIM). The CIM provides for common semantics to be used for turning data into information.

MultiSpeak has created a specification that supports distribution functionality of the smart grid. MultiSpeak has a robust set of integration definitions that supports nearly all of the software interfaces necessary for a distribution utility or for the distribution portion of a vertically integrated utility. MultiSpeak integration is defined using extensible markup language (XML) and web services.
The IEEE has created a standard to support synchrophasors — C37.118.

A User Group that discusses and supports real world experience of the standards used in smart grids is the UCA International User Group.

There is a Utility Task Group within LonMark International that deals with smart grid related issues.

There is a growing trend towards the use of TCP/IP technology as a common communication platform for Smart Meter applications, so that utilities can deploy multiple communication systems, while using IP technology as a common management platform.[34][35]

IEEE P2030 is an IEEE project developing a "Draft Guide for Smart Grid Interoperability of Energy Technology and Information Technology Operation with the Electric Power System (EPS), and End-Use Applications and Loads"[36][37].

NIST has included ITU-T G.hn as one of the "Standards Identified for Implementation" for the Smart Grid that it believed there was strong stakeholder consensus"[38]. G.hn is standard for high-speed communications over power lines, phone lines and coaxial cables.

OASIS EnergyInterop' – is an OASIS technical committee developing XML standards for energy interoperation. It's starting point is the California OpenADR standard.

The following footnotes and links will be published with each blog in this series.

Footnotes

http://earth2tech.com/2009/06/05/why-the-smart-grid-wont-have-the-innovations-of-the-internet-any-time-soon/
http://earth2tech.com/2009/04/21/ciscos-latest-consumer-play-the-smart-grid/
http://earth2tech.com/2008/05/01/silver-springs-the-cisco-of-smart-grid/
http://earth2tech.com/2009/05/20/utility-perspective-why-partner-with-google-powermeter/
http://www.ecommercetimes.com/story/67126.html?wlc=1245096400&wlc=1245366756
Supersmart grid paper
http://earth2tech.com/2009/04/20/smart-grid-miami-fpl-ge-cisco-silver-spring-rolling-out-1m-smart-meters/
"The rise of the Smart Grid". Deloitte TMT Predictions. http://www.deloitte.co.uk/TMTPredictions/technology/SmartGrid-electricity-grid-efficiency.cfm.
"Obama's Speech on the Economy". New York Times. 2009-01-09. http://www.nytimes.com/2009/01/08/us/politics/08text-obama.html?pagewanted=4.
"NIST Announces Three Phase Plan for Smart Grid". National Institute for Standards and Technology. 2009-04-13. http://www.nist.gov/public_affairs/smartgrid_041309.html.
NIST announces smart grid interoperability project via IEEE P2030, June 2009
St. Arnaud's "green broadband" news
The Federal Energy Regulatory Commission Chairman Pat Wood, III (appointed by George Bush) stated that the US transmission system cannot afford to be "antiquated" in this news release Federal Energy Regulatory Commission (2002-09-18) (pdf). FERC news release on ISO. p. 1. http://www.ferc.gov/news/news-releases/2002/2002-3/Sept18rto9.pdf. Retrieved 2009-04-29.
[L. D. Kannberg]; M. C. Kintner-Meyer, D. P. Chassin, R. G. Pratt, J. G. DeSteese, L. A. Schienbein, S. G. Hauser, W. M. Warwick (2003-11) (pdf). GridWise: The Benefits of a Transformed Energy System. Pacific Northwest National Laboratory under contract with the United States Department of Energy. p. 25. http://arxiv.org/pdf/nlin/0409035. Retrieved 2008-12-05.
Smart Grid Working Group (2003-06) (pdf). Challenge and Opportunity: Charting a New Energy Future, Appendix A: Working Group Reports. Energy Future Coalition. http://www.energyfuturecoalition.org/files/webfmuploads/EFC_Report/EFCReport.pdf. Retrieved 2008-11-27.
Federal Energy Regulatory Commission staff report (2006-08) (pdf). Assessment of Demand Response and Advanced Metering (Docket AD06-2-000). United States Department of Energy. p. 20. http://www.ferc.gov/legal/staff-reports/demand-response.pdf. Retrieved 2008-11-27.
a b National Energy Technology Laboratory (2007-08) (pdf). NETL Modern Grid Initiative — Powering Our 21st-Century Economy. United States Department of Energy Office of Electricity Delivery and Energy Reliability. p. 17. http://www.netl.doe.gov/moderngrid/docs/Modern%20Grid%20Benefits_Final_v1_0.pdf. Retrieved 2008-12-06.
"Gridwise History: How did GridWise start?". Pacific Northwest National Laboratory. 2007-10-30. http://gridwise.pnl.gov/foundations/history.stm. Retrieved 2008-12-03.
a b c d Qixun Yang, Board Chairman, Beijing Sifang Automation Co. Ltd., China and .Bi Tianshu, Professor, North China Electric Power University, China. (2001-06-24). "WAMS Implementation in China and the Challenges for Bulk Power System Protection" (pdf). Panel Session: Developments in Power Generation and Transmission — Infrastructures in China, IEEE 2007 General Meeting, Tampa, FL, USA, 24–28 June 2007 Electric Power, ABB Power T&D Company, and Tennessee Valley Authority (Institute of Electrical and Electronics Engineers). http://www.ewh.ieee.org/cmte/ips/2007GM/2007GM_china_intro.pdf. Retrieved 2008-12-01.
"Building for the future: Interview with Andres Carvallo, CIO — Austin Energy Utility". Next Generation Power and Energy (GDS Publishing Ltd.) (244). http://nextgenpe.com/currentissue/article.asp?art=273073&issue=244. Retrieved 2008-11-
Betsy Loeff (2008-03). "AMI Anatomy: Core Technologies in Advanced Metering". Ultrimetrics Newsletter (Automatic Meter Reading Association (Utilimetrics)). http://www.utilimetrics.org/newsletter/index.cfm?fuseaction=Newsletter.showIssuetoPrint&Issue_ID=68. Retrieved 2008-11-26.
Demanding standards: Hydro One aims to leverage AMI via interoperability
Smartgrids Advisory Council. "Driving Factors in the Move Towards Smartgrids" (PDF). European Smartgrids Technology Platform: Vision and Strategy. European Commission. p. 9. ISBN 92-79-01414-5. http://www.smartgrids.eu/documents/vision.pdf.
a b National Energy Technology Laboratory (2007-07-27) (pdf). A Vision for the Modern Grid. United States Department of Energy. p. 5. http://www.netl.doe.gov/moderngrid/docs/A%20Vision%20for%20the%20Modern%20Grid_Final_v1_0.pdf. Retrieved 2008-11-27.
Anderson, Roger; A. Boulanger, J. A. Johnson and A. Kressner (2008 ISBN 978-1-59370-157-4). p 333. Computer-Aided Lean Management for the Energy Industry.
2007 IBM Energy and Utilities Global Residential/Small Business Consumer Survey http://www-03.ibm.com/industries/utilities/doc/content/landingdtw/3165578119.html?g_type=pspot
page 10
Energy Future Coalition, “Challenge and Opportunity: Charting a New Energy Future,” Appendix A: Working Group Reports, Report of the Smart Grid Working Group. http://www.energyfuturecoalition.org/pubs/app_smart_grid.pdf
U.S. Department of Energy, National Energy Technology Laboratory, Modern Grid Initiative, http://www.netl.doe.gov/moderngrid/opportunity/vision_technologies.html
Yilu Liu, Lamine Mili, Jaime De La Ree, Reynaldo Francisco Nuqui, Reynaldo Francisco Nuqui (2001-07-12). "State Estimation and Voltage Security Monitoring Using Synchronized Phasor Measurement" (pdf). Research paper from work sponsored by American Electric Power, ABB Power T&D Company, and Tennessee Valley Authority (Virginia Polytechnic Institute and State University). http://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=3B975B94733D906CA197813C53C2BD86?doi=10.1.1.2.7959&rep=rep1&type=pdf. Retrieved 2008-12-01. abstract Lay summary. ""Simulations and field experiences suggest that PMUs can revolutionize the way power systems are monitored and controlled."".
a b Patrick Mazza (2005-04-27) (doc). [http://fortress.wa.gov/wutc/home/webdocs.nsf/de53b07997d108ea882563b50072c5b3/bc3ced6bb5f4cf29882570200083aaa3/$FILE/Powering%20Up%20Smart%20Grid%20report.doc Powering Up the Smart Grid: A Northwest Initiative for Job Creation, Energy Security, and Clean, Affordable Electricity.]. Climate Solutions. p. 7. http://fortress.wa.gov/wutc/home/webdocs.nsf/de53b07997d108ea882563b50072c5b3/bc3ced6bb5f4cf29882570200083aaa3/$FILE/Powering%20Up%20Smart%20Grid%20report.doc. Retrieved 2008-12-01.
(pdf) Wide Area Protection System for Stability. Nanjing Nari-Relays Electric Co., Ltd. 2008-04-22. p. 2. http://www.nari-relays.com/en/files/Wide%20Area%20Protection%20System%20for%20Stability.pdf. Retrieved 2008-12-12. Examples are given of two events, one stabilizing the system after a fault on a 1 gigawatt HVDC feed, with response timed in milliseconds.
"On-Line Voltage Stability Monitoring and Control (VSMC) System in Fujian power grid" (pdf). Proceedings, Power Engineering Society General Meeting, 2007. (Tampa, FL, USA: IEEE). 2007-06-24. doi:10.1109/PES.2007.385975. Lay summary.
Cisco Outlines Strategy for Highly Secure, 'Smart Grid' Infrastructure
Why the Smart Grid must be based on IP standards
IEEE P2030 Official Website
EETimes.com: IEEE, conference drive smart grids - P2030 aims to develop a guide to grid standards
Commerce Secretary Unveils Plan for Smart Grid Interoperability
Li, Jerry (2009), From Strong to Smart: the Chinese Smart Grid and its relation with the Globe, AEPN, Article No. 0018602, Asia Energy Platform. Available at http://www.aepfm.org/link.php
http://www.smartgrids.eu/: Look under 'background'
"U.S. Energy Independence and Security Act of 2007". http://www.thomas.gov/cgi-bin/query/z?c110:H.R.6.ENR:. Retrieved 2007-12-23.
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_public_laws&docid=f:publ140.110
http://apps1.eere.energy.gov/news/news_detail.cfm/news_id=12364
"Report: Smart Grid Market Could Double in Four Years". Zpryme Smart Grid Market. http://www.smartgridnews.com/artman/publish/Business_Markets_Pricing_News/Report-Smart-Grid-Market-Could-Double-in-Four-Years-1662.html.
http://www.e-energy.de/en/index.php
a b c d e Massachusetts rejects utility's prepayment plan for low income customers, The Boston Globe, 2009-07-23

Tsouvalas, Dean (1 September 2009), "Smart Grid 101", Exec Digital Magazine (Boston), http://www.execdigital.com/Magazine.aspx?id=1448&page=32, retrieved 2009-09-01

External links

The NIST Smart Grid Collaboration Site NIST's public wiki for Smart Grid
Smart Grid News Free weekly news letter with information on Smart Metering and the Smart Grid
Opal-RT provides Real-Time Smart Grid Simulator Hardware and Software.
Video Lecture: Computer System Security: Technical and Social Challenges in Creating a Trustworthy Power Grid, University of Illinois at Urbana-Champaign
Video Lecture: Smart Grid: Key to a Sustainable Energy Infrastructure, University of Illinois at Urbana-Champaign
Google Map of AMI & Smart Metering Programmes across the World. Maintained by Smart Metering Project Team at the Energy Retail Association in the UK.
Similar Google Map showing North American Initiatives categorized by AMR/AMI/Smart Grid Data provided by Enernex, map created by Energy Retail Association project team in the UK.
How the Smart Grid will recharge Plug-In Electric Hybrids
Smart Grid Takes Off, Sustainable Industries Magazine.
Power meters help homeowners track and cut their energy use, The Christian Science Monitor.
Latest News in Smart Grid and Smart Metering
Smart Metering and Smart Grids: Intelligent Technology for Utilities
Who's Who in Smart Grid and Smart Metering
Smart Policy: Achieving a Smart Grid
Smart Grid Software: I.S/g

What a Smart Grid is

2010-11-09T11:10:00.000-08:00

There is a difference between "What is a Smart Grid" and "What a Smart Grid is".

The function of an Electrical grid is not a single entity but an aggregate of multiple networks and multiple power generation companies with multiple operators employing varying levels of communication and coordination, most of which is manually controlled. Smart grids increase the connectivity, automation and coordination between these suppliers, consumers and networks that perform either long distance transmission or local distribution tasks.

Transmission networks move electricity in bulk over medium to long distances, are actively managed, and generally operate from 345kV to 800kV over AC and DC lines.

Local networks traditionally moved power in one direction, "distributing" the bulk power to consumers and businesses via lines operating at 132kV and lower.

This paradigm is changing as businesses and homes begin generating more wind and solar electricity, enabling them to sell surplus energy back to their utilities. Modernization is necessary for energy consumption efficiency, real time management of power flows and to provide the bi-directional metering needed to compensate local producers of power. Although transmission networks are already controlled in real time, many in the US and European countries are antiquated[13] by world standards, and unable to handle modern challenges such as those posed by the intermittent nature of alternative electricity generation, or continental scale bulk energy transmission.

Modernizes both transmission and distribution

A smart grid is an umbrella term that covers modernization of both the transmission and distribution grids. The modernization is directed at a disparate set of goals including facilitating greater competition between providers, enabling greater use of variable energy sources, establishing the automation and monitoring capabilities needed for bulk transmission at cross continent distances, and enabling the use of market forces to drive energy conservation.

Many smart grid features readily apparent to consumers such as smart meters serve the energy efficiency goal. The approach is to make it possible for energy suppliers to charge variable electric rates so that charges would reflect the large differences in cost of generating electricity during peak or off peak periods. Such capabilities allow load control switches to control large energy consuming devices such as hot water heaters so that they consume electricity when it is cheaper to produce.

Peak curtailment/levelling and time of use pricing

To reduce demand during the high cost peak usage periods, communications and metering technologies inform smart devices in the home and business when energy demand is high and track how much electricity is used and when it is used. To motivate them to cut back use and perform what is called peak curtailment or peak levelling, prices of electricity are increased during high demand periods, and decreased during low demand periods. It is thought that consumers and businesses will tend to consume less during high demand periods if it is possible for consumers and consumer devices to be aware of the high price premium for using electricity at peak periods, this could mean cooking dinner at 9pm instead of 5pm. When businesses and consumers see a direct economic benefit of not having to pay double for the same energy use to become more energy efficient, the theory is that they will include energy cost of operation into their consumer device and building construction decisions. See Time of day metering and demand response.

According to proponents of smart grid plans,[who?] this will reduce the amount of spinning reserve that electric utilities have to keep on stand-by, as the load curve will level itself through a combination of "invisible hand" free-market capitalism and central control of a large number of devices by power management services that pay consumers a portion of the peak power saved by turning their devices off.

Essential for renewable energy

Supporters of renewable energy favor smarter grids, because most renewable energy sources are intermittent in nature, depending on natural phenomena (the sun and the wind) to generate power. Thus, any type of power infrastructure using a significant portion of intermittent renewable energy resources must have means of effectively reducing electrical demand by "load shedding" in the event that the natural phenomena necessary to generate power do not occur. By increasing electricity prices exactly when the desired natural phenomena are not present, consumers will, in theory, decrease consumption. However this means prices are unpredictable and literally vary with the weather, at least to the distribution utility.

Platform for advanced services

As with other industries, use of robust two-way communications, advanced sensors, and distributed computing technology will improve the efficiency, reliability and safety of power delivery and use. It also opens up the potential for entirely new services or improvements on existing ones, such as fire monitoring and alarms that can shut off power, make phone calls to emergency services and etc..

US and UK savings estimates and assumptions behind them

One United States Department of Energy study calculated that internal modernization of US grids with smart grid capabilities would save between 46 and 117 billion dollars over the next 20 years[14]. As well as these industrial modernization benefits, smart grid features could expand energy efficiency beyond the grid into the home by coordinating low priority home devices such as water heaters so that their use of power takes advantage of the most desirable energy sources. Smart grids can also coordinate the production of power from large numbers of small power producers such as owners of rooftop solar panels — an arrangement that would otherwise prove problematic for power systems operators at local utilities.

The above vision makes two assumptions. First, that they will act in response to market signals and there needs to be some sort of telecommunications network. In the UK, where consumers have for nearly 10 years had a choice in the company from which they purchase electricity, more than 80% have stayed with their existing supplier, despite the fact that there are significant differences in the prices offered by a given electricity supplier. End users may be less responsive to price signals than proponents of Smart Grids think. Second, in the case of the telecomms aspect of Smart Grids, this ignores the possibility of bringing autonomy to a given appliance. Various companies (such as RLTec) have developed low cost systems that allow products to react to network fluctuations (usually network frequency). This type of control is called "dynamic demand management". A feature of DDM being that, it is low cost, needs no telecomms network and is available now. Of course these are not points that proponents of a "power telecomms network" may wish to hear about or indeed see propagated.

