Summary
A business’s energy use is complex and impactful. If not dealt with well, if the moving parts of a business’s energy-use ecosystem are not recognized and prioritized, if progress is not made on the priority items, if efforts are ad hoc not connected and synergized, then the combined drag on a business’s success will be substantial. Meeting this challenge well will result in a business’s energy-use ecosystem become a strength, a competitive advantage for attracting new customers, talent, and investment, and for promoting contentment amongst existing customers, talent, and investors.
The Concept of an Energy-use Ecosystem
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Energy is resource. A commodity. It is produced by burning or otherwise manipulating another commodity – coal, oil, gas, uranium, sunlight, gravity, and wind are currently favorites.
Energy use is an activity. In the business to business context it is a complex activity. It requires the coordination of hundreds of other activities and resources and systems from fields including finance, contract law, knowledge and risk management, and human behavior, in addition to the fields of engineering and technology that may first come to mind.
Beyond the resource, energy, and the activity, energy use, every business today has an entire energy-use ecosystem, unique unto itself. A business’s energy-use ecosystem, just like the natural ecosystem students learn about in high school, consists of every way that anything related to energy use does or could affect the business’s success. Not only the immediately obvious elements such as where the energy it needs is coming from, what technology is in place so that energy is put to use to provide energy services, and what the financial cost is for that energy and that technology, but also the huge number of much less obvious elements all the way out to things like new regulations about putting a price on carbon will do to profits, when the transition away from burning fossil fuel will impact a business’s customers’ ability to buy its services, and the domino effect of government’s actions in support of the UN Sustainable Development Goals.
This ecosystem has grown much more complex in the past ten years, and seems set to continue on that trajectory. Energy use now not only affects a business’s ability to continue operating from one minute to the next, and its ability to do that at a profit; energy use now also affects a business’s reputation, its brand, and its ability to satisfy important stakeholders from right across its major stakeholder categories of customers, employees, and owners/investors.
Complexity and impactfulness means that this ecosystem is rich with opportunities to advance the business’s success, but also with risks and threats to diminish that success and negatively affect the career of business executives.
The opportunities and the threats related to a business’s energy-use ecosystem are often two sides of the same coin. Amongst a business’s full range of stakeholders there are those for whom one or more aspects of energy use can be a hot button – positive or negative. For example, someone at corporate office or with the investors may be both very attentive to the cost of energy but also insistent that the business participate in industry initiatives to promote electricity supply deregulation.
Failing to fully appreciate the business’s extended energy-use ecosystem may lead managers to make decisions that might leave them looking ill-prepared, a poor judge of risk, or less than astute. For all these reasons, business managers are well advised to deal competently with the subject. Both the risk of failing to see a threat and the risk of failing to capitalize on an opportunity will lead to higher-ups asking why.
On the other hand, when this challenge is well met, a business’s energy-use maturity becomes a strength, a competitive advantage. Its energy-use maturity will contribute to its success in winning in the B2B environment, because energy-use maturity is exactly the sort of attribute the best customers are looking for so they can demonstrate they have good reasons for choosing your business over one of your competitors. Similarly, energy-use maturity adds appeal when the contest is for talent, for investment – equity and debt both – and for that all-important license to operate that no business can take for granted. In short, for success.
Note that a business’s senior management team has no choice but to manage this challenge at the business unit level, because each business has its own combination of location-dependent issues, job-market dependent issues, and customer-mix dependent issues. This is not a challenge that can be handled by a head office producing a standard operating procedure.
Dealing with a business’s energy-use ecosystem is, in a sense, more than management. Management denotes dealing with things under a manager’s control. Many aspects of a business’s energy-use ecosystem are clearly outside the manager’s control. But nonetheless there are management skills that can be put to work. If thinking about and planning to deal with this ecosystem for the first time, the initial goal will be to understand it. This will include mapping out the range of issues as fully as practicable, and then putting in some rigorous cognitive effort to rank each element with reference to magnitude of impact, likelihood of impact, and time horizon of impact. This is not easy. The factors are different for every business, and depend on correctly anticipating the needs of various parties including corporate office management , current shareholders, and even future investors.
The objective of all this effort is to be able do the best possible job of exploiting the opportunities and managing the risks. And then to get better at doing this over time.