As the UK’s energy sector continues to undergo significant transformation, research* commissioned by Capgemini has found that 84% of its main players have identified or plan to identify new business opportunities related to the increasing amount of data being produced. Of that number, a subsequent 84% are already pursuing or plan to pursue these opportunities. What’s more, over half (52%) are looking beyond the current value chain to find alternative revenue streams, prompting significant shifts in business models, and approaches to innovation and collaboration.
All UK energy suppliers agree that the market will be completely turned on its head by a host of digital transformations over the next 5 years, but most (86%) cite the government’s 2020 smart meter target as the pivotal driver for this. Smart metering and other initiatives, especially those focused on customers, mean that energy retailers are generating and receiving large amounts of data. Encouragingly, over three quarters (78%) said they feel well equipped to handle this influx, and 70% have already implemented innovative technologies in order manage and use it effectively.
Our energy Expert Alain Bollack commented on the findings: “Data is the lifeblood of today’s innovation, so the fact that the Government has provided a mandatory stimulus to increase it within the energy market will prove a huge boon to the industry. It is paramount that energy providers take full advantage of this, and while they will continue to improve customer experience and services with it, looking beyond their immediate boundaries for integration with other markets will also open new doors for both companies and customers alike.”
“Data economy”, i.e. ways to use data to open new business opportunities, has become a theme in the industry and requires a culture of collaboration. Especially if such business opportunities reside in the boundaries of adjacent industries, for example, the collaboration of utilities and insurance companies.
In the research, smart metering emerged as the number one area of collaboration for the industry – with 71% of those currently or planning to collaborate doing so for this technology. While collaboration may be well established in this area, the results showed clear room for improvement elsewhere. Only two fifths (40%) of larger suppliers are currently collaborating or planning to collaborate with companies from adjacent markets. Interestingly, six in ten (63%) of those large suppliers who are not planning to collaborate admitted their preference to grow and pursue new business opportunities was through acquisitions. This is indicative of barriers to collaboration, and in the search for “why”, misaligned business models (73%) and poor cultural fits (73%) were cited by this group as the top barriers to collaboration across the industry lines.
Needless to say, utility companies do not disregard the value of being able to collaborate. Those already collaborating or planning to collaborate see its potential, and recognise increased speed of change (63%), enhancement of customer experience (68% of smaller energy supplier) and the ability to reach a wider target audience (50%) as major motivators to overcome barriers to collaborate.
Perhaps signifying the first step towards this, almost three quarters (72%) of the market stated that they are at least open to sharing their data with third parties. Here it was the prospect of an improved customer experience (68%), new products (61%), and new revenue streams within the value chain (39%) that topped the list of benefits for smaller suppliers. For larger suppliers it was new revenue streams from both within (50%) and outside (75%) the value chain, plus a reduction in costs (50%) that most appealed.
Bollack summed it up: “The retail energy market is in the midst of unprecedented, significant and enduring change. To respond to these pressures, energy suppliers are working hard to re-evaluate their business models and break down barriers to innovation. Faced with massive external forces, attitudes to collaboration are surely shifting within the industry, with the opportunities it affords quickly becoming too evident to ignore.”
Read the full findings of our research into the impact of digital transformation on the UK energy market. You can also read our Experts’ insights related to cloud, innovation and collaboration, talent management strategies, as well as AI and automation.
In December 2017, Vanson Bourne conducted 50 interviews with the Big Six and other smaller energy suppliers via a telephone methodology in the UK. The average global annual revenue was £12 billion for the Big Six and £524 million for other smaller energy suppliers. Respondents were in the following roles or had the following job titles within their organisation: marketing, innovation officer, technology officer, other IT role, commercial, metering and customer service.