Although there are specific and proven smart grid technologies in use, smart grid is an aggregate term for a set of related technologies on which a specification is generally agreed, rather than a name for a specific technology. Some of the benefits of such a modernized electricity network include the ability to reduce power consumption at the consumer side during peak hours, called Demand side management; enabling grid connection of distributed generation power (with photovoltaic arrays, small wind turbines, micro hydro, or even combined heat power generators in buildings); incorporating grid energy storage for distributed generation load balancing; and eliminating or containing failures such as widespread power grid cascading failures. The increased efficiency and reliability of the smart grid is expected to save consumers money and help reduce CO2 emissions.

History

Today's alternating current power grid evolved after 1896, based in part on Nikola Tesla's design published in 1888 (see War of Currents). Many implementation decisions that are still in use today were made for the first time using the limited emerging technology available 120 years ago. Specific obsolete power grid assumptions and features (like centralized unidirectional[1] electric power transmission, electricity distribution, and demand-driven control) represent a vision of what was thought possible in the 19th century.

Part of this is due to an institutional risk aversion that utilities naturally feel regarding use of untested technologies on a critical infrastructure they have been charged with defending against any failure, however momentary.[citation needed]

Over the past 50 years, electricity networks have not kept pace with modern challenges, such as:

security threats, from either energy suppliers or cyber attack

national goals to employ alternative power generation sources whose intermittent supply makes maintaining stable power significantly more complex

conservation goals that seek to lessen peak demand surges during the day so that less energy is wasted in order to ensure adequate reserves

high demand for an electricity supply that is un-interruptible

digitally controlled devices that can alter the nature of the electrical load (giving the electric company the ability to turn off appliances in your home if they see fit) and result in electricity demand that is incompatible with a power system that was built to serve an “analog economy.” For a simple example, timed Christmas lights can present significant surges in demand because they come on at near the same time (sundown or a set time).[citation needed] Without the kind of coordination that a smart grid can provide, the increased use of such devices lead to electric service reliability problems, power quality disturbances, blackouts, and brownouts [15].

Although these points tend to be the "conventional wisdom" with respect to smart grids, their relative importance is debatable. For instance, despite the weaknesses of power network being publicly broadcast, there has never been an attack on a power network in the United States or Europe.[citation needed] However, in April 2009 it was learned that spies had infiltrated the power grids, perhaps as a means to attack the grid at a later time.[citation needed] In the case of renewable power and its variability, recent work undertaken in Europe (Dr. Bart Ummels et al.)[Full citation needed] suggests that a given power network can take up to 30% renewables (such as wind and solar) without any changes whatsoever.

The term smart grid has been in use since at least 2005, when the article "Toward A Smart Grid", authored by S. Massoud Amin and Bruce F. Wollenberg appeared in the September/October issue of IEEE P&E Magazine (Vol. 3, No.3, pgs 34-41). The term had been used previously and may date as far back as 1998. There are a great many smart grid definitions, some functional, some technological, and some benefits-oriented. A common element to most definitions is the application of digital processing and communications to the power grid, making data flow and information management central to the smart grid. Various capabilities result from the deeply integrated use of digital technology with power grids, and integration of the new grid information flows into utility processes and systems is one of the key issues in the design of smart grids. Electric utilities now find themselves making three classes of transformations: improvement of infrastructure, called the strong grid in China; addition of the digital layer that is the essence of the smart grid; and business process transformation, necessary to capitalize on the investments in smart technology. Much of the modernization work that has been going on in electric grid modernization, especially substation and distribution automation, is now included in the general concept of the smart grid, but additional capabilities are evolving as well.

Smart grid technologies have emerged from earlier attempts at using electronic control, metering, and monitoring. In the 1980s, Automatic meter reading was used for monitoring loads from large customers, and evolved into the Advanced Metering Infrastructure of the 1990s, whose meters could store how electricity was used at different times of the day.[16] Smart meters add continuous communications so that monitoring can be done in real time, and can be used as a gateway to demand response-aware devices and "smart sockets" in the home. Early forms of such Demand side management technologies were dynamic demand aware devices that passively sensed the load on the grid by monitoring changes in the power supply frequency. Devices such as industrial and domestic air conditioners, refrigerators and heaters adjusted their duty cycle to avoid activation during times the grid was suffering a peak condition. Beginning in 2000, Italy's Telegestore Project was the first to network large numbers (27 million) of homes using such smart meters connected via low bandwidth power line communication[17]. Recent projects use Broadband over Power Line (BPL) communications, or wireless technologies such as mesh networking that is advocated as providing more reliable connections to disparate devices in the home as well as supporting metering of other utilities such as gas and water[citation needed].

Monitoring and synchronization of wide area networks were revolutionized the early 1990s when the Bonneville Power Administration expanded its smart grid research with prototype sensors that are capable of very rapid analysis of anomalies in electricity quality over very large geographic areas. The culmination of this work was the first operational Wide Area Measurement System (WAMS) in 2000[18]. Other countries are rapidly integrating this technology — China will have a comprehensive national WAMS system when its current 5-year economic plan is complete in 2012[19].

First cities with smart grids

The earliest, and still largest, example of a smart grid is the Italian system installed by Enel S.p.A. of Italy. Completed in 2005, the Telegestore project was highly unusual in the utility world because the company designed and manufactured their own meters, acted as their own system integrator, and developed their own system software. The Telegestore project is widely regarded as the first commercial scale use of smart grid technology to the home, and delivers annual savings of 500 million € at a project cost of 2.1 billion €.[17].

In the US, the city of Austin, Texas has been working on building its smart grid since 2003, when its utility first replaced 1/3 of its manual meters with smart meters that communicate via a wireless mesh network. It currently manages 200,000 devices real-time (smart meters, smart thermostats, and sensors across its service area), and expects to be supporting 500,000 devices real-time in 2009 servicing 1 million consumers and 43,000 businesses[20]. Boulder, Colorado completed the first phase of its smart grid project in August 2008. Both systems use the smart meter as a gateway to the home automation network (HAN) that controls smart sockets and devices. Some HAN designers favor decoupling control functions from the meter, out of concern of future mismatches with new standards and technologies available from the fast moving business segment of home electronic devices[21].

Hydro One, in Ontario, Canada is in the midst of a large-scale Smart Grid initiative, deploying a standards-compliant communications infrastructure from Trilliant. By the end of 2010, the system will serve 1.3 million customers in the province of Ontario. The initiative won the "Best AMR Initiative in North America" award from the Utility Planning Network. [22]

Problem definition

The major driving forces to modernize current power grids can be divided in four, general categories.

Increasing reliability, efficiency and safety of the power grid.

Enabling decentralized power generation so homes can be both an energy client and supplier (provide consumers with interactive tool to manage energy usage).

Flexibility of power consumption at the clients side to allow supplier selection (enables distributed generation, solar, wind, biomass).

Increase GDP by creating more new, green-collar energy jobs related to renewable energy industry manufacturing, plug-in electric vehicles, solar panel and wind turbine generation, energy conservation construction[23][24].

The following footnotes and links will be published with each blog in this series.

Footnotes

http://earth2tech.com/2009/06/05/why-the-smart-grid-wont-have-the-innovations-of-the-internet-any-time-soon/
http://earth2tech.com/2009/04/21/ciscos-latest-consumer-play-the-smart-grid/
http://earth2tech.com/2008/05/01/silver-springs-the-cisco-of-smart-grid/
http://earth2tech.com/2009/05/20/utility-perspective-why-partner-with-google-powermeter/
http://www.ecommercetimes.com/story/67126.html?wlc=1245096400&wlc=1245366756
Supersmart grid paper
http://earth2tech.com/2009/04/20/smart-grid-miami-fpl-ge-cisco-silver-spring-rolling-out-1m-smart-meters/
"The rise of the Smart Grid". Deloitte TMT Predictions. http://www.deloitte.co.uk/TMTPredictions/technology/SmartGrid-electricity-grid-efficiency.cfm.
"Obama's Speech on the Economy". New York Times. 2009-01-09. http://www.nytimes.com/2009/01/08/us/politics/08text-obama.html?pagewanted=4.
"NIST Announces Three Phase Plan for Smart Grid". National Institute for Standards and Technology. 2009-04-13. http://www.nist.gov/public_affairs/smartgrid_041309.html.
NIST announces smart grid interoperability project via IEEE P2030, June 2009
St. Arnaud's "green broadband" news
The Federal Energy Regulatory Commission Chairman Pat Wood, III (appointed by George Bush) stated that the US transmission system cannot afford to be "antiquated" in this news release Federal Energy Regulatory Commission (2002-09-18) (pdf). FERC news release on ISO. p. 1. http://www.ferc.gov/news/news-releases/2002/2002-3/Sept18rto9.pdf. Retrieved 2009-04-29.
[L. D. Kannberg]; M. C. Kintner-Meyer, D. P. Chassin, R. G. Pratt, J. G. DeSteese, L. A. Schienbein, S. G. Hauser, W. M. Warwick (2003-11) (pdf). GridWise: The Benefits of a Transformed Energy System. Pacific Northwest National Laboratory under contract with the United States Department of Energy. p. 25. http://arxiv.org/pdf/nlin/0409035. Retrieved 2008-12-05.
Smart Grid Working Group (2003-06) (pdf). Challenge and Opportunity: Charting a New Energy Future, Appendix A: Working Group Reports. Energy Future Coalition. http://www.energyfuturecoalition.org/files/webfmuploads/EFC_Report/EFCReport.pdf. Retrieved 2008-11-27.
Federal Energy Regulatory Commission staff report (2006-08) (pdf). Assessment of Demand Response and Advanced Metering (Docket AD06-2-000). United States Department of Energy. p. 20. http://www.ferc.gov/legal/staff-reports/demand-response.pdf. Retrieved 2008-11-27.
a b National Energy Technology Laboratory (2007-08) (pdf). NETL Modern Grid Initiative — Powering Our 21st-Century Economy. United States Department of Energy Office of Electricity Delivery and Energy Reliability. p. 17. http://www.netl.doe.gov/moderngrid/docs/Modern%20Grid%20Benefits_Final_v1_0.pdf. Retrieved 2008-12-06.
"Gridwise History: How did GridWise start?". Pacific Northwest National Laboratory. 2007-10-30. http://gridwise.pnl.gov/foundations/history.stm. Retrieved 2008-12-03.
a b c d Qixun Yang, Board Chairman, Beijing Sifang Automation Co. Ltd., China and .Bi Tianshu, Professor, North China Electric Power University, China. (2001-06-24). "WAMS Implementation in China and the Challenges for Bulk Power System Protection" (pdf). Panel Session: Developments in Power Generation and Transmission — Infrastructures in China, IEEE 2007 General Meeting, Tampa, FL, USA, 24–28 June 2007 Electric Power, ABB Power T&D Company, and Tennessee Valley Authority (Institute of Electrical and Electronics Engineers). http://www.ewh.ieee.org/cmte/ips/2007GM/2007GM_china_intro.pdf. Retrieved 2008-12-01.
"Building for the future: Interview with Andres Carvallo, CIO — Austin Energy Utility". Next Generation Power and Energy (GDS Publishing Ltd.) (244). http://nextgenpe.com/currentissue/article.asp?art=273073&issue=244. Retrieved 2008-11-
Betsy Loeff (2008-03). "AMI Anatomy: Core Technologies in Advanced Metering". Ultrimetrics Newsletter (Automatic Meter Reading Association (Utilimetrics)). http://www.utilimetrics.org/newsletter/index.cfm?fuseaction=Newsletter.showIssuetoPrint&Issue_ID=68. Retrieved 2008-11-26.
Demanding standards: Hydro One aims to leverage AMI via interoperability
Smartgrids Advisory Council. "Driving Factors in the Move Towards Smartgrids" (PDF). European Smartgrids Technology Platform: Vision and Strategy. European Commission. p. 9. ISBN 92-79-01414-5. http://www.smartgrids.eu/documents/vision.pdf.
a b National Energy Technology Laboratory (2007-07-27) (pdf). A Vision for the Modern Grid. United States Department of Energy. p. 5. http://www.netl.doe.gov/moderngrid/docs/A%20Vision%20for%20the%20Modern%20Grid_Final_v1_0.pdf. Retrieved 2008-11-27.
Anderson, Roger; A. Boulanger, J. A. Johnson and A. Kressner (2008 ISBN 978-1-59370-157-4). p 333. Computer-Aided Lean Management for the Energy Industry.
2007 IBM Energy and Utilities Global Residential/Small Business Consumer Survey http://www-03.ibm.com/industries/utilities/doc/content/landingdtw/3165578119.html?g_type=pspot
page 10
Energy Future Coalition, “Challenge and Opportunity: Charting a New Energy Future,” Appendix A: Working Group Reports, Report of the Smart Grid Working Group. http://www.energyfuturecoalition.org/pubs/app_smart_grid.pdf
U.S. Department of Energy, National Energy Technology Laboratory, Modern Grid Initiative, http://www.netl.doe.gov/moderngrid/opportunity/vision_technologies.html
Yilu Liu, Lamine Mili, Jaime De La Ree, Reynaldo Francisco Nuqui, Reynaldo Francisco Nuqui (2001-07-12). "State Estimation and Voltage Security Monitoring Using Synchronized Phasor Measurement" (pdf). Research paper from work sponsored by American Electric Power, ABB Power T&D Company, and Tennessee Valley Authority (Virginia Polytechnic Institute and State University). http://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=3B975B94733D906CA197813C53C2BD86?doi=10.1.1.2.7959&rep=rep1&type=pdf. Retrieved 2008-12-01. abstract Lay summary. ""Simulations and field experiences suggest that PMUs can revolutionize the way power systems are monitored and controlled."".
a b Patrick Mazza (2005-04-27) (doc). [http://fortress.wa.gov/wutc/home/webdocs.nsf/de53b07997d108ea882563b50072c5b3/bc3ced6bb5f4cf29882570200083aaa3/$FILE/Powering%20Up%20Smart%20Grid%20report.doc Powering Up the Smart Grid: A Northwest Initiative for Job Creation, Energy Security, and Clean, Affordable Electricity.]. Climate Solutions. p. 7. http://fortress.wa.gov/wutc/home/webdocs.nsf/de53b07997d108ea882563b50072c5b3/bc3ced6bb5f4cf29882570200083aaa3/$FILE/Powering%20Up%20Smart%20Grid%20report.doc. Retrieved 2008-12-01.
(pdf) Wide Area Protection System for Stability. Nanjing Nari-Relays Electric Co., Ltd. 2008-04-22. p. 2. http://www.nari-relays.com/en/files/Wide%20Area%20Protection%20System%20for%20Stability.pdf. Retrieved 2008-12-12. Examples are given of two events, one stabilizing the system after a fault on a 1 gigawatt HVDC feed, with response timed in milliseconds.
"On-Line Voltage Stability Monitoring and Control (VSMC) System in Fujian power grid" (pdf). Proceedings, Power Engineering Society General Meeting, 2007. (Tampa, FL, USA: IEEE). 2007-06-24. doi:10.1109/PES.2007.385975. Lay summary.
Cisco Outlines Strategy for Highly Secure, 'Smart Grid' Infrastructure
Why the Smart Grid must be based on IP standards
IEEE P2030 Official Website
EETimes.com: IEEE, conference drive smart grids - P2030 aims to develop a guide to grid standards
Commerce Secretary Unveils Plan for Smart Grid Interoperability
Li, Jerry (2009), From Strong to Smart: the Chinese Smart Grid and its relation with the Globe, AEPN, Article No. 0018602, Asia Energy Platform. Available at http://www.aepfm.org/link.php
http://www.smartgrids.eu/: Look under 'background'
"U.S. Energy Independence and Security Act of 2007". http://www.thomas.gov/cgi-bin/query/z?c110:H.R.6.ENR:. Retrieved 2007-12-23.
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_public_laws&docid=f:publ140.110
http://apps1.eere.energy.gov/news/news_detail.cfm/news_id=12364
"Report: Smart Grid Market Could Double in Four Years". Zpryme Smart Grid Market. http://www.smartgridnews.com/artman/publish/Business_Markets_Pricing_News/Report-Smart-Grid-Market-Could-Double-in-Four-Years-1662.html.
http://www.e-energy.de/en/index.php
a b c d e Massachusetts rejects utility's prepayment plan for low income customers, The Boston Globe, 2009-07-23

Tsouvalas, Dean (1 September 2009), "Smart Grid 101", Exec Digital Magazine (Boston), http://www.execdigital.com/Magazine.aspx?id=1448&page=32, retrieved 2009-09-01

External links

The NIST Smart Grid Collaboration Site NIST's public wiki for Smart Grid
Smart Grid News Free weekly news letter with information on Smart Metering and the Smart Grid
Opal-RT provides Real-Time Smart Grid Simulator Hardware and Software.
Video Lecture: Computer System Security: Technical and Social Challenges in Creating a Trustworthy Power Grid, University of Illinois at Urbana-Champaign
Video Lecture: Smart Grid: Key to a Sustainable Energy Infrastructure, University of Illinois at Urbana-Champaign
Google Map of AMI & Smart Metering Programmes across the World. Maintained by Smart Metering Project Team at the Energy Retail Association in the UK.
Similar Google Map showing North American Initiatives categorized by AMR/AMI/Smart Grid Data provided by Enernex, map created by Energy Retail Association project team in the UK.
How the Smart Grid will recharge Plug-In Electric Hybrids
Smart Grid Takes Off, Sustainable Industries Magazine.
Power meters help homeowners track and cut their energy use, The Christian Science Monitor.
Latest News in Smart Grid and Smart Metering
Smart Metering and Smart Grids: Intelligent Technology for Utilities
Who's Who in Smart Grid and Smart Metering
Smart Policy: Achieving a Smart Grid
Smart Grid Software: I.S/g

What is a Smart Grid?

