The battle to control profit margin really boils down to a battle for the customer premises, where the serious money resides.The gas and electric industries in the United States control about $900...
The Search for Consumer Content in Energy Marketing and Retailing
service levels. Some consumers may even allow management firms or retailers to install micro-production platforms on their premises to support highly distributed electricity supply, or even, at scheduled times, to serve as load-shedding units. In return, the consumers might receive deeply discounted service or "supply" credits that could be converted into cash, vacation, or free-service upgrade packages.
and the Back Office
Western Union introduced credit cards as early as 1914, but failed when losses skyrocketed. Bank of America tried again in California in 1960 and changed the world. The difference lay in back-office systems: Billing, Collections, and Customer Service (BSSC).
Clever or novel product ideas will not suffice without the platform of a BCCS system. Back-office services are inseparable from product design, service delivery, and margin capture.
When Bank of America launched its credit card (which became Visa), delinquent account losses exceeded $10 million for the first year alone. By late 1961, it had to halt expansion, regroup, and deploy the resources of its famed Systems and Equipment Research Group to install a credit tracking system and issue credit cards statewide. (Bank of America was a pioneer in information technology, leading the U.S. banking industry in automating check processing in the late 1950s.) Today, of course, credit card companies such as Visa and American Express could not hope to function without their massive and increasingly sophisticated BCCS systems (em which, in a real sense, are their product.
Pricing, of course, marks an essential ingredient in any customized service. However, the mechanism for presenting and closing on millions of prices per day must be an interactive billing system that lets the consumer exert control over prices by choosing from a continually changing menu. By the turn of the century, this menu will reflect the customer's unique history of service and preference, plus a specific combination of services tied to a promotion or an upgrade window for an affinity group.
Tailored frequent pricing will likely join with real-time payment options and multiple payment mechanisms, so that customers may pay for consumption instantly, if they wish. Multiple payment mechanisms could include debit, credit, and stored-value cards; electronic cash; or preapproved credit balances domiciled with the merchant or a third-party payment-clearing agent. Tailored payment will prove a powerful aspect of interactive billing systems, a subset of the BCCS system.
Who wins in this game?
The energy retailers of the first tier will successfully internalize their BCCS system, giving them a major competitive advantage. The boundaries of the firm will expand from those circumscribed by its "payroll" and "assets" to include a network of alliances with operating and client service organizations. Other firms will lag, compelled to outsource their BCCS system (including high-volume, interactive-call centers), perhaps to the first-tier retailers, large computing companies, or specialized subsidiaries of telecommunications and financial service firms.
The BCCS system and creative product design will require a web of competencies and loyalties, since no firm enjoys the means, experience, and intellectual capital to proceed alone.
The leading energy-content providers will use their BCCS systems and the evolved multimedianet to create