Energy Recoded: Business Model Innovation with Endesa
January 31, 2020 at IE Business School, Madrid, Spain
Download: Business Model Innovation by Peter Fisk
Today’s business world is no longer stable and predictable. It cannot simply evolve from the past and extrapolate into the future. Yet too managers hope that their old models will continue to work. They seek to replicate the success formula of the past, to continuously enhance and improve the status quo, and trust that their luck will continue into the future. We call this a fixed mindset. Instead they need to break free, with a growth mindset.
“The best way to predict the future is to create it”said Abraham Lincoln.
Markets are more crowded than ever before. Competition is intense, from across geographies and sectors, whilst customer aspirations are constantly fueled by new innovations and possibilities. Innovation is continuous and essential. Yet too much innovation is just improvement, keeping pace, not getting ahead. It is quickly imitated or redundant, the advantage is lost, and investment is squandered.
“This is the age of disruption … which is not simply about disruptive technologies, but dramatically changing how people think and behave” says Sebastian Thrun of Udacity.
- Most Innovative Companies in Energy 2019 by Fast Company
- LanzaTech: turning emissions into fuel by CNN
- Watty: energising the smart home
- Top 10 Renewable Energy Companies 2019 by Energy Acuity
- Examples of 3 energy companies using new business models by EnergyPost
- 7 future utility business models by PwC
- Utilities new business models, by IDC/CapGemini
- Energy as a service by Recanteur
Francesco Venturini, head of Enel X, says that the energy sector is at a crucial inflexion point, with huge change and new entrants on the horizon. Driving this is how the boundaries between energy and other sectors will blur through new business models.
“If I think about electric mobility, utilities are competing with car manufactures; in energy managements systems, utilities compete with digital platform providers; in the field of the smart home, utilities are competing with the tech giants; and so on,” he says. Therefore, traditional utilities, which are not ready to tackle this new ecosystem, are definitely disadvantaged in comparison with those players that decide to deal with these new business models proactively.”
He says this will allow customers access to better pricing models. For example, through demand-side-response services, customers willing to adjust their energy consumption to off-peak, cheaper supply times will benefit from the lowest prices. “Through these new business models, more and more companies will join the game, blurring the line between sectors and increasing competition, with potential pricing benefits.”
New business models
New business models are the most effective way to transform organisations, to innovate the whole way in which the business works. Inspired by a new generation of businesses – Airbnb to Uber, Dollar Shave Club to Netflix – we see dramatically new business models in every market, through collaborative platforms, data analytics and personal recommendations, or subscription-based payments.
Airbnb makes money by helping you to make money out of your spare room, connecting host and guest, then taking a small fee from each. Nespresso makes great coffee, selling discounted machines, and then getting you to sign up to an everlasting and incredibly profitable direct revenue steam of coffee pods.
What if your business started leasing rather than selling, became part of the sharing economy? What if you simply facilitated an exchange between buyers and sellers and took a cut? How about moving to a subscription model, or a freemium model, or a referral model, or an advertising model?
We used to just think a business simply made things, and sold them. Now its much more complicated. Or rather, there are many more innovative ways to achieve success …
The term “Business Model” is over used and under defined. Business models explain how organisations work – how do they create value for customers, and in doing so how they create value for all other stakeholders. They can map the current business, or explore options for the future.
The approach originates from mapping “value networks” in the 1990s, understanding the systems across business and its partners through which value (both financial and non-financial) is created and exchanged – by who, how and for whom. I remember working with Pugh Roberts to create a multi-million dollar dynamic model for Mastercard which showed varying any one driver – such as interest rates, or branding – affected everything else. And thereby being able to test new ideas and optimise the model.
Business models represent the dynamic system through which a business creates and captures value, and how this can changed or optimised. They are a configuration of the building blocks of business, and their creative reconfiguration can be a significant innovation.
Business models became fundamental to business strategy, driven by them but often driving them. Hambrick and Fredrickson’s Strategy Diamond is all about aligning the organisation, achieving an economic logic between strategic choices. They help to align the business, matching the right strategies for outside and inside, using the proposition as the fulcrum, and profitability as the measure of success.