2010-09-07T11:27:00.000-07:00

This begins a series on Smart Grids. I'm sure you have all been asking the question "What is a Smart Grid?". Let's see if we can answer this question.

A smart grid delivers electricity from suppliers to consumers using two-way digital technology to control appliances at consumers' homes to save energy, reduce cost and increase reliability and transparency. Such a modernized electricity network is being promoted by many governments as a way of addressing energy independence, global warming and emergency resilience issues. Smart meters may be part of a smart grid, but alone do not constitute a smart grid.

A smart grid includes an intelligent monitoring system that keeps track of all electricity flowing in the system. It also incorporates the use of superconductive transmission lines for less power loss, as well as the capability of integrating alternative sources of electricity such as solar and wind. When power is least expensive a smart grid could turn on selected home appliances such as washing machines or factory processes that can run at arbitrary hours. At peak times it could turn off selected appliances to reduce demand.

Similar proposals include smart electric grid, smart power grid, intelligent grid (or intelligrid), FutureGrid, and the more modern intergrid and intragrid.

What is a Smart Grid?

The function of an Electrical grid is not a single entity but an aggregate of multiple networks and multiple power generation companies with multiple operators employing varying levels of communication and coordination, most of which is manually controlled. Smart grids increase the connectivity, automation and coordination between these suppliers, consumers and networks that perform either long distance transmission or local distribution tasks.

Transmission networks move electricity in bulk over medium to long distances, are actively managed, and generally operate from 345kV to 800kV over AC and DC lines.
Local networks traditionally moved power in one direction, "distributing" the bulk power to consumers and businesses via lines operating at 132kV and lower.

This paradigm is changing as businesses and homes begin generating more wind and solar electricity, enabling them to sell surplus energy back to their utilities. Modernization is necessary for energy consumption efficiency, real time management of power flows and to provide the bi-directional metering needed to compensate local producers of power. Although transmission networks are already controlled in real time, many in the US and European countries are antiquated[13] by world standards, and unable to handle modern challenges such as those posed by the intermittent nature of alternative electricity generation, or continental scale bulk energy transmission.

Goals

In principle, the smart grid is a simple upgrade of 20th century power grids that generally "broadcast" power from a few central power generators to a large number of users, to instead be capable of routing power in more optimal ways to respond to a very wide range of conditions, and to charge a premium to those that use energy at peak hours.

Respond to many conditions in supply and demand

The conditions to which a smart grid, broadly stated, could respond, occur anywhere in the power generation, distribution and demand chain. Events may occur generally in the environment (clouds blocking the sun and reducing the amount of solar power, a very hot day), commercially in the power supply market (prices to meet a high peak demand), locally on the distribution grid (MV transformer failure requiring a temporary shutdown of one distribution line) or in the home (someone leaving for work, putting various devices into hibernation, data ceasing to flow to an IPTV) that motivate a change to power flow.

Latency of the data flow is a major concern, with some early smart meter architectures allowing actually as long as 24 hours delay in receiving the data, preventing any possible reaction by either supplying or demanding devices.[1]

Provision megabits, control power with kilobits, sell the rest

The amount of data required to perform monitoring and switching your appliances off without your consent is very small compared with that already reaching even remote homes to support voice, security, Internet and TV services. Many smart grid bandwidth upgrades are paid for by over-provisioning to support also consumer services, and subsidizing the communications with energy-related services or subsidizing the energy-related services, such as higher rates during peak hours, with communications. This is particularly true where governments run both sets of services as a public monopoly, e.g. in India. Because power and communications companies are generally separate commercial enterprises in North America and Europe, it has required considerable government and large-vendor effort to encourage various enterprises to cooperate. Some, like Cisco, see opportunity in providing devices to consumers very similar to those they have long been providing to industry.[2] Others , such as Silver Spring Networks [3] or Google [4][5], are data integrators rather than vendors of equipment. While the AC power control standards suggest powerline networking would be the primary means of communication among smart grid and home devices, the bits may not reach the home via BPL initially but by fixed wireless. This may be only an interim solution however as separate power and data connections simply defeats full control.

Scale and scope

Europe's SuperSmart Grid, as well as earlier proposals (such as Al Gore's continental Unified Smart Grid) make semantic distinctions between local and national grids that sometimes conflict. Papers [6] by Battaglini et al. associate the term "smart grid" with local clusters (page 6), whereas the intelligent interconnecting backbone provides an additional layer of coordination above the local smart grids. Media use in both Europe and the US however tends to conflict national and local.

Regardless of terminology used, smart grid projects always intend to allow the continental and national interconnection backbones to fail without causing local smart grids to fail. They would have to be able to function independently and ration whatever power is available to critical needs.

Municipal grid

Before recent standards efforts, municipal governments, for example in Miami, Florida [7], have historically taken the lead in enforcing integration standards for smart grids/meters. As municipalities or municipal electricity monopolies also often own some fiber optic backbones and control transit exchanges at which communication service providers meet, they are often well positioned to force good integration.

Municipalities also have primary responsibility for emergency response and resilience, and would in most cases have the legal mandate to ration or provision power, say to ensure that hospitals and fire response and shelters have priority and receive whatever power is still available in a general outage.

Home Area Network

A Home Area Network, or "home grid", extends some of these capabilities into the home using powerline networking and/or RF using standards such as Zigbee, INSTEON, Zwave, or others.
Because of the communication standards both smart power grids and some Home Area Networks support more bandwidth than is required for power control and therefore may cost more than required. The existing 802.11 home networks generally have megabits of additional bandwidth for other services (burglary, fire, medical and environmental sensors and alarms, ULC and CCTV monitoring, access control and keying systems, intercoms and secure phone line services), and accordingly can't be separated from LAN and VoIP networking, nor from TV once the IPTV standards have emerged.

Consumer electronics devices now consume over half the power in a typical US home. Accordingly, the ability to shut down or hibernate devices when they are not receiving data could be a major factor in cutting energy use, but this would mean the electric company has information on whether you are using your computer or not, and if, for example, you simply have a screen saver on with family pictures while you do chores or work around the house, the electric company could at their discretion decide your computer is not being used and turn it off for you.

Other key devices that could aide in the utilities efforts to shed load during times of peak demand include air conditioning units, electric water heaters, pool pumps and other high wattage devices. In 2009, smart grid companies may represent one of the biggest and fastest growing sectors in the "cleantech" market [8]. It consistently receives more than half the venture capital investment.

In 2009 President Barack Obama asked the United States Congress "to act without delay" to pass legislation that included doubling alternative energy production in the next three years and building a new electricity "smart grid". [9] On April 13, 2009, George W. Arnold was named the first National Coordinator for Smart Grid Interoperability [10]. In June 2009, the NIST announced a smart grid interoperability project via IEEE P2030[11].

Europe and Australia are also following similar visions. In those parts of the world, the integration of communications and power control, both of which have generally fallen under more government supervision, is more advanced, with utilities often required or asked to provide competitive access to communications transit exchanges and distributed power co-generation connection points.

On August 20, 2009, Casa Presedencial in Costa Rica introduced a bill to the country's Legislative Assembly that would open up the energy market that is currently run by a government monopoly, and require all new private electricity generators to use smart grid technology.

Researchers and regulators support IP, closer power and data ties

Bill St. Arnaud of CANARIE (Canada's backbone research institute) argues often for closer integration of power and telecom policy, proposing that consumers should own their own power meter data explicitly and that they should have a choice of service providers for communication and power management, with reach potentially into every home AC outlet. [12] In the US, FCC Chair Michael Powell likewise expresses support for this principle of unifying the power management and other data services and offering basic levels of both to every consumer, rather than allowing power management to exist in its own separate "silo" or be confined only to non-IP-based meters or devices.The IEEE P2030 project seeks to define interoperability between various types of power grids, in part to prevent the emergence of too many incompatible silos that would cause the overall grid to be less resilient.

The following footnotes and links will be published with each blog in this series.

Footnotes

http://earth2tech.com/2009/06/05/why-the-smart-grid-wont-have-the-innovations-of-the-internet-any-time-soon/
http://earth2tech.com/2009/04/21/ciscos-latest-consumer-play-the-smart-grid/
http://earth2tech.com/2008/05/01/silver-springs-the-cisco-of-smart-grid/
http://earth2tech.com/2009/05/20/utility-perspective-why-partner-with-google-powermeter/
http://www.ecommercetimes.com/story/67126.html?wlc=1245096400&wlc=1245366756
Supersmart grid paper
http://earth2tech.com/2009/04/20/smart-grid-miami-fpl-ge-cisco-silver-spring-rolling-out-1m-smart-meters/
"The rise of the Smart Grid". Deloitte TMT Predictions. http://www.deloitte.co.uk/TMTPredictions/technology/SmartGrid-electricity-grid-efficiency.cfm.
"Obama's Speech on the Economy". New York Times. 2009-01-09. http://www.nytimes.com/2009/01/08/us/politics/08text-obama.html?pagewanted=4.
"NIST Announces Three Phase Plan for Smart Grid". National Institute for Standards and Technology. 2009-04-13. http://www.nist.gov/public_affairs/smartgrid_041309.html.
NIST announces smart grid interoperability project via IEEE P2030, June 2009
St. Arnaud's "green broadband" news
The Federal Energy Regulatory Commission Chairman Pat Wood, III (appointed by George Bush) stated that the US transmission system cannot afford to be "antiquated" in this news release Federal Energy Regulatory Commission (2002-09-18) (pdf). FERC news release on ISO. p. 1. http://www.ferc.gov/news/news-releases/2002/2002-3/Sept18rto9.pdf. Retrieved 2009-04-29.
[L. D. Kannberg]; M. C. Kintner-Meyer, D. P. Chassin, R. G. Pratt, J. G. DeSteese, L. A. Schienbein, S. G. Hauser, W. M. Warwick (2003-11) (pdf). GridWise: The Benefits of a Transformed Energy System. Pacific Northwest National Laboratory under contract with the United States Department of Energy. p. 25. http://arxiv.org/pdf/nlin/0409035. Retrieved 2008-12-05.
Smart Grid Working Group (2003-06) (pdf). Challenge and Opportunity: Charting a New Energy Future, Appendix A: Working Group Reports. Energy Future Coalition. http://www.energyfuturecoalition.org/files/webfmuploads/EFC_Report/EFCReport.pdf. Retrieved 2008-11-27.
Federal Energy Regulatory Commission staff report (2006-08) (pdf). Assessment of Demand Response and Advanced Metering (Docket AD06-2-000). United States Department of Energy. p. 20. http://www.ferc.gov/legal/staff-reports/demand-response.pdf. Retrieved 2008-11-27.
a b National Energy Technology Laboratory (2007-08) (pdf). NETL Modern Grid Initiative — Powering Our 21st-Century Economy. United States Department of Energy Office of Electricity Delivery and Energy Reliability. p. 17. http://www.netl.doe.gov/moderngrid/docs/Modern%20Grid%20Benefits_Final_v1_0.pdf. Retrieved 2008-12-06.
"Gridwise History: How did GridWise start?". Pacific Northwest National Laboratory. 2007-10-30. http://gridwise.pnl.gov/foundations/history.stm. Retrieved 2008-12-03.
a b c d Qixun Yang, Board Chairman, Beijing Sifang Automation Co. Ltd., China and .Bi Tianshu, Professor, North China Electric Power University, China. (2001-06-24). "WAMS Implementation in China and the Challenges for Bulk Power System Protection" (pdf). Panel Session: Developments in Power Generation and Transmission — Infrastructures in China, IEEE 2007 General Meeting, Tampa, FL, USA, 24–28 June 2007 Electric Power, ABB Power T&D Company, and Tennessee Valley Authority (Institute of Electrical and Electronics Engineers). http://www.ewh.ieee.org/cmte/ips/2007GM/2007GM_china_intro.pdf. Retrieved 2008-12-01.
"Building for the future: Interview with Andres Carvallo, CIO — Austin Energy Utility". Next Generation Power and Energy (GDS Publishing Ltd.) (244). http://nextgenpe.com/currentissue/article.asp?art=273073&issue=244. Retrieved 2008-11-26.
Betsy Loeff (2008-03). "AMI Anatomy: Core Technologies in Advanced Metering". Ultrimetrics Newsletter (Automatic Meter Reading Association (Utilimetrics)). http://www.utilimetrics.org/newsletter/index.cfm?fuseaction=Newsletter.showIssuetoPrint&Issue_ID=68. Retrieved 2008-11-26.
Demanding standards: Hydro One aims to leverage AMI via interoperability
Smartgrids Advisory Council. "Driving Factors in the Move Towards Smartgrids" (PDF). European Smartgrids Technology Platform: Vision and Strategy. European Commission. p. 9. ISBN 92-79-01414-5. http://www.smartgrids.eu/documents/vision.pdf.
a b National Energy Technology Laboratory (2007-07-27) (pdf). A Vision for the Modern Grid. United States Department of Energy. p. 5. http://www.netl.doe.gov/moderngrid/docs/A%20Vision%20for%20the%20Modern%20Grid_Final_v1_0.pdf. Retrieved 2008-11-27.
Anderson, Roger; A. Boulanger, J. A. Johnson and A. Kressner (2008 ISBN 978-1-59370-157-4). p 333. Computer-Aided Lean Management for the Energy Industry.
2007 IBM Energy and Utilities Global Residential/Small Business Consumer Survey http://www-03.ibm.com/industries/utilities/doc/content/landingdtw/3165578119.html?g_type=pspot
page 10
Energy Future Coalition, “Challenge and Opportunity: Charting a New Energy Future,” Appendix A: Working Group Reports, Report of the Smart Grid Working Group. http://www.energyfuturecoalition.org/pubs/app_smart_grid.pdf
U.S. Department of Energy, National Energy Technology Laboratory, Modern Grid Initiative, http://www.netl.doe.gov/moderngrid/opportunity/vision_technologies.html
Yilu Liu, Lamine Mili, Jaime De La Ree, Reynaldo Francisco Nuqui, Reynaldo Francisco Nuqui (2001-07-12). "State Estimation and Voltage Security Monitoring Using Synchronized Phasor Measurement" (pdf). Research paper from work sponsored by American Electric Power, ABB Power T&D Company, and Tennessee Valley Authority (Virginia Polytechnic Institute and State University). http://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=3B975B94733D906CA197813C53C2BD86?doi=10.1.1.2.7959&rep=rep1&type=pdf. Retrieved 2008-12-01. abstract Lay summary. ""Simulations and field experiences suggest that PMUs can revolutionize the way power systems are monitored and controlled."".
a b Patrick Mazza (2005-04-27) (doc). [http://fortress.wa.gov/wutc/home/webdocs.nsf/de53b07997d108ea882563b50072c5b3/bc3ced6bb5f4cf29882570200083aaa3/$FILE/Powering%20Up%20Smart%20Grid%20report.doc Powering Up the Smart Grid: A Northwest Initiative for Job Creation, Energy Security, and Clean, Affordable Electricity.]. Climate Solutions. p. 7. http://fortress.wa.gov/wutc/home/webdocs.nsf/de53b07997d108ea882563b50072c5b3/bc3ced6bb5f4cf29882570200083aaa3/$FILE/Powering%20Up%20Smart%20Grid%20report.doc. Retrieved 2008-12-01.
(pdf) Wide Area Protection System for Stability. Nanjing Nari-Relays Electric Co., Ltd. 2008-04-22. p. 2. http://www.nari-relays.com/en/files/Wide%20Area%20Protection%20System%20for%20Stability.pdf. Retrieved 2008-12-12. Examples are given of two events, one stabilizing the system after a fault on a 1 gigawatt HVDC feed, with response timed in milliseconds.
"On-Line Voltage Stability Monitoring and Control (VSMC) System in Fujian power grid" (pdf). Proceedings, Power Engineering Society General Meeting, 2007. (Tampa, FL, USA: IEEE). 2007-06-24. doi:10.1109/PES.2007.385975. Lay summary.
Cisco Outlines Strategy for Highly Secure, 'Smart Grid' Infrastructure
Why the Smart Grid must be based on IP standards
IEEE P2030 Official Website
EETimes.com: IEEE, conference drive smart grids - P2030 aims to develop a guide to grid standards
Commerce Secretary Unveils Plan for Smart Grid Interoperability
Li, Jerry (2009), From Strong to Smart: the Chinese Smart Grid and its relation with the Globe, AEPN, Article No. 0018602, Asia Energy Platform. Available at http://www.aepfm.org/link.php
http://www.smartgrids.eu/: Look under 'background'
"U.S. Energy Independence and Security Act of 2007". http://www.thomas.gov/cgi-bin/query/z?c110:H.R.6.ENR:. Retrieved 2007-12-23.
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_public_laws&docid=f:publ140.110
http://apps1.eere.energy.gov/news/news_detail.cfm/news_id=12364
"Report: Smart Grid Market Could Double in Four Years". Zpryme Smart Grid Market. http://www.smartgridnews.com/artman/publish/Business_Markets_Pricing_News/Report-Smart-Grid-Market-Could-Double-in-Four-Years-1662.html.
http://www.e-energy.de/en/index.php
a b c d e Massachusetts rejects utility's prepayment plan for low income customers, The Boston Globe, 2009-07-23

Tsouvalas, Dean (1 September 2009), "Smart Grid 101", Exec Digital Magazine (Boston), http://www.execdigital.com/Magazine.aspx?id=1448&page=32, retrieved 2009-09-01

External links

The NIST Smart Grid Collaboration Site NIST's public wiki for Smart Grid
Smart Grid News Free weekly news letter with information on Smart Metering and the Smart Grid
Opal-RT provides Real-Time Smart Grid Simulator Hardware and Software.
Video Lecture: Computer System Security: Technical and Social Challenges in Creating a Trustworthy Power Grid, University of Illinois at Urbana-Champaign
Video Lecture: Smart Grid: Key to a Sustainable Energy Infrastructure, University of Illinois at Urbana-Champaign
Google Map of AMI & Smart Metering Programmes across the World. Maintained by Smart Metering Project Team at the Energy Retail Association in the UK.
Similar Google Map showing North American Initiatives categorized by AMR/AMI/Smart Grid Data provided by Enernex, map created by Energy Retail Association project team in the UK.
How the Smart Grid will recharge Plug-In Electric Hybrids
Smart Grid Takes Off, Sustainable Industries Magazine.
Power meters help homeowners track and cut their energy use, The Christian Science Monitor.
Latest News in Smart Grid and Smart Metering
Smart Metering and Smart Grids: Intelligent Technology for Utilities
Who's Who in Smart Grid and Smart Metering
Smart Policy: Achieving a Smart Grid
Smart Grid Software: I.S/g

Ten Uncommon Job Hunt Tactics that have Worked

2010-01-05T10:43:00.000-08:00

Here's some advice for "new entry" job seekers as well as us seasoned veterans.

