On Saturday, March 27, 2010, an estimated one billion people from more than 120 countries on seven continents took part in the largest Earth Hour event yet. Starting in New Zealand and following the sun around the world to reach Hawaii 24 hours later, people turned off their lights for 60 minutes at 8:30 p.m. local time. This was largely a symbolic event to raise awareness of our impact on the environment and the actions we all can take to reduce carbon footprint, but what impact does turning your lights off really have, and what is being done to improve this area?

Reaching over and turning your lights off while you read this blog will do little to help the environment. That is because utilities have to continuously generate enough power to run your lights just in case you turn them on – after all, you don’t want to cause a brown-out in your city just so you can light up your room. Granted, if everyone continually uses less power, overall demand levels may fall to levels where less generation is needed – but a limiting factor is that most utility companies do not have a means in place to know what you’re using right now. Most of us have older, analog meters at home that are read once a month, so our utilities do not know how much we use each day or throughout the day. As a result, they create and must rely on usage profiles to estimate how much power you’re going to use.

That’s changing under Smart Grid. Utilities across the world are replacing those meters with the digital sort that can communicate back and forth to the utility, and monitor your usage in near real-time. That way, if you turn your dishwasher on now, the utility will soon see that you’re using more power – and they can adjust generation accordingly. More importantly, they’ll have greater insight into usage levels within our homes at frequent intervals (approximately 15 minutes) which they’ll be able to use to refine their models and use analytics to predict usage patterns – which means they can plan generation more efficiently. That way, if you start unplugging your cell phone charger and turning off your computer when you’re not using it, the utilities will have a stronger ability to see those changes and lower generation – ultimately helping to reduce our use of fossil fuels.

Smart Grid is also going to change the way you manage your own power usage. Many regulatory bodies are requiring utilities to make usage data available to third-party companies. Google has already begun integrating data from several utilities into their iGoogle portal, allowing you to see your usage in near real-time on the web. Utilities such as TXU offer access to energy usage on the web and your cell phone so that you can view usage and even adjust the temperature in your house. Other vendors are creating home gateways so that you can network your appliances and control them remotely. Schlage allows you to remotely lock and unlock your doors with their Schlage LiNK product. Soon enough, when you venture off on a long trip to Grandma’s house, you won’t have to drive back to see if the oven is off – you’ll grab your Droid and check from the car.

Commercial carriers like Verizon are investing heavily in technologies that support Smart Grid, and we are working with utility companies and vendors to develop the secure, two-way communication networks and integrate devices into applications that allow consumers and businesses to make smarter choices about their energy usage. Placing this power into the hands of consumers allows us all to make a direct difference for the environment.

As we celebrate Earth Day on April 22 and we think about the ways we can impact the environment, keep in mind that Verizon is working with utility companies around the world to help us all reduce our carbon footprint.

Over the last several months, we’ve seen our clients become more interested in smart building solutions, partly to reduce their energy consumption but also to reduce carbon output and integrate renewable energy sources. In brief, smart buildings leverage IP networks to lower capital and operating costs by integrating building systems (e.g., energy management, lighting, HVAC). This integration allows building owners and lessees to monitor energy usage at facilities, control usage in response to changing energy prices, and monitor and reduce carbon emissions.

Common goals of smart building programs include:

1. Conserve Energy: Ability to manage and limit power usage at company facilities, and to shed load among the devices connected to the network helps improve the utilization of connected equipment. Local override is generally allowed to give managers control.
2. Curtail Usage: Systems allows customers to leverage participation in load curtailment programs. Utilities will reduce power during peak times, and systems will resort to backup generation during peak times. In exchange, they get lower rates from the utility.
3. Monitor Carbon Output: Systems can be used to monitor real-time power usage by building and circuit, and calculate carbon emissions in near real-time. Adding a live interface to the US EPA also allows companies to update their EnergyStar rating on a real-time basis.
4. Increase Energy Reliability: Adding battery storage capabilities allows customers to maintain power levels even during outages. Alarms can be configured to detect low supply and switch automatically.

Companies can benefit from smart building solutions in both new and existing facilities. Existing building control equipment and devices can be integrated into a common application through solutions such as a federated bus architecture. Our enrolment in curtailment programs has allowed us to generate revenue streams from local utilities; in exchange for allowing them to cut our power during peak times, we receive direct payments and lower energy rates. When power is cut, our system automatically transfers to backup battery stores that maintain constant power for operations. We work with a variety of vendors to test their components and systems, giving us a solution that leverages a best of breed approach to monitor and control energy usage.

