In business for keeps: Business geographic and competitive advantage

In business for keeps: Business geographic and competitive advantage

Jennifer Krabbenhoeft
Senior Consultant UGC Consulting 6200 S. Syracuse Way, Suite 222
Englewood, Colorado 80111
303-773-6166, 303-773-6618

Abstract
More than perhaps any other industry, the utilities industry is deeply immersed in geography and spatial relationships. Facilities, customers and competitors alike can be readily mapped and identified with a myriad of attributes. This faci Iitates a range of initiatives, from setvice restoration after an outage to the marketing of products and services. Among the specialized uses of AM/FM/GIS technology is business geographies applications, which increasing numbers of utilities are turning toward as they build toward a competitive future. Business geographies represents a layering of multiple business process systems and a sophisticated vehicle to support strategic, tactical and operational decisions. Business geographies draw on readily available demographic, financial, facilities and related data to enable utility strategists to perform both spatial and market analyses of various competitive scenarios. The applications are oriented toward protecting existing revenue streams and developing new sources of revenue through competitive offerings to the marketplace.

Overview of Business Geographic Decision Support Tools
Businessgeographies applications support strategic and tactical decision making through the visualization and analysis of spatial and nonspatial data derived from both internal corporate and external sources. These applications can be thought of as database decision support tools that integrate multiple geographically related variables and use maps for viewing analytical results in easy to understand ways. The visualization allows for more rapid analysis of large amounts of information, quicker comprehension of the analytical results, and better visual tools for communicating the results to use in decision making.

As the utility industry faces increasing competitive pressures, companies are focusing on maintaining and increasing shareholder value through cost containment and revenue growth strategies. Utilities are using business geographies tools to assist in determining when and where to deploy limited resources to achieve revenue and profit margin objectives.

Business Geographics Decision Support Tools and Systems Integration
Because business geographies applications support strategic and tactical decision making, they frequently require access to information across several enterprise functional areas and related information systems. For example, a facilities planning application would require marketing and forecasting data regarding future customer sales growth by geographic area, existing customer locations and related sales data, and existing facilities location and capacity data. Maintaining and sharing spatial and nonspatial enterprise data via a common data store is key to the efficient development of business geographies applications.

To facilitate the use of up-to-date internal corporate files containing address attributes, such as CIS data sets, supplier/vendor data, and sales intelligence information, addresses should be centrally geocoded using one of several commercially available TIGER-derived street address files.

Understanding the Marketplace: Integrating Enterprise and External Data
In an increasingly competitive environment, utilities are under pressure to make rapid and informed decisions regarding existing markets, as well as the development of strategies to address new markets. There is a need to define and locate targeted customers for new and existing products and services and to optimize resources by initially addressing the most profitable opportunities.

This analysis may involve expanding into new geographic markets or launching new product offerings within existing geographic markets. In either case, it is important to leverage the wealth of customer and market information that is available within internal systems and from external data sources. This wil I include information sources regarding existing and potential customers, competitors, suppliers, delivery channel partners, service and coverage areas, and facilities data. An increasing number of spatial and geocoded data sets, with coverage for the United States or North America, are available from data vendors. Some are more general in nature, and provide information such as political boundaries, census geography and demographics, geographic area economic trends, postal boundaries, specific consumer household data, and business site data.

Others are targeted specifically to the energy industry and provide spatial and nonspatial information about the following:

Electric and gas distribution company service areas
Electric and gas energy rates by customer class and company
Natural gas transmission, distribution, production pipelines
Natural gas storage faci Iities
High voltage transmission Iines and substations
Power plants
Energy use patterns by type of industry/customer segment

With the vast amount of location referenced information, both internal and external, available about markets and customers, business geographies applications can provide the ability to quickly analyze these massive volumes of market data to gain competitive advantage.

Overview of spatial Database Management System Technology
GIS divides data into two distinct types. The first type is “spatial” (or “graphic”) data that describe geographic, geometric, or topological entities, for example, a line representing a street. The second type is “aspatial” (or “attribute”) data that provide characteristics about a graphic entity, for example, a street name. In this overview, GIS and spatial data management are referring to systems used to manage al I types of spatial data across a corporation, not just facilities management information.