Before you can get a job, you need to know which job search strategies work and which do not. Take a look at these tips to find out how to make your job hunt more effective.

1. Hire a cold caller.
Cold calling to get a job really works–if you're good at it. Your ability to sell yourself on the phone shows exceptional sales skills, self-confidence, drive, and commitment. But most cold calls are executed poorly for the job hunt.

Debra Feldman is a professional cold caller at Job Whiz; you hire her to get you a job, and she can do it. By cold calling CEOs. What's the catch? She costs thousands of dollars. So consider teaching yourself the skill well enough to talk your way into a job where you can afford Feldman. You can definitely learn how to get a job from this as confidence on the phone will often help you with your career development.

2. Use proactive recommendations.
Instead of waiting for a hiring manager to ask for job references, have your job reference call immediately. This works well if you have a heavy-weight reference, like a well-known CEO or someone who knows the hiring manager. But it also works well if you have little career experience. In fact, if you are just starting out with your job search it's a great tool.

"The good employers have relationships with professors and they forward students who seem exceptional," says Joel Spolsky, chief executive of Fog Creek Software and author of the blog Joel on Software.

Also tap your job coaches. They tend to know students well after meeting daily for practice over the course of a few years. "A coach has extended knowledge of the students' personalities," says Tom Carmean, head lacrosse coach at Amherst University, who has given many references to employers. To start your job hunt off on a good start, this is one tip to consider for sure.

3. Stay organized with job hunt software.
How many times have you put the wrong name on a cover letter? Forgotten where you applied? Forgotten what the job was? You need to be organized right off the bat – maintain an Excel spreadsheet with all your contacts. This is essential for the job hunt.

For a serious job hunter who recognizes that a hunt never ends, you could try JibberJobber, which not only helps you organize your information, but can bug you about the things you should be doing but might not be, such as following-up with a phone call. So to be successful in your job search, consider this technique.

4. Turn a non-job into a job.
Many companies use temp agencies as recruiting firms. Instead of going through the interview process, companies sift through temp workers until they find one they like. So when you find yourself temping at a company you like, give a star performance; even if the work doesn't require much skill, personality matters a lot in this sort of situation, so be fun and charming. And don't be shy about asking for full-time work.

Note that this tactic will work for an internship as well. Matt Himler, a student at Amherst College, started out looking for an internship, and shifted his focus when he saw an actual job was a possibility. He now gets paid to blog for AOL Money & Finance.

5. Use social networking sites.
Some, like LinkedIn, are full of professionals who understand that a good job hunt is not an event but a way of life. Most of these people are good networkers and emphatic about making sure they are in a job they love; definitely the types you should be hanging out with, so sign up and create your own profile.

"Ninety percent of jobs posted at LinkedIn are associated with a profile," says Konstantin Guericke, co-founder of LinkedIn. So you can find a job you want, then find a way to connect with the hiring manager through people you know, and you'll have a leg up on the competition because – as if you haven't heard this a thousand times – most people get their job by networking.

-Click here to see the video How to Master Online Job Networking-

6. Date someone with a network.
Ubiquitous job hunting question: What if I don't have a good network? Match with someone who does and use theirs. Kay Luo works in corporate communications and has an extensive network that she just forked over to her boyfriend, a software engineer. His LinkedIn network: seven people, including Luo. Her network: More than 100.

7. Use U.S. mail.
You're probably not going to get past the automated resume scanner at a big corporation. Even qualified candidates don't get through. So don't even think about getting through if you're not a perfect match.

Instead, circumvent the system with snail mail. That's right. Go to Kinko's and buy some of that bonded resume paper that you always wondered who was using. Find the name of the hiring manager and send the letter directly to her. Chances are she receives 200 emails a day and one or two pieces of physical mail a day. So at least you know she'll see what you sent.

Chris Russell, who blogs at Secrets of the Job Hunt, says this tactic also works well at a small company where you can target the CEO.

8. Write a blog.
Don't tell yourself that blogs are for kids. They're not. They're for professionals to get noticed.

Himler, the Amherst student and AOL blogger, points out that blogging is very time-consuming, even for a college student. "College students are really into MySpace and Facebook. Blogging hasn't taken off. But in five years my friends will go into a profession and they will want to get their name out there, and the best way to do that is with a blog.

"Himler fits in blogging with his full-time job of being a student and a lacrosse player, so consider that you might be able to tackle a blog as well.

9. Comment on blogs.
Realistically, most people don't have the time or mental energy to maintain a blog. But you can target people you would like to work for and start commenting on their blog. Bloggers notice the people who regularly send great comments. This is a way to enter into a conversation with someone you want to notice you.

This is a good tactic for not just hiring managers but also a person in your industry who is well-connected and could help you if he knew you.Michael Keleman, who blogs at Recruiting Animal, says that recruiters who blog regularly turn their commenters into job candidates.

10. Be nice.
People who are perceived as nice get hired more frequently," says Robin Koval, co-author of The Power of Nice: How to Conquer the Business World with Kindness.

But you probably already think you're nice. Most people do. If you get jobs easily, then chances are you probably are nice. Or so talented you can get away with being only moderately nice.

Job Search Stalled? Do What The Pros Do.

2009-11-21T15:25:00.000-08:00

I was reading a golf magazine recently and a particular article caught my attention. It was about what one of the top pros on the PGA tour does when he gets stalled or in a slump. He simply goes back to basics. He goes back to when he first started playing golf to review if one of the 4 basics of golf have changed. He indicated most of the time this fixes the problem.

Your job search may need the exact same thing. If your search is stalled, not attaining the traction you want, or the level of traction you were getting isn’t happening now, going back to the basics may be the ticket.

Like golf, there are basics in a job search that get out of alignment. What once worked, isn’t any longer. We often blame something or someone else. Anyone who plays golf knows this and always blames the equipment for the problem. It is never operator error. If only just getting a new putter or driver would fix the problem. It rarely does, but at least it’s fun to try new equipment.

Rather than blame others it probably makes sense to first look at, “have you changed” or “have you picked up a bad habit along the way without even know it.” Chances are these have a higher probability of being the problem.

So let’s take the search back to basics.

1) Start with you. After 3 or 4 months in a job search most candidates have gotten so much input and help they no longer know what is right and what is wrong or what they were doing well and what wasn’t working. It all starts to blur together. It may be time to stop getting input from all of these sources.

Limit your input to a few select people/experts. Preferably to those that have knowledge in the specific area of your search. By now you should have identified the experts you trust, those that have given you honest and often tough advice, those that excel in job search knowledge and/or someone that brings a unique talent to your party. For example, if you need help in selling yourself, find a sales trainer or expert in sales and ask them to help you. Try to develop a “Personal Advisory Board.” Some may want to be paid, but most will not.

2) Focus on what isn’t working and what is working. For example, if you are getting interviews but not the offer, chances are your resume and networking is working and your interviewing skills are what needs to be fixed. On the other hand, if you are no longer getting interviews and once were, chances are your marketing plan or networking plan needs to be looked at or redone.

Don’t waste time trying to fix what isn’t broken.

3) Evaluate the fundamentals of your search.

Take a look at your preparation. Consider videoing yourself, review what questions to ask in an interview, how do you prepare for an interview, have you identified the right companies and people, are you relying too heavily on the Internet, etc. This list could go on and on. You need to be objective.
Has your resume changed? Has it gone through so many version changes it no longer really reflects your abilities and accomplishments? It could also be the opposite problem, it is too generic and doesn’t really sell you. It is not properly marketing you. Maybe you should talk to a marketing or sales expert for help.
Is your marketing and networking plan still effective or has it gotten outdated? Go back and identify more company targets, especially if your geographic requirements have changed. Make a serious evaluation about how you are networking and who you are networking with. Consider some new networking groups to get involved with, reestablish some old connections, and identify new connections that are focused in the area you need.Stop meeting people for the sake of meeting people and comparing whose business card stack is highest.
Conduct and video a mock interview. Take a serious look at yourself on video. How do you come across, what is your body language saying, how do answer the question, do you actually answer the question asked or what you think they asked, do you have eye contact, etc. This can be key to those getting interviews and not offers.

Just like the pros, consider getting back to basics. Take a fresh start on your search to re-energize it.

10. Dealing With Emotional Behavior

2009-10-28T13:54:00.000-07:00

Dealing With Emotional Behavior

Planning Questions:

What specific kinds of emotional behavior are you likely to encounter on the job?
How are you likely to react?
How can you cope with your reactions and respond most constructively?

Key Actions:

Calmly acknowledge the emotional behavior.
Describe the impact the emotional behavior is having on you and on the discussion.
Determine if it's possible to continue the discussion constructively.
Propose an approach for jointly refocusing on the work issue.
Express support and reassurance.

9. Recognizing Positive Results

2009-10-05T10:31:00.000-07:00

Recognizing Positive Results

Planning Questions

What specific action have you recently observed that deserves recognition? (Where appropriate include who, what, when, where, or how much.)
Why is this action important to recognize?

Key Actions

Describe the results you are recognizing as specifically and immediately as possible.
State why these results deserve your personal appreciation.
Close by reaffirming your recognition and continuing support.

8. The Performance Appraisal Interview

2009-09-28T11:49:00.001-07:00

The Performance Appraisal Interview

Seek the employee's opinion of his/her overall performance since the last appraisal.

Give recognition for accomplishments since the last appraisal.

Specify one or two areas where performance might be improved, then ask for confirmation and suggestions.

Summarize overall performance to put things in perspective.

End on an encouraging note.

The contents of a performance review should never be a surprise to the employee at the time the review is given. The performance review is merely the formal documentation of the prior period's performance and justification for any salary adjustments that might be taking place, or not taking place. If you have multiple employees, reviews should address similar categories of concern for similar positions.

Any positive performances during the period should have been acknowledged at the time they occurred, with a note or letter of commendation placed in the employee's file at that time. Any negative issues should also have been acknowledged at the time they occurred, with appropriate levels of disciplinary action (coaching, retraining, written warning, performance improvement plan, etc.) documented at the time they occurred, and copies placed in the employee's file. Written warnings and PIPs should have been signed by the employee at the time they were given.

Goals for the next period should also be included in the review and in harmony with the direction of the company. They should be Specific, Measurable, Attainable, Realistic and Timely. These are known as SMART goals.

When it's time to write the performance review, you'll have the employee's file to refer to for justification of the comments you are entering on the review. If you've done your job throughout the period, the review should be an easy one to write. But above all, when it is given, it should not be a surprise to the associate. Be firm, be fair, and be consistent. You might also want to have another manager review it for objectivity in the event of a negative review.

7. Disciplinary Action

2009-09-22T13:22:00.000-07:00

Disciplinary Action

State the problem and refer to your previous discussion.
Ask for any reasons for the lack of change.
Describe the disciplinary action you're going to take and why you're taking it.
Outline specific steps to solve the problem.
Assure the employee of your interest and support.

6. Correcting Problem Behavior

2009-09-15T08:39:00.000-07:00

Correcting Problem Behavior

Calmly identify the problem, explain why it concerns you, and express your desire for change.
Seek out and listen to the employee's reasons for this behavior.
Ask for the employee's ideas for solving the problem.
Offer your help as the employee's supervisor.
Agree on an action plan and set date to review progress.

5. Improving Employee Performance

2009-08-31T07:57:00.000-07:00

Improving Employee Performance

Set up a problem-solving meeting with the employee to discuss the performance problem that concerns you.
Stay positive and friendly, actively seeking and listening to your employee's ideas during your discussion.
Agree on the specific actions that each of you will take.
Set a specific follow-up date to check on progress.

4. THe Work Progress Interview

2009-08-24T08:22:00.000-07:00

The Work Progress Interview

Set a time in advance of the meeting and explain its purpose.
Ask for and listen to the employee's evaluation of progress.
Give positive feedback on areas where progress has been made, giving specific examples.
Focus on solving key problems and reviewing priorities.
End the meeting with an agreement on what the present status of the work is and specific goals for the future.

3. Setting Job Standards

2009-08-19T11:26:00.000-07:00

Setting Job Standards

Explain job importance.
Establish job standards.
Set job priorities.
Set a date for an early progress review.

2. The Hiring Interview

2009-08-11T19:17:00.000-07:00

The Hiring Interview

Build a friendly atmosphere.
Ask open-ended questions, digging deeper when you need more information.
Sell your company and the job if you think the applicant is right for the job.
End on a positive note with a specific follow-up action.

1. Constructive Feedback

2009-08-11T19:12:00.000-07:00

Leadership

Giving Constructive Feedback

State the constructive purpose of your feedback.
Describe specifically what you have observed.
Describe your reactions.
Give the other person an opportunity to respond.
Offer specific suggestions.
Summarize and express your support.

Planning Questions

What is the purpose in giving this feedback?
What specific actions do you want to reinforce or correct?
What are the consequences of these actions?
What are your reactions?
What suggestions might be helpful?

OBIEE vs EssBase

2009-06-24T16:07:00.000-07:00

Is the wave of the future OBIEE vs EssBase?

It is indeed possible, depending on the sentiments and skills of the Oracle sales force that this product could kill EssBase. It doesn't take a genius to recognize that if anyone can do it, Oracle engineers can reverse engineer the repositories and multi-dimensional models behind the Hyperion Applications. Clearly HFM is already there. But why go technically inferior to please sales guys? (That's a rhetorical question. If Oracle kills Essbase, there is NO technical competition.)

From a technical perspective, it seems strange that substituting any other product besides Essbase under the covers is going to give any better performance, especially the 64-bit stuff. The catch is that the product stream of Hyperion finapps really are not so very demanding in the main, on Essbase. The real strength of Essbase - where it has yet to be beat, is pure datamart applications.

Essbase could become a specialty reporting engine sold through System 9 portals and that OBIEE (whatever exactly it is) becomes the database of record within Oracle's finapps. This would throw the market into another small paroxysm but enable another class of consultants into the fray. The difficulty is that everybody is going to have to ramp up the OBIEE skills - that means another 2 years before successful implementations are going to be easy to be had.

The really intriguing question is ASO functionality at a standstill? There are some that do not appreciate the BI n-tier (for n>2) platform. There are some infrastructure mechanics that will not cry if they don’t have to install and certify Planning, HFM, et al. So maybe OBIEE adds to the confusion, or maybe it simplifies things by getting Essbase out of the way.

Either way, the future of BI is getting more and more interesting every day.

Principals to Live By

2009-03-16T13:21:00.000-07:00

We all can learn from those who have succeeded before us…

What is Class?