Scan through any reputable publication and you are sure to hear a lot of buzz around Smart Grid and the transformation of the utility industry. While there are different ways to technically define smart grid, I see it essentially as a communications network that provides control and intelligence about the grid. And, technology service providers play a critical role. At the Smart Grid Forum on January 21, I am addressing an audience of energy and utility companies to convey exactly how service providers can help them adopt smart grid capabilities.

The term smart grid may be new, but communications networks have been around for a while thanks to public carriers. For example, every cell phone is essentially a smart meter that is connected to a communications network that not only allows users to complete a call or receive an e-mail; it also allows them to get up to the minute billing records, provides the ability for carriers to remotely update service profiles and creates a common platform for consumers and customer service representatives to view the call data record in real time. In short, carriers have deep experience in deploying and managing global communication networks and as the utility industry transforms to a smarter grid, there is a lot to gain from partnering with the telecommunications industry.

Carriers can also share some of their experiences which are very applicable to utility companies as they continue their migration to the smart grid:

• Data Explosion: First, there will be an explosion of data that comes along with smart grid as smart meters and related devices will be polled more frequently. This data explosion will require higher network bandwidth, increased storage and expanded computing capacity of the systems.
• Security: As additional newer devices come online, there will be an increased need to restrict unauthorized access and secure system and customer data.
• Customer Interaction: Technology has already altered consumers’ expectations of how they can interact with their service providers. Smart devices and the tools will enable and require utilities to provide a much richer customer experience.

Partnering with carriers makes good business sense. Just as many Fortune 500 businesses and government customers as have used technology companies for their critical infrastructure needs, utilities should also leverage a carrier’s infrastructure, knowledge and experience to help them with smart grid migration.

In contrast, a few years ago, the gadget panel on the front of my refrigerator started acting up.  I called the repairman, he charged me for the trip and for a replacement part.  That part didn’t take, and over the next several weeks, he came back nearly a dozen times to try different parts – but I only paid for the one trip charge and the part that ultimately worked.

Why is it that my doctor couldn’t warranty her services the way that the repairman did?  This was a common ailment, not a terminal illness, that I hired her to fix.  She may have had no way of knowing whether my body would respond to a particular treatment, but her surprise that the first treatment didn’t work was similar to my repairman’s when the first few parts did not solve the problem I hired him to fix.  It’s no wonder that our healthcare system is so large when consumers have to pay multiple times to fix minor problems, when countless other professionals at least offer some sort of warranty for their work.

A recent issue of Imprimis Magazine alludes that doctors have little choice in how they bill because of how government programs charge – Medicare only allows certain charges, so that’s how the business model was setup in the first place.  Medicare’s restrictions also inhibit technological advances such as electronic medical records and phone/email consultations with your physicians, keeping costs high.  If I’d been able to have a phone consultation with my doctor, I could have at least avoided my second office visit, freeing her to see other patients and keeping money in both my and my insurer’s pockets.  The Economist recently published an article on healthcare, citing evidence that more spending does not reliably lead to better outcomes (which I experienced firsthand).  Without altering the current business model, changing the incentive structure, and encouraging innovation, our healthcare system will continue to be plagued by high costs and lower quality.

The Imprimis article goes on to give examples of innovations in healthcare that have led to freer markets and lower prices over time – the type of behavior you’d expect under a free market system, and a welcome contrast to the current trend of our healthcare system’s costs rising at twice the rate of income.  These innovations include increased use of electronic medical records, telephone consultations with doctors, and published performance metrics – items that do not seem so revolutionary when compared to other industries.  One of the other trends mentioned is the increased use of walk-in clinics such as MinuteClinic that treat common illnesses (such as my ear infection) and offer lower prices by employing nurses instead of physicians   I have been a frequent customer of MinuteClinic because it is often easier to get an appointment and the price is half what my doctor would charge.  And the set of services they provide is a good starting point for identifying common conditions that can be warrantied, reducing costs for consumers and insurers.

As we continue to debate the future of our healthcare system, I hope that the role of innovation and private enterprise are expanded and leveraged to lower systemic costs and the need for additional government regulations such as those that contributed to our current situation.

As an entry-level consultant, my answer was easily measured in billable hours.  As the years progressed, I added sales assists, direct sales, increased brand recognition, and sales calls to that measurement.  But nowadays the answer is a little more cloudy.

