Zpryme Trendz Volume XIV

Everyone seems to be up in arms at GM’s recent announcement that they’ll be shedding 15% of their workforce and closing several plants. Workers are angry at the loss of jobs, government is irate at the message it sends, green-minded customers are upset that the Volt will be discontinued, and the markets are happy at the strategic realignment that will ‘equip GM for the future’. It speaks to some obvious trends that are in front of us. But some ‘dot-connecting’ is required for the non-obvious trends that most will miss in their reactions to the announcement.

One dot

In 2017, GM acquired a small company, Cruise, that was working on self-driving cars. The acquisition price was just shy of $1Bn in cash and stock. The company had raised just $18M before the acquisition, but the $1Bn was small change for a global auto company looking to get ahead of the competition. Most people noticed. However, what many of them have failed to pay attention to since that acquisition is that SoftBank, the mega venture capital fund with $100bn under management, and Honda have both invested $2.25Bn and $2.75Bn respectively in Cruise since then. The acquisition and investments moved GM to the front of the pack when it comes to self-driving cars and autonomous vehicles. The value of Cruise under GM is now worth more than the ‘losses’ GM will incur to cut staff and assets. Honda’s most recent investment boosts the value of Cruise to $14.6 billion, about a third of GM’s $48 billion market cap. All from looking at the future through a slightly different lens from their traditional approach.

Another dot

Endesa just announced that they’ll be erecting 100,000 charging stations across their coverage area over the next few years. Owned by Spanish utility Enel, Endesa has earmarked 65 million euros for the deployment taking place over the next two years. The company is planning to deploy more electric car charging stations than there are gas stations in Spain (~10k gas stations)! How is this possible? Some of the stations will be on private property and expand the footprint of Endesa. The model it suggests that energy storage assets owned and controlled by the utility will be deployed on real estate where the utility previously had little footprint. As this article suggests, ‘All the electric vehicle charging facilities will be connected to the Enel X global digital platform, which will facilitate interoperability and remote control of the charging points.’ It’s a model that maintains the utility Cost Of Service (COS) rent on assets deployed model but with a focus on distributed and connected assets. Why is the company doing this? Because it’s a hedge against an uncertain future. These companies are not predicting the future, they are employing the tactic Jeff Bezos is said to live by, focus on what will not change.

Connecting the dots

As these companies transition, there will be a requirement for a digital platform that sits centrally, managing the operations and the information that flows across the system. These companies have chosen to take a platform approach to their future. A platform strategy is an approach to entering a market which revolves around the task of allowing platform participants to benefit from the presence of others. In traditional competitive strategy, it is generally assumed that customers can determine their willingness to pay for products or services independently. It enables the development and movement towards scaling new technologies with speed and with a considered risk management approach. It enhances decision making with its reliance on data and advanced analytics/artificial intelligence while also enabling the implementing company to tackle new opportunities and markets with clarity; the platform doesn’t change, but the apps you build on top of it can be customized to test a market. In the Endesa example, the charging stations can be both charging stations for EVs and calibration/data exchange terminals for AVs. Same platform, different applications. We discussed the platform approach to addressing the future during our workshop last week.

Unfortunately for most US utilities, there are no clear indications of a decisive push towards a  platform strategy. Utilities have managed their operational technologies (OT) well and kept the grid going. With the help of vendors, utilities have also managed their information technology (IT) adequately, for the most part (I worked at a power station so I know how much cobbling together actually occurs). What we are wholly unprepared for is that messy middle where the assets are distributed and the ownership of assets (hardware and software) is unclear. There’s a ‘3rd space’ required, and that’s where the platform strategy comes in.

GM is taking that approach. Endesa is taking that approach. It’s playing out like it always seems to for our industry. An auto company is adapting to fast changing times with a platform strategy (fewer vehicles, same underlying platform approach). And a European utility is diving in with a strategy that’s skating to where the puck is going. What are we doing in the US utility industry? What end of the platform spectrum do we want to be on? What outcome are we adapting our inputs to create? Thoughts?

Our workshops help you connect the dots yourself

We had a great workshop last week and the next one will be in Austin on December 12. A great learning opportunity before the holiday lull. For subsequent workshops we’ll be taking an adaptive approach. We found the conversations were deeper when we focused on specific company issues. For that reason we’ll be keeping the workshops to a company specific format; we’ll come in for a half-day session with your company and dive into the topic. Topics are selected based on research findings that show where gaps in knowledge exist. Email seyi.fabode@zpryme.com to schedule a half-day session to upskill 3-8 people in your company in the application of AI, a critical part of any platform strategy for your company.


Till next week.