Class never runs scared. It is sure-footed and confident in the knowledge that you can meet life head-on and handle whatever comes along.
Jacob had it. Esau didn’t. Symbolically, we can look to Jacob’s wrestling match with the angel. Those who have class have wrestled with their own personal “angle” and won a victory that marks them thereafter.
Class never makes excuses. It takes its lumps and learns from past mistakes.
Class is considerate of others. It knows that good manners are nothing more than a series of petty sacrifices.
Class bespeaks an aristocracy that has nothing to do with ancestors or money. The most affluent blueblood can be totally without class while the descendant of a Welsh miner may ooze class from every pore.
Class never tries to build itself up by tearing others down.
Class is already up and need not strive to look better by making others look worse.
Class can “walk with kings and keep its virtue, and talk with crowds and keep the common touch.” Everyone is comfortable with the person who has class—because he is comfortable with himself.
If you have class, you don’t need much of anything else. If you don’t have it, no matter what else you have—it doesn’t make much difference.

John Wooden, College Basketball Coach

Class is an intangible quality that commands, rather than demands, the respect of others.
This is because those who have it: are truly considerate of others, are courteous and polite without being subservient, are not disagreeable when they disagree, are good listeners, and are at peace with themselves because they do not knowingly do wrong.
In short, a person with class might well be defined as one who practices “The Golden Rule” in both his professional and personal life.

Character

Lou Holtz, College Football Coach

“The answers to three questions will determine your success or failure. 1) Can people trust me to do my best? 2) Am I committed to the task at hand? 3) Do I care about other people and show it? If the answers to these questions are yes, there is no way you can fail.

HONESTY

Harry Truman, Thirty-Third President

It isn’t polls or public opinion of the moment that counts. It is right and wrong and leadership. Men with fortitude, honesty and a belief in the right make epochs in the history of the world.

LOYALTY

Woodrow Wilson, Twenty-Eighth President

Loyalty means nothing unless it has at its heart the absolute principle of self-sacrifice.

Bum Phillips, NFL Coach

Loyalty, up and down the line. That’s one quality an organization must have to be successful.

ENTHUSIASM

Clint Eastwood, Actor & Mayor

I like people at their prime enthusiasm, when they’re riding a crest. Promote a guy and he’ll be dying to do good work for you.

Commitment to Excellence

John Wooden, College Basketball Coach

Success is a peace of mind, which is a direct result of self-satisfaction in knowing that you did your best to become the best you are capable of becoming.

HARD WORK – SACRIFICE

Vince Lombardi, NFL Coach & General Manager

The dictionary is the only place success comes before work. Hard work is the price we must all pay for success. I think we can accomplish almost anything if we are willing to pay the price. The price of success is hard work, dedication to the job at hand, and the determination that whether we win or lose, we have applied the best of ourselves to the task at hand.

Douglas MacArthur, US Military General

Preparedness is the key to success and victory.

ORGANIZATION

John Wooden, College Basketball Coach

Without organization and leadership toward a realistic goal, there is no chance of realizing more than a small percentage of your potential.

CONSISTENCY

Henry Doherty, American Industrialist

Plenty of men can do good work for a spurt and with immediate promotion in mind, but for promotion you want a man in whom good work has become a habit.

LEADERSHIP

Paradoxical Commandments of Leadership

People are illogical, unreasonable, and self-centered.Love them anyway.
If you do good, people will accuse you of selfish ulterior motives.Do good anyway.
If you are successful, you win false friends and true enemies.Succeed anyway.
The good you do today will be forgotten tomorrow.Do good anyway.
Honesty and frankness make you vulnerable.Be honest and frank anyway.
The biggest men with the biggest ideas can be shot down by the smallest men with the smallest minds.Think big anyway.
People favor underdogs but follow only top dogs.Fight for a few underdogs anyway.
What you spend years building may be destroyed overnight.Build anyway.
People really need help, but may attack you if you do help them.Help them anyway.
Give the world the best you have and you’ll get kicked in the teeth.Give the world the best you have anyway.

Joe Namath, NFL Quarterback & Sports Broadcaster

To be a leader, you have to make people want to follow you, and nobody wants to follow someone who doesn’t know where’s he’s going.

Mahatma Ghandi, pacifist leader of India

I must leave. For there go my people and I am their leader.

Harry Truman, Thirty-Third President

Leadership is the ability to get men to do what they don’t want to do and like doing it.

Vince Lombardi, NFL Coach & General Manager

Contrary to the opinion of many people, leaders are not born. Leaders are made, and they are made by effort and hard work.

Dwight D. Eisenhower, Thirty-Fourth President and US General

A platoon leader doesn’t get his platoon to go by getting up and shouting, “I am smarter, I am bigger, I am stronger, I am the leader.” He gets men to go along with him because they want to do it for him and they believe in him.

Earl Weaver, Major League Manager

Leadership can be defined in one word – honesty. You must be honest with the players and honest with yourself. Never be afraid to stick up for your players.

Tom Landry, NFL Defensive Back and Coach

Leadership is a matter of having people look at you and gain confidence by seeing how you react. If you’re in control, they’re in control.

TEAMWORK

Franklin D. Roosevelt, Thirty-Second President

People acting together as a group can accomplish things which no individual, acting alone, could ever hope to bring about.

Vince Lombardi, NFL Coach & General Manager

Individual commitment to a group effort—that is what makes a team work, a company work, a society work, a civilization.

PRIDE

John Madden, NFL Coach and Sports Broadcaster

There must be desire, intensity and a feeling of wanting to be the best on the part of a player. That comes from within him. You can’t manufacture pride.

Chuck Knox, NFL Coach

Pride is not like a coat; it’s not something that you lay down for two or three days and then decide when you get up some morning that you’ll have pride that day and put it on. It must be there every day and it takes constant work to achieve it, to keep it.

HUMILITY

Woodrow Wilson, Twenty-Eighth President

A fault that humbles a man is of more use to him than a good action that puffs him up.

Lao-Tzu, Chinese PhilosopherI

have three precious things that I hold fast and prize. The first is gentleness; the second is frugality; the third is humility, which keeps me from putting myself before others. Be gentle and you can be bold; be frugal and you can be liberal; avoid putting yourself before others and you can become a leader among men.

HANDLING ADVERSITY

Alexander Graham Bell, American Inventor/Scientist

When one door closes, another opens. But we often look so long and so regretfully upon the closed door that we do not see the one that has opened for us.

John Wooden, College Basketball Coach

Things turn out best for those who make the best of the way things turn out.

Accept Responsibility

John Madden, NFL Coach & BroadcasterOnce something is done, there are two things you have to do. One, you must evaluate what happened. Two, you must work towards it not happening again.

PERSERVERANCE
Jacob M. Braude, English Business Executive

Life is a grindstone. Whether it grinds you down or polishes you up depends on what you’re made of.

Ray Kroc, Major League Owner and Founder of McDonald’sPersonal Credo --
Press On

Nothing in the world can take the place of persistence.
Talent will not; nothing is more common than unsuccessful men with talent.
Genius will not; unrewarded genius is almost a proverb.
Education alone will not; the world is full of educated derelicts.
Persistence and determination alone are omnipotent

Principals and Values

Leadership:

Lead by example
Manage by facts
Encourage risk
Take ownership and be accountable
Demonstrate high ethics/integrity

Quality:

The basis for all we do
Continuous improvement
Remove root causes of problems
Participate
Implement best practices

The Customer:

Our number one priority-a lifecycle experience
Understand their business
Listen—understand requirements
Build trust, confidence, and long-term relationships
Easy purchasing experience at an affordable price

Trust:

Work together/produce together/succeed together
Demonstrate dependability
Assume the best in your peers/co-workers
Be a trusted advisor to your internal/external customers

Business Results:

Achieve business objectives
Establish measurements-plot improvement
Be market driven
Plan effectively-implement the plan
Learn from yesterday and invent in tomorrow

Our Employees:

Hire and retain the best and brightest
Foster an atmosphere of success and “one team”
Develop people and provide career opportunities
Treat with dignity and respect
Share information
Offer appropriate reward/recognition
Provide a challenging experience

Decision Interface

2009-02-07T07:36:00.000-08:00

Decision Interface’s founding vision was to provide measurable business results through the proper implementation of business processes and systems. We remain committed to that objective today. For over 25 years, we have assisted our clients from coast-to-coast in achieving and exceeding their business goals and objectives.

What sets DII apart from the many other successful consulting firms is more than our ability to deliver top-tier consulting. It is the way we approach each engagement as a partnership and consider it our responsibility to provide fresh perspective and identify new opportunities.

Our thorough understanding of the business challenges faced by our clients as well as our deep knowledge and expertise in tier-one business systems uniquely qualifies Decision Interface as a preferred services partner. For Oracle applications, there is no one better – our team includes people who helped develop many of the consulting extensions to the Oracle application suite.

Whether implementing an integrated ERP environment, designing asset accounts or assisting a client’s assessment of their needs, wants and likes, we always keep an eye on the client’s bottom line. We understand that the best results come through an open, engaged, collaborative process with the client – you. Our measuring stick is the extent to which your expectations are exceeded.

We’ll work with you on a variety of projects and ongoing engagements including system implementations, upgrades, customizations, and system maintenance. Some of our recent work involving Oracle applications includes:

Leading the functional implementation of Oracle eBusiness Suite for a utility in the southwest;
Working with an Arizona utility on application changes and maintenance; and
Implementing customized version of Oracle’s Advanced Benefits for a Southern California healthcare provider.

Our objective every day is to place the right people on your team to clearly define issues, identify potential solutions, and implement the right answers to achieve the right results for your company. Decision Interface helps you face today’s most complex technology challenges and increase return on your application software investment.

If you take the time to meet with us, you will find that our team is approachable, experienced and passionate about delivering honest, practical, sustainable value.

P R O F E S S I O N A L S E R V IC E S

Key Clients·

ARCO·
ATMOS Energy·
Avista·
Cal ISO·
City of Burbank·
Dell Corporation·
Intel·
Intermountain Gas Co·
San Diego Gas & Electric Company·
Sharp Healthcare·
Southwest Gas Co.·
University of Phoenix

Services Provided

Application DBA Support·
Asset Management Implementation·
Business Flows Documentation·
Business Intelligence Implementation·
ERP Assessment·
ERP Implementation·
FERC COA Design·
HRMS Assessment·
HRMS Implementation·
Integrated Suite Technical Architecture ·
Plant Accounting Implementation·
Supply Chain Implementation

Performance Management

2008-12-30T00:00:00.000-08:00

Performance management helps organizations achieve their strategic goals. Rather than discarding the data accessibility previous systems fostered, performance management harnesses it to help ensure that an organization’s data works in service to organizational goals to provide information that is actually useful in achieving them and focus on the Operational Networking Processes between that performance level. The main purpose of performance management is to link individual objectives and organizational objectives and bring about that individuals obey important worth for enterprise. Additionally, performance management tries to develop skills of people to achieve their capability to satisfy their ambitiousness and also increase profit of a firm.

Wikipedia

Performance Management
By: Gary Rinehart

Decision Interface
White Paper - December 2008

Performance Management: The Last Frontier

Performance management promises to be the new—and perhaps last—frontier in software development for the enterprise. Many vendors are scrambling to articulate a performance management position that fits their existing product capabilities, while they build out the rest of the functionality that is required to offer true performance management.

It is interesting that AMR Research has coined a new term, Pervasive Performance Management, and has even written an article[1] to explain that they mean by this term. To back up this terminology, AMR Research has conducted a “poll” and the survey says. . .

Pervasive PM is of high importance (what is it again?)

Importance will continue to grow over the next three years (really!)

37% of companies are either currently using or implementing pervasive PM technologies (what are these technologies?)

45% plan to evaluate pervasive PM investments in the next three years (hmmm)

Many of the perceived challenges for pervasive PM are IT related

However, once you get past the marketing hype, you begin to understand that the promise of performance management is not really about software, but rather about managing a set of business processes to achieve a desired result. In reality, performance management has been around for decades, but has lacked both the efficiency and effectiveness to provide much value deep within the organization. This is where art mixes with science—or, more accurately, where technology mixes with the business decision process.

Consider a typical decision-making process with these simple steps (see Figure 1):

Understand actual historical performance

Construct a view of the future

Test options to identify the best alternative

Make the decision and execute the change in direction, if any

Use actual results to refine assumptions and continuously improve the process

High-Value Decisions Benefit from a High Degree of Automation

Figure 1: The decision value curve shows how high-value decisions benefit from a high degree of automation

Organizations that have taken these steps are ahead of the curve when it comes to providing a good environment for decision making. However, simply mastering these steps will not provide the return on investment most companies are looking for in today’s competitive business environment. The key to achieving the desired results is the automation of the decision cycle itself, or more importantly, removing unnecessary manual interface points from it.

For example, in most cases the above steps are loosely tied together by a highly manual process requiring a separate product or specialized analysis tool for each step. In fact, most decision processes rely primarily on a business intelligence tool for retrieving historical data that is then exported to Excel, and becomes the subject of management meeting after management meeting. In the end, it’s really about the accuracy and timeliness of the decision, and with the right combination of best practices and technology, this can be achieved. Let’s explore this thinking further.

Understanding Actual Historical Performance

Most organizations start their trek down the road of understanding and decision making here. Organizations need a firm grip on their operational history, and they must be aware of when delivery performance is low, promotional lift is high, and average sales prices are falling. Historical metrics are very valuable when trying to understand where you’ve been, so you can be smarter about where you’re going. The primary vehicles used on this quest are data integration tools, data warehouses, and reporting tools. They all combine to offer insight into what has already happened. This category of solution is termed business intelligence (BI).

A view into what has happened is a worthwhile step on the path to automating a decision process. Actual numbers identify past problems, and can help an enterprise isolate the causes, allowing management to take steps to ensure the same problems do not recur.

The major limitation of using actual data, however, is that the events have already occurred, providing no management guidance about what is likely to happen. For example, when a manufacturer receives a large and unexpected order from a top customer, a management alert is generated because current inventories will not support the spike in demand. The manufacturer knows that certain actions must be taken to resolve the potential out-of-stock situation, but it doesn’t know where to start. In most cases, managers rely heavily on intuition-based methods to make such decisions. Decision automation begins to step in here, but many decisions are still based on instinct and experience.

Constructing a View of the Future

Depending upon the business problem, there may be leading indicators for future performance. If available, leading indicators are the next step in decision-process automation because they are actual data; yet, because of their correlation with future performance, they represent a business manager’s first indication of what is likely to happen in the future.

While leading indicators may provide a powerful tool for predicting the future, they typically have limitations:

True leading indicators with a high rate of return are somewhat rare and depend on business processes

Their predictive value is typically very tactical

For example, in a telesales business, decreasing overall call volume portends a drop in revenue. In the housing market, when interest rates rise, housing prices are likely to soften.

Leading indicators are typically tracked through BI solutions. While these BI solutions would be able to report the actual indicator, the projected view of the business based upon this indicator is limited by scalability. In addition, the more complexity in the variables, the more difficult it will be for these reporting tools to accurately project forward.

Another method of obtaining a view of the future relies upon the organization’s ability to integrate planning data from both operational and financial perspectives into the overall decision process so that, as actual performance changes, a direct cause-and-effect relationship can be drawn between actual and planned performance. With this method, the organization has a better idea of what changes can be made to solve the immediate issue as well as to ensure that new issues are not triggered by a tactical decision.

Taking the same manufacturing example above and applying operational production-planning information, the business analyst can see the effect of the spike in demand on the future production plan, which could very well be an out-of-stock situation in six to eight weeks. Having this additional insight also allows the business analyst to see where an increase in production from underutilized capacity might result in reversing the out-of-stock situation. This deeper level of insight results from the stronger role automation takes in the decision process—if an organization takes this approach to integrate planning data from both operational and financial systems.

Testing Options to Identify the Best Alternatives

While a view into the future is extremely helpful for business managers, it does not provide certainty. Understanding potential future states and their implications is a tremendous help to business judgment. This can be as discrete as changing a single assumption in a granular part of the business, or as complex as changing multiple assumptions and looking at end states for the entire business. This activity is typically called business modeling and is normally accomplished with complex spreadsheet models and algorithms.

However, many of these “what-if” solutions are limited because they are:

Done offline: Ad hoc analysis is typically performed as a back-office activity, without access to the run time environment

Limited in scope: For planning applications, users can only make “what-if ” changes to the plan; in modeling environments, users can only make these changes within the confines of the specific departmental model

Limited in user reach: In modeling environments, only specialists who understand the model can perform the “what-if” analysis. In planning environments, this analysis is typically limited to a planner, within the scope of his/her particular portion of the plan; rarely can a planner understand the aggregate impact across the entire plan

Effectively automating this portion of the decision process requires “what-if” activities that are integrated into the solution. In addition, “what-if” capabilities must be unconstrained—they must permit any user to change any assumption (or set of assumptions) across the solution and get an instant view of the incremental impact the change will have across the metrics that matter. Furthermore, by leveraging a solution with slice-and-dice capabilities, analysts, business managers, and executives can get a 360-degree view of the impacts of the change.

Key to testing these hypotheses and understanding decisions’ impacts across the organization is the feature called “versioning.” Versioning enables users to create multiple “what-if” versions, then compare, share, and merge them. This aspect of automating the decision process is invaluable, especially when decisions impact a wide swath of departments and objectives across the enterprise. This level of automation provides the controls necessary to implement good decisions that positively impact business performance across the organization, with everyone on the same page.

