A digital tool for strategy development
Lyngby Taarbæk Utility is feeling the geopolitical energy crisis on several levels - not only in terms of rising costs for energy and construction projects but also in preparedness and IT security. The company's CEO Flemming Horn Nielsen has been working hard on strategy and strategy development since 2020, and he argues for ditching the Excel sheets in favor of a system designed for the purpose.
In April 2020, a new CEO took over Lyngby Taarbæk's recurrent utility, which was faced with increasing its annual investment level from DKK 20-30 million to DKK 2-300 million. This required professionalizing and modernizing the company, and to lead this task the then Board wanted a new CEO. And a new strategy development process would be set in motion.
The choice fell on Flemming Horn Nielsen, who came from the oil/gas industry, where he had worked for 30 years - the last years as Director of Dong/Ørsted's oil and gas activities in Denmark. Here he tells us about Lyngby Taarbæk Utility's transformation from a company with no momentum to aspiring to be one of Denmark's best utilities.
From crawling to walking in strategy development
"I found out pretty quickly that it was a bit of a craftsman's offer I had taken over. In several areas, very basic things had to be put right before we could even start working strategically," says Flemming Horn Nielsen.
"This resulted in 150 concrete actions in 11 areas. By autumn 2021, we had gone through it all and could say: okay, now we can crawl, then we're going to start walking a bit. But one thing is to cut and modernize a company, another is that there are other things happening in the meantime that you must deal with. We can't look in a newspaper, for example, and not see something about drinking water quality, wastewater, pollution, climate change mitigation, or waste."
Lots of areas to address strategically
He also mentions the development of society, which means that ever-greater demands are being made. There are always new developments on the environmental side and on the tariff and regulatory side. Owners' expectations of price and quality and comparisons with other municipalities are also important. So does the geopolitical situation, which has an impact on IT and the security of supply. And moreover, there is an important agenda in terms of staff retention and attraction.
"There is fierce competition to find a wastewater project manager today. It's difficult. But also, construction and excavation workers can be difficult to find because we are competing with many others who have the same recruitment needs," says Flemming Horn Nielsen.
And he hasn't yet talked about the ubiquity of digitization, where he notes that there's still a lot to tackle - from things that have been in manuals being made digitally available to staff, to improving digital infrastructure and how data talks to each other. Here, according to Horn Nielsen, the utility sector is still very immature as an industry. In other words, there are plenty of areas that need to be addressed strategically.
The development of a strategy must be about what moves the business
"All the issues mentioned have to be incorporated into the strategy development in one way or another. This also applies to customers, who have completely different and more demanding requirements today than they did just ten years ago. If there's a water break, it's rarely more than 20 minutes before people get impatient and start posting on social media. So, customer focus is also a natural strategic priority."
Once all the basics were in place in the autumn of 2021, Lyngby Taarbæk Forsyning started in earnest with the more future-oriented strategy work under the title Strategy 2.0. The new CEO had experienced many strategy development processes that had been declarations of intent or nice words written on a poster, and to avoid this, he defined two clear requirements for the new strategy from the beginning.
"The first requirement was that it had to be simple, self-explanatory and support implementation - that is, the strategy development had to be designed in a way that made it very clear to people what this was all about. The second was that the strategy should only be about something that develops Lyngby Taarbæk Utility. There is a tendency to cram in all sorts of other things that are just ordinary tasks and day-to-day operations, and then the strategy becomes unclear and interferes with the ideas that really move the company," says Flemming Horn Nielsen.
Simple and impractical - but it works
He stresses that all strategic initiatives and any strategy development process must be very clear and measurable because there can be no doubt as to whether they have been achieved - or how far they are from being achieved. And each initiative must have a direct lineup to the overall strategic objective so that the individual responsible for the initiative knows the reason why it needs to be done.
Lyngby Taarbæk Utility's strategy is designed as a "strategy house" with four supporting pillars. Under the pillars are a total of 99 initiatives, each of which points to points further up the strategy house. At the end of the calendar year, a review of progress is made, and a new 12-month roll-up is made. It's simple and low-tech, but according to Flemming Horn, it works really well, partly because he's embraced the latest technology in the field.
