Utility Week

28 | 5TH - 11TH OCTOBER 2018 | UTILITY WEEK Operations & Assets Roundtable Changing business models for competitive advantage 20 September, Charlotte Street Hotel, London Playing to win To meet their younger and more agile competitors head on, established energy suppliers are having to embrace new technology, and how to interact with their customers in new ways. T he look and feel of the energy retail market is changing. There are now more than 70 suppliers vying for cus- tomers' attention, compared with about 40 companies in 2015. With so many new entrants, existing players in the market are having to evolve their business models to meet the challenge. At Utility Week's recent roundtable, Play- ing to win: changing business models for competitive advantage, held in association with Gentrack, senior members of major and mid-market suppliers gathered to discuss how energy companies are responding. Established players are learning that sim- ply being in the market is no longer good enough. Incumbents are increasingly finding themselves being challenged by younger and more agile businesses and in turn are look- ing at how they can respond and use their legacy to their advantage. And while each new entrant will claim to offer something different, the recent demise of several challenger brands has already demonstrated that agility does not always equal survival. One participant pointed out that about 80 per cent of business processes are the same no matter what company you work in. They suggested it is the remaining 20 per cent of processes where companies can make the most of their points of difference. Technology is helping with that. The group explored how companies can shake up the way they do business and the oppor- tunities digital disruption is creating for them. Take the mobile app market for example. It's now so ingrained in modern life you'd be forgiven for thinking Apple's app store must have been around for much longer than a decade. It started with a focus on games but it wasn't long before that flipped to function for consumers, one member said. "Financial services switched to app-based systems about five to six years ago," they say. With about 80 per cent of the population owning a smartphone – the banking indus- try has moved to between 50 and 60 per cent of people controlling their money day-to-day through their phone. The question is, what can you do with energy? Some suppliers are purely app- focused, but other companies are offering a variety of online channels so customers can communicate with them. Another participant explained that recent research carried out by their company into the B2B market shows about three-quarters of business customers begin interaction with their energy supplier online. The problem is that most of these custom- ers will not be able to go end-to-end online because of complexities in the market. "It seems the further you go, the less you know," one participant suggested, explain- ing the industry can still be difficult to fathom despite several years of experience." Meanwhile, one recalled a conversation over Skype a couple of years ago with some- one in Australia which was like a "view into the future" for the energy market. Based on their smart meter, the person in Aus- tralia could see how much energy they had used that day and had purchased a block of energy for the next day. In the UK, that may still feel like a pipe- dream. "But you can see where the puck is moving to and where you need to be to give consumers that kind of ability to interact with the market", the discussion agreed. A key message of the aernoon was that although the energy market can be complex, participants must break down the complex- ity for consumers wherever possible. With big and small businesses alike trying to be efficient and reduce the cost to serve customers, there's clearly a lot the sector can learn from other industries and countries. The group also discussed the wealth of data that can be created from various tech- nological advances, but the consensus was the industry needs to get better at using this. And the roundtable also talked of how major suppliers are choosing different tech- nological paths – such as home services and electric vehicles – and the political and regulatory context in which the industry operates. Later this month, we will learn if there will be another radical market transforma- tion when the Competition and Markets Authority's independent panel publishes its final report into the proposed merger between SSE and Npower. If given the go ahead, it will only be a mat- ter of time before the big six become the big five. The industry will also be looking ahead to the price cap and the impact that will have on companies' ability to play to win.

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