As energy prices drop, the expansion of energy-related offerings must grow for companies to remain relevant and competitive. Energy companies are recognizing the strategic benefits of defining and commercializing Smart Home solutions that make customers feel empowered by the expansion of these new technologies, while realizing the financial benefits of retail growth. Utility business models are changing, and utilities are looking to find new growth opportunities in an increasingly challenging environment. As Sprosty Network continues to support more utilities to identify and develop growth opportunities, we are seeing that utilities are broadening the scope and depth of their customer relationships, which, for some, even includes establishing a retail presence by launching or expanding their online and physical retail businesses. Utilities are pursuing such initiatives to proactively address customer retention concerns while diversifying their ability to generate revenue and ROI. But what is the potential value to the customer and the organization of the utility stepping beyond the role of sales channel in the instances where the customer value proposition rests on the ongoing services rather than simply a product purchase? Pursuing growth opportunities such as these have benefits beyond expanding total revenue and profit, including:
- Deepening relationships with existing customers and can drive loyalty and lower churn;
- Allowing organizations to build relationships with customers to whom it currently lacks relevance, or even access; and
- Providing a buffer than can balance revenue and margin levels as energy economics fluctuate
According to a recent Sprosty Network survey, consumers across the US show strong interest in utilities as a preferred source of smart home and home power products and services. This analysis aims to prove that not only do utilities have the right to play across several smart home and home power categories, but utilities are strongly positioned to win in the space. Also highlighted are the potential headwinds utilities face that should be addressed to successfully take advantage of these opportunities. Few utilities have the process, tools and talent to identify and evaluate new business opportunities, much less the ability to test, learn, iterate and stand up and operate new businesses. Identifying new businesses requires:
- Understanding and diligence around customer-focused iteration that include testing and experimentation, starting very small and inexpensively and scaled deliberatively based on learnings;
- Determining sizing and timing of pilots. We often find that utilities think about pilots in terms of thousands or hundreds of thousands of homes. The trouble with that approach is one small glitch (which are expected in experimentation) at such scale can quickly sour the organization on the new concept.
- Overcoming a very strong “not invented here” syndrome. Utilities have a predisposition to build from the ground up creating an extraordinarily high hurdle to initiate new business ventures. In contrast, in many industries today, new businesses are often built using Lego-like combinations of capabilities from internal and external sources such as Software as a Service Platforms and other 3rd-party service providers.
Ideation, much less execution, is a known challenge within the utility and energy space. Amidst the rapid evolution and innovation within the energy industry, utilities and energy companies alike combat the paradigm of who they are vs. who they need to be. The shift from a regulated, structured, monopolistic, predictable and safe business model to one focused on commercializing new products aligned to customer needs and expectations is not simple, but also not unique. A strong internal and external network focused on strategic solutioning and growth mechanisms is imperative. Whether you manage programs, channels, innovation or a business unit, this whitepaper provides:
- Supporting data points to pursue retail as a growth opportunity for a utility
- A list of specific sub-categories that a utility might evaluate to pilot
- The key features utilities must consider in order to win
- Potential headwinds and pitfalls utilities face in pursuing growth opportunities
- Considerations for growth
Sprosty Network is a business acceleration consulting firm, helping companies drive growth by creating innovative new opportunities. We identify and help commercialize pragmatic innovation processes and tools. We support clients from ideation through execution, bringing a profound understanding of consumers’ wants and needs, we dig deep into market and technology trends, helping our clients find new paths others don’t see.