A BizTech Byte
For industrial manufacturers, utilities, oil and gas players, and other companies heavily reliant on energy and resources, the disruption caused by technological advances is compounded by other factors. The falling costs of renewable energy, commodity price volatility, and rising demand for low-carbon solutions, more circular material flows and less waste, to name just a few. For these companies, everything is in flux.
In this changing landscape, energy companies are acquiring utilities and transportation businesses. Technology companies are entering the connected homes market and energy services. Telcos are investing in connected vehicles and autonomous driving, and automotive OEMs team up with utilities. The examples go on. While there is no definitive understanding of how these future business models and value chains will evolve, there are already indicators of where new opportunities will lie. For example:
- Circular economy business models are expected to unleash $4.5 trillion in value by 2030.1
- Renewable energy sources are on track to make up 40 percent of all power generation by 2040.2
- The global bio-plastics market is expected to grow from $19.54 billion in 2016 to $65.58 billion in 2022, at a CAGR of 22.36 percent.3
To thrive in these and other areas, energy- and resource-intensive companies know that “business as usual” is a risky option. In fact, 76 percent of industry leaders agree that current business models will be unrecognizable in the next five years.4 And 39 percent see their primary sources of growth in the future coming from entirely new products.5 The challenge for them now involves determining where and when to place their bets.
It’s a major conundrum, indeed. Traditional forecasting and scenario-planning methods that take a siloed, linear or incremental view of industry changes hold little value now. Many fail to recognize the exponential and combinatorial effects that are driving technological progress. Energy- and resource-intensive companies must plan their futures in an environment where uncertainty has become systemic. But how are they supposed to prepare for a future they cannot define? We advocate a three-pronged approach.
First, companies should continue to incrementally improve their operations and grow their core businesses.
Low-cost renewable energy, circular value chains and new technologies can all be used to optimize and streamline systems, organizational structures and processes. A core transformation serves two purposes. It produces savings that can be reinvested to drive profitability and growth in new areas. It also makes a company more efficient and agile. These characteristics will be critical to their long-term success, regardless of where their future business models take them.
Second, companies must navigate the chaos of disruption and uncertainty by focusing on those things that will not change: The immutable end uses of materials and energy.
We will always need shelter, food and water. People and goods will always need to be moved around the planet. Everyone and every business will always need lighting, power, heating and cooling. The world will always depend on goods and services that require some combination of virgin and processed materials and energy resources. By anchoring on these immutable end uses that meet the needs of a growing middle class, companies can define a North Star—an end goal that can that can be used to guide their decision-making today.
Third, companies need to invest in “discovery” capabilities.
In today’s age of uncertainty, it’s more important than ever for businesses to be able to scan the opportunity horizon and select and test emerging technologies and business innovations that hold the greatest potential. By focusing on these capabilities now, companies will be better positioned to know when and where to invest to serve their end-use markets and tap new pools of profitability.