Energy & Commodities
Part 3: Growth
Unlock Value with Capabilities for Energy Trading Innovation
Joseph Tabita
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Energy & Commodities
Part 3: Growth
Joseph Tabita
Executive summary:
Energy trading companies are in a period of change. The energy transition, evolution of customer behavior, societal shifts, new business models and technological advancements are redefining what disruptions supply and trading organizations may face—and what they can achieve.
To address these disruptions, organizations can embrace digital transformation programs focused on one thing: innovation that supports goals and creates value.
The space between where a business is now and where it hopes to go next represents opportunity, and innovation is the path forward. Innovation is not a one-off “eureka moment.” Instead, it is a process that requires time and investment in multiple corners of an organization to marshal their digital and non-digital capabilities and deliver results.
Trading organizations can follow a three-point blueprint to embark on the digital innovation process and fuel innovation: articulate their goals, create a plan of action and invest in capabilities that will transform their ways of working.
If innovation is a process that can be broken down into steps, that process starts with a single question: What does an organization want to achieve?
Broadly speaking, there are three business goals that make the biggest impact on organizations: cutting costs, increasing revenue and enhancing agility. Each business must work out the specific combination of these that will best serve its interests. Businesses should refine their goals so that they are reasonable, achievable and impactful. An organization aiming to increase revenue, for example, should weigh the specific approach it may want to take:
Serve existing markets and customers: For example, crude and refined products will remain relevant, but the supply and demand equation will change more quickly. Creating insight and advantage here will pay dividends down the road.
Enter new markets: Power trading and network management are evolving quickly with the increased footprint of virtual power plants (VPPs) and the advent of distributed energy resources (DERs).
Create new markets: New energy commodities are going to create new markets and challenges (e.g., hydrogen and ammonia). Leading the way here may open doors to new partners and help cement a strong position in the post-fossil fuel world.
Defining and refining its goals empowers an organization to be intentional about its future—and it will unlock value by focusing growth on targeted areas, investing with precision and creating new opportunities.
Having made the key decisions about its business goals, organizations must define how innovation will support those goals, invest with those goals in mind and create a roadmap to guide innovation and investments.
If, for example, an organization identifies a goal of becoming more agile, it must define “agility” in actionable terms. Does agility mean de-siloing data so that it can streamline and automate processes? Does it mean developing new, leaner platforms that are more responsive and adaptable? In either of these cases, the organization can invest in its goal of becoming more agile by focusing its efforts on modernizing systems or building new platforms that are responsive to market conditions.
Once an organization engineers a feasible digital innovation strategy, it should develop a calendar to execute it. Targeted timelines will enable the business to progress at a reasonable pace. Rolling out a calendar not only fuels the project’s momentum, it also helps an organization determine when, where and how to invest in capabilities that will turn the goal from vision to reality.
With the key strategic decisions made and the plan in place, the organization should focus on bringing together digital and non-digital capabilities that execute its goals and foster continuous innovation.
What are these capabilities? They include new tools, future-focused technologies and streamlined ways of working that modernize business processes in an industry that has remained largely unchanged for more than a century. These capabilities include the following:
Data-driven insights empower organizations to discover where they might uncover new value and identify the areas they should focus on to achieve their goals.
Energy trading organizations have the challenge of navigating constantly shifting markets. New commodities and sources of energy—such as biofuels and wind power—have significantly increased in recent years, a trend that has disrupted existing markets. Governmental regulations, including official pushes for net zero, further complicate the picture.
These disruptions are also opportunities for growth. Energy organizations can enter new markets to gain early advantages as these markets mature over time. Renewable energy, for instance, is accelerating its growth.
Products are at the heart of energy trading organizations: Traders monetize products that power the world. Appropriately, they should be intentional about adopting a product mindset, rather than a project mindset. In other words, organizations should see the forest for the trees by focusing on outcomes, rather than overly strict timelines.
With a product mindset, energy trading organizations can enhance earnings by helping markets become more resilient and adaptable to evolving conditions. For example, DERs—such as residential batteries and solar panels—are difficult to account for, since individuals or local communities take the initiative to install them. They also represent hidden value for trading organizations: By connecting DERs with energy markets, traders can increase their revenue while also helping energy customers reduce costs.
Organizations should also feel empowered to take a data-driven approach that brings together business operations and IT teams. Together, they can develop digitally informed strategies to improve outcomes by optimizing their investments and identifying advantageous energy sources.
For energy trading organizations utilizing systems that are not optimized for current and future real-world conditions, they should invest in next-generation digital architecture.
Existing energy trading systems tend to be monolithic and siloed, contributing to inefficient processes and workflows. This also means that they are slow to adapt to emerging conditions, especially as new energy sources disrupt the market and consumers increasingly generate their own power.
To succeed in today’s ever-changing landscape, energy companies must embrace agile, adaptable platforms that dismantle data monoliths and reflect up-to-the-minute changes. Digital engineering and IT tools enable organizations to deliver on their promises at pace and scale. Cloud technologies offer one way that energy traders can access, store and react to real-time information about positions, risk and profits. They can leverage this visibility to make smarter, quicker and data-driven decisions.