All current GISSstore both types of data in either proprietary or hybrid databases. A hybrid database refers to placing aspatial (attribute) data into an RDBMS, while the spatial data continue to reside in a proprietary database. Although this allows the aspatial data to receive the benefits of an RDBMS, two distinct data stores remain with the inherent deficiencies of maintaining synchronicity between them. To take full advantage of RDBMS technology, a Spatial Database Management System (SDBMS) places the spatial (graphic) data and the aspatial (attribute) data into a relational store. Corporate data, both spatial and aspatial, are unified into a single, united relational database. SDBMSS generally consist of several components that provide data access and gee-processing capabilities. These components include a spatial indexing mechanism, a spatial data model, gee-processing tools, and application building toolkits. GIS products also provide “off-the-shelf” applications that access the SDBMS.

The AM/FM/GIS can use the full set of relational database management facilities, including security, integrity, concurrency, Iocki ng and mu Itiuser access, transaction management, journaling, and backup and restoration. The engine also allows proprietary 4GLs to be replaced with extended SQL. This architecture places the attribute data and the graphic data in a single relational database. The proprietary format of the graphics is discarded in favor of a relational format. The attribute data is accessible by any RDBMS-compliant (SQL) application or application tool set. The graphics data is accessible by any SDBMS-compliant application or application tool set. The non-AM/FM/GIS applications require data translations unless they can be replaced with SDBMS-compliant applications. Translations to the remaining non-AM/FM/GIS applications can be of an SQL-compliant nature, rather than proprietary.

Positioning Systems Integration to Support Revenue Growth and Changing Industry Dynamics
To position information technology investments to support a reduction in operating costs, as well as growth strategies focused on emerging market opportunities, the following should be included in a utility’s systems integration initiative:

A corporate database design that provides support for utility operations, as well as for market growth initiatives; and
The development of a systems architecture that facilitates wide distribution of and access to corporate data assets through the use of information access and decision support tools.

Figure 1 illustrates a systems integration approach that includes support for both utility operations and market growth initiatives. Benefits of this approach include the design and development of a central corporate database that includes many sources of both internal and external customer intel Iigence, producthervice, competitor, supplier, and facilities data.

Figure 1 Systems integration for operations and marketing strategy support
The customer information component in the above diagram should allow for the inclusion of data from multiple internal and external sources that hold valuable customer data. Development of a database design to incorporate detailed data regarding how customers are using a utility’s products and services creates a centralized data store that focuses on the utility’s strategy to customize products and services to address specific customer and customer segment needs. A comprehensive corporate database is an integral part of a systems architecture that facilitates access to spatial (geographic) and non-spatial (attribute) data via decision support and information access tools. This allows for the easier development of applications that require information sources that cross organizational and/or functional system boundaries.

The development of a landbase model that supports more than the existing utility operations service area will expand the functionality of the landbase for use in retail market opportunity analysis. For example, commercially available street network data could be included in the landbase for a regional or multistate area to support analysis regarding the following:

Gas main extensions
Competitor analysis
Market segmentation
Target marketing both within and outside of the existing LDC service areas for current and/or new products and services.
Acquisition analysis

System Support for Service Unbundling
Energyservice unbundling is a response to meet the demands of the rapidly developing customer-driven national energy market. Service unbundling will also be coupled with setvice rebundling to meet individual customer and customer segment-specific needs and perceived value of services. To be successful in this new energy market, utilities need access to accurate and focused customer intelligence to aggressively market existing, and develop new, rebundled products and services. Systems integration can support these initiatives in the following four ways:

Improve the utility’s ability to leverage existing customer information assets housed in various internal systems.
Provide a means to acquire, integrate, maintain, and easily access useful external market data regarding potential markets, customers, competitors, and possible partners.
Provide tools, such as the Intranet Web tools described below, that allow rapid prototyping and development of marketing, sales, customer service, and executive decision support applications.
Establish a systems environment that facilitates the use of information and information technology assets to provide new customer services. The following subsection will illustrate how the use of Intranet and Internet tools for information distribution, along with a flexible systems integration architecture, can support a utility’s setvice unbundling and market growth initiatives.

Use of Inttanet and Internet Tools for Information Distribution
An Intranet is an internal information system that uses Internet technology, Web services, TCP/1P and HTTP communications protocols, and HTML publishing tools. The Internet can be used as an external marketing, customer service, and communications tool, as follows:

Publishing information regarding utility products and services
Generating sales leads via interactive forms that allow a customer or potential customer to express interest in specific products and services
Providing shareholders with information or interactive services
Providing two-way customer communications regarding energy use, billing, customer preferences, etc.
As an economic development tool to advertise available sites and associated economic, demographic, and land use information.

