Utilities Tech
The 4th
Industrial Revolution is here! The first author that coined the term was German
Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, in
his book: “The Fourth Industrial Revolution”. Schwab argues that this
revolution is different in scale, scope and complexity from any that have come
before. Characterized by a range of new technologies that are fusing the
physical, digital and biological worlds, the developments are affecting all
disciplines, economies, industries and governments, and even challenging ideas
about what it means to be human. With my releases “Revolution 4.0 and the Man
of Tomorrow” in March 2016 I was amongst the first authors to dwell on it’s
meaning. But how is it different from the previous three industrial
revolutions? An example in the Utilities Sector will show us the LIGHT.
In release
“Where no Man Has Gone Before” I explain that the Utilities Sector is composed
by electricity, gas and water. Let us take the electricity sector as example: Thomas Edison was the inventor of Direct Current
Electricity and the light bulb. He founded General Electric Light Bulb Company
in 1887, which was later incorporated in General Electric Company. General Electric,
the only surviving company of the Dow Jones Industrial Average from the
beginning of the 20th Century manage to survive the following revolutions by
diversifying into segments such as: Appliances, Power and Water, Oil and Gas,
Energy Management, Aviation, Healthcare, Transportation and Capital. Meaning,
it’s core business is not electricity anymore.
In his book “The
New Oil – Using Innovative Business Models to Turn Data Into Profit”, author
Arent van’t Spijker takes us through a fantastic example as to how to reshape
the electricity sector into a Data Value Driven industry. In the following
Business Model Canvas, “a utility company sells electricity contracts (X) as a
value proposition to consumers (A). It’s key activities include the supply of
electrical power (X). As part of this activity, the utility company installs
digital metering devices in the homes of consumers to measure the amount of
power used by the household. These smart meters do not only measure the amount
of electricity used, but also register additional data such as the times of
use, the fluctuations on the power grid and even which actual devices are using
power. This data is sent back to the utility company, where it is stored in a
database. It is then used to provide services (Y) to the consumers, for
instance by offering variable rates during the day to stimulate power usage at
offpeak times or by displaying personalized advice on a smart thermostat or a
web portal”.
“The device at
the heart of this data transport is called the Smart Meter, which measure both
incoming electricity and outgoing flows over a particular time. The customer
value resides in the data, for instance by comparing your washing machine’s
data against a global database of washing machines, your electricity company may detect that your
machine is using more energy than average washing machines that run as often as
you run yours. Based on that data, the company could calculate that purchasing
a new washing machine would save you enough money to be profitable in 4 years’
time”.
This is a clear
example of Revolution 4.0 applied to revitalize an industry. An electricity
company implements smart meters through which data is collected. This data is
processed, “packaged” and sold a service. Consumers might pay an extra fee for
this data, but it is extremely valuable for cost savings. The data “pays
itself” to put it bluntly. As the Data Driven Strategy grows, electricity
companies will continue offering their standard services but will as well grow
their business in the data segment. Eventually Smart Meters and the collected
data can be sold not only to existing customers but also to non-customers. This
is a way to expand the market by attracting new customers but also to unlock
untapped market value. In this example, we clearly view how the fourth
industrial revolution differs from the previous revolutions, which were
capital intensive. Switching to a Data Driven Strategy does not require huge
capitals, but is knowledge intensive. Having vision, taking risks and leading data
driven strategic changes are un-negotiable skill-sets for the World of
Tomorrow.
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