This piece is part of Leading Edge, a Nous Group series on contemporary leadership.
Skilled leadership has always been critical in infrastructure and utilities (including electricity, gas, water and telecommunications) given these businesses are large scaled, capital intensive, heavy engineering enterprises that provide technically complex, essential services.
But until recently, most challenges were on the supply side: choosing what equipment, facilities and land to use and sourcing appropriate capital. Success was based on strong functional expertise, given performance was delivered through effective asset management and running an efficient field force. It was never easy, but it was largely predictable.
Today, those supply-side challenges remain but there are other more diverse challenges too. Contemporary leaders must deal with multi-faceted disruption – new technologies, ad-hoc public policy, an increasingly hostile natural environment (think bushfires and climate change), economic pressures on efficiency, and customers who want reliable outcomes at the lowest carbon and cost.
Leaders need to be outstanding influencers and motivators with strong, well-thought-out positions on key issues who are just as comfortable engaging with ministers and MPs, boards and shareholders, local councils and communities, engineers and activists.
Leaders of utilities and infrastructure businesses face four disruptive challenges.
Rapid technology change. The heavy engineering requirements of the past will continue, but today’s businesses must also incorporate advanced digital capabilities. This will create a more flexible and responsive two-way grid but may also result in a more dynamic, higher-risk system, requiring leaders to engage with a broader range of skills, where they are making decisions outside of their expertise.
Decarbonising in response to climate change. These businesses have always consumed huge amounts energy and thus been major emitters of carbon. The technical challenges of decarbonisation are not trivial, and in addition leaders need to be more active in shaping the debate around how to transform the sector to achieve decarbonisation. This means moving from being a policy taker to becoming a constructive and influential policy contributor.
Irreconcilable customer expectations. As governments have found over the past two decades, customers have diverse and often irreconcilable expectations. Utilities and infrastructure businesses are on the front line of responding to these expectations. One-size-fits-all will not satisfy users, so leaders must be mindful of the interests of end-customers (retail, business, vulnerable, life support etc.) while meeting cost and risk objectives.
Diverse workforces. Enter any utility or infrastructure workplace and you will find a diverse group of people bringing diverse experiences to their work. Led well, this diversity can create unmatched performance; led insensitively, it can damage morale and performance. The quality of people has always mattered in these capital intensive-businesses, but leveraging diversity requires a step up in leadership.
Moreover, in highly geographically distributed organisations, leadership must also be distributed – in other words, activating more leadership by more people. For example, effective front-line leadership for maintenance and construction crews is critical to respond to emergencies and reducing costs to fit operational budgets.
The first barrier is these businesses’ history and culture: over decades they have enculturated a low appetite for risk. While today’s workforce is very diverse, the leadership may not be.
The second barrier is that while policy-makers and regulators appreciate the need for change, they move with great care, sometimes 10 years behind the sector, thereby reinforcing the status quo. Furthermore, shareholders who have invested for stable, low-risk returns eschew disruption; many are pension funds that simply want two dividends a year. Leaders who aspire to change must address the cautious perspectives of these different stakeholders.
These businesses provide essential services and are at the heart of great societal challenges – and so can inspire people. Meaning is perhaps the greatest leadership asset these leaders can use to motivate performance: start with the “why”.
While these businesses operate in complex environments, leaders will develop most effectively when they can focus on a manageable number of priorities. The messages they deliver must be meaningful and clear; too many senior managers use the latest business jargon and thus never successfully connect with their people.
These businesses do need to build their people’s technological capabilities. But it is insufficient to depend on the same pool of leaders with the same DNA, so they must also import leaders from technology-leading industries to complement long-held in-house skills. Combining the new with the existing depth will create stronger and better prepared businesses.
Engaging more actively with stakeholders – including working with peers and educating the board and shareholders – will contribute to the sectors’ transformation and to the growth of the business. Along the way it will also build the engagement capability of future leaders.
Utilities and infrastructure businesses remain big, complex, and capital-intensive, so leaders must be on top of these issues. But leaders should also be able to lead and respond to technological disruption, social and environmental change, and increasingly diverse customers and staff.
Get in touch to discuss how we can help your utilities and infrastructure business develop its leadership.
This piece was written with support from Penelope Cottrill, Greg Joffe, Craig Knox Lyttle, Steve Lennon and Phillip Vrettakis.