This case study encapsulates the remarkable journey of Reliance Energy, which began after the takeover of Bombay Suburban Electric Supply Ltd (BSES) in 2003 by Reliance Industries Limited. The realisation of the importance of technology led to technology-enabled business transformation initiatives within Reliance Energy, which helped it to move a step ahead of its competitors and created important growth opportunities for the organisation.
The takeover of Bombay Suburban Electric Supply Ltd (BSES) in 2003 (eventually renamed Reliance Energy) marked the foray of Reliance Industries Ltd into the power transmission and distribution business. The power sector, plagued by bureaucratic controls and constraints on supply and demand, offered little managerial discretion to alter the traditional drivers of growth and profitability. The case illustrates how Reliance Energy leveraged technology to transform its strategy and operations in order to establish international standards of operational excellence and customer service in the Indian power sector. Students learn about the significant risks in technology-driven transformations and their critical success factors, such as complementary changes in firm structures and business processes. The case is set in 2008, when the Chief Information Officer (CIO) of Reliance Energy is found dwelling over the digital transformation of the company that has led to the decision to spin off the information technology (IT) department into a third-party technology solutions provider for the infrastructure sector. Was the digital transformation of the company a success? What were the lessons learnt from this transformation?
Power Generation Sector in India
In 2008, India was the fifth largest power generator in the world, with about 4% of global power generation. This was far below the country’s overall power requirement. Extensive transmission and distribution losses, thefts and inefficient power management leading to regular power failures throughout the country were persistent problems. The government began to restructure the sector in a phased manner, leading to the first phase of electricity reforms in 1991. Foreign and private investors were allowed to operate as Independent Power Producers (IPPs) in the power generation segment with SEBs (State Electricity Boards) responsible for the transmission and distribution of power generated by these IPPs.
In a bid to accelerate progress in the sector, the government initiated the second phase of reform with the establishment of the Power Trading Corporation (PTC). PTC encouraged trading of power, to achieve economic efficiency and supply security . Following these changes, the Electricity Laws (Amendment) Act was passed in 1998 to enable private participation in the power transmission sector.
The passage of the Electricity Bill, in Parliament, in 2003, which sought to provide a legal framework for reforms and restructuring of the power sector, ushered in sweeping changes. The Act was based on the principles of promoting competition, protecting consumers’ interests and providing power to all.
Reliance’s Acquisition of BSES
Reliance Industries Limited (RIL) had long envisioned entering the power sector–an important constituent of the energy sector–as part of its diversification strategy. The group had made its initial foray into the power industry with the establishment of power generation plants in Jamnagar, Gujarat (Reliance Power), Orissa (Hirma Power), and Tamil Nadu (Jayamkondam Power). Through these projects, RIL gained significant knowledge and experience of operations in the energy industry.
After the death of Dhirubhai Ambani, founder of the Reliance Group, in 2002, the group’s assets were divided between his two sons, Mukesh Ambani and Anil Ambani. This division of assets led to the formation of a new group–the Reliance Anil Dhirubhai Ambani (ADA) group. In order to pursue its interests in the power sector, the Reliance ADA group decided to make a strategic investment in the industry through the acquisition of BSES Ltd, one of the leading power companies in the country.
BSES was one of the few utility companies engaged in the generation, transmission and distribution of power. Established by British engineers, the company had grown over the years to service a major part of suburban Mumbai, parts of Orissa and Delhi. Post its acquisition, BSES was renamed Reliance Energy under the banner of the Reliance group .
Faced with increasing competition from both existing and new players, Reliance Energy realised that for it to become the leading player in the utility business it needed to excel in the efficiency of its operations and offer superior value to its customers. The CEO of Reliance Energy was clear from the start that technology would play a key role in the transformational agenda of the company. In fact, technology was a fundamental part of Reliance’s mission statement: “To be a technology driven, efficient and financially sound organisation.” A powerful partnership existed between the CEO, a business leader attuned to the strategic use of technology, and the CIO who had a sound understanding of the business.
The board of Reliance Energy reaffirmed the view that technology-enabled transformation was the first step toward safeguarding revenues from impending competition and improving growth and profitability. The use of technology to integrate information across the organisation would eliminate unnecessary manual involvement in transaction processing or grievance redressal; more importantly, integration of information would provide relevant and accurate information to the appropriate person in the shortest possible time, leading to improved efficiency and the quick resolution of business issues.
The application of IT to develop an integrated organisation involved significant risks. The CIO, however, decided to take the challenge head on. The first step in this direction was to assess the existing state of IT in BSES, and subsequently develop a roadmap that would be in line with the vision of the company to establish international standards of operational excellence and customer service, in the Indian power sector.