An Intranet is an internal communications tool following the same security standards and policies as the utility has for other internal systems. By establishing a corporate Intranet, a utility provides a cost-effective means of broadly distributing information from many sources, allowing users to access that information with common desktop tools. Many corporations are beginning to adopt lntranet/lnternet browsers as a universal front end for internal applications and external communications and services. This is partly due to recent advances and offerings in Web technology software that provide capabilities such as Intranetilnternet applications development tools and access to mainframe resources over the Intranet. Software products are now available to develop spatial Iy enabled Intranet appl ications that can provide cost-effective, easy access to business geographies capabilities to cross-functional corporate users.

The following subsection will illustrate how GIS tools and systems integration can support the development of business geographies applications and the use of Intranetilnternet tools.

Figure 2. Use of GIS and internet tools for a business geographics Read/View Application

Figure 3. Systems integration using GIS tools
Internal and external market data within a common enterprise data store provides the following:

Easy access to existing customer data housed in isolated functional systems.
Ability to maintain and access external market data within the same common data store as internal data.

Developing a common enterprise data store for both spatial and nonspatial data using spatial data management technology provides the following:

Enables easy access and manipulation of spatial data from the same data source used for storing non-spatial corporate data.
Supports use of lntranet/lnternet front end and rapid applications development tools.
Suppotts the use of a geographic market analysis user interface and associated applications development tools.

How Business Geographic can Support Strategies and Tactics

Target Marketing
Target marketing provides decision support for developing proactive marketing plans, targeted promotional campaigns, and sales prospect lists. Using consumer and business geocoded site data, this application determines the location and characteristics of potential customers. By measuring the distance from potential customer sites to existing distribution facilities, and using estimated cost variables and expected new load, the cost to extend new service to potential customer sites can be estimated. These cost estimates and projected new load can then be used to determine new revenue and margin expectations. This application provides the ability to target the most profitable geographic areas and specific customer sites for new gas service.

Market Segmentation
data regarding business type (by SIC) and size and consumer demographics can be utilized to assist in segmenting the marketplace and in defining concentrations of certain market segments and/or targets by geographic area. Additional data, such as the relationship of target markets to competing distribution company service areas, associated energy price differentials, and weather variations and associated energy use patterns, can be used to further refine the market segmentation and targeting strategy.

Development of Defensive Marketing Strategies
Defensive marketing strategies define the next most likely alternative energy supplier(s) for certain customers using several market variables such as competing supplier prices, existing service areas of competing suppliers, the competition’s access to transmission, and available capacity. Devel_t of Stra@@s to FxK)and Bevond Fxislmg Geowaohic Mar- . . These strategies define new market opportunities by mapping the geographic concentrations of targeted industry or consumer segments. By associating energy price by geographic area and energy load and use patterns to each market segment, a company can assess the size and profitability of a competitor’s market and/or a particular geographic market.

Development of National Account Strategies
National account strategies map site locations of multiplant industrial or large commercial multisite corporations to assist in determining existing energy supplier(s); energy price differentials; and site proximity to certain transmission, distribution, and production and/or generation facilities.

Economic Development
This application maps available sites in a utility service area along with proximity to highways, airports, and railway, as well as demographic and economic data for the area. This application can be used to “sell” the utility service area to businesses looking to expand or relocate. Aerial photography and/or satellite imagery can be added to this application to provide a more detailed presentation to economic development prospects regarding specific areas of interest. Point of Contact Mm and U

This application provides Customer Service and Sales representatives with information, such as sales lead indicators from Marketing, to sel I new or additional products and services to existing customers of other products and services. The CSR can query certain geographic areas to view where coverage for certain services (e.g., gas distribution services, fixed network AMR-related services, or appliance maintenance services) is provided. Landbase information, such as streets, street intersections, and cities, is also displayed for reference. Information regarding population demographics by census tract can be overlaid to assist in determining if a customer matches a marketing-defined profile for a specific service offering. Data regarding geographic areas where special promotions for certain services are being offered can also be included in the map display to assist in the sale.

Sales Forecasting
This application is used to display and analyze customer and potential customer location and actual or estimated usage to determine geographic market penetration in forecasting geographic market sales and in estimating projected new market share.

Sales Planning/Resource Allocation
This application is used to display and analyze forecasted sales by geographic market area to determine appropriate sales staffing for each area.

Product Managemd
This application maps forecasted product/setvice sales by geographic area compared to actuals for that area. Related geographic data can then be used to evaluate why sales are falling short of expectations in certain areas.