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Digitization in the Energy Sector: Evolutionary or Revolutionary Change? – EXXETA Energy Blog

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Digitization in the Energy Sector: Evolutionary or Revolutionary Change?

The term “digitization” increasingly affects the public discussion, the political agenda and, above all, strategic and operative decisions of established companies in the German and European economic regions. The German energy industry has also taken up the discussion and recognized the digitization as an enabler for the Energiewende.

The threat to established actors is not the dematerialisation of physical assets or the displacement of commodity energy, rather it is the threat of new products and services of new players that better meet end-user needs. Energiewende and digitization are increasingly intertwined and processes that are continually evolving. Utility companies can use digitization as an opportunity within the framework of Energiewende. The challenge lies less in technology, but rather in the development of new business models and products for energy customers.

Digital transformation and disruption – integration of one’s own project into the digital strategy

The fundamental question for a company is in how far is the core of the added value is affected by digitization and how much its own role will change in the future. The dimensions of a business strategy to deal with change are the level of transformation and disruption (see figure 1): The conviction in sustainability and competitiveness of one’s own core business determines the orientation of today’s digital or innovation strategy. While the targeted degree of digital transformation is referred to as the evolutionary change (the effort to make the core business more efficient by means of technical possibilities), the level of disruption refers to the revolutionary, radical change in new business models that cannibalize the existing ones.

 

Digitization_Driver of Business Development
Figure 1: Driver of Bussiness Development and Classification of Digital Strategy

 

In particular, the Big Four (German utility companies) are developing disruptive strategies by means of their innovation initiatives. Almost all of them have established semi-independent innovation hubs with external start-ups and partners that are looking for new disruptive business models in digital ecosystems such as Berlin, Tel Aviv or Palo Alto. Innogy, for example, is raising its digital profile with the “innogy Generator Programe”, a kind of traineeship for start-ups. One focus area is “Disruptive Digital”: New digital business models with the potential to revolutionize the traditional energy world are identified and fostered among energy generation, trading, grid and retail. EnBW presents an innovation strategy that goes beyond the internal research and development department. Therefore, they heavily invest in the semi-independent “New Venture GmbH” to expand their portfolio. For example, with “SM!GHT”, EnBW pursues the goal of a digital, urban infrastructure by developing an ordinary element of the street: the street lantern.

The focus of smaller and medium-sized actors is primarily on more evolutionary improvement, like customer communication and interaction with apps or paperless office projects. Fundamental changes are usually not attempted. Technology is rather used as an engine for increasing the efficiency of the existing business model and less as an opportunity for a revolutionary change. There are numerous solutions at the moment: As part of Smart Energy Solutions, decentralized producers, consumers and flexibility options can be integrated into portfolios and the planning, management and monitoring of decentralized CHP plants can be implemented. Using data analytics, for example, it is possible to plan and control energy networks including controllable consumer and storage systems (e.g. electric vehicles).

From the Lean Organization to the Agile Organization – resolve team conflicts and allow new methods of work

The concepts of Design Thinking and Lean Startup have become widely accepted as leading practices for many innovation initiatives. Design Thinking develops user-centered solutions with heterogeneous teams for problems and adjusts them in an iterative process. Lean Start-up changes the viewpoint of how new products and services can be brought successfully to the market with as little capital as possible at a high frequency between observing, developing and measuring. Figure 2 shows how new products and services of established structures are developed iteratively and independently. If successful they are integrated into existing structures. The minimum viable product, normally developed at short notice, is an artefact for testing the product idea. It can, for example, be implemented within the scope of Design & Development Sprints, where interdisciplinary teams develop and test a product in an intensive program and extend their methodological knowledge using external experts.

 

Figure 2: The Process from an Idea to the Finished Product
Figure 2: The Process from an Idea to the Finished Product

 

The service portfolio of EXXETA combines business and IT world and offers the ideal combination of management, industry, methodology and IT consulting. With EXXETA branch at Potsdamer Platz in Berlin, a team for new digital approaches is available in the local digital ecosystem. For more information, contact Frank.Sonne@EXXETA.com.

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