New entrants to the energy sector can win market share by streamlining their operations and drawing on best practises.
By Denise Philip
September 30, 2015
In today’s highly competitive energy market, there are primarily two types of utilities companies – incumbents and new entrants. Despite lacking the financial strength and infrastructure that incumbents enjoy, new entrants are creating competitive alternatives previously unheard of in the utility market and they are doing this with the help of innovative vendors.
Despite the fact that competition for market share among incumbents and new entrants is strong and the fact that the supply of gas, electricity and water is a low margin, commodity services, there are attractive market opportunities for new entrants.
For this reason, utilities must look to how services are delivered and how customers are served to build competitive advantages, create loyal customers and win market share.
New entrants shouldn’t reinvent the wheel
According to Kirill Rechter at CEO at LogNet Billing, the biggest challenge that new entrants are faced with is how to build an efficient operation despite the fact they don’t have all the facilities that incumbents have.
He explains, “Because of this, it is important for new entrants to streamline their operations from the beginning without investing too much into areas that they shouldn’t be investing in and won’t give value. For instance, infrastructure and writing software or creating other legacy pieces that incumbents are good at. Often, new entrants are not always made aware of all the complexities because they have to perform as market players and comply with regulation. Our intention is to help them by minimising their costs and investments while ensuring their competitiveness.”
He suggests that to overcome these challenges in a sustainable way, service providers should carefully align their business processes and use best practises. Best practices according to Mr Rechter are preconfigured sets of offerings and the corresponding business processes, such as defining a service plan for an electricity service and the subsequent activities and workflows involved in ordering, delivering and invoicing the service. “They certainly shouldn’t reinvent the wheel. By using these best practises, new entrants will be able to compete better with other service providers that are selling the same commodities. The idea is to be differentiated from others in the market and this can be accomplished with streamlined business processes.”
“We have an extensive business processes catalogue included in our solution, which is actually a long list of best practices. This catalogue is constantly growing and is used by our customers as best practice building blocks for their operations.”
While new entrants do face challenges, there are market opportunities available to them, says Mr Rechter. He points out that competition for market share among incumbents and new entrants is strong. “For instance, customer churn in the UK is high – somewhere in the low hundreds of thousands of energy customers are switching suppliers monthly. This is a huge opportunity for new entrants. By providing lower pricing and clearer billing and good service, a new entrant can compete with incumbents. They should be providing their customers with simpler and more convenient offers. For example, self care, transparent monthly billing, quick turnaround on customer requests and innovative services will help them differentiate themselves, even though they are selling a low margin commodity.”
Gaining competitive advantage through billing
As customer expectations change and the forces of competitive markets grow, both incumbent and new entrant utility companies can leverage automated service delivery, simplified customer support and transparent billing to grow their businesses.
This is where LogNet Billing’s strategy can make a difference. The company calls its strategy Modern Billing and it is a method for helping service providers leverage their billing operations into a competitive advantage. “We provide all the necessary tools for service providers to compete.” says Mr Rechter.
At the base of the Modern Billing strategy is LogNet Billing’s MaxBill solution. The company describes MaxBill as a full featured customer management and billing solution. It says that the solution supports multiple service environments and features advanced rating options, CRM, order management, billing and strong partner management.
Today, with increasingly commoditized services, changing business models and evolving customer expectations, LogNet Billing’s Modern Billing strategy and the MaxBill solution offer service providers an innovative framework to create competitive advantages.
The solution is holistic in that it defines, configures, and implements business processes that connect all departments and roles in an organization. It can be deployed independently by a system integrator and maintained by the service provider and it enables service providers to make ongoing changes in response to market conditions, such as regulation and competition. The solution also helps service providers pursue the strategic decisions taken at the executive and board level, such as to grow the customer base, improve profitability, streamline operations and expand services.
The MaxBill solution has been deployed in a broad range of vertical markets and is supporting complex multiple service environments around the world. In addition to the utility market, the company has many telecommunications and digital content markets.
Entrants taking advantage of high churn – A case study
First Utility, the UK’s largest independent energy supplier after the Big Six, took advantage of the high level of churn and alongside LogNet Billing, they grew from few tens of thousands customers to over 1 million within less than three year period.
The company was originally created because its founders felt that the energy companies in the UK were failing customers with spiralling costs, confusing tariffs and poor service.
By offering a simplified service delivery and low costs supported by transparent pricing and billing, First Utility entered the energy market to compete and win market share.
After discovering that its existing legacy systems and technology approaches caused significant operational delays when it wanted to introduce new service packages – particularly when those new packages included multiple service types, the utility made the decision to make some changes.
The utility company chose LogNet Billing to help them deliver on its corporate strategy to enter the retail energy supply market and to grow its business with automated service delivery and transparent billing.
LogNet Billing’s MaxBill solution serves as the base for First Utility to rollout efficient businesses processes for delivering on the utility company’s corporate strategy.
LogNet Billing enabled First Utility to transform their smart meter readings into competitive advantages and generate full value from their customer. In addition, there are numerous possibilities for adding services supported by complex bundling scenarios, according to Mark Daeche, founder of First Utility.
MaxBill was selected by First Utility because it had been designed from the ground up to manage multiple service environments regardless of the industry sector and it is built with a flexible workflow engine making the configuration of automated business easy to integrate across the organization.
MaxBill replaced various separate legacy systems previously used by First Utility. MaxBill’s fully automated solution helps to remove the operational bottlenecks that First Utility had been experiencing and can now better serve customers with complete information and lower response times.
The solution gives First Utility access to real-time usage data generated by the smart meters. The solution was also deployed in compliance with the energy sector regulations in the UK that govern the obligations of gas and energy suppliers.
“Flexible billing, service delivery and customer care operation helps First Utility to make dynamic pricing
adjustments, create new promotional plans, loyalty schemes and engage in improved cross-product marketing that support its strategic goals,” explains Rechter, “This is what sets them apart in the market.”
Invest in a future-ready product
“Service providers don’t want to replace their billing system every three to five years so it is important for us to offer a billing solution that is relevant in the future and provide customers with the most benefits. We recommend that new entrants opt for a ready-to-use product that can be deployed quickly and at the same time be ready for future needs, such as supporting new services,” explains Mr Rechter.
“The billing vendor should be in partnership with their customers in order to properly understand their needs.”
LogNet Billing was named a Major Market Player in an analyst report from IDC on billing strategies for energy service providers in competitive markets. LogNet Billing also recently received the Global Telecoms Innovation Award from Global Telecoms Magazine. LogNet Billing received this award recognition together with one of its systems integrator partners for the benefits it delivered to a prominent incumbent telecommunications service provider in Southeast Asia.