Business models can often appear very mechanical, lacking emotion and easy to imitate. In 2001 Patrick Staehler, in particular seeking to explain the new breed of digital businesses, created a business model “map” driven by the value proposition, enabled by the value architecture, creating economic value and sustained by cultural values. The last point here is most interesting, in that it captured the distinctive personality of a business, its leadership styles and ways of doing business. This is much harder to copy, and also sustains the other aspects.
Alex Osterwalder’s subsequent Business Model Canvas emerged as the most common template on which to map a business model. He popularised the approach so much so that his supersized canvas now features in workshops throughout the world, always with an array of multi coloured sticky notes as teams debate the best combination of solutions for each box. Whilst the canvas lacks the sophistication of value driver analysis and dynamic modelling, it is about testing hypothesise in each aspect, and how they could work together, and that respect works as a thinking model.
Business models have become a practical tool for rethinking the whole business, seeing the connections and then innovating the business. In fact they offer a great platform to facilitate new strategy and innovation thinking. That’s why we’ve created the Business Innovation Program, which combines design thinking, new business models and strategic implementation – a great way to engage your team, to think about new ways to grow, and to create the future, practically.
We explore at least 50 different business model templates which could transform your business. We start with the customer, to explore emergent needs and behaviours, shaping better propositions and solutions, then exploring how to deliver them commercially, and as engaging customer experiences.
0900 – 1030: CHANGE, DISRUPTION AND GROWTH
- Making sense of today’s world, the challenge and opportunity of relentless change
- The future isn’t like it used to be, so we can’t keep doing what we used to do
- 100 companies changing the world right now. What can you learn from them?
- Start with a future mindset, jump ahead, look forwards not backwards
- Going beyond limits, how will you be the change, how will you achieve more?
- Growth strategies – innovation beyond products, technology, and creativity
1100 – 1230: INNOVATING THE BUSINESS
- Starting from the future back – create the future you want, then work backwards
- Working from the outside in – rethinking solutions through customer eyes
- 10 types of innovation – products and services to business models and experiences
- Ecosystems, from make or buy, to partner and connect, platforms and communities
- Innovation multipliers – accelerate ideas further and faster to accelerate growth
- Creating a growth factory – portfolios, self-tuning and the invincible company
1230 – 1400: BUSINESS MODEL INNOVATION
- Business models – emergence of business models, 50 models to adapt and apply
- Linking business models to strategy, business plans and organisation design
- Rethinking your business model – what is it, and not – and different ways to define it
- Mapping existing business model – simplifying how your business actually works
- Innovating new business models – rethinking how your business could work better
- Developing a business model portfolio – creating the invincible business
1530 – 1700: NEW BUSINESS MODELS IN ENERGY
- Innovation in energy – how are banks innovating, what are the new models?
- Rethinking products and services – what would deliver the proposition better?
- Rethinking channels and brands – how to build more inspiring connections?
- Rethinking revenues and pricing – exploring alternative ways to make money?
- Rethinking assets and resources – how to use what you have better?
- Rethinking activities and partners – what do to do yourself, and by others?
1700 – 1830: DEVELOPING YOUR NEW BUSINESS MODEL
- Your products and services – what would deliver your proposition better?
- Your channels and brands – how to build more inspiring connections?
- Your revenues and pricing – exploring alternative ways to make money?
- Your assets and resources – how could you use what you have better?
- Your activities and partners – what do you need to do yourself?
- How would you change Endesa’s business model? Where will you start?
- Article: The 10x Leader
- Article: Amplifying Potential
- Book: “Gamechangers: Are you ready to change the world?“
- Book: “Business Genius: A more inspired approach to leadership”
- Workshop: “Gamechangers Program: Leading for smarter innovation and profitable growth”
- Workshop: “Business Innovation Program = Design Thinking + Business Models + Strategic Execution“
- Practical Tools: Stanford d.School’s Design Thinking Process Guide
- Download a summary of Peter Fisk’s keynote “Gamechangers”