Using our manufacturing example, we can see how building various decision scenarios can benefit the decision maker by offering different methods to solve the potential future out-of-stock situation. For example, one scenario might look at ways to solve the problem by maximizing revenue potential, while another might focus on reducing inventory cost. By providing different methods for solving the same problem, the decision maker is empowered to take several variables or value-levers into consideration, resulting in a more insightful and favorable outcome. Furthermore, by integrating the data into a single decision interface, this process can be highly iterative and responsive. It can provide an environment for continuous planning, or in the case above, continuous supply and operations planning.

Today, planning solutions are focused on the plan creation process for a single plan. The output of the application is the plan itself (e.g., merchandize planning). While these solutions put tremendous effort into the creation of the plan, they do nothing to help business managers understand how a particular plan works and interacts with other plans. For example, when our manufacturing company intersects the demand and supply plans, it may find it is actually planning to run out of stock for some SKUs. Thus, offering an infrastructure that integrates and synchronizes multiple plans with actual historical data provides the best environment for true decision automation.

Making the Decision and Executing Any Change in Direction

Enterprises do not have a single plan. Instead, they have a collection of many plans, focused on different areas of the business from different points of view (e.g., dollars vs. units, day vs. month, SKU vs. family, division vs. region). Each plan is created without a clear understanding of what is happening in other plans, making more difficult (or even impossible) coming to a decision that is “enterprise aware.” However, by synchronizing and aligning various plans, managers are able to see an integrated, forward-looking view of the business. This gives them a directional view of what the enterprise as a whole plans to accomplish over the period, and is a key driver in the decision process.

However, it is rare to find a solution that automates this activity with respect to the decision process. Those that do are often built in complex code or proprietary application development environments, are specific to the process in question, and are not easily modified when process changes arise. Automating this aspect of the decision process requires a workflow engine capable of writing the results to the system of record when the decision has been approved. In addition, the decision workflow must include an audit of the potential changes to be made, not just the results. This is important because it gives the decision maker a clear picture of both the dependent and independent variables attached to a single decision.

Again using our manufacturing example, the business analyst can settle on a few options for solving the potential out-of-stock situation, with each option flexing a different aspect of the business from the most to least profitable action. Each scenario is submitted to a decision workflow that is routed to the appropriate operational managers for approval. Once consensus is reached, a single decision is then executed and the necessary data is written back to the operational system—in this case, the actual production plan is updated for several future periods to accommodate the recent demand spike.

Attaining this level of automation in the decision process is rare, but those companies that can reach it can minimize the impact of human errors based on “gut instinct” and institute fact-based decisions that positively impact the organization as a whole.

Using Actual Results to Refine Assumptions and Continuously Improve the Process

While it is simple to understand why organizations want to track historical decisions, the simple fact is that because most decisions are made by highly manual processes incorporating a mass of data using complex spreadsheet models, keeping track is impossible in many cases. The best way to understand the effectiveness of your decisions is to have a persistent audit trail of actions that were taken. This is the by-product of automating the previous four steps in the decision process.

Because most companies track history fairly well, it should be easy to establish your own decision-audit process in the spirit of continuous improvement, or (more importantly) to comply with requirements such as those outlined in Sarbanes-Oxley. Continuing with our manufacturing example, the analyst now has the hindsight to understand the impact of the available options and the decisions made as actual operations play through. The benefit here is continuous improvement and refinement of the business and decision-making processes. Tracking decisions is also a good way to establish plans for variable compensation or “management by objective” incentives based on target attainment.

Summary

You might look at this five-step process and say to yourself, “This is not rocket science.” For the most part, you would be correct. The problem is that each step requires a different set of data coupled with a specific set of skills on behalf of the user. Combine that with the fact that few vendors can provide solutions for all five steps in the process, and you have a real challenge.

As a result, decisions are made in many organizations by what I call the decision triangle—people, process, and Excel. This triangle works for the most part, but it’s highly manual in terms of process and data, and thus requires considerable resources for a single decision to be executed. This explains the strong focus on the promise of packaged performance management solutions: they can provide data integration, persistence, and automated decision processing. They are able to reduce the number of resources required to execute the decision (see Figure 2).

Figure 2: Performance management and the decision triangle

A decision that wasn’t executed, or that wasn’t executed in time to achieve the desired results, was just a good idea. Being able to ensure a decision is executed within the relevant time frame closes the decision loop and allows the company to ensure “control” over its business direction as it “tunes” the business to its ever-changing market.

As a business moves further along the decision-automation value curve, it will realize increased benefits from faster, more educated decisions utilizing fewer resources, and ultimately provide a compelling return on its investment in both process improvements and technology. The real promise of performance management hinges on the ability of solutions to address the full lifecycle of the decision process, and most importantly, to enable accurate and timely decision making.

[1] “Could IT be an Obstacle to Successful Pervasive PM?”, AMR Research, March 28, 2008

Déjà vu -- All Over Again

2008-01-01T12:00:00.000-08:00

By Gary Rinehart

All Over Again

Over the last couple of decades I’ve been presenting various forms of “executive information systems (EIS),” “business intelligence data marts (BI),” “performance management environments (PM),” “management by information (MBI),” Management Information Systems (MIS), Enterprise Resource Planning (ERP), etc., etc., etc. I’ve discussed how companies can buy all the enterprise applications they want, but unless they are performing well to begin with, that software isn’t going to help a whole lot. To most, these investments are a cost without an ROI.

Originally I was discussing MIS environments. It did not stop with MIS. In fact, it hasn’t stopped with ERP applications. Other segments of business technology, ones that depend on these enterprise-software backbones, have similar issues. Let’s look again at one of them, namely the business intelligence (BI) or performance management (PM) market. Unless you approach it the right way, it won’t fill its promise.

Déjà vu all over again

In 1993, on the eve of the ERP spending explosion, we in IT were talking about our needs and the promise of these new “client/server-based” business applications. One quote stands out from those days: “If we go in and ask senior management for millions to bring in this new technology, we have to be able to answer the question, ‘What’s in it for the CEO?’” They were interested in what were then called executive information systems, or tools to get information out of ERP systems to guide executive decision making.

Now, 15 years later, amid information overload, we’re still pursuing this dream. Only now we call it business intelligence, executive dash-boards or performance management, and we long for real-time dashboards that give us the information we need to be better managers. The desire for these systems has resulted in a huge business:

Since 2001, BI and PM have been major factors in IT spending, according to spending studies. Initially, they were in response to federal Sarbanes-Oxley (SOX) compliance requirements, but they have expanded much further.
Spending will grow to $32.1B this year, up 7.4% from 2007 and averaging more than $2.44M per organization, according to AMR Research’s newly completed survey of governance, risk management, and compliance (GRC) spending in the United States, Germany, and Japan. Within this spending, risk management is now the new compliance, equaling or exceeding financial governance in influence and spending.

Trying to capitalize on this opportunity, the big enterprise vendors have bet big: IBM bought Cognos for $4.9B; SAP grabbed Business Objects for $6.7B; and Oracle acquired Hyperion for $3.3B. That’s nearly a collective $15B that three of the largest software companies in the world have shelled out, showing just how lucrative this market is.

Rules of success

However, sales success and market growth do not necessarily translate to effective implementations. These tools have enormous promise, but most aren’t seeing it. Given the level of investment, it is in all our interest to start generating benefits.

To help make this happen, these four rules to guide your success are offered:

Rule No. 1: Start with decisions executives already make and work backwards
This is called “decision reengineering.” Too many companies start with the plethora of information they have and then try to use technology to organize it and present it in an organized way. However, if it’s not information that executives are relying on, it will still be ignored.

Instead, spend some time to understand what information is being used or desired, and then design systems to present it in a usable way. Having more regular or real-time access to information that is already being used will yield measurable results and gain executive buy-in.

Rule No. 2: Technology won’t change organizational behavior

Behavior must be changed first or the systems will fail. If people don’t communicate or share information, technology is not going to make them do it.

It is amazing how often companies think new technology is going to make people change the way they work. If two people don’t talk to each other, buying each of them a cell phone is not going to change that. Likewise, content management (CM) systems and BI tools are not going to make people who don’t share information become open to doing so. The end result is most likely a useless system and a lot of frustration if the process is not fixed first.

Rule No. 3: Just because you can or others are doing it is not a reason

A few years ago, a Fortune 500 CIO wanted to put together a justification for spending millions on an e-procurement system. When asked why he said that his CEO was on the board of another company and several of the other CEOs were talking about the millions they had spent, and his CEO didn’t want to get left behind. This CIO was left to make it happen.

So many bad decisions start this way. I call it the Lemming Theory. The technology is available and it really works, but only if you are ready for it. Executive dashboards are sexy. They are the “in” thing. We all want executive dashboards because they sound great, and we’ve all read how XYZ Company is using them effectively. Just know going in that you need more than that before you can be sure you’re not wasting time and money.

Rule No. 4: Make sure a line-of-business (LOB) executive is driving the bus

IT has to put these systems in and make them work. If they fail, IT will be blamed. However, failure won’t be because of technology issues, but because the business users don’t support the systems. If a LOB leader is not taking the lead, don’t do it—it’s that simple.

Technology offers us incredible opportunities. What is available to us today in business compared to just 10 years ago is astounding. But none of it matters if you don’t take simple steps to assure success.

Technology is always only part of the equation, and we all know that nature abhors an unbalanced equation.

In Conclusion

BI systems exist for the sole purpose of helping executives to meet their goals and objectives. The concern of a BIS is not with how a function is performed but with what people do. The job of the BIS is to provide management with enough information to know the appropriate action when a problem exists, and to provide feedback on that action when implemented.

The value of BIS is closely tied to its degree of focus upon key business issues. Subsequently, BIS’ greatest impact is as an instrument of change. It acts as a beacon, a catalyst, for changes guiding the rest of the organization towards the evolving corporate goals. The BIS is instrumental in extending the executive's "reach", putting the executive in closer contact with key individuals within the organization.

In 1967 Peter Drucker wrote a definitive text for executive effectiveness appropriately titled The Effective Executive. Drucker wrote:

"To be effective is the job of the executive, to effect, and to execute, are, after all, near synonyms. Whether he works in a business or in a hospital, in a government agency or in a labor union, in a university or in an army, the executive is first of all, expected to get the right things done at the right time. And this is simply that he is expected to be effective...Intelligence, imagination and knowledge are essential resources, but only effectiveness converts them into results. By themselves, they only set limits to what can be attained."

The management of any enterprise is a complex task requiring the mastery of information as a strategic tool by the entire executive team. BIS will aid the executive team to question and analyze, diagnose and explain, test and discover, and manage and monitor events. In short, BIS allows the executive team to truly become effective.

Best of Breed vs. Integrated Suites (BoB vs ERP)

2006-03-10T07:57:00.000-08:00

INVESTMENT IN INTEGRATED APPLICATIONS REAPS THE BIGGER REWARDS

If time and money were of no consequence we'd all buy our fish from coastal fishing towns and our vegetables from the local farmers' market. But the reality is that the convenience of buying these products from one supermarket makes it the preferred option.

Similarly, best-of-breed software applications have their place in the market, but most businesses - particularly SMEs - should not set their sights on this approach. As businesses move forward, they should think about integrating their systems to get the most value from their IT investment, capitalizing on what they already have and ensuring they avoid painful integration issues as they grow.

The way to avoid growing pains is by viewing business IT as a facilitator, helping to solve problems across the organization. While best-of-breed applications might solve individual pain points, an integrated suite provides the convenience and the longevity to achieve ongoing returns.

Larger vendors offer a trustworthy network of smaller independent software vendors (ISV), which the vendor can rely on to add tailored layers to its base technology. The customer benefits from the specific vertical expertise of the ISV, the stability of ongoing R&D that is likely from a larger player, as well as the clarity of vision that should promise the ongoing support of the product.

The integrated suite approach comes into its own in its ability to cut 'fat' from your business. If used effectively, integrated applications will enable you to make your business leaner. They can streamline wasteful processes (for example, removing costly, paper-based invoicing and replacing with e-invoicing).

They can put information in the hands of the right people at the right time, allowing them to review performance and react to business functions. They can improve efficiencies by reviewing processes, using integrated applications to increase productivity and cut costs. They allow you to interact better with customers through customer insight applications, develop closer relationships with customers and meeting their needs more effectively. They also ensure employees are using the technologies to improve business processes and effect change.

A critical success factor is for organizations to invest in business applications that can be exploited to their fullest extent. Broader business requirements should be borne in mind, and IT should enable business barriers to be broken down. The familiarity and ease-of-use of an integrated suite can offer the benefits of continued R&D, enabling businesses to reap the greatest rewards from their technology investment.

DUMP THE DINOSAUR AND FIND SUPERIOR SEPARATE SYSTEMS

Memories are still fresh of dotcom-era companies with an IPO to their name, but less in the way of actual proven software. So it is understandable that FDs of companies have now gone the other way and seem anxious to purchase all their software from a set of known vendor behemoths.

Unfortunately, IT purchasers who live by the maxim 'no-one ever got fired by buying their software from dinosaur x' are throwing out the baby with the bathwater.
You simply can't buy everything you need from one vendor, even if you want to. Even SAP, the colossal German ERP software vendor, covers only 30% to 70% of a company's business model, according to its own CEO.

For the remaining 30% to 70% you need other features. But surely you should standardize on as few vendors as possible?

Or perhaps not. Software companies became successful in the first place by doing one thing very well. Oracle did it with databases, Microsoft did it with operating systems and SAP with financial software.

But it's also true that as soon as companies step outside their core competence, they are less successful. Once vendors unceremoniously drop their non-core products, customers are left to 'migrate' (for the definition of 'migrate' see 'rewrite' in the dictionary) their applications, perhaps with 'help' from the vendor (see 'pay', see also 'chutzpah').

But buying core products from large vendors isn't without risks. Takeovers can signify the end of established product lines, and recent history has shown that even the biggest vendors aren't safe from acquisition.

It is critical to inject some business judgment here. I have been working with a customer who compared my own company's software with their existing product, and found a new project could be delivered in one-fifth the time of its existing technology. This project was delivered in 60 days and had a payback period of under-two months.

With this kind of return, who cares about long-term issues? The alternative - putting up with an inferior applications that takes five times as long to do the same task - would simply be an abuse of shareholder funds.

I'm not advocating that every part of the business makes independent technology decisions. The key is to standardize aggressively on infrastructure - networks, operating systems and databases. These technologies are highly mature. However, business applications are what truly deliver value, and for these, don't constrain your company. Innovative vendors can add tremendous value in their own specific areas of core competence.

Meeting Management

2005-02-20T17:52:00.000-08:00

Introduction

In the course of the normal workday, managers attend or conduct a number of meetings. More than a million meetings will be held this year at corporate conference centers alone, in addition to the millions of daily meetings inside the office. But most managers have no formal training in how to plan and run meetings, that is why we consider 25 percent to 50 percent of all meetings to be unnecessary or unproductive.

Nido Qubein, author of Communicate Like a Pro, has a golden rule he urges on all managers weighing the pros and cons of scheduling a meeting: "If you can get the job done without holding a meeting, then calling one is a waste of time." Wasting time in meetings is not just a business problem. The same lack of skills applies to professional and trade associations and community activities.

If we are to make these meetings productive, we have to plan for both productivity and communication. The key to this planning is an agenda that answers the following questions:

Do we need a meeting?
Who should come to the meeting?
What do we need to accomplish at the meeting?
How long should the meeting last?
Where should the meeting be held?

Less that 10 percent of all meetings have agendas. We are too busy for such niceties. The meeting participants need time to prepare for the meeting - to gather information. If people have a chance to think ahead about their remarks, the remarks may better deserve listening.
If ten managers are going to attend a meeting and the meeting last two hours, then ten people times two hours means 20 work hours. Take salary, fringe benefits, overhead, administrative expenses, and the estimated cost will be $700 an hour per meeting. Is the meeting worth it? It depends on what the meeting will accomplish. Most of the people who attend meetings would be doing some useful and productive work if they were not there. Too many meetings serve little purpose as a medium for communication. We have to be aware of our time and how to conserve it.

Agendas

Why do you want to see all these people face-to-face at the same time? Do you need to reach a decision about something? Do you want to share information? Do you want to have a discussion around a problem - and do you plan to resolve the problem at the meeting? Is this merely a fact-finding conference?

Once an objective is established, it's important to ask what alternatives there are to a full-blown meeting. Could you disseminate the information in a memo or via electronic mail? Could you make a few quick phone calls?

If once you've asked these questions and it looks as if a meeting is unavoidable, then it's time to start planning an agenda.

There are four key steps in preparing a good agenda. They are:

Make a list of the items you want to discuss. Be sure to keep it brief and specific - one line should be enough for each item.
Decide which person at the meeting will be responsible for each item. Never ask someone to a meeting without having a reason why you want him/her there. It may be to handle an agenda item; it may be that you need him/her there for political reasons. Just make sure you have a reason.
Decide what process you'll follow in handling each item. Do you just want to give out information? Do you want to get information? Do you want to solve a problem with the item? Do you want to reach some sort of decision about an item? If you just want to discuss something but don't want to reach a decision at this point, tell your meeting attendees that and explain why?
Set a time limit for each agenda item. Be sure you're realistic though - don't give five minutes to a controversial item you know everyone is going to have an opinion on.

