Changing Change
The Essentials Newsletter, Forty-seventh Edition
As framed brilliantly and simply in the classic management book, Who Moved My Cheese?, we humans are all challenged with accepting change to one degree or another. In terms of change across industries, the seminal framework developed by Thomas S. Kuhn back in the early 1960s, “The Structure of Scientific Revolutions,” is spot on. But I’m jumping in too quickly…let me back up and provide some context.
Many of our 17 critical infrastructure sectors (16 federally designated plus mining) are conservative by nature because what they do is essential for our safety, health, and financial well-being. So, risk must be managed more closely, which, logically, has a dampening effect on innovation. Homing in on the industry I know best, the electric sector, that characterization applies, and then some. In the modern era, electricity delivery is highly regulated/overseen related to the rates utilities can charge, the investments they can make, the environmental footprint they impact, and their security posture. Pressed by those regulators to improve efficiency over the last 50 years, utilities got to a point where, in the last 20 years or so and until very recently, demand (load) growth had become almost flat.
Contrastingly, when the industry was in its infancy in the late 1880s until about the early 1970s, innovation was rampant. According to Construction-Physics.com:
Abundant electricity is a defining feature of the modern era. At the turn of the 20th century electrical power was a rare, expensive luxury: in 1900 electricity provided less than 5% of industrial power in the US, and as late as 1907 was in only 8% of U.S. …Electricity’s transition from a luxury good to the foundation of modern life happened quickly. By 1930, electricity was available in nearly 70% of US homes, and supplied almost 80% of industrial mechanical power. By 1950, the US was tied together by an enormous network of high-voltage transmission lines.
That is almost unfathomable growth in a short amount of time. Electricity literally powered our military during World War II. After that, a major economic boom coupled with technological developments and huge growth in construction, including the buildout of our national highway system in the 1950s and 1960s, spurred even more growth in electricity use. During these eras of high demand, the industry innovated in myriad ways – developing massive projects involving hydropower (example: the Hoover Dam), nuclear power, natural-gas fired power, and coal-fired power, and also learned how to share high-voltage assets in regions. These innovations were enabled by brilliant engineers doing highly technical electronics and electro-mechanical work to improve capabilities and efficiencies. The industry shared assets in other ways, as well, including wireless telecommunications networks that enabled them to communicate in the field during maintenance activities and restore power in outage events even when the large telecom providers did not have service.
Beginning in the 1970s, however, energy shortages, especially in the oil and gas sectors, complaints about the market power exerted by some utilities, and a heightened focus on the environmental impacts of power plants, resulted in increased regulation. Admittedly, some of that regulation eventually resulted in further innovations, including to clean up or “scrub” emissions from coal- and gas-fired power plants. But even with additional oversight and expenditure on such remediations, electricity demand remained high until the early 2000s. Since then, such demand had leveled off – until very recently.
At the same time (around 2005), utilities and others in the sector that had deployed digital technology to give themselves greater control over their operations realized the extent of the cybersecurity threat on those same digital assets. Addressing this threat required significant investments in mitigating cyber risks, an issue shared across critical infrastructure sectors as discussed in numerous editions of The Essentials.
Physical and weather threats to the electric sector have also ticked up in the past 20 years – the devastating hurricanes Katrina/Rita in 2005 and Helene in 2024 bookending this era of multiple, devastating, named hurricanes resulting in trillions in damages, according to the National Oceanic and Atmospheric Administration Hurricane Costs. Other storms such as Super Storm Sandy, Winter Storm Uri, Winter Storm Elliott, and multiple wildfires have caused utilities and other stakeholders to have to rethink their resilience posture and the institutions they have created to gain efficiencies and additional revenue in a limited growth environment. Not to mention physical security incidents in which nefarious individuals or groups have targeted utility infrastructure.
Therefore, it’s no surprise that utilities are risk averse: 1) it’s in their nature to be because people’s lives and livelihoods are on the line; 2) stagnant growth has caused a “belt-tightening” mentality in the last 20 years; 3) significant weather events impacting utility infrastructure have increased; 4) mitigating physical and cybersecurity threats requires significant resources and focus; 5) workforce retirements mean utilities have to tread more carefully with less experienced personnel; and 6) the pandemic revealed significant supply chain constraints, forcing utilities to revisit their procurement strategies.
No wonder change is hard in this sector. And, I would add that change is hard in any of the critical infrastructure sectors, especially some of those experiencing similar headwinds. Given the massive shift in load growth experienced in the electric sector in the last couple of years and factoring in the background I just mentioned, how can the industry change its attitude toward change?
I mentioned at the top of this edition the book Who Moved My Cheese? It was widely read and referenced in the 1990s, and a colleague commended it to me several years ago. In a basic way, it delineates four buckets of individuals’ response to change and in so doing provides a framework for us to benchmark ourselves, our employees, colleagues, bosses, clients, etc. For example, is my response a “knee-jerk no,” just because an idea would mean a change or is my response more substantive?
But the work that I read in my college philosophy class, The Structure of Scientific Revolutions, enabled me to understand institutional aversion to change. This book has stuck with me for 34 years -- I think about it in numerous contexts, and it allows me to get to the crux of why we live with poor performing regulatory structures, business models, and even internal processes and procedures. Even though Kuhn’s book focuses on science, the truth it reveals is applicable to any sector or institution. In my interpretation, the crux of Kuhn’s book is:
In science, which is based on theories derived from experiments, a theory will seem accurate and provable enough that the scientific community (and the general populace) embraces it. A classic example is the theory that the earth was the center of the universe.
An innovative scientist comes along – often a bit rebellious and outside of the normal way of thinking – who disproves the original theory.
Said scientist is vilified and, in some cases, imprisoned or put to death. Again, think of Galileo proving that the earth revolves around the sun.
Eventually, sometimes years or decades after the new theory disproves the old theory, the scientific community, governments, the general populace, etc., come around to the new way.
The reason for the initial resistance is because paradigms are created around significant scientific theories. Such paradigms include job creation, careers and reputations, religious leaders touting the theory, governments embracing the theory, etc.
If the original theory is wrong, will everyone lose their jobs, the mission of their lives? Will people be embarrassed? Will they lose control? Maybe or maybe not, but the fear of those potentials is significant.
We’re seeing Kuhn’s premise play out as we speak, as the electric sector must change rapidly to meet exponential demand growth from AI/data centers within the context I mentioned above. Outdated regulatory regimes, pseudo-markets, egos, reputations, and individual resistance to change (how many of you have heard “just don’t change anything until I retire in a year”) are all on display. What isn’t as simple in the electric sector is that a new paradigm has not yet been fully formulated. I know of smart people thinking about and circling around such a new paradigm, of course. The question is will all the deciders in the sector move quickly enough once that new paradigm – or even a set of “sub-paradigms” – is embraced. Other CI sectors are also facing paradigm shifts due to different pressures.
In the interim, we as individuals in the electric, or other CI sectors experiencing existential pressures, can try to better understand how we respond to change so that we can, if need be, change how we respond to change, expanding our horizons and opening our minds to overcome fear of change. This will help us better suss out whether or not our aversions to new ideas or products are fear-of-change-based or legitimate.