Energy Management Strategy
Deloitte Insights video
Energy consumption is one of the first things that come to mind when consumers are trying to save money, but for business and government, energy management is a new operational imperative – one of the last frontier opportunities to address operations in a strategic way. Tune into this episode of Deloitte Insights to learn how an energy strategy can create value and reduce risks.
It’s time for Insights, a video news production of Deloitte LLP. Now here’s your host, Sean O’Grady.
Sean O’Grady (Sean): Hello and welcome to Insights. Today, we will be discussing energy strategies and their potential to create value and reduce risks. Joining us on the desk in New York is Rebecca Ranich, a director in the Federal Energy and Resources Management practice of Deloitte Consulting. Next to Rebecca is David Fornari. He is a principal, also within the Federal Energy and Resources Management practice of Deloitte Consulting. So folks, the private sector is struggling with growth and then over on the government side about a trillion dollars or more needs to be cut from the federal budget in the years ahead and so that is causing many of these departments within the federal government to think about the way that they are spending dollars. My question to you, we can begin with you Rebecca, is how does energy strategy potentially gets into that idea of saving dollars?
Rebecca Ranich: Yeah, it doesn’t sort of naturally come to mind, does it, when you think about saving money and yet has really become a new operating imperative, not just for the federal government as we are learning in our business in Washington, but for the private sector as well, and it is really, it is one of the last frontier opportunities to address operations in a strategic way that we have not yet explored. And so, one of the things that managing energy strategically will do is really help to reduce costs certainly, mitigate and manage risks. You know, we were always looking in the business community for ways to manage risks and uncertainty in our businesses and in government; it is much the same. And so, looking at energy through that lens affords a great new avenue of opportunity to reduce risks and cut costs. It also has another sort of byproduct, if you will, which is to understand how to make energy supply more reliable and secure for you. So, you will hear a lot in the coming months, I think, about the Department of Defense where we do work and understand that, you know, the military has a very big footprint and is concerned about energy costs and reliable supply.
Sean O’Grady (Sean): How about you David? Do you see this as an opportunity?
David Fornari: Well, of course Sean. It is actually just good management for organizations to look at every element of cost that impacts their financial statements. When we talk about energy, we talk about it in a broader sense. It is electricity, it is natural gas, and it also includes water. So, all of these elements have a big impact on a company’s business model. So, good organizations will take a look at all of those characteristics of things that impact their business model and put a plan in place to address them.
Rebecca Ranich: Yeah and what we are really advocating, and I think we are starting to see now and reading about a lot in the media today, is that business and government are not reactive all the time now. They are actually becoming proactive strategically about understanding what the challenges are, what the opportunities are, and they are many, that will allow them to strategically proactively manage these issues and opportunities to their ultimate advantage and benefit.
Sean O’Grady (Sean): Now, you said it off the topic. This is a little unnatural, maybe not the first place that there might be a jumping off points. So, my question is, is there a business case to support this kind of management?
David Fornari: Absolutely, Sean. Energy and water are very tangible. I mean, there are items that are procured on a daily, weekly, and monthly basis. So, as an organization begins to evaluate the consumption and the supply and demand of energy, you know, they need to look at opportunities to reduce that consumption. So, when you reduce consumption by definition, you are building a foundation to reduce cost, and if you are looking at reliable supply, you begin to look at the factors that Rebecca talked about earlier around mitigating risk to their business operations.
Rebecca Ranich: And I think too, you know, building on that what you are seeing is opportunity to innovate and, you know, we talk a lot about innovation in the next decade and in this new century, right, and how do we innovate our way into the new age. And so, these energy challenges really are great opportunities for innovation. You are seeing it in different technologies, different ways of behaving and thinking about tomorrow related to energy, and I think it is those different ways of thinking, which we like to call rethinking, really, the organization, will create the opportunities to innovate our way into this century in a very positive and powerful way.
