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Finnish distribution utility crafts a business strategy that drastically remakes the company.
The Finnish distribution company Graninge Kainuu Oy (GKO) is responsible for the electricity distribution network in the province of Kainuu in Northern Finland (Fig. 1), with business interests for the distribution and sale of electrical energy. GKO's distribution network is located in an area where population density is low, with approximately 95,000 inhabitants living in an area of 22,500 sq km (8690 sq miles). GKO supplies 53,000 distribution customers and, as a measure of the rural nature of the area, the length of overhead network commissioned per customer is 240 m (790 ft).
During 2001, GKO's shareholders set two operational targets, namely, "high yield" and customer satisfaction in the form of "good continuity of supply."
To achieve these twin company policy objectives, GKO reformulated its strategy and made significant strategic changes to improve the company's profitability during the last quarter of 2001. The changes led GKO to concentrate on its core businesses, while all other operations were outsourced. GKO outsourced the construction, operation and maintenance of the distribution networks, inspection of electrical equipment, management and maintenance of real property, vehicle and small machine repair shop, and GKO's telephone exchange.
At the same time, the subsidiary Kajaanin Lampo Oy outsourced the construction, operation and maintenance of district heating networks and heat stations. (The canteen, messenger services and IT support services had previously been outsourced.)
Eitel Networks Pohjoinen Oy
During 1999-2000, GKO investigated alternative ways of organizing and managing the construction, operation and maintenance of distribution networks. As network management and operations were unbundled in the late 1990s, GKO had considerable experience in using the orderer-producer operating model. Market research studies on possible outsourcing included consideration of a joint venture with a local telephone company and detailed discussions with Voimatel Oy, ABB and Eitel Networks (EN) Pohjoinen Oy. EN was selected as the service supplier in a three-year contract beginning in January 2002, a decision based on the company's clear strategy and the remarkable synergy benefits. To ensure a smooth and successful transition period, GKO acquired a 25% minority interest in this service company.
Principles of cooperation:
* The distribution company decides what kind of work will be carried out on the network.
*...