Find a tool that makes monitoring and reporting easy
"In my experience and that of some others, you shouldn't try to solve it with Excel sheets and other tools at hand. Try to find a digital strategy tool that is dedicated to strategy implementation, that helps with structuring, and that makes monitoring and reporting easy. We've done that, and it makes the strategy much more manageable and transparent."
Using DecideAct's digital platform for strategy execution, Lyngby Taarbæk Utility can go across the pillars of the strategy house and identify the initiatives that are linked to sustainability, diversity, or other important agendas.
"In practice, this means that you can quickly find out, for example, which of the UN's Sustainable Development Goals a particular initiative is relevant to. Or when the board wants to know how we work with sustainability, I can click into my system and show all the initiatives in our pillars that support that particular focus area," says Flemming Horn Nielsen.
Transparency is important in communicating with the board
In this way, Lyngby Taarbæk Utility has achieved very simple communication between the employees and the board about how things are going. And according to Flemming Horn Nielsen, that part can be surprisingly difficult. After all the toasts, reality sets in and you must follow up on how things are going. That's why it needs to be measured and managed. Another advantage is that it's easier to explain the context and introduce new employees to the strategy.
"When I recently hired a new operations manager who was going to inherit his part of the strategy house for this year, it was very easy to explain everything in a simple and visual way. This transparency is also important when communicating with the board. They are not inside the day-to-day operations, nor should they be, but they need to be reassured that there is the necessary momentum and that the promises are being delivered," says Flemming Horn Nielsen.
The tool does not do it alone
He stresses, however, that the tool does not make the whole difference. The relational aspect is particularly important. Among other things, it is important to be very aware of how you talk together about things that need to be solved. Psychological security must be created so that everyone can criticize and ask questions if there is something they do not understand. According to Horn Nielsen, this is essential to deal with the built-in resistance that often exists in change processes. And how much they matter is underlined by the reality Lyngby Taarbæk Utility, like other utilities, faces.
"Our costs, especially for the operation of sewage treatment plants and waste disposal, have risen sharply, but the cost of materials for construction projects has also taken a huge hit. The increasing focus on climate adaptation, wastewater, and clean drinking water means that the volume of construction projects is high and will remain so for several years. As we are also subject to annual 2% savings from the Supply Secretariat, the demands for efficient operations and project implementation are, if possible, even higher than before," says Flemming Horn Nielsen.
Digitalization moves up the agenda of strategy development
The current geopolitical situation has also prompted an update of contingency plans and communication procedures, for example in the event of power cuts. The same applies to IT security, where the forthcoming NIS2 Directive is already being integrated into strategic plans.
"In general, digitalization has moved further up and closer to management's overall strategic decisions and the way we organize ourselves. It's a long, hard haul to enable us to act in a new and, by all accounts, more changing reality," says Flemming Horn Nielsen.
Conclusion. When Flemming Horn Nielsen was appointed as CEO of Lyngby Taarbæk Utility and charged with guiding the business into a new era of efficiency, sustainability, security, budgeting and green priorities, he was faced with a massive task. As he says, they had to aspire to crawl before they could even walk as a company. The strategy development could have no room nice words and good intentions without actions and results.
The ‘strategy house’ and four supporting pillars under which sit 99 initiatives all pointing forwards and upwards is not just an image that works well, but very much part of Flemming’s determinedly clear approach to strategy development and application. Central to this is the need to adopt technology that is absolutely dedicated to the purpose of strategy development, analysis, execution and accountability. DecideAct’s digital platform has brought the company’s Strategy House to life, made life easier and brought critical levels of transparency, manageability and all round clarity to the processes. It has also aided the key factor of human interaction. As Flemming notes, it is important to have a culture where questioning, criticizing and open communication are possible and encouraged. To stifle these is to create resistance, and resistance is damaging to strategy.
In November 2022, a conference on how the energy crisis and utility strategies are now one of the biggest challenges for all companies, was held at the Danish Parliament. To get all valuable insights from this conference, feel free to download the Magazine with everything that you need.