Newton’s First Law of Motion defines inertia – the tendency for a moving object to keep moving, and the tendency of an object at rest to stay at rest unless acted upon by a force. Let’s discuss the second idea – that sometimes things that stand still need a shove.
The traditional energy industry, could be said to have been standing still for quite some time. After all, we’re still basically deriving energy from the same sources we always have, in power plants that are aging, across an inefficient infrastructure. Utilities were asked to deliver cheap, abundant and reliable power – and they have. In exchange, they were granted market exclusivity. And for many decades now, that model’s worked pretty well.
Until now. Meet the outside forces: Technology. Changing consumer values. Environmental concerns. Competition. Together, they’re forcing utility companies to re-think, re-invent, re-acquaint and re-define themselves.
Accenture’s latest report, The New Energy Consumer: Strategic Perspectives on the Evolving Energy Marketplace, and the companion report, Revealing the Values of the New Energy Consumer, take a in-depth and fascinating look at the blur of change facing today’s utility companies.
Here are some of the highlights:
- Almost three-quarters of respondents indicated they’re willing to buy energy from a non-utility provider.
- The progressive rollout of smart meters gives utilities an opportunity to move beyond commodity sales, into products and services. But the vast majority of utility companies are ill equipped to do so, hampered by old paradigms and an aging workforce out of touch with the latest technology. Want inspiration? Check out EPB, a small municipal utility in Chattanooga, TN that sells ultrahigh speed Internet access.
- Nature abhors a vacuum, so if utility companies don’t fill the pipeline with related products and services, others will. Expect increased competition from companies such as Google, who’s already received federal authorization to sell electricity, energy and other services and products at market-based rates. Also watch out for consumer product companies to join the fray, like Best Buy, telecoms, cable companies, retail (The UK’s Marks & Spencer for instance) and high tech companies like Cisco Systems and General Electric who are both rolling out home energy management tools.
The four critical focus areas for utility companies are: the innovation imperative, information as the new currency, the power of collaboration and the changing faces of energy consumers.
- Innovation around new products and services to build and strengthen consumer relationships. How do you build-in an innovation pipeline and culture?
- Leveraging information as a competitive advantage – and not just information around distribution and infrastructure – information on usage and consumer needs. Utilities will have to get to know their consumers – because Google, General Electric and Best Buy already do.
- Utilities need to deliver tailored products and personalized services in a world where consumers expect this as table stakes. When a person can get movie recommendations based on their past rental habits, anything less is a disappointment.
- Don’t call them “rate-payers” anymore – with new providers of energy, including homeowners creating their own and selling it back to the grid – customers will become more elusive, and reaching them will be a whole new ballgame.
If you’re in the energy business, you have some really tough questions to be answering right now. What does your business model look like in 10 years? What are the changing market forces? How will your company adapt? Whatever the answers may be, remember that Newton’s First Law favors the moving objects gaining market share and consumer loyalty. So maybe it’s time to get started on the quantum changes the energy business is facing and adopt some new thinking before someone else does.