In many industries, the economic slowdown means longer sales cycles, smaller contracts, and thinner margins.  The supply of available labor is larger than demand, so customers can afford to be choosy and spend more time scrutinizing credentials. Eager for work, companies are often willing to work for free in hopes of proving their worth and securing a deal down the road; my firm has been conducing 1-2 day free workshops to help clients develop their ideas and learn how our experience can help.

Personally, I have been spending my evenings and bench time focused on creating intellectual capital, developing and executing marketing campaigns, and developing and leading some of these workshops.  We all know that investing a brand, whether through mass media or face-to-face interactions, leads to longer-term value for the company, its clients, and its employees – but at the end of the exercise, have we really made any money for the company that day?

Most of my engagements over the past year or so have involved restructuring and cost reduction.  On these projects, we focus not only on lowering the cost base to match demand, but also on investing in areas where we see demand potential or where key capabilities should be developed to position the company for emerging trends.  Companies are willing to accept lower margins now in exchange for better products, positioning, and margins when the economy turns and demand recovers – but they’re also interested in better measurement systems to evaluate progress along the way and identify when to adjust course.

My company is no different; I recently launched a program to leverage bench resources to accelerate the development of intellectual capital so that we can increase our brand recognition, stay ahead of emerging trends, and develop our employees’ skills.  Our metrics are robust; it takes a steady volume of relevant IC to feed the marketing pipeline, resonate with potential buyers, setup sales calls, and deliver winning proposals.  Without programs like this, we run the risk of stagnation and falling behind the curve.

So did I make any money for the company today?  Maybe not, but we’ll be making money tomorrow.

Industry Challenges

Utilities today continue to face considerable challenges in the marketplace:

• Rising commodity prices are applying upward pressure to rates
• Regulators are continuing to press for slow rate growth and cost savings
• The cost of debt is rising because of the current real estate and credit crisis
• Pressures are increasing to update aging infrastructure and build to meet strong demand for renewable technologies, from customers and regulators alike

Not surprisingly, many utilities are looking to engage in merger and acquisition (M&A) activity to address these challenges, providing them the opportunity to expand the system and support growth while constraining cost increases across the enterprise.

Our Perspective on M&A Activity

Activity has certainly picked up over the last few years, most likely as a result of the repeal of PUHCA (the Public Utility Holding Company Act of 1935) in 2005 –which ostensibly made it easier for utilities to pursue acquisitions by reducing federal oversight of these transactions. While the industry is certainly not seeing the same volume or magnitude of mergers as in the late 1990s, utilities seem to be emerging from the “back-to-basics” strategies they adopted in the early 2000s that focused on improving their internal operations and processes. This will lead to more acquisitions and structural changes.

Our perspective is that recent (and future) activity is marked by the following traits:

• International activity is in play. The weak U.S. dollar makes U.S. companies more attractive for international acquisitions and the industry may see increased merger activity from foreign investment.
• Regulators remain a prominent force. While the repeal of PUCHA may have eased federal hurdles, state regulators remain a prominent force. Case in point: six of the ten mergers withdrawn in the past six years were due to the state regulatory process (Table 1).
• Failed or sub-optimal mergers have occurred. The regulatory hurdles combined with other factors have halted some significant mergers that would have changed the industry landscape.
• The nature of transactions may change. Many industry observers believe merger activity within the industry will continue, although the nature of transactions may change from large-scale mergers to smaller acquisitions of assets and to foreign investment.
  In summary, it seems clear – given the current financial and regulatory environment, utilities will continue to pursue strategic acquisitions that provide synergies to increase scale, constrain cost increases, and manage rate base and regulatory pressures.

Source: Archstone Consulting Analysis

M&A Challenges Typically Result from Inadequate Planning and Execution

Let’s face it – across industries, mergers have a very high rate of failure. Following a merger, only 42% of companies outperform their peers in shareholder value, and only 29% realize an increase in aggregate profitability! The reasons have been well circulated in business media – the most common reasons that executives give for this are cultural divides and poor planning and execution.

Our perspective is that the three largest challenges utilities face while integrating organizations are:

1. Inadequate or Unrealistic Planning
2. Underestimating Regulatory Hurdles and Costs
3. Failing to Realize Planned Benefits

1. Inadequate or Unrealistic Planning
Most organizations undergoing a merger retain strong advisory support from a variety of experts to successfully execute a transaction. Planners must realistically assess the major challenges to the process, most notably regulatory approvals and cultural integration. Additionally, data indicates that as utilities grow larger, they generate less market value-added (MVA) per dollar of capital invested, most likely because large companies insulate managers from the pressures of accountability and incentives of ownership. In addition, large combined energy companies may attract more regulatory attention and denied the opportunity to earn a high return on large capital bases. Finally, cost savings often don’t materialize because many companies underestimate the costs to get regulatory approvals, to terminate leases and employees, and to operate in a multi-state regulatory environment, all of which result in unrealized benefits.

