Innovative Utility Services: Powered by Partnerships

Innovative utility services are being powered by technology and partnerships, writes Amy Marshall, Power & Utilities Director, KPMG.
Published: Tue 31 Mar 2015

Change, and particularly change wrought by the introduction of new technology, can represent an opportunity to thrive for companies of all types, but is also a threat to survival.

A KPMG 2014 cross-sector survey (“Survival of the Smartest: which companies will survive the digital revolution”) identified how much companies expect their business model to change by 2020 in response to technological, environmental, and consumer changes. 50% of energy sector respondents stated that strong or fundamental changes would be needed against an average of 34%. So it may be a truism that we are living in a period of unprecedented change which affects everyone, but utilities expect to have to change more than most.

Utilities’ agile response to change is critical

We believe that agility in reacting to external changes, and particularly technology, will be central to energy companies’ ability and need to create new services. There are a number of candidate technologies on the cusp of success and mass adoption that have the potential to offer attractive cheap new energy sources and services.

Customers may move rapidly to adopt technologies such as energy storage, rooftop solar, micro-generation, automated home management systems, and fuel cells to name a few. Once the tipping point is reached, the most successful companies will be those that invest in and are well positioned to market the new technologies being adopted by the marketplace. In the absence of a sufficiently agile response, incumbent utilities may face potentially stranded investment in old systems and infrastructure made obsolete by the new products.

Reaching beyond the traditional sector boundaries is an important source of innovation and new ideas. In a digital and networked world - and smart energy is a textbook example of this - there is often an overlap of previously separate sectors: products and services come together, integrated solutions are in demand, old value chains are broken. Digitalization and networking decrease the formerly high entry barriers in many sectors. This increases competitive pressure from new market players, but also opens up additional growth prospects.
 

Partnerships offer utilities opportunities

Partnering in all industries is a way of accessing skills, products, new ideas and approaches from outside organizations that might otherwise be challenging culturally, or slow and costly to develop internally. In periods of change and cross-over between previously separate industries, partnerships offer an opportunity to stay ahead, or at least in, the game.

Today, we see that traditional energy industry players are under competitive pressure from non-traditional sources in many ways – from distributed generation, to storage and CHP, to aggregators and energy services companies (ESCOs). Innovation is happening and new services are being created.

One response from the traditional players in the face of new kinds of competition is to partner to accelerate access to new technology and services. And similarly partnering offers a way of quickly reaching scale and momentum from newer entrants to allow them to compete more effectively against larger companies. Partnering in this way, at its best, means that both sides win.

In the UK market we have seen recent examples of this – British Gas investing in and subsequently buying AlertMe, a provider of energy and home monitoring hardware and services; and Npower’s partnership with Nest giving their clients access to smart thermostats being just two. It is unlikely that either energy supplier could have bought such innovative products to market so quickly and in the same manner if they had relied on their traditional product and service development processes

At KPMG we also take the partnering principles to heart. We not only work with clients, standing shoulder to shoulder with them through finding, selecting and integrating with partners; but also apply the same principle to our own business. Our strategic alliance with McLaren Applied Technologies brings together McLaren’s highly tuned expertise in predictive analytics – a discipline that is outside of our traditional sphere - and KPMG’s extensive audit and consulting capability. Through the partnership we will jointly develop and deliver a unique range of services drawing upon a combination of KPMG’s longstanding consulting pedigree and business insight, paired with McLaren’s high performance culture and technical know-how.
 

Further reading

KPMG-Survival of the Smartest: Which Companies will Survive the Digital Revolution? 2014 (KPMG Austria) [pdf]

KPMG-The Agile Utility- 2014 (KPMG US) [pdf]