A public utility is a classic application of synergy concepts which we experience in our daily lives, and which can influence the mental models of many stakeholders on synergy initiatives. Utilities typically provide universal service by aggregating the needs of many users, and servicing those needs through the products and services which the utility offers. These products and services themselves are typically provided from many different sources, and often trade off cost and demand in determining which sources to use over time.

A familiar example of such a utility service is offered by the electric power industry, which performs electric power generation, electric power transmission,  electricity distribution, and electricity retailing to provide electric power to their customers. Today, electric power within most first world nations is a commodity which is typically offered to the market under predictable unit cost pricing (such as cents per kilowatt hour) within a class of service and period of performance. Such prices may also have price elasticity of demand under different market conditions, which is one means of managing the aggregated demand as it varies across users.

Utilities are a relatively recent innovation. Once Thomas Edison and his team invented the electric light in 1879, their innovation began to create demand for electric power within many communities, initially for street lighting and eventually for private homes. The first regional power plant, the Edison Illuminating Company, was formed in 1882. This interdependency between production and consumption demonstrates a critical characteristic of utilities, since lights aren't of use to people without the electricity to power them.

The initial Edison-architected companies offered power generation solutions based upon direct current. By 1887, there were already 121 power generation plants in use which provided such solutions. However, these plants could only economically deliver this power to customers that were within about one and one half miles of the generating station. Alternating current, a more efficient alternative which had been invented in this same timeframe by Nikola Tesla, provided a competitive alternative which did not have this distance limitation, and was being marketted by George Westinghouse. The competition between these standards, often known as the War of Currents, was waged for decades, through intellectual property law, publicity campaigns, and competing technological innovations.

Prior to the introduction of electric power, most industries were supported by either water power or steam power. As noted in the Innovator's Dilemna, disruptive technologies such as electric power often tend to surprise existing businesses in a marketplace, and it is rare for such established businesses to successfully adopt emerging technologies successfully into their existing products. The technology incumbants in such environments can temporarily survive by appealing to their least efficient customers, who may be happy to continue to use these existing technologies to avoid conversion costs, but this reluctance may ultimately reduce their ability to pursue the new markets necessary for long-term survival. This is one of the greatest risks for any utility offering, especially when new customers desire the best available technology, and sustaining businesses instead want to extend the economic life of prior investments in assets.

Samuel Insull, on whom the movie Citizen Kane is based, created the first electric utilities as we know them. Prevailing opinion at the turn of the twentieth century was that competition was the best way to improve service and keep prices low. Insull, instead, believed that a regulated monopoly, which gave exclusive operating rights to one company within a specific territory (in exchange for regulatory control over terms and prices) would be more beneficial for both utilities and customers. Although such regulation was not actually realized until 1914, Insull began acquiring many of his competitors much earlier. By 1895, he had already acquired about 30 of them, and their rights to use the different manufacturers' equipment, so that he had obtained an effective monopoly on electric service in Chicago. He went on to found Consolidated Edison in 1907. Insull's contributions are described in the book, The Big Switch in this way:

One of the underlying value propositions of utilities lies in their ability to economically respond to escalating demands within the market which they serve, and offering competitive pricing relative to those demands. One of the challenges in meeting these demands is in providing efficient operations throughout a wide demand curve, and especially at peak demand. The price of these services can then be determined by factors such as the necessity of the item, available substitutes, and the duration of commitments for purchasing, rather than being driven by the risks of unservicable, concurrent demand. The operations architecture which such centers depend upon can require significant investments and sophisticated analyses to manage this demand over time.

When such a utility offering is available to customers, the fixed costs of such services can help facilitate critical decisions within those businesses. For example, the fact that transmission costs can be reduced when utilization is close to generation often drives site selection decisions for power-intensive businesses like data centers. Unfortunately, as California electric power customers were reminded, it may also mislead customers regarding key non-functional requirements such as scalability and reliability, which can become more significant when resource shortages occur, as pressures on demand increase, or if the underlying capabilities are not sufficiently robust to satisfy the needs of customers. Such factors historically have meant that it has taken much longer for utilities to be positioned to service the needs of their most demanding customers, businesses, rather than customers.

Consider the early days of automobile production. In the 1920's, Henry Ford recognized that he needed electric power to achieve dramatic gains in productivity at the Highland Park Ford Plant. The massive gas and steam engine pictured on the right is one of nine that was built to supply electric power for this factory. This local generation was required because neither the capacity or reliability was available from utilities at that time. Built in 1916, these engines developed nearly 6,000 horsepower, and drove a 4,000 kilowatt DC generator; they weighs 750 tons, were 82 feet long, and 46 feet wide. With the benefits of this electric power and the refined production techniques which it enabled within the plant, 1000 model Ts could be manufactured per day, which drove the purchase price down from $800 to $300, which itself created considerable new demand at that price. Yet these benefits were only achieved because of the vision to pursue self-generated power, rather than wait for such capacity to come on-line from a utility provider.

Today, data centers are also consuming large quantities of electric power, and are co-located with power generation, so transmission losses are minimized. In order to deliver the required capacity and reliability to support such industries more broadly, an abundance of power must exist, efficient power grids must support transmission to remote users, and effective load management of generation, marketting, and distribution subsystems need to be implemented. The operations architecture which enables such centers to balance capacity and demand thus require thoughtful design and significant investments for the necessary infrastructure to be put into place. For example, consider this proposal for California's current water shortage (which of course is itself only rational if shortages are not too severe, and minimum demand is predictable).

While such an approach can realize economies of scale for delivering a commodity service like electric power, one cannot expect this same strategy to work for non-commodity items. Consider the cost-effective application of technology and knowledge to solve problems that we call engineering; such pursuits are typically not scalable in the way that commodities are, since they are typically do not exhibit uniform properties which are independent of the size of the application. The methods and approaches required to produce a thousand lines of code for a small software project are not directly applicable to a million line project, any more than the construction techniques for a back-yard storage building are directly or economically applicable to those required to build a skyscraper.

The goals of lean production of a commodity focus on removing waste in recurring manufacturing operations. The goals of engineering are instead to identify, understand, and address the unique constraints of a project in order to allow its products to be repeatably manufactured and efficiently supported. Success in engineering is highly dependent upon having ready access to information, ideas, domain expertise, and an inventory of proven components and architectures that can be built upon. Such elements are simply not in abundance or interchangeable in the way that electrons are. The real challenges in such engineering efforts are thus not in managing inventory or standardizing work flow (though both are still useful tactics to employ), but in making intelligent tradeoffs between alternatives, improving communications paths, managing complexity, and avoiding accumulations of technical debt. Each of these typically are unique to the project context in which such work is performed. If meaningful lessons can be extracted from such efforts, and applied to future projects, the means of engineering can indeed be improved across projects, but this knowledge transfer is not free, easy, or always meaningful to the next project coming down the pipe. For example, consider the impact of pay-as-you-drive insurance on our previous case study on automobile usage.

The takeaways from our examination of this synergy case study are:

• Existing technologies may be entrenched and difficult to dislodge to achieve broader goals
• The costs of servicing customer needs by a utility may not increase linearly with demand
• Competition between competing technologies can consume substantial resources and time.
• There are critical interactions which must be negotiated between producers and consumers of any 'common' capability; both sides must agree on protocols for business decision-making, forecasting techniques, pricing models, and the means of allocating resources to the most appropriate customers, when available resources are insufficient to service all needs.
• Physical co-location is often an important source of value for customers.
• A utility offering requires a uniform commodity product to be successful, patience, and a predictable investment stream to implement the required changes for successfully transitioning from the 'old' to the 'new'.