2. Understanding Regulatory Costs and Hurdles
Over the past few years, some leading utilities (most notably Exelon/PSEG) have withdrawn merger applications, primarily due to a rigorous regulatory approval process. Our perspective is that these utilities likely underestimated the power of the Public Utility Commissions (PUCs) as well as the consumer advocacy groups. At some point, the give-backs became unpalatable and the deals needed to be halted. Clearly the number of constituents to manage is significant–PUCs, consumer groups, the Federal Energy Regulatory Commission (FERC), the Department of Justice (DOJ), shareholders, etc.–however, perhaps most surprising is the significant power and resistance of the state regulatory groups. Acquiring a utility in another state adds even more complications to the process. As regulators evaluate potential mergers in their jurisdictions, they are looking to minimize monopoly power, to ensure that consumer protections are in place (e.g., rate reductions, choice of energy suppliers, investment in the community), and increasingly to look for environmental investments (e.g., wind).

3. Failing to Realize Planned Benefits
In short, once the acquisition is consummated, many organizations simply can’t overcome the cultural hurdles or simply had not assembled a clear merger integration execution plan. As far as cultural challenges, employees of the acquiring and acquired companies will both face uncertainty about the future of the merged organization, including leadership, operations, and locations, as well as their own personal future. This uncertainty may lead to lower morale, decreased productivity, and attrition, and must be countered with clear communications. Additionally, many pre-merger communications focus on short-term goals, benefit, and profit.

Add to this the reality that as with any significant transformational initiative, the merger integration effort can lose steam over time, especially if a clear integration team and plan isn’t established. While most acquisitions start with a series of “quick hits,” most companies fail to address the processes and systems needed to achieve full integration of the merging businesses. To compound this, utilities are not typically nimble organizations accustomed to quickly enacting change, so the change effort to achieve these synergies can likely not be overestimated

Merger Success can be Achieved by Following Five Key Tips

So what should companies due to mitigate these challenges? Put simply – plan well, manage the regulatory process, and execute mercilessly.

In our experience, companies that experience the most success with merger efforts follow the following five steps:

1. Fully articulate the rationale for the merger in terms of its strategic importance
2. Apply a rigorous process to identify the economic value of the acquisition
3. Anticipate and manage the regulatory approval processes
4. Develop and follow an M&A Playbook
5. Begin integrating as early as possible, maintaining momentum until target benefits are realized

1. Fully articulate the rationale for the merger in terms of its strategic importance
Acquisitions should support the utility’s long-term strategic objectives and ultimately add value for shareholders. This value can come from a larger geographic footprint, a better power-generation and asset mix, and a more efficient cost structure.

But considering the time, energy, and resources required to pursue an acquisition, along with historical success rates, executives should also consider whether the transaction is the best avenue to achieve these goals. It may be possible to achieve operational improvements and cost reductions by investing in existing assets or conducting focused improvement efforts, rather than tying up company resources for months or years pursuing an acquisition.

Before committing to an acquisition, companies should also ensure that groupthink is not a factor. This can be done by testing assumptions analytically to understand scenarios/ranges, and also by obtaining an outside opinion from firms who have worked through M&A processes for peer companies. That said, the key is to conduct “realistic planning” and truly look at the future merged organization with “open eyes.” Dealmakers need to honestly examine the planned benefits – to paraphrase Jim Collins, we must “confront the brutal facts,” yet still retain an unwavering confidence to successfully execute (if that is the right course of action).

2. Apply a rigorous process to identify the economic value of the acquisition
Utilities face a complex regulatory environment, and economic benefits must be realized quickly. The most successful acquirers rigorously examine each business unit, function, and process to determine the most efficient way to combine the two organizations. This approach needs to be pragmatic and geared toward driving tangible headcount and other cost savings. These projected savings should be the yardstick to measure integration efforts progress.

Measurement of the actual results is a key success factor of the merger – we suggest a long-term (3+) year reporting process should be developed to track synergies against the original deal model. The true synergies and value are typically realized much longer-term; therefore, a process should be in place to measure an acquisition’s success against the original projected model. This provides data for feedback to individuals internally (regarding priorities and accountability), as well as to Wall Street analysts (“Hey look how good we did”).

