The rules for global business are changing at the fastest pace since the 19th century industrial revolution – and the combination of digital and renewables will massively disrupt the energy sector. Obstacles only, or new opportunities? Well, it depends.
Renewables are gaining rapid traction in energy. For example, battery electric Tesla’s dominate new auto sales in the US and is beating traditional OEMs such as Daimler who invented the internal combustion engine over 100 years ago. And according to the latest research from Bloomberg New Energy Finance (BNEF), a dominant institution in energy market analytics, cost for solar power has decreased by 85% since 2010. Wind energy has had a similar trajectory reaching a 50% reduction.
Cost disruption in new energy, the increased consumer aversion to the oil industry, and the economic realities facing coastal regions impacted by extreme weather events, are now challenging security dogma and political power central to the 20th century fossil economy. In many parts of the world, including growth giants India and China, solar power in green field developments are now cheaper per kWh than comparable investments in coal, traditionally a low-cost energy option in developing markets.
As governmental policy, related subsidies and tax-breaks have come into play – increased volume, economies of scale, and acceptance for new technology among businesses owners and consumers have paved the way for know-how accumulation and efficiency improvement in supply chains and processes through digitalization.
Modular thinking paving the way
In parallel, mega size investments in the size of tens of billion USD are transforming automotive supply chains, workforce and modular technology development in a fast shift to green mobility. For example, German automotive OEM Volkswagen just deployed their first true electric modular platform architecture for mass market vehicles.
The catalyst for transformative change in automotive and energy alike, spells platform-based modularization and digitalization across strategic marketing to engineering, production, and deployment. On the Norwegian market, traditional Oil & Gas businesses like Equinor and Kvaerner (watch this video to see how Kvaerner navigates the digital shift) are refocusing strategy into offshore wind power. This creates opportunities in insurance, maintenance, workforce orchestration and legal compliance through the use of digital tools and artificial intelligence.
The renewable digital future
Looking at world trade, Foreign Affairs (a leading multiplatform for American foreign policy) estimated a decline in exports from 28 to 23 as percent of global gross output during the period 2007–2017. During the same period, according to the World Bank macro indicators, the global economy grew by 40 percent in GDP terms.
What’s the underlying explanation to the trade balance delta then? A pivot towards digital. From 2005 to 2017, the amount of data flowing across borders every second grew by a factor of 148 according to Foreign Affairs.
What does all this mean to organizations capitalizing on heavy assets investments and global trade, such as the traditional shipping industry? Most will need to supplement or replace their traditional offerings with digital goods and services to stay relevant. Software fully replacing traditional electronics and mechanics (such as apps in smartphones succeeding mechanical cameras), and with human-like abilities to support and make decisions are quickly moving into everyday life, in the private space and at work alike.
A new playbook demanding continous learning
All in all, the underlying rules for global business are changing at the fastest pace since the 19th century industrial revolution, where both critical infrastructure and the terms for energy security are changing at the same time. The combined pivot to digital and renewables is a massive disruption force.
It comes with great opportunities for organizations with will power, fundamental capabilities and people who are daring enough to challenge tradition and previous ways of building sustainable societal value, while generating cash in the new world order. Executive management teams need to be brutally honest when answering questions on macro level change, long term business ambition and capability.
The importance of strategic partnerships
In order to succeed, organizations need to understand how their business landscape is being disrupted. They need to build revitalized agility into operations, enhance supply chains and production, deploy agile processes across the firm and support next generation products and services.
How do you do it? Businesses can build internal capability or form partnerships with firms providing access to know-how and tools in digital transformation for the full journey, or parts of it. Learn how Cognizant provides services for Energy & Utilities firms enabling digital transformation and best in class operational excellence.