Spring 2000

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John E. Boyd, MS '76

John E. Boyd is president and chief executive officer of Con Edison Solutions, a subsidiary of Consolidated Edison, Inc. At Con Edison Solutions, an unregulated energy services company, he is responsible for leading the company's entry into natural gas markets and unregulated electricity and for building its business in the related energy services marketplace. Mr. Boyd assumed the leadership role at Con Edison Solutions in December 1997, following a distinguished 32-year career with the communications giant AT&T Corp.

In 1965, Mr. Boyd began his career with AT&T at New York Telephone. He subsequently held a succession of leadership positions including vice president of Marketing Strategy and Business Development for Consumer Products, president of AT&T Computer Systems-International and vice president of sales for New York.

During his tenure at AT&T, Mr. Boyd held various executive positions in the local communications, consumer products, computer systems, and telecommunications systems areas. Throughout his career, he was recognized for successfully launching new businesses and product lines and for entering new and challenging markets.

Mr. Boyd earned his B.A. in English from Iona College and his M.S. in advanced management from Pace University's Lubin School of Business. He provides guidance and insight on developing programs that reflect contemporary relevance and best practices as a member of the Lubin School's Advisory Board. An active participant in both the communication and energy service fields, Mr. Boyd serves on the board of directors of Remote Source Lighting Company, Inc. and the board of advisors of Talus Inc. He is also the founding chairman of the Telecommunications Industry Association and a past governor of the Electronic Industries Association.
 

Executive in Residence John E. Boyd, MS '76: Forging the Tools for Success

  [John E. Boyd]
John E. Boyd, president and CEO of Con Edison Solutions, explains the challenges of marketing an electric utility in New York City to a group of undergraduate students.

When residents of Washington Heights, in New York City, suffered through many hours without electricity on the hottest day of the year last summer, it created a major crisis for the electric supplier, Consolidated Edison, and for the city administration. It also demonstrated how a single factor causes most of the volatility in the electricity market. On that sweltering July day, the price for one megawatt hour of electricity, which normally costs around $30 wholesale, rose to around one thousand dollars. "The volatility facing the U.S. electricity market due to weather alone is incredible," remarked John E. Boyd, p resident and CEO of Con Edison Solutions, an unregulated energy services company that is a subsidiary of Consolidated Edison. Boyd is a Lubin Advisory Board member, and was a recent Executive in Residence. He is also an alumnus of Lubin, having received an M.S. in Advanced Management in 1976.

Boyd spent February 9, 2000, on the Pleasantville and White Plains campuses, lecturing to undergraduate and graduate classes. He also had an opportunity to speak with faculty and administrators on both campuses.

In recounting the events of the summer of 1999 in New York City, Boyd described how the demand for electricity to power air conditioners that July day exceeded the capacity of the wires carrying it to Washington Heights. The result: the heat that such a large quantity of electricity generated caused the cables to burst into flames.

The Business of Risk Management
Although it is the leading cause of market volatility and the greatest driver of electricity usage, the weather represents only part of the equation, remarked Boyd. "As marketers for an electric utility, we must calculate electricity usage for every customer over every hour of every day for one whole year. We then aggregate our calculations to determine the total load for the year," Boyd explained. Errors of 10 percent or more in their estimates result in penalties imposed by the utility. "We must have extremely good economic forecasting models in place if we expect to remain in the business."

Prior to deregulation, the utilities themselves were responsible for managing the risk associated with weather phenomena and economic forecasting. It is now in the hands of energy services companies like Con Edison Solutions to accurately manage such risks. "Managing the volatility so that we can search for ways to take advantage of volatility is what enables us to make money," said Boyd, who emphasized the value of information to his company and his customers. "How do you give value to customers when you're in a commodity market? By providing them with accurate and up-to-date information about various sources of energy, thus enabling them to better utilize their resources and take better advantage of the marketplace."

Simple Product, Complex Marketing
Successful management of volatility and demand is not the only challenge Boyd faces as the head of Con Edison Solutions. "Electricity is the kind of thing you mostly notice in its absence. There 's nothing simpler than making it, however, it is one of the most complicated things to sell," Boyd explained.

Describing one of the many marketing challenges his company must overcome in the d e regulated energy marketplace, Boyd shared with his audience the observation that an inverse relationship exists between the d e g ree of product complexity and the degree of difficulty in marketing that product. The ability to overcome such obstacles is especially crucial given that, according to Boyd, "the d e regulated side [of the utility i n d u s t ry] will drive 80 percent of p rofits in the next ten years."

You're probably asking yourself, what makes electricity so difficult to sell? Boyd's audience, to whom he posed that very question, responded with several insightful answers. One student suggested that in and of itself, electricity does not re p resent any value; the value comes f rom what it enables one to do with it. Another student pointed out the difficulty in diff e re n t i a ting one company's electricity f rom that of another. Boyd a g reed, but argued that the primary reason electricity is so difficult to sell is that, for the most part, electricity cannot be stored. "The utilities must manufacture electricity when the consumer needs it, without producing too much. Any excess electricity simply goes to waste," he explained, emphasizing the enormous logistical challenges such a "just-in-time" model poses.

The Future of the Electricity Industry
Although Boyd acknowledged the need for strong brand positioning in the recently deregulated commodity-driven energy business, he stressed the importance of broad strategic vision in an industry that has begun to attract investors. The ability to recognize emerging opportunities by "thinking out of the box" will be a major determinant of long-term profitability, according to Boyd, who believes that, in the long run, people may no longer have a need for Con Edison as a provider of energy. Pointing to the information revolution that continues to transform business, Boyd argued that "the Internet presents us with solutions that we wouldn't have even considered ten years ago. Fuel cells, microturbines, and advanced metering technologies are just a few examples of possibilities that will completely revamp all of our old assumptions about electricity."

Boyd attributes many wellknown strategic blunders to a lack of vision, citing IBM's infamous decision to focus on mainframes and Barnes & Noble's failure to recognize the Internet market for books as examples of companies looking internally for strategic cues while ignoring the wants and needs of their customers. Placing too much emphasis on existing investments for fear of cannibalization can lead to stagnation and poor decision making, according to Boyd. "It's an absolute truth of marketing. A company must cannibalize itself at some point if it wants to keep abreast of a changing marketplace. The trick is being able to recognize a significant shift in technology or in the marketplace that's going to fundamentally change your business."

Boyd's message was clear: companies must strive to respond to their customers and to their environment if they expect to remain competitive. Those companies that can deliver the value their customers seek while creating value for themselves will prevail. "The world will belong to the people who understand marketing, who understand and respect their customers, who can make intelligent bets on what their customers will value, and who can build the infrastructures needed to deliver those values to the customer."