For some, winning might mean maintaining revenue flows; for others it might mean completely redefining their businesses to expand into new products, services or geographies.
Smart is beginning to change the energy landscape — and shake up the value chain.
By altering how energy is generated, delivered and used, smart is making room for new competitors from sectors such as retail, media, telecommunications and technology, as well as from within the industry itself.
This will result in industry winners and losers. So who will win in smart?
Predicting the future is not an exact science. However, by looking at industries that have undergone similar transformations to smart, we can see that past winners shared a number of qualities, among them the ability to:
- Manage uncertainty with anticipation and agility
- Rapidly scale new opportunities and successfully roll out new technologies
- Manage risk-taking
- Create solid revenue streams
- Time their market entrances just right
These winners were able to remain flexible and clear-minded as the market transitioned from one state to another, and to take bold action and respond to opportunities as they arose.
What do you want to be a winner of?
What does winning in smart mean for you? The answer will depend on your company’s starting point and its ultimate objectives. For some, winning might mean maintaining revenue flows; for others it might mean completely redefining their businesses to expand into new products, services or geographies.
For example, RWE, one of Europe’s leading electricity and gas companies, is currently piloting an intelligent home control system called “SmartHome.” For this technically challenging and innovative project, RWE is teaming with a number of companies (such as Microsoft) across different industries, from IT to design to product development. RWE believes that the winners in smart will be companies with the ability to communicate effectively and to draw together the right combination of skills needed.
So the first challenge is to define what success means for you — given where your business is now, and where you want to go. This will be influenced by:
- Speed of change in your market(s) — What are you investing in? Investment opportunities will differ depending on whether the speed and extent of change required is treated as an:
Infrastructure upgrade — Investment may be needed to cope with increased energy demand, environmental pressure or to upgrade out-of-date infrastructure. There are opportunities for return on investment from effective spending and improved performance. However, companies need to be alert to “tipping points” that signal the market is moving from an infrastructure upgrade into an evolutionary or revolutionary state.
Evolution — As customers become more receptive to change or where technology becomes suitably advanced, the market accelerates into a more competitive state. Companies need to be ready with innovative products and services, as well as strong customer communications, to capitalize on the opportunities an evolutionary market presents.
Revolution — Once customers are engaged and the smart infrastructure is in place, a complete shift in business models is needed to compete along the value chain. To participate in this rapidly changing business landscape, utilities will need to build or acquire skills that strengthen their customer focus, enhance innovation, reinforce their brands and maintain their strategic flexibility.
- Your long-term tactical strategy — Do you aim to become a market leader in smart grids, smart metering and/or smart homes? And in which geographical markets do you intend to compete? Some companies will continue to operate within their home markets; for others, energy will become borderless and they will seize opportunities to roll out products and services in other geographies. Technology leadership will also differentiate which companies can seize a stake in smart.