- Trends & Technology
Securing tomorrow’s sales today: developing new business models
Digitalisation, decarbonisation and decentralisation: the three big Ds are the main drivers of the current changes in the energy industry. Alongside external factors and the political constraints associated with them, the competition within the energy market has also got tougher.
Sinking margins, particularly in the core business, require a new way of thinking. For market players, this means: questioning their own structures and continually adapting strategies in order to be able to react quickly to changes in the market. In doing so, major focus is placed on the development and expansion of new business models. At innogy Consulting, we provide support within this framework for all challenges – for instance, when dealing with new business models in the sense of optimising existing end-to-end processes or setting up new product strategies. But what exactly must we consider when new business models need to be conceived and implemented, and how exactly does this work in practice?
Recognise trends, take on the customer’s perspective and derive business models
A new business model must primarily be characterised by two key features: the potential to secure the survival of the business in the future and to solve a customer’s problem. In order to guarantee this, business models need to be scalable. However, especially in an energy group which has grown over time, high initial investments at the start of the process tend to deter the individual divisions when, according to the financial plan, they will only be able to break even after several years. But how can we work together with our customers to estimate which services will be in demand in the future and generate the sales of tomorrow? Current trends that influence the development of the corresponding market provide an important point of reference here. By analysing these trends, we can find the first indicators to reveal the direction in which business models will be moving. A crucial point, however, is to understand what is actually concerning the customer, which problems they are currently facing and which ones they will have to deal with in the future. In order to do this, we create what are known as personas in order to represent different target groups. They depict people representative of a target group with their characteristic qualities in great detail in order to make user behaviour more tangible.
Digitalisation, decarbonisation and decentralisation as a motor for the change process
The digitalisation mega trend also offers businesses many starting points for developing a new business model: from developing new solutions with a direct interface to the end customer, to models for data analysis with a descriptive, forecasting and prescriptive character, to the minimisation of manual process by using specific tools. The same goes for the expansion of decentralised production structures. For example, sustainable heating systems, smart home products or even charging infrastructures for electric vehicles in the private and public sphere can provide scope for the growth of an energy provider’s portfolio. In the field of renewable energies, the expansion of alternative and efficient energy producers and consumers presents a potential new area of activity, especially against the backdrop of the nuclear phaseout and the emerging phaseout of coal. Taking a look further afield, outside of the energy industry, delivers inspiration for new business models. Because within the context of industrial convergence, companies that haveoperated more or less independently for decades can and must work together to create new solutions. This affects the field of electro-mobility and the digital sectors in particular, where we work hand-in-hand with software developers, for example.
New thinking –with methods
This all means there is a diverse range of potential new areas of activity for energy providers and related market players. But how can companies whittle these down to the fields which are actually attractive and develop specific new products? In order to tackle exactly this challenge, we at innogy Consulting use agile methods such as design thinking or the SCRUM approach. Both of these methods have one advantage above all: shorter, iterative processes can meet the wishes of end clients in a more targeted and flexible way.
So the goal of design thinking is to create innovations that are user-oriented and which satisfy the user’s needs. What’s special about this is that product development involves an iterative six-step process – from understanding, observation and point-of-view to the development of ideas, to prototypes and their improvement. During this process, the interdisciplinary teams rely on fixed values and principles of behaviour in the brainstorming phase. The SCRUM technique originated in software development, but has since transferred into other fields. The special thing about this process is that one work package is selected per month and is implemented by the project team during this time – without any modifications or disturbances from outside. We support our customers in learning the methods of the product development process theoretically, applying them in a practical setting and using these themselves in the long term.
Business model development in practice – three questions for Robert Hanka
It sounds good in theory. But how does developing new business models work in practice? To find out, I spoke to my colleague Robert Hanka, who has dealt with precisely this subject in one of his projects.
Robert, as part of a completed project, you developed a new business model together with the customer, which went beyond the classic role of an electricity infrastructure operator. What exactly was your assignment?
Robert Hanka: As you have already correctly pointed out, the energy market is currently undergoing a major overhaul, which also offers great opportunities for our group. That’s why it is particularly important to look further afield and expand our horizons. As part of a strategic project, we analysed possible new target markets and business models. At that time, the fibre optics (FTTx) business unit was in its infancy. So we then evaluated and worked out several potential business models in this field.
Fibre optic expansion is not a business sector that you would expect at first glance from an energy supplier. And yet this is exactly the business model you developed. How did you go about this?
Robert Hanka: In order to shine a light on the possibilities of fibre glass expansion and supply in this specific case, our team used Business Model Canvas. This enabled us to define the different structural aspects of a business model – such as value proposition, customers, as well as revenue streams and cost structures. This format and the comparability it offered us was valuable at all stages of the discussions with our technical experts as well as for decision making, both within our own project team and for the client.
What is the result of the project? Has the new business model already been brought to market?
Robert Hanka: Our analysis has shown promising market potential in the new business model for innogy. The fact that the Executive Board followed the strategy we developed, and approved an increased budget for investments in the fibre optics business was a great success for everyone involved. Accordingly, we are already active in the fibre optics business – not only in the infrastructure sector, but also in terms of end customer sales. In addition, a follow-up project has emerged from our initial approach, which involved expanding the implementation of the business models across Germany. Looking back, it has shown me that the current market also offers great opportunities for our customers in other industries – besides the energy market. However, these must be seized at an early stage.