The Minnesota Power Story

Electric utilities have seldom been held out as examples of customer focus, which makes the story of Minnesota Power (MP), a utility in Duluth, all the more extraordinary. In the mid-nineties the U.S. power market started to change as signs were increasing that deregulation of power was imminent. While most utilities could see that they were going to have to do business in a very different way, MP was one of the few utilities to aggressively start realigning its culture to serve its most critical customers.

Drivers for Minnesota Power's Strategic Account Realignment

In 1994 the majority of MP's largest customer contracts were ending in the next few years . Steve Sherner, MP's vice president of Large Power Marketing, heard rumblings from these customers that they would not sign up again unless the contracts' terms were more flexible to their needs. As one customer executive put it, "MP needs to wake up and understand the beast they're serving—what it takes for us to survive long term . Our survival is their future." Other large power customers went beyond rumbling. One of them petitioned the Minnesota Public Utilities Commission, asking that they be allowed to get their power from a local cooperative rather than from MP. The account lost. Another account sought open access from the legislature so customers could get power from anywhere they wanted. That bill was denied by only one vote in the Minnesota senate.

The large-customer rumblings then grew louder and clearer. After its new short-term contract was signed in 1995, MP's single largest customer ($45+ million a year) refused to come celebrate with MP because it felt there was nothing to celebrate. Later, in the spring of 1995, Sherner commissioned assessments on the firm's largest power customers. He wanted an objective third-party view of these relationships to test his concerns and to make certain MP executives heard directly from strategic accounts. Shortly into this assessment, MP confirmed that this account's executives were very dissatisfied with the MP relationship. Account contacts were eloquent about embracing the future of deregulation : they were actively looking for a new power supplier. Those conducting the account assessments strongly suggested that MP mount a major effort to repair this large-customer relationship.

What Key Players Did to Strategically Realign Minnesota Power

Besides the market shift, contract expirations, and large-customer complaints, the fourth driver in realigning the corporate culture was the addition of two new players at MP. The utility named Ed Russell, from outside MP and the utility industry, as corporate CEO. MP also promoted Bob Edwards, its very creative CFO, to president. Russell knew about business and customers but had little experience with utilities and so, while staying closely involved, he allowed Bob Edwards to lead that part of the business.

On one of their very first days on the job, Russell and Edwards attended the presentation of the large-customer assessments. Hearing about how their largest customers felt about MP was certainly not the happiest way to begin their tenures. But both Russell and Edwards saw the customer feedback as a gift and said it presented an opportunity for MP to protect and develop its critical relationship assets.

Eric Norberg, then director of Large Power Marketing, emerged at this point to take a leadership role in assisting both in the relationship repair and corporate alignment. Norberg over-saw the large-power relationships, working closely with two seasoned account managers, Dave Lundein and Brad Oachs. Norberg, Lundein, and Oachs assumed a more proactive role in the relationships and negotiations, working to make contracts more flexible for MP's largest customers. As so many others at MP did, they rose to the challenges in front of them.

On April 25, 1996, Norberg held a meeting of MP executives and managers to develop the repair strategy for the largest account. All those at the meeting stepped up and assumed strategic responsibility for managing the repair effort. As Norberg said, "(W)ith industry restructuring coming, we really didn't want to lose (the largest account's) contract (or any contract for that matter). In fact we were committed to using the results of that contract as a cornerstone of our restructuring effort for the company."

To further this relationship building and contract negotiation, Edwards met personally with the largest customer's general manager in Minnesota. Each left his lawyers and support people behind, which made negotiation much easier. After the GM and Edwards defined their interests and concerns, Edwards brought those issues back to MP staff so they could create customer solutions. As the GM said, "It was a good move by Bob. He took a big risk, though, because if it didn't work out with us, he had no line of appeal left at MP." For the first time, the general manager could see that MP was serious about listening to his plant's needs.

After the April meeting, Norberg assumed tactical control of the largest account's relationship-repair process, managing the multiple relationships between people in MP departments and parallel functions at the customer. Edwards, Norberg, and MP's other decision makers had a major insight at this point—that the large-power marketing department alone could not drive MP's alignment around strategic accounts. If the alignment were not supported by the other functions, one customer phone call to an old-mindset MP employee might jeopardize that account relationship—however large. Norberg does admit, though, that MP's cultural realignment to strategic relationship management was made easier by MP's values. "Minnesota nice" is much more than an expression. Employees wanted to have good relationships with customers and see them succeed. Now management had aggressively given them such an opportunity.

Norberg began breaking down MP's functional walls. He made certain that all parties within MP who would have to implement a contract were consulted and on board before any deals were struck. He also kept these same people in the loop whenever a customer meeting or communication occurred. His basic responsibility was making sure that MP lived up to its commitments. Norberg's team included some 30 cross-functional MP employees. He worked with them to gather ideas, to figure out how to work the regulations in the customers' favor, and how to reinforce Russell's and Edwards' original message about protecting and developing critical relationship assets.