Four steps for energy network leaders to shape their future

Four steps for energy network leaders to shape their future

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The energy network is changing fast, so it is likely that a semi-decentralised network will exist within the next 20 years. As we move towards this future, there are some major implications network providers should consider. The move towards a semi-decentralised grid will see network companies transition from the current state, to platform managers, to network orchestrators and ultimately become the ‘brain’ of the network. If network service providers act now, they will have an opportunity to play a part in shaping the future energy network.

Four steps to drive the change required

Network service leaders are already aware of the need for change, but few are clear on where and when to start, and what first steps can be taken to shape and prepare for the future without compromising existing core, regulated revenue streams.

Nous’ view is that a good starting point for network providers is to develop a shared commitment to an agreed future vision, while resourcing effort to flexibly shape and respond to future needs as they emerge. The following four steps can help energy providers to act early and effectively to prepare for the future.

1. Establish a shared commitment to a future vision

Establish a commitment to a future vision

Dedicate resources to enable the changes

Diagram of strategic agility

Dedicated innovation resources should be accountable for identifying new business models and customer oriented products, services and markets as sources for future growth. These resources should operate as a group and run like a ‘start up’ – free from any rigidity and risk-limiting mindsets. This will allow the group to trial new risk taking ventures and learn with speed. The type of work this group can focus on includes:

  • Trial investments in small scale projects allowing the organisation to ramp up or scale back investment as appropriate.
  • Identifying and exploring new business models to test opportunities for the organisation to improve energy efficiency and generate new revenue streams.
  • Acquire new companies to expand capabilities, obtain key assets and bring new intellectual property to the organisation.

Network providers in Australia can seek inspiration from international peers. In the USA, providers have established out-posts and VC arms in Silicon Valley, where they systematically test their own technology innovations, search for new ideas, and tap into information flows from energy start-ups.

3. Ensure strategic investment of resources and capital

Ensure strategic investment of resources and capital

A prioritisation framework for investment of effort and resources should outline a common way for the group to:

  • Identify the opportunities for experimentation
  • Prioritise the opportunities for investment of effort and resources
  • Determine mechanisms for allocation of resources and capital
  • Decide on signature bets for larger scale investment.

A strong prioritisation framework means that innovation resources will have both strategic agility and strong links with the core business to drive quality investment in growth and change.

4. Influence change from the legacy to the future business model

Influence change from the legacy to the future business model

Core operations can make low risk decisions and investments that will be useful regardless of how the future looks. The outcomes of these decisions will progressively position the business to respond to future opportunities with speed.

The new group of innovation resources can operate as a support to these business units and influence them to adjust. Learnings from innovation efforts combined with long-held operational expertise can uplift capability and achieve internal convergence. Areas of focus should include:

  • Increasing agility – Enhancing competitive intelligence capability to monitor and provide the best information on technological, policy and market developments.
  • Achieving an uplift in key capability areas – Implementing targeted capability development such as in technological competency and intelligence along the data value chain.
  • Driving customer-centricity – Embedding initiatives to improve customer loyalty and empowerment and obtain useful insights into customer needs.

Building connectivity between core operations and innovation resources will balance the focus between what makes the business successful today and where it needs to be in the future. It is possible to protect core revenue streams and strategic assets while augmenting new revenue streams and capabilities that will dominate in the future.

Providers who start now will reap the benefits sooner

With the current regulatory environment and the burden of legacy assets looming large, there is undeniable appeal to a ‘wait and see’ approach. But change is inevitable and acting early provides a unique opportunity to not only reduce uncertainty, but to help shape and lead the future network.

The first step is always difficult and getting the leadership team to agree to a unified commitment can be challenging. But it is an extremely worthwhile exercise, and starting now not only reduces the pressure of having to react to change (rather than prepare for it), but also allows providers to realise the benefits of change earlier.

Get in touch with our utilities experts to discuss how you can align your leadership team now and get ahead of the change.

This article was co-authored by Michael Kron.

[1] Yves Doz, Mikko Kosonen “Fast Strategy: How strategic agility will help you stay ahead of the game” 2008

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