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September 27, 1999

E-Business Energizes PG&E

Illustration by Dennis Harms ne transformation begets another. As PG&E Corp. completes its metamorphosis from a regulated, regional electric and gas utility to a competitive marketer of energy services throughout North America, the $20 billion San Francisco company is embarking on another transformation: from an old-line business to one that relies heavily on information and electronic-business technology. In the midst of both transformations is the customer.

Deregulation has changed the face of PG&E. Only one of its five major business units--Pacific Gas and Electric Co., which provides natural gas and electricity to 13 million Northern Californians--is regulated by state regulators. Competition for customers has created a new culture at PG&E, one that requires quick decisions. Decisions that once took three months to make now are made within a month. It's a pressure-cooker atmosphere for IT staffers, "like being in SAP-rollout mode all the time," CIO John Keast says.

Keast, who plays a central role in facilitating the E-transformation at PG&E, gathered 30 PG&E IT and E-business executives for a two-day summit in late July. A featured presenter at the summit was Joshua Rymer, a senior VP from Charles Schwab & Co., a brokerage company in the forefront of E-business. It didn't matter that Schwab isn't in the energy and utility business. A key intent of the Schwab appearance and the summit itself was to let PG&E executives gain greater awareness of the E-business landscape and determine specific E-business opportunities.

E-business issues faced by PG&E, Schwab, and most other companies in competitive industries are similar: employing technology to drive down costs while serving customers more efficiently, Keast points out.

With IT and E-business executives following the same script, the next move was to get buy-in from PG&E's top executives. In individual meetings tailored to each specific business, Keast is briefing the CEOs of each business unit about the role each needs to play to make E-business at PG&E a success.

Keast says that some traditional practices at PG&E, such as building detailed business cases or developing return-on-investment calculations, are not as important in the quick-moving world of electronic business. "E-business means to do it real fast and real thin," Keast says. "You've got to be prepared to accept less details around these projects; some of the data you need don't exist."

For example, a company may offer lower prices for products or services sold online than it does when those same products and services are sold through traditional channels. If a business doesn't undercut its own prices, a competitor will. "You would do better to do it to yourself," Keast says. If a business must cannibalize itself, set up a separate business unit, with both units reporting to the CEO, Keast says. This will help avoid intrabusiness conflicts. Once the online approach succeeds, then the online unit can be merged into the main business or remain separate--perhaps leading to an initial public offering.

A business that decides not to act may find thatit's made a decision, nevertheless. "Not making a decision in E-business is making a decision," Keast says. "If you decide not to do something, that's OK; but you have to realize there's a consequence to that, too."

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Illustration by Dennis Harms