Trading companies can also tap into additional revenue streams by using their platform to calculate new ways to monetize their intelligence, algorithms, software and data. Once a company has successfully developed and launched a new platform, an opportunity exists not only to create efficiencies in its own business but also to sell the product to others in the industry.
Gone are the days when organizations traded in limited sources. To be competitive, organizations must be adaptable, agile and embrace these new opportunities.
One of the biggest transformations impacting the energy market is the increasing distribution of sources. By taking customer experience into account, trading organizations can create new value by incorporating distributed energy into markets. It will also enable them to develop systems that can be scalable, as DERs will only grow in the coming years. Finding productive ways of working with DERs now ensures that traders will not be left behind.
Data is in the DNA of a trading organization—and it is the building blocks of their goals, as well as the key to realizing their worth and identifying their opportunities.
By accessing and utilizing data, organizations can discover how to improve all their other capabilities: how they should be strategizing, what products they should invest in and where there is opportunity to make their operating systems more efficient.
Data capabilities not only provide traders with a snapshot of their current position and progress but also empower them to map out where they are going and determine the best way to get there. This knowledge equips them to identify and realize value, help them remain relevant and retain their competitive advantage.
Data-driven insights empower organizations to discover where they might uncover new value and identify the areas they should focus on to achieve their goals.
Energy trading organizations have the challenge of navigating constantly shifting markets. New commodities and sources of energy—such as biofuels and wind power—have significantly increased in recent years, a trend that has disrupted existing markets. Governmental regulations, including official pushes for net zero, further complicate the picture.
These disruptions are also opportunities for growth. Energy organizations can enter new markets to gain early advantages as these markets mature over time. Renewable energy, for instance, is accelerating its growth.
Products are at the heart of energy trading organizations: Traders monetize products that power the world. Appropriately, they should be intentional about adopting a product mindset, rather than a project mindset. In other words, organizations should see the forest for the trees by focusing on outcomes, rather than overly strict timelines.
With a product mindset, energy trading organizations can enhance earnings by helping markets become more resilient and adaptable to evolving conditions. For example, DERs—such as residential batteries and solar panels—are difficult to account for, since individuals or local communities take the initiative to install them. They also represent hidden value for trading organizations: By connecting DERs with energy markets, traders can increase their revenue while also helping energy customers reduce costs.
Organizations should also feel empowered to take a data-driven approach that brings together business operations and IT teams. Together, they can develop digitally informed strategies to improve outcomes by optimizing their investments and identifying advantageous energy sources.
For energy trading organizations utilizing systems that are not optimized for current and future real-world conditions, they should invest in next-generation digital architecture.
Existing energy trading systems tend to be monolithic and siloed, contributing to inefficient processes and workflows. This also means that they are slow to adapt to emerging conditions, especially as new energy sources disrupt the market and consumers increasingly generate their own power.
To succeed in today’s ever-changing landscape, energy companies must embrace agile, adaptable platforms that dismantle data monoliths and reflect up-to-the-minute changes. Digital engineering and IT tools enable organizations to deliver on their promises at pace and scale. Cloud technologies offer one way that energy traders can access, store and react to real-time information about positions, risk and profits. They can leverage this visibility to make smarter, quicker and data-driven decisions.
Trading companies can also tap into additional revenue streams by using their platform to calculate new ways to monetize their intelligence, algorithms, software and data. Once a company has successfully developed and launched a new platform, an opportunity exists not only to create efficiencies in its own business but also to sell the product to others in the industry.
Gone are the days when organizations traded in limited sources. To be competitive, organizations must be adaptable, agile and embrace these new opportunities.
One of the biggest transformations impacting the energy market is the increasing distribution of sources. By taking customer experience into account, trading organizations can create new value by incorporating distributed energy into markets. It will also enable them to develop systems that can be scalable, as DERs will only grow in the coming years. Finding productive ways of working with DERs now ensures that traders will not be left behind.
Data is in the DNA of a trading organization—and it is the building blocks of their goals, as well as the key to realizing their worth and identifying their opportunities.
By accessing and utilizing data, organizations can discover how to improve all their other capabilities: how they should be strategizing, what products they should invest in and where there is opportunity to make their operating systems more efficient.
Data capabilities not only provide traders with a snapshot of their current position and progress but also empower them to map out where they are going and determine the best way to get there. This knowledge equips them to identify and realize value, help them remain relevant and retain their competitive advantage.
Fostering innovation is about creating value. Companies should constantly optimize existing products and services to extract more value from them and simultaneously seek new sources of revenue.
Energy companies leading change in the industry are doing this by investing in capabilities that will boost outcomes: strategy, products, engineering, customer experience and data. Together, these capabilities create value by finding solutions and setting up systems for ongoing transformation to meet future goals and stay ahead of the curve.
Publicis Sapient partners with organizations to develop impactful capabilities that drive innovation and help them face the future of energy trading with confidence, skill and purpose. Get in touch to explore how to build new capabilities to fuel innovation.
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