Lead the disruption or be disrupted

The Energy sector is witnessing a new era, transforming radically before our very eyes. Influx of renewable energy generation, emergence of the prosumer, as opposed to the consumer, shift from centralised to distributed generation, digitalisation of everything… these are just a few of the major changes. Technological innovations are penetrating the sector and their applications are beginning to show solid business cases: blockchain, robotics, artificial intelligence, virtual and augmented reality, drones. If you participate in this sector, your most vital strategic question is where to focus your efforts, before all bets are off and your rivals outplay you.   

According to a PwC research, more innovation is expected to occur within the Energy sector in the next 20 years than since the time of Thomas Edison. This sector has never been a leader in employing and benefiting from technological innovation. It has never kept pace with other industries, and it never was a quick adopter of new technologies. But today’s consumers are aware of new technological possibilities and are keen to benefit from their utilisation to better their lives. Market players that will incorporate these new offerings will win. Technology is at the heart of change. In other words, – disrupt or be disrupted.

The technologies that transform

Numerous technologies are emerging with a potential of dramatically affecting the future of the Energy industry and its current cost structure. PwC annual survey (across various sectors) shows that 76 % of CEOs worry about the speed of tech change and 64 % think the technology used in their businesses will be disruptive over the next 5 years. PwC narrowed these disruptive technologies down to the "Essential Eight": AI, Augmented reality, Blockchain, Drones, IOT, Robotics, Virtual Reality, 3-D printing. Let us focus here on those most likely to be broadly commercialised within the next decade and have a fundamental impact on the traditional sector value chain.

• Robotic Process Automation (RPA) will affect your business operations and competitive positioning in numerous dimensions: economic value, workforce costs, and quality and control improvements. RPA software designed to reduce time cycle and lower costs of manual, repetitive, time-consuming, and rules-based business tasks. According to estimates from the “Organise your future with robotic process automation”, 45 % of all business tasks can be automated, cutting  workforce costs by more than $2 trillion worldwide. RPA allows rapidly digitising processes in separate business units, delivering impressive and sustainable value in short timeframes (getting the always-desired low-hanging fruits to management). The recommendation is to automate as much as possible, maximise productivity and aim for 100% auditability. RPA can help your company prepare for the future, with a solid foundation for the emergence of machine learning and artificial intelligence.
• Artificial Intelligence (AI). PwC study “Sizing the prize” reveals that AI, robotics and smart automation could contribute up to 14 % to global GDP by 2030, around $15 trillion at today’s values. According to the “2019 AI Predictions”, this technology is going to transform nearly everything about your business and markets: enhancing personalisation and automating the processes. The capital-intensive sectors will be the biggest gainers. The leading US companies plan to become AI-enhanced throughout all their operations. Concerns have grown over how AI could affect privacy, cybersecurity, employment and the environment. The most topical questions is: Can we trust AI? This is even more critical in the Energy sector, where we cannot risk the systems to be vulnerable. The top challenge for the executives in 2019 is ensuring AI systems are trustworthy.
• Virtual and augmented reality (VR/AR). Initially a computer games’ platform, these technologies are gaining momentum in business applications, having moved far beyond games. 75 % of the Forbes World's Most Valuable Brands have created some form of either VR or AR experience for customers or employees. VR creates a simulated immersive world, while AR bridges the digital and physical worlds adding new layers of information. In the energy sector, VR technology applications can be found mostly in training (and virtual tours). It suddenly makes learning fun. The pragmatic application is minimising workforce turnover with hazard-free learning environment. AR, on the other hand, offers more personalisation potential and improves customer engagement, blending digital and physical shopping. The market for these technologies is growing, projected to total above $140 billion by 2020 according to “The Essential Eight technologies” report.
• Blockchain is one of the emerging technologies of the Fourth Industrial revolution based on a system of traceable blocks of information, in which the market players execute the transactions without intermediaries. It is a new transparent and efficient solution through optimising processes and eliminating barriers. Blockchain has a real potential to transform the existing market models and affect most sectors, including the Energy markets. Its core application is supply chain tracking, smart contracts, and peer to peer trading. Some challenges must be resolved before its widespread utilisation. Regulation is one of these issues. Blockchain technology can eliminate or substantially reduce the role of centralised management entities and will certainly disrupt the energy sector. Co-published PwC and the World Energy Council, the "Blockchain Insights paper" reveals that 100 % of the surveyed are convinced that Blockchain will disrupt the Energy industry and accelerate the speed of the transition, 92 % think the technology will start a disruptive impact within 5 years, 53 % say it will bring new cybersecurity risks and 86 % are considering partnerships with start-ups.

Conclusion

PwC foresees that the Energy sector will evolve and change the ways how it operates, developing new roles, employing technologies and creating new customer-driven platforms. This is caused by a shift from a centralised and standardised top down model to a digital, personalised and distributed model. A combination of the emerging technologies and shifting customer behaviour will drive the change. Companies that recognise the shift and embrace it will be in the driver’s seat. Those that fail to recognise the value of the new (technology-driven) market model may find themselves fatally behind.  

Next Steps to stay in the game

As mentioned, Energy sector companies have not been as quick adapting innovations and marketing them to their clients as other sectors have. The major concern is the threat of increasing distance between utility companies and their customers. The paradigm shift in the Energy sector has the value pools shifting towards “behind the meter”. With this in mind, the market players will need to think differently and see an opportunity in the new technologies rather than a threat. In its flagship report “Capturing value from disruption”, PwC called this a new ‘technology push – customer pull’ era.

From my perspective, here are a few strategic directions to ponder in order to outpace your rivals and defend your competitive advantage:

• New technologies ARE transforming the sector. The most successful models involve collaboration. Do collaborate with start-ups – they innovate.
• The value pools in Energy sector are shifting. Your best strategy is increasing the proximity and the intensity of relation with the clients. Evaluate what technologies can better your client’s life – employ those.
• Robotic Process Automation save labour costs and improve client satisfaction. Early adopters already see positive results. Rethink your processes through the use of an RPA prism. 
• Artificial Intelligence will fundamentally disrupt your market with innovative new services and business models. Whenever learning is involved, move to AI.
• Blockchains originally focused on the financial services industry, yet have spread wildly into other sectors. Whenever transactions are involved, consider Blockchain.  
• Virtual and augmented reality go beyond gaming – that ship has sailed. These technologies show tremendous potential in improving customer experience. Whenever perception of the world is involved, move to VR/AR.

Provided the pace of the technological evolution and customer rapid self-education, always remember: if you do not lead disruption - you will be disrupted.