Imagine the energy transition is a great Gladiatorial Games – the largest since the Industrial Revolution. The battle-hardened gladiators of Games past must now prove their mettle against unprecedented obstacles, including:
- More warriors than ever before
- Innovative weapons
- New styles of fighting and
- An ever-shifting arena
Watching Ridley Scott’s epic ‘Gladiator’ for the umpteenth time, keenly following the plight of Maximus Decimus Meridius (commander of the Armies of the North, General of the Felix Legions, Father to a murdered son and so on), it was this curious thought that occurred to me.
The seasoned fighters in this analogy are the large utilities that dominated the old energy system. Their way of fighting, with large centralised generation from cheap fossil fuels, is increasingly obsolete and their weapons, generally stemming from being big fish in a small pond, have been outmoded. If they are to survive, they must adapt.
Such is the conclusion of a recent report drawing on the insights of six former “gladiators” (aka. senior industry and political figures), providing insight and guidance that may prove useful to those still fighting. In it they outline what is driving the energy transition, the sectoral changes that are resulting, and the challenges that this poses to those within it (as illustrated below).
The incumbent gladiators are in a precarious position. If the large utilities are to have a hope of flourishing through the energy transition then they must do the following three things.
First, they must adopt new styles of fighting. We have so far in our research analysed over 100 of the business models emerging to better suit the new energy arena. Many of these innovative approaches are discussed in my colleague Jon’s blog. We have a good idea of what new energy looks like: decentralised, low-carbon, and customer centric. Large utilities must change their style of operation to fit this structure if they are to remain relevant.
Second, they must use better weapons to gain an advantage or to defend themselves as they battle for market share. For example, the development of storage devices in anticipation of increasing intermittent renewable generation on the grid or enabling customers to make the most of their decentralised generation devices through remote support and insights offerings. As in battle, first mover advantage here will be key. Those who develop the product that first fills a need will be able to corner that market and build on expertise denied to competitors. Large utilities, with their vast knowledge and resource, are in a good position to develop superior solutions if they pay attention.
Ultimately, the most effective way to gain advantage over your opponents in the arena is to gain the favour of Caesar. Of all three things, pleasing Caesar is of paramount importance! For Caesar, so far unacknowledged despite his central role, will ultimately decide who shall live to fight another day. In this energy transition cum gladiator games scenario, the central role of Caesar falls to the customer. It is the customer that has created the games through demand for energy. It is the customer who is overlooking the entire proceeding, observing the strengths and weaknesses of the various participants. It is the customer that will offer the final vote – the thumbs up or down – through their wallet.
The best way to please Caesar? Get to know him! What does he want? More importantly, what does he need? Knowledge is power and this fact has not been lost on our numerous gladiators. It is no coincidence that many of the new business models Delta-ee’s been researching centre on customer service instead of commodities. Nor that many are investing heavily in energy insights from better customer data analytics. This is a zero-sum game. Access to Caesar and his data is limited to those who first satisfy him (for, having found this, why would he search further?). As my colleague Arthur’s blog notes, those who don’t build these services fast enough will likely lose customers, and the data that comes with them. Lose the opportunity to know Caesar and you cripple your chances of pleasing him.
In many ways, Maximus Decimus Meridius is the role model large incumbent utilities need. He was a master in one style of fighting, head of a victorious conquering army then his situation changed. Ousted as head of the pack, he was forced to fight as a gladiator in local tournaments. He adapted to these new circumstances, using his superior military knowledge to outmanoeuvre his fresh-faced opponents. Similarly, large utilities can take old lessons and apply them to new situations and once again thrive.
Of course, those familiar with the film will know (and spoiler alert if you don’t!) that, despite his successful adaptation, Maximus is ultimately mortally wounded. Deliverer of the fatal blow? Commodus, better known as Caesar. I guess that even if you do everything right, survival cannot be guaranteed if the customer doesn’t like you!
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