Powering strategy with innovation

A PwC power & utilities roundtable report

If change is to be successful, it has to be matched with innovation

As the energy transformation gathers pace, many companies find themselves at a strategic crossroads where tough choices on direction are being made. Commitment to sustained innovation in multiple dimensions is an important indicator of a company’s ability to pursue its strategies.

“…in the future marketplace that is beginning to emerge, innovation will be a differentiator between those companies that will be recognised as market leaders and those that will simply be part of the pack.”

Norbert Schwieters, Global Leader, Energy, Utilities and Resources Partner, PwC Germany

About our roundtable

Our Vienna roundtable event, May 2019, followed on from the release of PwC’s Strategy& report Power strategies, analysing the strategic direction of the global top 40 (GT40) power utilities companies. The roundtable involved senior executives and PwC leaders from 18 countries and four continents discussing the often mission-critical role that innovation is playing in an era of energy transformation.

The strategic paths utilities elect to follow establish the competitive model for the business. This then requires a choice of a commercial approach to the market, i.e., a business model, which is the linking mechanism between a strategy and its economic outcomes.

The megatrends of decarbonisation, decentralisation and digitisation are compelling utility companies to evolve faster than ever before. The analysis by PwC’s Strategy& of the GT40’s strategic actions showed many companies are embracing radical change, reinventing themselves, aggressively pursuing business model innovation and entering new markets for energy solutions and services.

As noted in the GT40 study and confirmed during our roundtable, the optimal model for strategy design and execution is not externally derived and portable across companies. Rather, it needs to be tailored to fit the philosophies of the executive leadership team and the aptitude, key differentiating capabilities and ‘personality’ of the organisation. In short, it is unique and forged in the DNA of the business. It is a foundation for both strategy and innovation.

In the past, GT40 utilities have been active across the entire value chain, from conventional generation through transmission, distribution, and retail. Full vertical integration contributed to significant scale and control of power markets within their territories.

As the utilities sector has evolved through a combination of increasing deregulation, decreasing individual asset scale, growing competition, and the growth of intermittent resources, the need for and value of full vertical integration has become less apparent.

Five fundamental areas are emerging where utilities are realigning their resources to meet the new market requirements: strategy, innovation, digital, networks, and customers.

Some GT40 utilities have reorganized or are reorganizing themselves around specific value chain segments, and in some cases specific generation technologies, i.e., renewable versus conventional. These utilities seek business model clarity and more certain returns.

Many European companies have led the way in terms of innovation. However, innovation is by no means confined to GT40 companies covered in our analysis or to Europe. Also, US companies are participating in burgeoning markets and taking the lead.  

Nevertheless, it is important to drive innovation that is ready for market adoption. 

On a global level, utilities are entering new markets, developing their market offerings and driving innovation, often through acquisitions.

Partners across all energy-related sectors are collaborating to address the shared challenges of megatrends such as decarbonisation and digitalization as well as new markets such e-mobility.

In the power utilities sector, there is a strong emphasis on collaborating in order to acquire the new capabilities required to meet customers’ and the markets’ emerging needs. 

These capabilities-based strategic moves typically address new technology offerings, channel requirements and the challenges of a more flexible, decentralised electricity system.

Find more practical examples for these kind of collaborations in our discussion paper. 

Contact us

Jeroen Van Hoof

Jeroen Van Hoof

Global Leader, Power and Utilities, Partner, PwC Netherlands

Tel: +31 0 88 792 1328

Paul  Nillesen

Paul Nillesen

Strategy& Energy Practice Partner, PwC Netherlands

Tel: +31 88 7927237

Olesya Hatop

Olesya Hatop

Global EU&R Clients & Markets Industry Executive, Director, PwC Germany

Tel: +49 211 981 4602

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