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"Smart Grid." What do these words conjure up for you? For the typical individual working in our industry, these words might conjure up images of the various technologies associated with making the grid more intelligent: two-way communication meters, sensors and controls to improve reliability and reduce system stress, in-home control portals, meter data management systems, and the list goes on. Along with these systems comes a multitude of technology firms, service providers and consultants helping to implement the components of the Smart Grid technology spectrum.

The task of building the new Smart Grid is daunting on many fronts. While a utility may have made all the appropriate decisions on which technologies to use to implement its Smart Grid strategy, technology decisions, while a critical component of the Smart Grid, are only part of the success. This article concentrates not on the technology behind the Smart Grid, but rather on the management needed to ensure that all of the moving parts of such an enormous undertaking are orchestrated successfully, namely, governance.

Picture this...

Your company has made the decision to implement a Smart Grid strategy. Your CEO informs you that, in your role as CIO, he expects you to design a strategy, get some of the stimulus money and build the Smart Grid for your company. You've implemented a GIS, OMS and even a CIS system successfully. Can building a Smart Grid be much different?

Well, remember that CIS implementation you barely survived? A Smart Grid implementation is a lot like that... just on steroids. It also has some of the same challenges. For instance, vendor management, stakeholder management, change management, expectation management... well, just plain management. For a Smart Grid implementation to be successful requires clear strategy, clear requirements and definitions to support that strategy, clear lines of demarcation concerning roles and responsibilities, and, most of all, well-defined ownership. Without these cornerstones of good management, deployment and ongoing success will be at risk, no matter how good your technology decisions are.

Why? Well, Smart Grid means different things to different stakeholders, and the very ambiguity of the concept lends itself to shifting interpretations and misaligned expectations. To your counterpart who runs T&D, Smart Grid probably means a wealth of things: it's about reliability, asset management; O&M cost reductions and improvements in SAIDI. To the head of customer care, while those are important, his/her view is that the Smart Grid is really about giving customers more choices and a chance to manage their energy costs more effectively. It's also about remote connect/disconnect and lower "days sales outstanding" (DSO) and significantly redefining the customer experience. Talk to the person in charge of regulatory affairs, and Smart Grid is all about business models and risk and change.

The above scenario is from the point of view of the CIO. The reality is the CIO may not necessarily be the individual leading the effort. An organization can appoint someone from T&D, Customer Care, Regulatory or another part of the business to lead the Smart Grid initiative.

No matter whom the "Smart Grid Leader", the list of stakeholders that need to be satisfied goes on and on. Each one brings a different definition of success to the party. And none of these definitions layer seamlessly on top of each other, so the risks of scope creep and organizational silos and corporate misalignment is all too real.

As utilities ramp up their Smart Grid initiatives it becomes increasingly difficult to manage, monitor, measure and report on the multitude of sub-initiatives that make up a Smart Grid implementation. Just having a project management office (PMO) which is overseen by a steering committee with Excel spreadsheets in place to track project progress, costs, issues, etc., is simply inadequate. As we will see, implementing the Smart Grid opens up a host of complexities which makes deployment exceptionally challenging. For that reason, a successful Smart Grid deployment includes a governance plan.

What is Governance?

The cornerstone of good governance starts with intent.

Intent

Governance is all about preserving and enabling the "intent" of your Smart Grid strategy. Intent can be specified by clearly defining objectives and guiding principles of how all the disparate parts are expected to work together. The intent should be documented, shared and socialized within and across organizations.

Key Components of a Governance Operating Model

Governance is an ambiguous term with as many definitions as companies involved in business relationships. To help organizations ensure consistency in Smart Grid governance, there are several critical elements to ensure success. Governance success is manifested in the people, processes, and supporting tools, collectively referred to as an operating model.

• Decision Rights and Process Owners
• Organization Structure
• Committee Structure
• Governance Processes

Roles, responsibilities and decision making rights need to be defined up front. Smart Grid ownership is at times elusive. While a Smart Grid leader might be appointed as the "owner" of special initiatives, the organization is not necessarily aligned seamlessly around that owner. Different stakeholders have different priorities, so expect decisions to be difficult in that environment.