Timed agendas make meetings listenable. They help in estimating how long the entire meeting will be - the $64,000 question for your busy and meeting-jaded attendees. This will help people adjust their schedules. For instance, tell participants that from 9:00 to 10:00 we will deal with topic "A". From 10:00 to 10:30, we will deal with topic "B". From 10:30 to 11:15, topic "C", and so forth. In that way, meeting attendees can limit their presence to a time from which they can benefit and contribute. Non-contributors have a negative effect on the dynamics and achievement of the meeting objectives. It contributes to inertia and adds dead weight.

No meeting should be planned for over two hours in length. If your meeting must last longer than that, provide rest breaks every 60 - 90 minutes. That's about as long as people can go before they'll start getting up themselves and going for coffee or whatever.

The best time to schedule a meeting is from 9:30 to 11 in the morning. That gives people time to get organized at their desks, answer phone messages and clear out their in-boxes before they come to the meeting. They've had a chance to plan their days, chitchat with colleagues and drink their first cups of coffee. Then they're ready to sit down and concentrate with clear minds. If the morning meeting is not possible, the next best time is from 1:30 to 3 in the afternoon - as long as it ends on time. Room in the afternoon should always be left at the end of the day to go back to the desk and clear things up before going home.

Of course, these are just guidelines. If the corporate culture is different from this concept, the rules change. If your corporate culture is one in which people meet regularly for breakfast, lunch or late afternoon, then go with that.

Before the Meeting

Determine the purpose of your meeting. Consider the other available communication mediums, their cost and then choose the most efficient medium. If the most effective is a meeting, follow the rest of the guidelines. If not, forget the meeting and choose the more effective method of communication.
Prepare a draft agenda. List the items that the meeting can usefully discuss. See the Four Key Steps listed on the previous page.
Select the participants on the basis of their abilities to contribute to and profit from the meeting. If participation and discussion are important, limit the number of participants to five or six with a maximum of nine. A dozen or more people cannot effectively participate in a discussion.
Circulate the draft agenda. Include a firm return date for comment.
After you have received and considered comments on the draft agenda, prepare the final agenda. Include the topics to be discussed, date, time and place of the meeting, a list of the participants and their functions. And - to help manage the distracting interruptions from your meeting - an indication on how messages will be delivered to participants during breaks in the meeting.
Arrange the logistics:

Reserve the room. How many times do you go to a meeting to find that nobody remembered to reserve the room?
Plan and arrange for whatever audio visual support may be necessary.
Arrange the amenities; ash trays, pencils, note paper, water, glasses, etc.
Arrange for coffee breaks and meals, if necessary.

Coordinate travel and hotel arrangements - if out of town participants are to be at the meeting.
Prepare sufficient copies of any documents to be used at the meeting. If reading in advance will help the participants prepare for the meeting (it can often reduce the meeting time spent briefing participants on informational matters), send out documents in advance, perhaps with the agenda. If people from outside your organization will attend the meeting you may want to schedule a pre-meeting with your colleagues to coordinate strategies, roles and viewpoints.
Select a meeting leader on the basis of his/her ability to make the meeting work. Select someone else to take notes. The presence of a note taker often inhibits free expression of ideas at a meeting. If this is the case, do not take notes. However, if notes will be useful, a participant should not take them. A note taker cannot effectively contribute and note taking inhibits the note taker's ability to listen effectively.
If foreign visitors will participate in the meeting, determine what customs and meeting style will make them feel comfortable and welcome.
Prepare an attendance sheet - not to record truancy, but to help the note taker prepare the minutes.

At Last Minute (Or Hour)

1. Check on the documents that you will be handing out.
2. Visit the site immediately before the meeting to assure its readiness.
3. Set up and focus any audio visual equipment (make sure you have adequate extension cords).

Conducting the Meeting

1. Start on time as a courtesy to the people who have shown up on time. It assures the participants that this is to be an orderly, well-run meeting that deserves their listening attention.
2. Introduce the participants to each other by name and function. Name badges or an exchange of business cards may help. The badges and tent cards can be prepared ahead of time or the participants can write out their own with felt-tip markers.
3. Tell participants where they can find restrooms, coffee machines, telephones, or whatever else they may need. In addition to courtesy, this information helps eliminate distractions and promotes listening. Participants won't have to worry about these things when they should be listening to something else.
4. Remind them how messages will be handled.
5. Review travel arrangements. This will help reduce tension for those who have connections to make and will allow them to give full attention.
6. Review the agenda. Reinforce the purpose of the meeting. Modify the agenda as needed to take care of last minute developments. Once the "official meeting" has begun, stick to the agenda - especially in terms of time limits. The moderator should make sure that what the group has agreed to do in 15 minutes doesn't take an hour. When the meeting starts, the time limit ground rules must be set. As time starts to run out on one item, the moderator should notify the attendees that they've spent as much time as agreed to on the subject. Then the moderator should offer alternatives: i.e., come back to the topic later, table for next meeting, or deal with it differently. The moderator should be a consensus builder who can say: "This is what we set out to do, here's where we are. We can take one or two or three of these tasks. . . ."
7. Avoid microphones and recording equipment. But if necessary, tell participants how and why it will be used. It would be useful to offer participants copies of any recordings that may be made. Tell them how they may arrange to comment off the record. This is another way to reduce tension.
8. Summarize and note action items or agreements as you go from one item to another.
9. Keep track of time and pace the meeting with the available time. If people know your meeting will start and end on time they are less likely to be distracted by concern that the meeting will overrun other items on their personal schedule. If it looks as if the meeting is going to run over, be sensitive to your group's needs. Ask them if they would like to continue for another half hour (always set a time limit on the extension) or meet again at another time. This gives people who have other meetings or business to attend to a chance to have a say in the matter.
10. Plan follow-up meetings and actions. It is best to summarize each item and the action that was taken.
11. End on time.

After the meeting

1. Prepare the minutes promptly. Minutes are not a transcript. They should be concise but should contain:

Date, time, place and purpose of the meeting;
The names of those who attended;
Conclusions, agreements, action items and assignments.

They may also list open items. To be effective, the minutes should not try to summarize the discussion. They should not try to point out who said what and who disagreed with whom. They should not record for posterity, who made dumb statements and who suggested foolish ideas, and who is to be nominated for the Nobel prize for meetings. Such minutes inhibit guesses, hunches, opinions, suggestions if they are going to be recorded forever in the corporate archives.

Minutes should not reward poor listening behavior by presenting the content of the meeting to people who did not listen. Many people who attend will not bother to listen - they can read what happened in the minutes. Minutes that are summarized transcripts serve as an inducement to ineffective listening.
If necessary, particularly if the meeting includes people from outside of your organization, check to see that all participants feel that the minutes fairly reflect the meeting.
As needed, again, particularly if outsiders were present, you may want to have a post-meeting evaluation session with your own colleagues.
Follow-up action items, those assigned to others as well as to you.
Review the meeting in your own mind. What did you learn that would be useful in planning, conducting and follow-up for other meetings? Was anyone there who truly didn't need to be?

Were the "speechmakers" effectively handled - and what should be done the next time the situation comes up? Five minutes of your time immediately after the meeting saves you a lot of time in the long run.

All the preparation for meetings may seem like a lot when you're very busy. But when you think about the hours you waste in inefficiently run meetings, isn't it worth it? Remember, a successful chairperson plays two roles - director and lead actor. Double duty calls for plenty of preparation, sensitivity and often a willingness to share center stage with other performers. Learning to carry it off with skill and brio guarantees a reputation for command performances and the kind of enviable results that enhance a manager's reputation and can boost their career.

How to Stand Out at Someone Else's Meeting

You're not running the show, but that doesn't mean you can't stand out. Here are a few tips that make you a sought-after participant:

Do your homework - before the fact. When an agenda hits your desk a few days before a meeting, read it. Make notes about relevant points to discuss next to each entry. If you have questions, ask them sooner rather than later. The more information you have compiled before entering the boardroom, the better.
There are no small parts, only small actors. This holds true in the workplace as much as it does on-stage. There's no need to hog the limelight. Don't be tempted to grandstand. There is no need to threaten the chairperson's authority by attempting to gain control. Instead hold your thought until the time is perfect. Then let them wow your co-workers.
One great idea is better than a handful of so-sos. Limit idea-making to one or two issues where you can back up your proposals with statistics, experience or new research. Try to test the reaction to these issues before the meeting if you can. Talk to your co-workers, even your superiors. Try to gain your bosses support. Remember, the thing the boss hates most is a surprise - even if it is a prize winning surprise. It is much better to rework the proposal before hand than risk the prospect of a no-go vote in front of your peers.
When you're the new kid on the block, it is important to follow someone else's lead. Stand back and let people assume their regular seats before you take one. You don't want to lose the support of the senior vice president by taking her favorite chair. Observe a meeting's dynamics before jumping into the action. Your old company may have encouraged screaming matches, but these people could be whisperers.
All ears? Three cheers. Listening attentively - with your eyes and your body as well as your ears - can win points, not to mention the same consideration when you've gotten the floor. If you're whispering to your neighbor, you'll never know when important information is flying past.
A cause-and-effect relationship. Link your ideas to a promise of action and the prospect of immediate benefits. Show that A leads to B, that leads to C, using charts, diagrams and past examples.
No one can resist a volunteer. Back up your ideas by volunteering your group or yourself to assist in the analysis, implementation, etc. It is tough to resist a committed volunteer.
Don't drop the ball. If you've been asked by the chair or you volunteer to investigate an idea or develop a proposal, do so. Send a memo summarizing your findings within several days. Even if you haven't been able to finish the job, send a memo to let her know you're working on it.

Conclusion

Regardless whether you are conducting the meeting or attending the meeting, pay attention to detail. Listening and communicating define your successful participation in the meeting. If close to 40 percent of your working time is spent in meetings, it is important that you make this time effective. Stick to a strick agenda that has been distributed in advance to those who will attend. Don't make the meeting environment to comfortable. Set a time limit on the meeting and each agenda item. Manage the meeting. Promptly respond to those action items assigned to you. Prepare in advance for the next meeting. Good luck!

Benefits of an Executive Dashboard

1996-01-01T12:00:00.000-08:00

By Gary Rinehart

Introduction

This white paper draws on the authors experience with over 20 years leading corporations and over 15 years of consulting and development efforts in the area of Executive Information Systems (EIS) to explain how many of these companies have created EISes that are of great value to individual executives, groups of managers and the companies they serve.

Simply, an EIS is a reporting system. And like all reporting systems, its benefits are often difficult to quantify. This paper will attempt to explain what some companies have actually done with EIS and why the results were valuable.

Where’s the Beef?

There are many perceived benefits of Executive Information Systems. Above all, however, the use of an EIS as an instrument of change stands out as having had the greatest impact. The process is simple:

Identify a small number of key business issues.
Create EIS reports that track progress on these issues.
Get the EIS into the hands of the people who can make change happen.

Despite the straightforwardness and simplicity of this process, many EISs do not start out being used in this manner. Rather, they start out as an alternate (and superior) vehicle for delivering existing management reports, providing a “reference library” of financial reports and other standard reports.

This approach to EIS also has considerable merit since companies have a great deal invested in existing reporting systems and yet many do not present information in an easy-to-use and relevant form. The EIS usually represents a small incremental cost, yet it can leverage and multiply the value of existing data and systems for managers and executives. Exactly how an EIS can add value to existing data will be covered in detail later in this paper.

Figure 2: Information Flow

The benefits of using an EIS to deliver existing standard reports include:

Improved understanding of the business
Time saved in reviewing information
Greater access to supporting details
More timely delivery of data
Improved management coordination and control.

Nevertheless, there are enough EISs in use today that anyone studying the installed base will come to the conclusion that the value of an EIS is closely tied to its degree of focus on key business issues. In other words, if the organization perceives a need to change some aspect of the business, and the EIS is used to monitor the progress of that change, then the EIS itself becomes a catalyst and instrument of change and takes on a large and important role in the organization.

EIS in the Context of Traditional IT Technology

Until recently, information systems have been dedicated to the automation of well-defined tasks such as order processing, payroll, materials management, patient demographics, billing, etc. These systems are concerned not with what people do, but how they do it -- how they manufacture and test a product, how they enter and ship an order, and how they respond to the patient’s need for service. The benefits of these “foundation systems” are often quite visible. For instance, there are obviously competitive advantages to being the low-cost provider, or the company with the fastest delivery, or the company with the best customer service. These results have been achieved (and widely reported) through the application of IS technology. Examples include shop floor automation, airlines reservation systems, direct electronic ordering and billing, and computer-based testing and QA.

An EIS, on the other hand, addresses the issue of what people do. If a company has a problem in some area, people must direct their energies toward solving the problem rather than continuing with business as usual. The job of the EIS is to provide management with enough information to suggest that something has to change, and secondly to provide feedback on whether the new tactics are working.

Figure 3: Tying EIS to Business Strategy

Justifying the Cost of EIS

Not surprisingly, the cost justification of an EIS is not as obvious as with foundation systems. The mission of an EIS is not to reduce operating costs. Trying to cost-justify an EIS is like trying to cost-justify management itself.

The job of traditional computer-based systems is to make the business that exists today more efficient. The most important job of an EIS should be to act as a beacon that guides the organization from where it is today to where is wants to be tomorrow.

“This is what we want to achieve . . .”

“Management wants the organization to focus on these issues . . .”

“If these measures improve, you have succeeded . . .”

EIS Focuses Effort on Corporate Issues

No one has yet developed a convincing way to quantify the value of this mission. However, the rapid growth of EIS suggests that many executives understand instinctively that the use of EIS may in the long run determine their ability to manage change and ultimately to compete and survive.

In this sense, EISs are now being regarded as “strategic” by many companies in that they allow the company to manage change that might otherwise be unmanageable. Just as a computerized order entry system is a tool that helps clerks do their job faster and better, so the EIS is a tool that lets executives and managers deal with the complex process of change by greatly extending their capability to monitor and control organizational efforts and direction.

Even though it is quite possible that no one will ever be able to point to a single dollar “saved” by an EIS, executives themselves will and have testified that their EISs have become an indispensable part of the way they run their business.

Focusing on Key Business Issues

Issues and Answers

An EIS is most effective for dealing with issues that have a time horizon of a few months to a few years. Shorter term issues are best handled verbally or with E-mail. Longer term issues can certainly be addressed by an EIS, but need to be broken down into shorter term objectives in order to be a guiding and motivating influence on the organization. A survey conducted in 1991 by Management Analysis Company (MAC)1 indicated that organizations have difficulty relating to business issues that extend too far into the future.

Most executives can tick off a list of five or ten current business issues without hesitation. Each of these business issues suggest tasks or new activities and corresponding measures of progress. Each task in turn suggests subtasks with their own measures. Here are two examples:

ISSUES: Inventory tying up too much capital

EIS MEASURES:

Aggregate inventory by type vs. objective

Finished goods
Work in Process
Raw materials
Accessory

Actual Production vs. Scheduled Production

In house
Jobbed out

Shipments vs. objectives & last year

By product
By product line

ISSUE: Sales off from targets

EIS MEASURES:

Order Entry vs. Objectives vs. last year

Total
By Region
By District
Top 100 accounts

Shipments and Backlog

Same as above

Most “management reports” are the by-products of systems that have principle purposes other than management information, for example, running a factory, reporting to the IRS or SEC, producing a payroll, etc. By contrast, an EIS exists for the sole purpose of helping executives to meet their goals and objectives. So rather than allowing accounting and production systems to determine what data is available to managers, it is possible with EIS to let the business problems define what is measured and how it is presented.

In most cases, EISs are installed because existing information systems fail to provide the data needed to address current business issues. Here are a few examples drawn from the survey:

At a major insurance company, controlling headcount became one of the most important issues in running the business. A simple question like “How many people work for this company today?” produced three different answers: one from Human Resources, one from Finance, and one from Administration. None agreed.The President of the company chose a method for determining headcount for the company, its divisions, and down to the departmental level. These numbers are now tracked on the EIS that now contains the “official” numbers.With the President watching these numbers on a daily basis, department heads are very wary of adding personnel without thorough justification. Thus, with one stroke, the President has changed long-standing habits and corporate culture and solved a thorny business problem.
At a leading pharmaceutical company, the executives use their EIS’s exception reports to keep track of the sales of hundreds of different products in markets world-wide. Anytime a product outperforms expectations by a significant margin, the exception reporting system flags the event and brings it up on the EIS. This helps major opportunities from being “buried” and provides visibility high in the company for early signs of product success.
At a consumer products manufacturer, the EIS provides marketing managers with daily information on the prices of competitive products around the country. By accelerating the delivery and analysis of this information, the company can respond with promotions, prices adjustments, and advertising to quickly combat moves by competitors.
A manufacturer of heavy equipment uses their EIS to get quality reports to the top executives. The company had determined that it was losing old customers because of product defects. management wanted to promote product quality as the number one business issue. The new EIS with its focus on product quality statistics allowed senior management to ask very specific and well-informed questions. The message got through to the organization that management was dead serious about this campaign. Soon new and innovative quality improvement programs emerged at the plant level.
At an international bank, executives became concerned about their ability to spot emerging problems in their Latin American loan portfolio. So an EIS application was put in place to monitor not only the results of various foreign operations, but also a great deal of “soft” data about the political climate, nature of the businesses who are the bank’s customers, and staff capabilities in each of the bank’s foreign branches.
The concerns of the management team at an international chemical company focus more on mergers and acquisitions. Their EIS maintains a database of companies that are potential acquisition candidates, complete with breakdowns by lines of business and geography. Executives can “merge” any of these entities into the company and immediately get a rough cut on how the merger would change the complexion of the business. This information helps them identify companies that would achieve the mix of products and distribution that they seek for their company.
An electric power utility uses an EIS to immediately alert managers to any emergencies, such as an “event” at their nuclear power plant, major power outages or service interruptions, and dangerous overload conditions. The system continuously monitors the availability of alternative sources of power so that decisions can be made quickly if necessary.