3. Anticipate and manage the regulatory approval processes
The number of constituents involved in the process is significant – PUCs, Consumer Groups, FERC, DOJ, Shareholders, etc. – and as mentioned before, perhaps one of the most significant is the state PUC. The regulatory process differs in each jurisdiction – not only from a procedural standpoint, but also in terms of priorities. Regulators may be focused on achieving rate reductions, improving reliability, enacting environmental concessions, or avoiding monopoly power. Understanding the process and priorities of each jurisdiction of the combined organization will help to focus companies on the types of benefits to pursue and the messages that need to be crafted.

In the end, concessions will need to be made – you should also be prepared to walk away from a merger if the concessions and agreement rise to a level that is too complicated, too costly, or in conflict with your strategic objectives for the merger.

4. Develop and follow an M&A Playbook
As with any effort, a repeatable methodology with standard templates can help improve efficiency. Investing time in creating an M&A Playbook can help improve M&A evaluations and integrations by documenting processes, evaluation criteria, and tracking mechanisms that allow employees to focus on evaluating and implementing the transaction, rather than reinventing the wheel each time. In addition, the Playbook can be updated with lessons learned from prior integrations (from both inside and outside the company), helping to ensure they do not happen again (e.g., extra costs from terminating contracts and leases).

However, even with the Playbook guiding activity, executives should make practical, pragmatic decisions without overanalyzing information, which may not always be perfect during a merger process.

5. Begin integrating as early as possible, maintaining momentum until target benefits are realized
The CEO and Senior Executive team should champion and drive the process to help ensure that benefits are realized quickly. A PMO can be useful to help track progress, benefits, issues, and risks, using standards outlined in the M&A Playbook. Working with Senior Management, the PMO can also be effective in keeping the focus after quick hits are achieved. In order to quickly realize benefits, executives should make key decisions early, hard decisions with conviction, and make no excuses.

Integration plans should be designed by business unit or function to ease implementation, and change management should be a core component to help avoid cultural issues.

Conclusion

In conclusion, it is fairly safe to say utilities will continue to pursue mergers to counter rising commodity prices, maintain rate stability, achieve economies of scale, and improve their asset bases. As these are pursued, utilities will likely encounter the typical challenges common across all industry, most notably cultural integration and stakeholder approval; while facing the unique hurdle of regulatory approval of the intended transaction.

Note: This is a re-post of an article I co-authored for Archstone Consulting that was submitted to EnergyPulse.

Yet I recently read that most consumers are still not willing to use their phones for mobile banking because they are concerned about the security of their data:

According to recent research from Unisys, 71% of all consumers surveyed in 14 countries will not consider using a mobile device to bank or shop online. The issue, for the most part, comes to trusting the technology. The research reveals that more than half of all respondents do not trust their mobile devices to provide a secure transaction and currently only 9% use these devices to conduct transactions involving credit-card payments, money transfers, and deposits.*

At the same time, more money is being invested in mobile banking. These systems are really expected to catch steam by 2010, and over the last few weeks, both Citibank and Bank of America rolled out new mobile offerings.

I recently did some research on applying behavioral economics to improve the success of online offerings, and some of the success factors I’ve seen for online offerings are:

1. Limit Available Choices. When consumers are faced with too many choices, they may be overwhelmed and may fail to complete a transaction. You don’t need every aspect of your online offering to be available on a phone, so limit it to key transactions, such as balances, recent activity, transfers, and payments. Citibank doesn’t allow you to add payees to your bill payment account through a mobile device (which is also a security feature). When I use a Wells Fargo ATM, they give me one-touch access to my most common transactions (e.g., withdraw $100, no receipt). Look at your customers’ most frequent transactions, and the ones that they are most likely to want to execute from their phone on the train ride home, and only offer the top few.
2. Provide a Familiar Interface. Customers may be dissuaded from completing a transaction if they are uncertain as to how it will be completed. To reduce this uncertainty, you can add cues throughout the process to guide them through – think of the 3-step “Quote. Buy. Print” process offered by Esurance. Services like PayPal and Google Checkout provide a common interface that people are used to – this allows them to store their personal data at a site they trust, and not expose it to an unfamiliar merchant. My $4 book was from a third party I didn’t know, and I was hesitant to give them my payment information; but because they were selling it on Amazon, and the Amazon interface and payment process was familiar to me, I was comfortable completing this transaction.
3. Secure the Transaction. One of the most common reasons people don’t shop online is that they are concerned about credit card and identity theft, so businesses need to make sure to provide an adequate level of security. In addition to using familiar services like PayPal and Amazon, transaction-level security must be provided. Citibank’s mobile service uses 128-bit encryption, which is comparable to existing internet service, and Bank of America offers a “$0 Liability Online Banking Guarantee” that ensures customers are not responsible for unauthorized transactions.
4. Demonstrate the Benefits. People are naturally resistant to change, so getting customers to use your online offering requires highlight benefits that they will realize in the short-term. Sure, it’s convenient to access your accounts while killing time, but what else is in it for me? Many banks offer SMS alerts when balances run low or strange activity is detected – perhaps that feature must be initialized from a mobile banking session. Wells Fargo waives the cost of online bill pay when you maintain a minimum balance; perhaps banks could also waive it if a customer pays one bill per month from their mobile phone. Or maybe custom offers can be sent to my mobile once I’ve activated the service.

