Business platform models – vital for building novel ecosystems in an era of utility liberalization
Utility companies across the world are facing one of the biggest threats in their history: liberalization. Customers are becoming completely free to select their utility provider, including one of the innovative new market entrants.
With the newcomers tempting customers away, traditional utilities are asking themselves how they can distinguish themselves. They cannot differentiate via the quality of the electricity or gas. So, what should they do? Let’s explore.
Distinguishing offers key to survival
Traditional utility offers are very simple: charging a fee for the consumption of electricity, gas, water or other utility. Meanwhile. To take advantage of consumers new-found freedoms, inventive and agile young players are distinguishing themselves with novel offers that add value-add services to the traditional consumption offer – all for a flat fee.
Some are adding heating system maintenance services. Others are selling commodities such as thermostats or electric light bulbs. Others are establishing partner agreements so they can resell household appliances. Some others are providing smart services for cities, stadiums or even cruises landing in the harbor.
Utilities should develop their own original offers that look beyond their traditional business models. These new offers should instead be based on a platform business model that incorporates a wider partner ecosystem. For many utilities, this will be the only way to survive in the era of liberalization.
Liberalization has not reached the same level in all corners of the globe: it’s advanced in some countries, just emerging in others and not present at all elsewhere. Here in Italy, for example, liberalization started several years and will be completed by June 2020.
Nevertheless, there is a clear global trend toward liberalization. Utilities would be wise to start their preparations today.
Business models based on digital platforms
Digitalization sits at the heart of the new platform business models. Increases in the volume of electronic data and breakthroughs in the analytical capabilities are reshaping customer engagement and redefining value chains, and new market entrants are already taking advantage.
Let me suggest some concrete steps traditional utilities should take to build a new business model based on digital platforms, so they are ready to entice customers when their market opens up:
- My first step is about transforming how they interact with their customers, many of whom are from a generation that likes to use apps and social networks. Utilities traditionally only spend perhaps five minutes a year engaging with their customers, and often only when their customers are experiencing issues. This must change. Digital platforms help utilities reshape customer engagement by allowing them to engage more regularly with their customers, not only across today’s digital channels but also others that will emerge in the future.
- My second suggestion is about leveraging digital to open up new types of products and services. The possibilities here are vast and customer expectations are high. A digital platform becomes essential, both for accelerating time-to-market for new offers as customer demands evolve and for bringing flexibility to the systems these offers depend on. It also allows utilities to tailor their offers to more precisely meet customers’ specific needs, turning a handful of offers into hundreds or even thousands of personalized alternatives.
- My third step focuses on building a novel B2B partner ecosystem that could lead to highly innovative and disruptive business models. Utilities should consider developing new business models based on ecosystems that extend beyond traditional boundaries: transport, cities, factories and even competitors. The digital platform allows partners to share information and services efficiently and safely. Partners could even integrate their individual platforms and combine their services into one single offer to the consumer.
Take Enel here in Italy as an example of a well-established utility that has done just that. Enel founded a new company, Enel X, based around a partner ecosystem. Enel X has opened physical stores that sell electricity and gas contracts, alongside e-bikes, ovens, fridges and other physical products.
Adapting for the prosumer era
We’ve seen how digital platforms are vital for B2C interactions, accelerating time-to-market and enabling new partner ecosystems, business models and offers. These platforms also have a critical role to play in new energy generation ecosystems.
More and more consumers are joining the energy generation community; they are becoming prosumers. To balance local consumption and production, prosumers, generators, cities, utilities and distributors need to share (anonymized) information about consumption, the weather forecast, the production forecast and more. Digital platforms help the generation ecosystem share that information securely and efficiently.
When liberalization arrives, success for utilities will depend on platform business models. Explore our latest Journey 2022 ‘Resolving Digital Dilemmas’ report, researched and written by the Atos Scientific Community, to discover why the most successful companies in the digital era have built their businesses on platform business models.