In each of these examples, the information provided by the EIS was not easily obtainable from existing systems, at least not in a form that served the purposes of the executives. Note, for instance, that none of these systems rely on traditional financial reports.
From the executive’s perspective, the unique value of the EIS is that it can track any information, regardless of where it comes from, without impacting the operation of existing systems. The executive finds out what (s)he needs to know, when (s)he needs to know it. And the fact that the executives are watching certain information causes the organization to focus on the improvement of that information.

The flip side of this “EIS as a catalyst for change” is that executives can explore information with anonymity. One executive told us how he used to think twice before asking for things as innocuous as the advertising budget. Simply by asking an innocent question, subordinates went into a tizzy trying to anticipate why the executive asked the question and where the ax was going to fall. This executive appreciates the ability to use his EIS to satisfy his curiosity on various subjects without sending his troops scurrying.

Key Performance Indicators

The concept of Key Performance Indicators (KPIs) came out of MIT’s Sloane School in the late 70s. KPIs are an element of a methodology called Critical Success Factors (CSF). This methodology has three basic steps:

Overall corporate goals are broken down into appropriate goals for each division and department.
Each business unit identifies a number of critical activities (CSFs) that must be done well in order to achieve its goals. These activities must correspond to people or departments who are responsible for doing them.
Each business unit must establish a means for quantifying their successes. These measures are the Key Performance Indicators.

For example, suppose a company decides that one of its corporate objectives is to improve customer satisfaction. At the corporate level, a periodic survey of customers would be a key performance indicator since corporate managers are responsible for the overall effort. Activities that contribute to improvements might be:

Improved product quality
Improved customer service and support
Improved delivery times
More customer-suggested product enhancements

Each of these activities suggest their own set of key performance indicators.

The most important part of this process is that the key performance indicators are measures that the persons involved can actually take responsibility for and control. By definition, these KPIs will never be boring or irrelevant to their associated managers. They will never seem like excess or unnecessary data. And the EIS that tracks and reports these KPIs will become an indispensable tool for running the business and achieving results.

It is important to remember that KPIs relate to the activities of specific management levels or groups. A KPI that is very important to one level of management may be irrelevant to another. For instance, a KPI for the CEO might be return on equity. This KPI might seem completely irrelevant to the sales manager whose KPIs are specifically focused on revenue generation.

Daily Operating Reports

One obvious advantage of an EIS is the speed with which new information is distributed. The moment the central EIS database is updated, all users can see the newest information.

Consequently, the distribution of highly time-sensitive data is an obvious application for an EIS. Even though many top managers are not concerned with daily operating numbers, they are often interested in daily stock prices, fluctuations in currency and commodity markets, world and business events that will impact the company, and important internal events and developments.

Further down in the organization, however, we quickly encounter a layer of management that is typically very concerned with daily results. These managers have roughly twenty-one business days each month to meet their objectives, and every day counts. Daily sales results, competitive moves, production results, machine downtime, business interruptions, injuries, staffing, and materials costs are among the kinds of daily operating data that require rapid distribution and analysis. Many EISs find their greatest value when applied at this level rather than at just the pinnacle of the corporation.

Competitive Intelligence

All businesses are concerned with competition. The ability to size up a competitor’s strengths and weaknesses and the ability to react quickly to competitive moves are often critical to success. One EIS at a multi-national company uses competitive intelligence to identify takeover targets. At another company, the EIS has speeded up the delivery of competitive pricing information. And nearly every EIS has at least financial data available on major competitors.
An EIS, with automated hooks into various on-line public databases, can scan the contents of every major newspaper, business periodical, trade publication, and securities analysis for any mention of your competitors or product areas. The “one-column-inch” about a competitor’s new product will not be overlooked. And as soon as one of your competitors submits financial results to the SEC, they will be on the EIS for your immediate review and analysis.

Some companies have internal competitive intelligence departments. But frequently the information generated by these groups is not coordinated and distributed to key executives in a useful way. An EIS can be used to store and disseminate internally generated competitive intelligence and leverage the value of your existing investment in these activities.

Internal Narrative

Most people think of a computer-based system in terms of numeric data. Yet, for executives, the most important information may be in text form rather than numbers. For instance, a report explaining problems and delays with a new production line may be far more important than the quantitative measures of the delay.

Unlike other computer systems, an EIS is designed to store, sort, and retrieve text as easily as it handles numerical data. For example, at one company the EIS is used to track the progress of several hundred legal cases. Each case is categorized on its potential financial impact, publicity impact, affected products or business units, and likelihood of winning. Each case contains a summary of the complaint and the monthly update on progress by the legal department. So, for instance, an executive could quickly identify all product liability cases that might have a large dollar impact on the company and have a high likelihood of the company loosing. And more importantly, the executive could get a sense from the narratives of how each case is progressing. All of this is prefaced by an “executive highlights” narrative written by the head of the legal department.

At another company, narrative reports are submitted each week concerning the progress of roughly 125 new products under development. A color coded top menu lists the projects in red, yellow, or green letters to highlight underlying reports that contain highly adverse developments, cautionary developments, or favorable progress.

Another typical application of text retrieval is the dissemination of monthly operating reports written by heads of business units, divisions, or departments. it is often the case that these narrative reports must accompany or precede the distribution of numerical reports since they contain explanations for the numerical results. An EIS usually saves old reports so that an executive can look back and review what various managers had said in the past.

Getting More Value from Existing Data

Most organizations are already spending vast sums collecting operating and financial data. The value of this data to the executive depends on its accessibility in a useful form. Once we are freed from the severe constraints of a paper-based reporting system, considerable improvements are possible.

Just as a PC spreadsheet have all but replaced paper spreadsheets, so EIS will largely replace traditional paper reports. EIS has appeal because the executive gets more insight and information in less time. It is simply a more powerful and effective media for communicating existing data.

Navigation and Analysis

Why is an EIS a better reporting system? Two factors:

Navigation: Navigation refers to how you find your way through the data. indexes, tables of contents, and footnote references are the traditional ways of navigating through paper documents. They help you locate the information you are interested in and they lead you to related information or supporting details. The use of EIS offers greatly improved navigation methods.
Analysis: Analysis refers to the ability to relate disparate pieces of information in order to answer a business question. Example: Sales of our shampoo have been increasing in the Chicago market. But how does this compare with competition? Are we gaining or losing market share? Was there a change in the trend when we switched agencies? To answer these questions requires relating monthly historical data for our product and competitive products.

Computers have permitted major advances in both navigation and analysis. In the following sections, I will look at the navigational and analytic capabilities of an EIS as it deals with various kinds of information.

Hierarchically Organized Financial Data

One kind of data that every organization already has is financial data -- income statements, balance sheets, cash flow statements, and so forth. Usually such financial data is organized in a hierarchical structure. Example: Consolidated sales breaks down into sales by region. Sales for each region breaks down into sales by product group which in turn break down by individual product, etc.

Consolidated Sales............................................................. 1 item
Sales by Region...................................................... 10 items
Sales by Region by Product Line.................. 100 items
Sales by Region by Individual Product 1,000 items

If there are 10 regions, 10 product lines, and 10 products per product line, then a report that shows sales by region by individual product would have 1000 line items. In actual practice, this 10:1 explosion of data volume for each successive level of detail is quite typical. Consequently, in a large company with thousands of products, hundreds of markets, and multiple corporate entities, the paper reporting system becomes enormous, as we all know.

The irony is that the executive only needs perhaps 1% of this information. But, since you can never tell in advance which 1% will be needed, you must print it all. So a paper report is like a reference library -- it is only useful if 100% of what you need is available, even though 99% of what’s available is of no interest.

The bigger the reference library, the bigger the card catalog, the more rows of shelves to search, and the harder it is to locate information. So with paper reports. The larger the reports, the harder it is to navigate through the data, and the longer it takes to get the information. An the Analysis of information is of course slower as well. Paradoxically, the larger and more comprehensive the system, the less useful it becomes.

As the range of information contained in a reporting system increases, the system should become more useful and powerful, not less. With paper-based systems, the increased complexity of navigation outweighs the added value of the information.

The survey1 of executives revealed these perceived problems with existing reporting systems:

Too much irrelevant data
Much data not timely
No ability to see trends or directions
Can’t easily see key ratios
Numbers not adequately explained
Getting new or modified reports requires IS support and usually takes too long

An EIS addresses many of the shortcomings of paper-based reporting. The following lists just a few options that may be programmed within a particular EIS.

Pointing to line item name takes you directly to supporting detail.
Pointing to any number on the screen produces a graphic analysis of trends
Exception report automatically finds line items that vary significantly from budget
Any screen can be annotated and “mailed” to another user
Explanatory text narratives can be attached to every screen of numbers
Whatever is on the screen can be downloaded to a spreadsheet (Excel, Lotus 123, Quatro Pro, etc.)
Any screen can be printed on demand

The most important feature of an EIS is the intuitive navigation path through the data. If you want more details behind a line item, you literally point to the line item and the details appear.
These capabilities are only some of the facilities offered by an EIS hierarchical reporting system. The result for the executive is less data to manually review, faster answers to questions, more insight into problems and opportunities, and more timely delivery of the data.

The Relational Data View

Although hierarchically organized data is the traditional way to create management reports (because it adapts well to a paper-based system), there is a more powerful way to look at data that cannot be adapted to paper -- the so-called “relational” view of data.

Figure 4: Relational Data Cube

The relational data view allows you to “cut and slice” your data any way you want. For example, you could look at sales data by region, by product line, by salesman, by customer type, by customer size, by order size, by order frequency, etc. There are nearly an unlimited number of ways to look at any given database. That’s why a relational view of data does not lend itself to paper -- you would have to generate a nearly infinite number of reports.

But a relational view is no problem for a computer. You simply select how you want to slice your data, and the computer retrieves and displays the data the way you want to see it. In fact, many companies use relational databases on their mainframe as well as their PC. But since the reporting medium is usually paper, it is only practical to print out a small number of possible views of the data. And the user therefore does not fully benefit from the relational database technology that already exists.

Learning to use the “relational query” facilities of an EIS requires only a few minutes of practice. Once the concept is mastered, it can be the most powerful new tool for helping managers and executives understand what is really going on in their businesses.

Other Ways that EIS Adds Value

There are three other benefits of an Executive Information System that were identified in the survey: 1) an improved mental model of the business, 2) improved consensus building and communications, and 3) the traditional office automation benefits of efficiency, timeliness, and accuracy.

Enhancing the “Mental Model”

Today, the notion of a “mental model” is widely accepted in business academics. A person’s mental model explains their behavior in terms of their perceptions of the world and their experiences. For example, former President Reagan ran U.S. economic and foreign policy very differently from former President Carter. Both men presumably share the same goal of prosperity and individual fulfillment for all citizens, yet their different mental models of the way the world worked dictated that they adopt very different strategies to achieve the desired results.

Similarly in business, all CEOs share the same desire to maximize the return to the shareholders, but their strategies for achieving that result will be as varied as the CEOs’ mental models of the business. Mental models affect decision makers throughout the organization. For instance, further down in the organization, judgments such as how the public will respond to a certain advertising message are a function of the mental model of the marketing manager.
What happens when the mental model is defective? To some extent, all our mental models have defects. If they did not, we would never make mistakes. Like most statistical effects, however, mental models tend to cluster around the generally accepted view of reality. Those whose mental models are outside of these norms are generally considered either innovative, perceptive, and brilliant, or eccentric, “out to lunch,” and peculiar, depending of course on the outcome of their decisions.

Defects in the mental models can have disastrous effects. Suppose your mental model says that 1) Japanese make cheap, me-too, products, 2) that Americans only want big comfortable cars, and 3) that quality is not so important because Americans want to trade in their cars every three years anyway. Result: the U.S. automobile industry. Or suppose your model says that nobody will want to listen to a cheap little transistor radio with a 2 inch speaker. Result: the U.S. consumer electronics industry.

A business executive’s day is filled with processes that enhance his or her mental model -- meetings, phone conversations, first-hand observations, reading reports of results. These activities are “windows into reality” where executives can test hypotheses and theories against fact or consensus. Group decision making and consensus building are techniques that people use to smoke out defects in their mental models. If everyone disagrees with your judgment on some matter, then chances are that your mental model needs further testing and refinement. The more decisions you make and the greater the magnitude of those decisions, the more important it becomes to constantly refine and test the mental model. Therefore executives are heavy consumers of information and spend much of their time in meetings.

Information systems are one of the executive’s most important windows into reality. However, since most information systems are not designed primarily for executive use, they do not offer a particularly good window. Information needed by the executive is frequently not current, is hard to access, is couched in massive amounts of irrelevant data, and is often inconsistent with other data sources. Frequently there is more emphasis on numerical data than on knowledge interpretation of the data, i.e., lots of numbers, but few words.

Consequently, the executive’s view of IS is not always flattering. Most executives share the perception that information technology is best applied at the clerical or middle management level. They have seen little evidence that IS can be relevant to the problems of senior managers. This is a view of IS that an EIS can change.

An EIS improves the executive’s mental model by improving access to information that can be used to test assumptions. And to the extent that management turnover is a fact of life, the EIS can help new managers gain a quick understanding of their new domain.

Consensus Building

An EIS can be shared by all members of a decision making group, thereby providing a consistent and reliable set of data for all to reference. It gets everyone on the same page of the playbook. With each member of the decision making group better informed on the facts, the consensus building task of the executive can be faster and more productive -- instead of spending time trying to figure out whose numbers are right and how they are defined, the time can be spent discussing the various interpretations and analyses of the numbers.

There is also a communications aspect to an EIS that promotes speedy problem resolution and consensus building. If an executive sees information that requires explanation or consideration by others, (s)he can electronically send the information (s)he is looking at to others, along with his/her questions or comments. If a phone conversation is needed, then participants can all look at the same information on their screens.

Efficiency, Timeliness, and Accuracy

An Executive Information System ought to reduce the executive’s burden, not increase it. A truly efficient information system will be used less, not more, relative to the amount of information accessed. A system that raises more questions than it answers, presents the executive with more data to review rather than less, or is slower or less convenient than other methods of accessing data will fail.

Information that is distributed electronically through an Executive Information System saves time for both the user and the provider. “Saving time” means not only more current information for the user, but less time spent in accessing the information. These are two separate issues.
Most importantly, an EIS can filter and compress a broad range of data into a much more manageable set of reports. Techniques such as “compression grids” and “exception reports” can focus management attention on areas of the company that are not producing the expected results. Areas of the company that are performing either much better or much worse than expected surface automatically. Reports that contain “hot” issues are collected separately from the rest of the data so that they can be accessed quickly.

The information provider’s task is also simplified. Since an EIS provides facilities for the user to customize his/her own reports and do much of his/her own ad hoc analysis, there may be considerably less of this type of activity by the data provider. The process of updating, reviewing, and releasing new information is accelerated because there is no printing and paper distribution cycle to wait for.

An EIS also offers a wide degree of control over accuracy and timeliness. Generally, there is a tradeoff between accuracy and timeliness. In accounting systems, accuracy generally takes precedence over timeliness. Since most traditional management reports are spin-offs of the accounting system, they are subject to at least the same delays that are required by the accounting system. However, for management purposes, it may be far more important to get preliminary “flash” reports that have a degree of uncertainty than to get accounting quality numbers days or weeks later. Since the EIS will not be used to compute taxes or report to the SEC, it can be set up to provide information in the way that is most useful to the executives.

Conclusion

The two most important benefits of an EIS are:

a better set of tools for reviewing and analyzing existing information, and
the availability of key information that cannot be obtained using existing systems.

In addition to these two benefits, it is important to recognize that an information system can be a catalyst for change, refocusing the organization on new activities and goals. The EIS can be instrumental in extending a manager’s “reach”, putting the manager in closer contact with key individuals up and down the organization, and perhaps allow the company to reduce unnecessary layers of reporting management. And it can be a beacon guiding the rest of the organization towards corporate goals.

Once managers get accustomed to having an EIS, the limitations of a strictly paper-based reporting system seem intolerable. Simple facilities that are taken for granted in an EIS, yet are extremely difficult with traditional reporting systems, offer the first substantive opportunity for organizations to apply information technology to the business of management.

1 1993 Management Analysis Survey administered by the author. 800 surveys were sent to Fortune 500 executives. 190 responded representing 107 companies