Financial players bring credit depth to energy markets, but will they play by the rules?
The center of gravity for energy marketing and trading activity is moving from...
The Search for Consumer Content in Energy Marketing and Retailing
branded interfaces with customers, bypassing the smaller pipes and wires companies who presently control the contact with customers. The first phase may feature dynamic Web sites to conduct simple ordering and tracking. Hundreds of such Web sites will emerge within two years, impelling the second phase: a branded customer interface independent of the generic interfaces provided by commercial on-line services.
It may take over 5 million customers to amortize the cost and make cyberspace branding a commercially useful proposition for energy retailers. The Web site and customer interface must be integrated with a massively complex BCCS system linked to enormous electronic content warehouses and sophisticated call centers. Energy companies no doubt will squander hundreds of millions (em if not billions (em of dollars in the quest for cyberspace branding. Most will suffer financial exhaustion. Few will create a powerful new consumer brand.
The Networked Customer
Cyberspace retailing of customized services and products will create a new market niche composed of networked energy consumers. Individual consumers or customer premises will give way to interactive groups of energy consumers (e.g., a residential development, local members of a club, a church group, a city consortium of lodging and hospitality establishments, a collection of shopping malls). The collective buying and consuming pattern of members of a network will provide opportunity for the retailer and economic leverage for the participants.
Through their habits of spending and use, these networked consumers will create mutual value. (One location may install a client server, another a supply platform. A third may allow its superior computing system to be a controller. A few more may agree to service interruptions or temporal shifts in peak use, and so on.) The retailer will provide content and infrastructure management services, and function as a switching device among participating individuals or businesses (e.g., by establishing and maintaining a virtual private network for each networked customer on the evolved multimedianet).
Once a retailer compiles a portfolio of networked consumers (perhaps 25,000 to 50,000 such networks across the country), powerful entry and exit barriers will come into play. The decision to switch out of a network or cease participating will not only impose costs on the switching or departing individual, but also on all remaining members. These barriers will become formidable competitive tools for dominant national players, and eventually produce large and sticky market shares.
In 10 or 15 years, then, the North American energy system can expect a second transformation to networked supply and national shares (em impelled by the same forces of consumer sovereignty, economic democracy, information technology, and mass customization of services that are even now transforming the global economy and society.
Remaking the Environment
Energy utilities and other energy companies believe themselves eternal. The biggest believe they will inherit the transformed energy industry, yet none dominates in today's market. Simply put, it is not yet clear whether a business based on industrial technology can survive information technology.
Dominant firms don't just earn more, or grab the biggest market share. They remake the environment, forming their own biospheres. Microsoft changed the computing environment in