Goteborg Energi improves its
bottom line with IBM.
¦
The Challe nge
To reduce operating costs to remain
competitive in a deregulated
energy market
To fund a new p ower station
¦
The Solution
IBM Business Co nsulting Service s
used its strategic p erformance
improvement method to intro duce
55 cost-cutting pro je cts across
the company
Harnessed IBM’s deep
experience within the e nergy
and utilities industry
¦
The Be nefit
Secured an nual saving s o f
SEK170m (over €18m)
Increased awareness of costs
among staff
Delivered lasting performance
improvement and cultural change
Overvie w
Goteborg Energi provides electricity
transmission, gas production, heating,
cooling and broadband services
across Western Sweden. A wholly-
owned subsidiary of Gothenberg
City Council, it is now faced with
the opportunities and burdens
of deregulation.
Driving operational and cultural change
Goteborg Energi needed to reduce
operating costs to compete effectively
in a liberalised market and finance
new investments, for example the
construction of a new power station.
Recently, the board asked the
managing director to introduce a
cost-cutting programme. The MD
invited proposals from management
consultancy companies on how they
would radically reduce the company’s
operating costs. “We needed an
IBM Business Consulting Services
external partner to bring new ideas
and fresh thinking,” said Hans
Pettersson, project manager for the
efficiency programme at Goteborg
Energi. “As a former public monopoly,
we weren’t sufficiently focused on
costs and building revenues.”
Numerous management
consultancies – from large,
global players to small, local ones
– submitted proposals to Goteborg
Energi. After a thorough evaluation
process, the company chose IBM.
A concrete, involving method
“We selected IBM Business
Consulting Services for two main
reasons,” said Pettersson. “Firstly, they
described their project method in a
clear and concrete way. We could see
how it could make a real difference to
our business. Secondly, the quality of
their references was high and included
experience in the energy industry.”
IBM used its strategic performance
improvement method at Goteborg
Energi. This method involves the client
company to a high degree – with
Goteborg Energi running the efficiency
programme as an internal project and
IBM consultants matching internal staff
in key positions.
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05-IGS-000507 (04/05) NG
“This was a good way of working,” said
Pettersson. “We had the knowledge
about our company – how our people
work, what they work with and the right
people to speak to – while IBM had the
process and business expertise.”
Bot tom-up and top-down consultation
The project team ran a 12-week series
of workshops involving around 100
employees and eight IBM consultants
to analyse every business function.
It used a bottom-up approach,
inviting cost-cutting ideas from staff,
combined with a top-down approach
in which consultants and senior
management looked for opportunities
across the business. Following this
analysis, 55 cost-cutting proposals
were presented to a panel, consisting
senior management, unions and
other key individuals. All 55 proposals
received approval and detailed
project plans were developed for
each proposal.
Ninety-five percent of the projects
were ideas from Goteborg Energi staff.
These ranged from human resources,
customer relationship management
(CRM) and billing projects to technical
projects to improve the running of the
company’s gas turbines.
As the programme progressed and
Gotebo rg Energi learned mo re, it
gradually reduced the number of
IBM consultants and took on mo re
responsibility itself. One of the key
success factors, said Pettersson,
was the robust reporting regime
for the programme, which required
each of the 55 projects to report
monthly to the project office on cost
savings, performance versus targets
and timing.
A lasting impact
The efficiency programme is on
target to achieve annual savings of
over SEK170 m (over €18m). There
has been a major culture shift. “Our
staff are much more aware of how
much things cost and take an active
interest in the company’s financial
performance,” said Pettersson.
Pettersson estimates that the
efficiency programme, including the
provisio n of IBM consultants, will pay
for itself in less than a year and that
because savings are ongoing, the
programme will have a lasting effect
on the company’s performance – not
to mention the cultural impact of
changing people’s mindsets.
“IBM consultants put enormous
energy into this programme and
were very easy to work with,” said
Pettersson. “They bro ught fresh
ideas and new perspectives on
how to do things, gleaned from their
experience of the energy industry and
other sectors. The way in which they
encouraged us to think differently
will have a lasting impact on our
company culture.”