Executive summary
Decarbonization, decentralization, and digitization are compelling utilities to evolve faster than ever before. So, how are they responding to this new, three-dimensional challenge?
We analyzed the strategic actions of the world’s largest utilities by market capitalization. Our report highlights the different ways these heavyweights are navigating the road ahead and forging a new industry. We zero in on the strategies and capabilities that big utilities will need to succeed in an uncertain future. One finding is clear: Most utilities need to speed up the pace at which they develop and execute strategy.
Global power strategies
Strategy& recently analysed the strategic actions of 40 of the world’s largest utilities companies by market capitalization, exploring the different ways they are navigating the road ahead and forging a new industry. Watch this video to receive a high level summary of the key findings.
In-depth inverviews
Barry V. Perry
CEO of Fortis
St. John’s, Newfoundland and Labrador, Canada
Scott Prochazka
CEO of CenterPoint Energy
Houston, Texas
Brett Redman
CEO of AGL Energy
Sydney, Australia
Francesco Starace
CEO and General Manager of Enel
Rome, Italy
Dr. Johannes Teyssen
CEO of E.ON
Essen, Germany
Where are the strategic bets placed?
Utilities are working hard to create winning strategies amid the most significant transformation in the sector for decades. The majority of their strategic effort is focused on five key areas:
- Reducing exposure to conventional power generation, particularly coal
- Redirecting investment into networks and renewables
- Increasing activity in energy solutions and services
- Developing dedicated innovation facilities
- Restructuring and repositioning their businesses for market opportunities
Some utilities are embracing even more radical change. These leaders have begun to reinvent themselves, aggressively pursuing business model innovation and entering new markets for energy solutions and services. They are targeting new value pools in areas as diverse as energy management, electric car charging, and home automation.
Watch out for externalities
Not only are utilities dealing with a world where markets, customers, and strategies have transformed, the GT40 must come to grip with another challenge: The externalities that influence their operations are becoming sharper.
- Interest rates – and therefore the cost of capital – is rising
- Technology is shifting from analog, centralized, and standardized to digital, distributed, and personalized
- Customer needs are starting to outpace what the sector can deliver
- Utilities face a growing number of “unnatural competitors” in the form of highly admired global brands
A path forward: Think like a “non-utility”
Over the next few years, we expect to see a gap emerge between the most enterprising utilities companies and the rest. Leading players are learning from the way nontraditional competitors approach contested or new markets. They are thinking about shorter time horizons, innovative business models, and managing across multiple value chain segments. In other words, they are thinking like a “non-utility.”
These four steps provide a blueprint for utilities to act on now and set themselves up for future success.
Define where you will compete and develop the business models to do so.
Utilities cannot look to their peers for new business model concepts and designs; instead, they need to scan the competitive marketplace for successful models. A single business model is not likely to be sufficient for success in future markets. It is more likely that utilities will have to maintain multiple business models tailored to the needs of the markets they elect to compete in and how integration is valued in those markets. Accordingly, they need to be adept in managing across multiple value chain segments, each of which could adopt distinct business models to meet discrete market requirements.
Think and act commercially, rather than as a market incumbent.
As utilities learn to compete in a marketplace of broader products and services, they will find that many customer offerings do not fit in a traditional regulated business. Consequently, they will need to provide not just products or services, but a portfolio of offerings to customers. Product and service pricing, therefore, needs to be a core capability. Utilities must dramatically elevate their thinking about how to act commercially, rather than as an unsophisticated regulated incumbent. A commercial mind-set is fundamental to demonstrating value and meeting customer expectations.
Develop the capabilities for agile strategic actions.
Going forward, it will be strategically inadequate to respond passively to markets as the sector has historically done. For utilities to develop great ideas into commercial products, they will have to think like the FAANGs (Facebook, Apple, Amazon, Netflix, and Google). They will need to the capacity for continuous market sensing, constant innovation, a commercial mind-set, aggressive branding, and quick decision making. These are traits utilities are only now beginning to nurture.
Speed up the pace of strategy development and implementation.
Forget three- to five-year windows for commercialization: Strategy development needs to emphasize near-term readiness and offerings over long-term preparation and piloting. Several players in the GT40 need to speed up the development and pursuit of their strategies or risk falling behind. A recent survey revealed that 90% of industry respondents believed they had as long as five years to prepare for upheaval. About half thought they had three. We think it’s even less than that.
Multimedia
Power shifts: Podcast on energy transition
In this podcast we will be discussing the energy transition together with Pedro Azagra, Corporate Development Director of the Iberdrola Group. Interested? Tune in now!
North American utilities - their financial profitability and strategies
Tom Flaherty, Senior VP Strategy&, PwC US is outlining how North American utilities are performing compared to the rest of the world. What challenges do they have to catch up on?
How are GT40 Asia-Pacific utilities performing?
Mark Coughlin, Energy, Utilities & Mining leader in PwC Australia, discusses how the Asia-Pacific utilities are faring among their GT40 counterparts, and the challenges ahead.
European utilities and their performance
Dr. Paul Nillesen, Partner Strategy&, PwC The Netherlands, elucidates how European utilities are performing compared to the rest of the world.
Global power strategies
Strategy& recently analysed the strategic actions of 40 of the world’s largest utilities companies by market capitalization, exploring the different ways they are navigating the road ahead and forging a new industry. Watch this video to receive a high level summary of the key findings.
World's top utilities and how they are doing on strategy
Prof. Dr. Norbert Schwieters, former Global Energy, Utilities and Resources Leader, PwC Germany - answers two questions on how top utilities are acting globally to prepare for the future.
Thinking about strategy and mind-shift in the Utilities sector
Jeroen van Hoof, Global Power & Utilities Leader, PwC Netherlands - explains why global Utilities have to act now in changing their thinking about strategy.
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