E-nergizing The Company

On the first business day of the new millennium, Duke Energy initiated a guerrilla approach to e-business. A small band of advocates began to roam the utility, living in the business units, seeding pilot projects, assisting with implementations, coordinating resources and spreading success stories.

Eighteen months later, having launched more than a dozen successful Internet initiatives that saved the company US$52 million last year alone, the “e-team” is now handing off the projects to the businesses.

“Then,” says senior vice-president and chief e-business officer A.R. Mullinax, “we will declare victory.”

Here’s how they did it:

In late 1999, Duke’s corporate policy committee, at the urging of CIO Cecil Smith, authorized Mullinax to begin to harness the Internet. “Our CIO really understood the Internet space and the impact it was going to have on business,” Mullinax says. “He deserves the credit for really awakening Duke.”

The goal was to weave e-business into the Duke fabric. “We didn’t want to turn Duke into a dot-com,” Mullinax recalls. “We wanted to find uses of the Internet that would advance our existing business.”

Mullinax, then senior vice-president for procurement, was given free reign to recruit a team and carry out the mission. He chose Ted Schultz from strategic planning, Steve Bush, finance and administration; Dave Davies, IT project management; Amy Baxter and Dennis Wood, procurement; Elizabeth Henry, customer focus; and Anne Narang, Web design.

“Everybody brought strengths to the table,” Mullinax says, “and the other ingredient was chemistry. We worked well as a team.”

From the start, the team planned to disband in 24 months. “You should get to the point where you don’t need an e-business officer any more than you need a chief telephone officer,” Mullinax says.

The team spent the first month getting a good perspective on the Charlotte, N.C.-based company, which ranks 17th among the Fortune 100. Then, team members literally moved into the businesses. If a unit had already launched an Internet initiative, a team member would advise on strategy and implementation. If a unit was new to the Web, a team member could spearhead an initiative.

“Invest Little, Save Big”

The e-team had a budget, but its mantra was “invest little, save big.” It looked for business units that could use Internet tools in the most effective way, particularly those units where customers were dependent on information and easy access to that information would add value to the relationship.

“We could have taken on hundreds of initiatives, but we looked for the ones that would give us the most return compared with the level of effort it was going to take,” Mullinax explains.

Duke officials declined to disclose the operating budget for the e-team, but it was able to fund pilot projects, which helped make the e-business initiatives even more attractive to business units, and leveraged existing on-line tools among several businesses, making them virtually free for users. “We let them put their toes in the water,” says Wood, “and then if they liked it, they could jump in later.”

Henry worked at Duke Solutions, which advises very large industrial, commercial and institutional customers, such as Northfield, Ill.-based Kraft Foods Inc., on energy management. “I was attached at the hip to [Duke Solutions’] e-business strategist [Jeffrey Custer],” she recalls. “It worked so well to be with them, hearing what their issues were every day.”

Custer, director of corporate development at Duke Solutions, agrees. “You have a fear when you hear that corporate is going to create a new group, but they were different,” he says. “I was the lead; they were here to provide support and seed money. They kept the focus and kept me moving.”

Meanwhile, Schultz worked with Duke Energy Trade and Marketing in Houston, which provides energy to very large customers, such as city power companies. Henry and Schultz correctly suspected that the needs of the two customer sets would be similar. The e-team members funded and helped the businesses stage comprehensive focus groups to gather information on what customers wanted. That turned out to be a customizable Web page where clients could receive services like on-line billing and account status as well as energy industry information.

Custer says the focus groups made a big difference. “I had some fantastic things I wanted to put on [the site], but the customers said, ‘That’s great, but this is what I need today,’ ” he says.

The e-team funded the prototype, and the businesses provided coding and content-generation services. Within 90 days, Version 1.0 of my.duke-energy.com was up and running.

No Fear

The iterative, 90-day cycle was a hallmark of the e-team, and it kept them in touch with customers. “When you go off and work on something for six months, even if it’s bad, you’ve invested too much, so you try to put the round peg into the square hole,” Custer says. “But their [strategy] was ask the customer, prototype it, show it to them, make changes and do it again; keep it moving. You get a lot more feedback and buy-in that way.”

“We weren’t scared to fail,” Henry recalls. “We had to make fast decisions, [and] some wouldn’t work. Our job was to try things and learn from our mistakes.” For example, when the original portal prototype didn’t meet performance expectations, “we trashed it, and in six to eight weeks, we were up on a different software,” she says.

While Henry and Schultz worked on the customer portal, Wood brought on-line auctions to Global Sourcing, Duke Energy’s procurement unit. Working with FreeMarkets Inc., a Pittsburgh-based on-line auction company, Wood also explained the process and benefits to supply chain folks throughout the businesses. More important, he invited them all to the first live auction in May of last year.

Says Wood, “You can explain things all day long, but when they see it, it clicks.”

The e-team kept its view broad and fresh with Monday morning meetings. “We’d get together to share war stories, talk about what we were hearing and about opportunities,” Wood says.

For example, Davies’ project management portal was developed to facilitate collaboration and document sharing for Duke Engineering & Services, but other businesses were soon eager to leverage it.

About six months in, business people spontaneously started attending e-team meetings, and collaboration increased. “There have been a lot of things we’ve picked up that I never would have known,” Custer says. For example, when he learned about the on-line auction, he leveraged the technology to help one of his Duke Solutions’ commercial customers save 30 per cent on a natural gas contract.

Top management is proud of the e-team’s results. “E-business has helped accelerate cost savings, [and] we are also seeing performance enhancements,” said executive vice-president and chief administrative officer Ruth Shaw in a speech at a utility forum late last year.

Duke’s stock price has nearly doubled since the initiative began and is currently hovering in the low 40s. Though there are many reasons for the stock’s uptick, the e-business successes have contributed, say Wall Street analysts.

“Leading in technology helps maintain the image of market leadership, which is one of the factors that caused stock price to do so well,” says Tom Hamlin, an analyst at Glen Allen, Va.-based First Union Securities Inc.

The team’s success was built on strong support from executive management, the ability to hand-pick members, a crystal-clear mission, good communications, strong relationships throughout the business and freedom from red tape.

“It’s been an opportunity to demonstrate that you can influence the company with a small team positioned in the right way with the right message, delivered effectively,” Mullinax says. “It’s been very rewarding. And it’s been fun.”

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