In 2008, India was the fifth largest power generator in the world, with about 4% of global power generation. This was far below the country’s overall power requirement. Extensive transmission and distribution losses, thefts and inefficient power management leading to regular power failures throughout the country were persistent problems.
The IT Roadmap
Considering the criticality of IT as an enabler, it was important to identify the key technology investments that would yield the maximum benefits. A task force, comprising IT, the operations team of BSES and Reliance Energy’s in-house ERP implementation and e-enablement teams, were assigned the job of creating a roadmap for IT implementation within BSES. The company also hired McKinsey Consulting to offer a complementary perspective based on their extensive experience in technology-enabled business solutions for diverse industries. Overall, the objective was to integrate data and systems across functions and managerial levels, to achieve greater transparency for the benefit of customers as well as for the employees.
Extensive pilferage and defective meters were rampant in the power sector and BSES was not immune to these inefficiencies. The task force recommended the implementation of a Supervisory Control and Data Acquisition (SCADA) system, which monitored the network components closely and provided data for effective load management and fault analysis.
McKinsey and the task force had a set of solutions to address gaps in meeting basic customer needs. This consisted of Outage Management Systems/Trouble Call Management Systems that were responsible for improving response time with respect to complaints, and creating service responses with customised billing messages. Another solution was incorporating AMR system which led to a discernible change in the communication of billing information to customers. This meant that communication to customers would now change to SMS and email.
The Customer Relationship Management (CRM) module comprised Interactive Voice Response (IVR) which would allow the company to accommodate an increased number of callers, as well as account for each call made to the plant. The Field Force Automation (FFA) involved providing the field force with mobile terminals that were expected to not only reduce service errors, but also to improve the overall productivity and effectiveness of the workforce.
In addition to the above investments in operational efficiency and customer service, the task force also decided to invest in Learning and Knowledge Management and Analytics and Reporting Systems.
Considering the criticality of IT as an enabler, it was important to identify the key technology investments that would yield the maximum benefits. A task force, comprising IT, the operations team of BSES and Reliance Energy’s in-house ERP implementation and e-enablement teams, were assigned the job of creating a roadmap for IT implementation within BSES.
Managing the Business Equation
Both the CIO and the CEO were well aware that implementing changes in the staid environment of BSES would be fraught with numerous challenges. A variety of measures to address cultural change, training and end user involvement were taken to manage the challenging task.
The management’s first move after the acquisition was to give all BSES employees a computer and so, replaced the old computers with 3,000 new models, thus motivating existing employees to use them. Another move by Reliance was to retain the younger BSES employees rather than replace them with Reliance Energy IT personnel.
It was important that all the members of the organisational hierarchy use IT in their day-today operations. A multi-pronged plan, involving training programmes, discussion sessions, actual demonstration, exercises and quantifiable targets for users was executed at each level of management as an essential step toward managing the change.
To ensure a smooth transition, management decided to involve all business stakeholders in the IT implementation right from the blueprint stage. The company also made a deliberate attempt to integrate IT with the core operations There was both a direct and an indirect impact of this transformation on the company’s growth, improvement in customer service levels and overall business performance. The company’s net profits surged to INR 10.8 billion in 2008 from INR 1.62 billion in 2003.
Having established its leadership in the power sector over the years, the company was now poised to extend this position of strength to other vital areas of national concern, including the infrastructure development of India. Reliance Energy was confident of leveraging its core competence in building and managing world-class assets. The CIO was also considering various options related to the IT department at Reliance Energy. He was battling questions of outsourcing, implementing his success story in other departments of Reliance and providing extensive third-party consulting and advisory solutions through a possible spin-off of the IT department. Far from being the end, it seemed to be the beginning of another remarkable journey.
A multi-pronged plan, involving training programmes, discussion sessions, actual demonstration, exercises and quantifiable targets for users was executed at each level of management as an essential step toward managing the change.
ABOUT THE AUTHORS
Deepa Mani, Associate Professor of Information Systems and ISB Research Fellow, Executive Director, Srini Raju Centre for IT and the Networked Economy, at the Indian School of Business (ISB).
Geetika Shah, Associate Director, Centre for Learning and Management Practice, at the Indian School of Business (ISB).
Revathi Nehru is a Freelance writer
ABOUT THE WRITER
Vineet R Bhatt, Content Lead with the Marketing and Communications department, at the Indian School of Business (ISB), wrote this summary.