* Source: Consulting Magazine, July/August 2008.

All this effort has been done for good reason – there are plenty of errors made in spreadsheets that cause material problems, including earnings restatements:

• Kodak had to restate earnings because of an incorrect number of 0’s being entered into a spreadsheet
• RedEnvelope shares fell 25% when Cost of Goods Sold was incorrectly reported due to a spreadsheet error
• Other examples can be found at http://www.eusprig.org/stories.htm

Many companies have developed policies to govern the development and maintenance of spreadsheets, with the goal of providing a level of comfort over the results while giving employees the flexibility to quickly create reporting tools without heavy IT involvement. Others have revised their “end-user computing” policies to prescribe controls over spreadsheets. I developed such a policy for a client who was using a host of spreadsheets and databases to perform ad hoc analysis, financial filings, and respond to regulatory requests. Together, we called these spreadsheets and databases “User-Developed Applications (UDAs),” and the policy was designed to meet the needs of management, IT, and Internal Audit:

• Management wanted the flexibility to be able to develop tools for ad hoc and recurring analysis, without being required to work through the IT PMO process for each new application or change. They also wanted to ensure that the results were consistent from one iteration to the next, and that they were aware of changes made to underlying formulas. Finally, they wanted the option of having IT take over maintenance and control of the application if it grew in size and importance.
• IT wanted to be able to respond to calls to the helpdesk and support the business, even though they did not officially support UDAs. As such, they asked that users follow general development principles, maintain accurate documentation, and store applications on the network, allowing IT to debug formulas and restore prior versions of the application.
• Internal Audit wanted to ensure that they could rely on the results of these applications, audit the formulas, and follow the chain of approvals for changes made to the application.

Depending on the significance of the application (defined in terms of its financial, operational, and other risk level), the UDA policy contained guidelines over the following areas:

1. Documentation
2. System Development Life Cycle
3. Change Control
4. Security and Data Integrity
5. Analytics and Logic Inspection
6. Backups
7. Training
8. Segregation of Duties

To aid implementation and compliance, we developed a procedure manual that outlined requirements for UDAs, including checklists of activities within each of the 8 areas (depending on the application’s significance) and approval templates (modeled after the company’s IT PMO templates where possible).

Taken as a whole, the UDA policy and procedures helped formalize the process of developing and using spreadsheets and databases, while allowing IT to provide a increased level of support, and Internal Audit a greater level of confidence in results produced by these applications.

When developing a Business Continuity Plan, you inevitably discuss recovery locations and alternate sites, along with the types of supplies needed in each. In addition to backup computers, radios, and phones, companies also need to stock some perishable items like food, water, and batteries. But having these things also requires some manpower to make sure they stay fresh and usable.

The utility companies I’ve worked for maintain “storm centers” where they can monitor the status of their electrical system and maintain communications during storms, so we looked at these as viable alternate sites. One of my clients periodically cycles their food stocks and contributed non-expired items to a local food bank. Which got me thinking – if lots of companies are hiring people to do this, couldn’t they outsource it to a vendor?

Companies already hire vendors like Iron Mountain to rotate their records and backup tapes offsite. Vendors like PeaPod (or local grocers like Lunds & Byerly’s) deliver groceries to homes and businesses. Now Roche is offering to rotate supplies of medicine. It’s a simple combination of these business models to setup contracts to rotate companies’ emergency stocks and ensure they are kept fresh and ready for use during an event. Usable supplies that are rotated out can be donated to food banks or other charities such as Hope for the Cities so they are not wasted.