Reporting transparency may also be lacking, both in the data provided to the steering committees, as well as in the level of straightforward discussion within the committee. This creates "seams" in the governance of any project, but particularly in those multi-faceted projects that are transformational in nature, or have many stakeholders. And as a result, scope starts to creep, as a way to maintain a loose consensus. Transparency only works in an environment where all stakeholders are aligned around a common, explicit definition of success, and where the stakeholders are allowed to openly challenge that definition before committing to it. Once so defined, however, this definition has to extend from the Smart Grid owner up to the CEO and down throughout the entire organization. That's a tough recipe upon which to execute.

Transparency also requires concrete measures and rigorous analytics. Anecdotal information has to be checked at the door and the PMO needs to drive a set of key indicators that are discussed, weighed and acted upon.

EquaTerra has identified six key capabilities that enable multi-stakeholder management and governance success.

Risk Mitigation

• Finance and commercial management: The ability to ensure contractual obligations are being met by all parties. This ensures agreements are managed and the financial benefits are both tracked and realized.
• Compliance management: Ensuring effective compliance with regulatory, safety and privacy requirements, both internal (corporate policies) and external (regulations).
• Issue and problem management: Appropriate mitigation of issues and resolution. This ensures that issues impacting services purchased (regardless of cause) or the relationship are effective and expediently resolved.

Value Realization

• Change and program management: Facilitates anticipated business change with the service providers, including new services and transformational programs.
• Service quality management: Create optimization through standardization, defined performance and satisfaction levels. Ensures all aspects of service quality are met, problems are resolved and business stakeholders are satisfied with the performance and quality of the service.
• Communication management: Ensures business requirements and relationship are in alignment. This focuses on management of key stakeholders involved or impacted by the relationship, including the service provider and other affected third-party providers.

The governance team should possess critical skills, such as collaboration and negotiation. Great care needs to be taken when governance teams are built from internal organizations, as these competencies may not exist. Even with the best governance procedures in place, when a team does not possess the right type of experience and leadership, the relationship and the business outcome will suffer.

For this reason, organizations should consider the use of an objective third party to run their Smart Grid governance process. The third party functions as a trusted advisor, willing to raise the right questions at the right time, able to engage in the tough discussions in both public and private.

Tools

Until recently, the governance and management of complex multi-stakeholder relationships was difficult. While software has long been in use to manage all the relationships, typically those tools were home-grown or ad hoc (e.g., e-mail, electronic spreadsheets) and were not designed for or tailored to the needs of the governance organization.

In the past five years, many tools have emerged in the market designed specifically to support the management of multi-entity, multi-stakeholder initiatives. They are designed to enable the governance operating model described above, and include such things as managing service level agreements, contracts or change requests. The best tools incorporate advanced reporting capabilities, workflow management and support multiple providers -- all key requirements to enable the Smart Grid solution.

Relationship Management

Given the multitude of different technology and service providers need to implement Smart Grid, this initiative is more akin to a joint venture than a procurement transaction or simply buying external services. For this reason, it is critical that executives focus on the overall relationship with the providers and not just the commercial aspects of deals (e.g., meeting service levels and contract terms and conditions), though the commercial elements remain important. Companies with weaker service provider relationships may find, for example, that service levels are being met but the original intent is not. Additionally, much will change over the life of contracts as the Smart Grid market evolves; including what defines best practices in terms of performance and cost. It is critical, therefore, that both the buyer and service providers can adapt and respond to these changes.

Governance structures should contain the flexibility to evolve to accommodate the current and future business requirements. Governance will evolve as organizations move throughout business phases. Teams will need to flex and contract accordingly.

As with most complex, highly technical projects, organizations typically focus their time and efforts on the technology. The "human" side of projects, such as relationship management and operating models, is only thought of after a project begins to fail. So as you begin planning your Smart Grid strategy, make sure that you also plan for the more complex component of this initiative, the human component.