Survive, Thrive or Decline?

Australia’s power sector is currently gripped by the ‘tyranny of the urgent’.  Emerging progressively over the last five years, this ‘tyranny’ has now succeeded in becoming the new normal.  There are so many fires to fight, legitimate ‘keep the lights on’ issues to address, urgent rule changes to prosecute...  

And… there is so little time to actually think together about where we want to go.  What critical structural issues might be required to achieve a Net Zero Emissions grid? How might we, collectively, make the trade-off choices to get us there in a way builds trust and the social license for necessary change?

Systemic shifts, not incremental tweaks

Drawing upon almost two decades of experience leading technology innovations and transformational change initiatives in Australia’s power sector, in this white paper Mark Paterson explores the topic of grid transformation through the lens of sectoral disruption. 

Strangely, the history of disruption in many other sectors tells us that incumbent industry players commonly misinterpret what is actually occurring as disruption unfolds.  Often there is plenty of frantic activity and a good dose of urgency.  But perversely, the sense of the frenetic may reinforce a deceptively comforting sense of “we can fix this” as we continue to apply the tools that worked in the last century.  

In other words, it is entirely possible – indeed common – for a major sector to be so furiously busy with its infinite set of tactical fixes that it fundamentally underestimates the scale of transformative structural disruption unfolding. Perhaps this is especially tempting in the electricity sector where a century of highly regulated operations in a relatively stable environment can reinforce a dangerous ‘electric sector exceptionalism’.  

What got us here won’t get us there! 

It is always true that the need for tactical action and incremental change continues on. However, periods of transformation in large and complex systems also and especially require new capacities for navigating ambiguity and making effective, timely decisions with incomplete knowledge.  This is because the knowledge required for effective decision-making in a transformational period is no longer familiar nor ‘algorithmic’.  In many respects, we find ourselves, together, working with only gradually emerging new knowledge which Roger Martin refers as a journey from a Mystery to Heuristics to Algorithms.  

In addition, for the first time in a century, the traditional electricity sector is facing a future where a growing set of customer segments have various ‘product substitution’ alternatives.  Further complicated by the pace of large-scale decarbonisation, an inadequate collective focus on the holistic structural change required will exacerbate both the destruction of economic value and the deepening of social inequity.  

In periods of transformative change, regulatory bodies can feel like they are left ‘wing-walking’ in a turbulent and ambiguous context

In periods of transformative change, regulatory bodies can feel like they are left ‘wing-walking’ in a turbulent and ambiguous context

Characteristics for navigating sector-wide transformation 

A key challenge inherent to periods of major sectoral transformation is that its dynamics – how disruption actually plays out – is by definition outside the professional experience of everyone involved.  Following are three of the five characteristics of the organisations that not only survive but thrive in the context of transformation that the white paper explores. 

Executive Focus: Navigating a decade of dynamic change becomes a ‘mission-critical’ priority of leadership.

In major transformations, the decision for any commercial entity or regulatory body to honestly confront the pace and scale of change facing it has wide-ranging implications.  History has shown that breaking out of deeply ingrained cultural and cognitive inertia proves too much for many once great organisations and leaders.  

Whether a regulated utility or regulatory body, the strategic resolve, urgency and funded resourcing required for incumbents to reinvent themselves for long-term success cannot be outsourced.  In addition, the classic ‘Wait and see’ response of many leaders in times of transformative change has commonly proved to be a self-fulfilling choice for decline

Futures-competence: New organisational-foresight capabilities for exploring ‘future-back’ perspectives are embedded.  

A common trap at times of large-scale transformation is that humans – and therefore organisations – primarily comprehend it from a ‘present-forward’ mindset.  This largely unconscious framing operates on a tacit assumption that the future will be largely like the past, perhaps with some minor modifications. 

While this generally works in times of comparatively slow, incremental change, it is deeply flawed at times of transformative change. Where industry sectors enter periods of volatile change, traditional present-forward thinking must be complemented with – and constructively challenged by – ‘future-back’ perspectives. As Steve Jobs noted: “You can’t connect the dots looking forward. You can only connect them looking backwards.”

Building sector-wide capability for applying both present-forward and future-back thinking and action becomes critical for navigating transformation

Building sector-wide capability for applying both present-forward and future-back thinking and action becomes critical for navigating transformation

Adaptive Structures & Strategy:  Innovative structures and fit-for-purpose strategy models foster agility, innovation and alignment

Traditional governance structures in the power sector are typically based on long-standing knowledge and informed by conventions, rules and historical data.  A particular challenge for both governance structures and corporate strategy formulation over the next decade, therefore, is both the relative ‘newness’ of the context and the rapid pace at which it is emerging.   

One valuable lesson drawn from other sectoral transformations is that the traditional linear and hierarchical systems which have effectively regulated and governed the sector face profound challenges as the transformation advances.  Built for another time, the turbulence, uncertainty and ambiguity of context raises critical ‘fitness for purpose’ questions. 

A key part of the solution is the development of what Harvard’s John Kotter calls a ‘dual operating system’.  This is distinct from but complementary to the sector or organisation’s traditional hierarchical structure and governance mechanisms. While day-to-day operations continue to be effectively managed by the traditional mechanisms, the parallel operating system provides less constrained – ‘think the unthinkable’ – navigational insights that can be progressively injected into the traditional governance processes.   

Survive, thrive or decline?

With many examples of sectoral transformations up-ending other industries, there is much the power sector can learn for navigating its own transformation. 

New levels of strategic imperative, futures-competence, structural agility and organisational learning, coupled with best-in-class tools for ‘taming’ the inherently complex, will all be key to the organisations that shape the future.

Survive, thrive or decline?  The choice is ours.

The full text of the Pacific Energy Institute paper: ‘Survive, Thrive or Decline: Organisational characteristics for surviving and thriving a once-in-a-century scale of grid transformation’ by Mark Paterson can be found here.