David Fornari: You know, Sean, well-run organizations are beginning to capture the data necessary to build that business case. Most organizations will capture data on how much energy is consumed, they meter, they pay the bills. So, they know how much, but they have not yet begun to do effectively is to figure out why they are consuming that energy. So, if you understand why and you understand how much, then you begin to have the basis for the business case.
Rebecca Ranich: We would like to say, Sean, not to interrupt, but I think that data really is the Holy Grail here. It is the key that unlocks the potential because if you can manage and measure something effectively, then you can impact it positively into the future. So, when we think about the way to unlock value in the energy arena for organizations, government, and private business, we think the data holds the key to a lot of that potential value.
Sean O’Grady (Sean): Well, if that is the key, are there any challenges around that for some of these organizations?
Rebecca Ranich: Well, sure, you know, if you think about the way we have built our businesses and government over the last several decades, we have been very, very effective in creating data management systems and they tend to work very well for the purposes which they were designed to serve, right? So, we may have financial data management systems to manage the financial data of an organization or government agency. We also may have real estate data management systems that, you know, collects information on the footprint of all other facilities that are owned and managed by that particular entity. The challenges that those databases do not often talk to each other and generally, in fact, they do not, and so what we are learning is as powerful as the data is to unlocking the value, it is also one of the challenges that need to be overcome, certainly presents opportunities to innovate too as I think, you know, we have discovered in the work that we have been doing.
David Fornari: So, if you look at an organization, Sean, this capturing data, take like smart meters for example. There is a lot of data collection, lot of information technology behind smart meters, but at the end of the day, it is only a demand response. It is giving the consumer of energy demand responses as if you continue to consume as you going, this is going to be the outcome. At the end of the day, if human behavior being what it is, if you do not take the data response and alter our behavior by turning down the thermostat or doing other things to consume less, all we have done is capture data and report it against it. So, the big challenge is around the human behavior relevant to it. And then that takes you into another challenge about organization design. How well we are designing our organizations, what are the business processes that we put in place to take advantage of what is coming up from the data side to affect the human behavioral changes.
Sean O’Grady (Sean): So, in your view, how would an organization get around those two obstacles that you mentioned?
David Fornari: I think the key is having a strategy to support the plan around energy management and energy consumption. So, if you look at the traditional levers in an organization, basically it has been process, people, and technologies. Well, our view point is that now if you take energy and resources, and you link your strategy to supply, demand, the technologies behind it, then you could affect and create more value by looking at all of your challenges in a business model and tying it back to energy and resources.
Sean O’Grady (Sean): So, pooling it together.
Rebecca Ranich: Yeah, and I think, you know what, you have an opportunity to do here is to stop looking at business as usual. You know, create a new paradigm now of thinking that really allows you to rethink the future.
David Fornari: Along with looking at existing technologies and how they are going to change. If you go back 20 years, and the advent of the Internet, no one had a strategy around the Internet, but today, every organization has imbedded the Internet in its capabilities, into their business model. We think energy requires that same type of an approach. Because today it may not be apparent what types of strategies would you put in play to affect performance, that create value, but if you think about the Internet, now everybody does it, back then, hardly any organization did.
Rebecca Ranich: I think we have to not be frightened of the change and to embrace it and to look at this as a powerful catalyst to innovate our way into tomorrow. I think change is just a powerful positive concept, not one to be afraid of.
Sean O’Grady (Sean): Well, thank you both for talking about the change in landscape with us.
Rebecca Ranich: Thank you.
David Fornari: Thank you.
Sean O’Grady (Sean): Alright, we have been talking about energy management strategies and their potential to save dollars with Rebecca Ranich, a director in the Federal Energy and Resources Management practice of Deloitte Consulting and David Fornari, a principal also within the Federal Energies and Resources Management practice of Deloitte Consulting. If you like to learn more about Rebecca, David, or any of the topics discussed on today’s broadcast, you can find that information on our website. It is www.deloitte.com/insightsus. For all the good folks here at Insights, I am Sean O’Grady, we’ll see you next time.
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