The energy transition: a major threat for large industrial groups

Major industrial groups are the stars of the economic landscape; their CEOs are admired. Those of the world of energy, Siemens, ABB, General Electric, Schneider Electric, Mitsubishi, do not escape this rule. All energy transition projects are waiting for them as they would expect the Messiah; their participation in a pilot project is publicized, exploited as if the value of the project or the expected results depended on their presence.

Are they really the overpowered actors we are talking about? Do they really have the expected influence within energy ecosystems?

Let’s share three observations about this:

1-    Siemens recently announced the dismissal of 7000 employees, General Electric that of 12000 people. Commentators agree that these two groups were slow to invest in renewable energy and especially had difficulty managing the decline of activities formerly at the heart of these companies and highly lucrative. I do not think that it is a lack of anticipation. Economically speaking, it seems easier and more profitable today to milk cash cows to the last drop and degrease them in brutal stages. Large groups seem more attracted by the pursuit of very profitable activities than by the creation of new and more unpredictable businesses.

2-    I often hear representatives of large groups, complaining about pilot projects and demonstrators: these initiatives take time and cost. They want to make “business”. When they plan to launch a new product, it seems normal to them to invest in R & D. The energy transition is disrupting energy systems as a whole. These are new systems that must be designed before deploying them massively. I do not believe that the big industries have perceived the interest of investing in R & D approaches for global solutions. But their products will be sold in the future as “elements” to customers who will buy these complete solutions. If you wait for large groups to be actors of the energy transition, you risk seeing them come when it will be the time of the harvest. But will this time come quickly? And part of the harvest may be reserved for early investors in R&D initiatives.

3-    Innovation requires perseverance. Large groups live in the immediate future. Rare are those who have managed to carry out a new activity. After 5 years, if not sooner, patience disappears. Such company focused its communication on Smart Cities and becomes inaudible on this theme two years later, on the pretext that the results do not come fast enough.

These three observations show that large companies are not in a position to be committed, loyal and persistent actors in the energy transition. They will not be absent for as much: they will be in all the opportunities that can be addressed without modifying their DNA.

These large companies have successfully developed “portfolio” strategies for years, leading them to manage a harmonious balance between a mass of mature businesses and emerging or end-of-life activities. The energy transition does not make these strategies obsolete but requires that companies develop another strategic axis: the evolution of their DNA. Such product supplier must sell solutions; another one must position itself on the services etc … This axis requires the management of deep changes: this is probably the reason why it is carefully avoided and for which the large companies have rather interest to avoid the energy transition than to face it.

This leaves room for medium and small businesses, more open to change and innovation: to occupy this space, they will have to learn to network.

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