Spare a thought for energy CEOs in this tech-race world

My latest column in Recharge magazine:

We live in an era where change seems to be accelerating, wherein eventualities once deemed black swans because of their unlikelihood regularly come to be viewed as predictable surprises after the event. In this context, imagine sitting down for confidential in-depth interviews with 60 business leaders and their equivalent in public service, and asking them what they honestly feel about their situation: in particular their personal ability to spot what is coming, and to put proactive plans in place.
That is what BBC veteran Nik Gowing and change guru Chris Langdon did in 2015. In a report entitled “Thinking the impossible: a new imperative for leadership in the digital age”, they share the results. They found that many leaders, once guaranteed anonymity, admit to a dire state of doubt and inadequacy, and many say their insecurity burgeoned in 2014.
Gowing and Langdon describe their findings as “deeply troubling”. They talk of 2014 as “the great wake up” year, because of the multiple geopolitical and strategic disruptions it threw at the world. They found that the insecurity of leadership, and the unwillingness of leaders to square up to “unpalatable” issues, is particularly marked in the digital domain. “In what is fast becoming a new disruptive age of digital public empowerment, big data and metadata”, they write, “leadership finds it hard to recognise these failings, let alone find answers and solutions.”
In the light of these conclusions, it is interesting to consider the full extent of the challenges energy-industry leaders face today. Let me consider five themes, all greatly relevant to the energy markets of the future: transition, data, artificial intelligence, robotics, and capital.
First, the challenges of transition from fossil fuel dependency to zero carbon. Business models are dying in the incumbency, yet the best operable replacements are far from obvious. Prizes are huge, and penalties dire. On the one hand, Tesla can raise $400 million of free money from customers tabling deposits for a product (the Model 3) that can’t even be delivered to them for a year. On the other hand, SunEdison can plunge from multi-billion dollar status to bankruptcy within less than a year.
Second, the world of big data has largely yet to manifest in energy markets. It will. Ever more advanced algorithms have allowed tech companies to grow in recent years from nothing to multiple-billion-dollar valuations. They have done so utilising a broad array of strategies, including use of real time data (e.g. Waze), peer to peer bypassing (e.g. Skype), hyper personalisation (e.g. amazon), the leveraging of assets in the citizenry (e.g. airbnb), leveraging of assets and workers (e.g. Uber), sharing of assets (e.g. zipcar), outsourcing of data processing (e.g. kaggle), and people-power financing (e.g. Kickstarter). Tech giants with operations that span these strategies, such as Apple, Google and Facebook, have made their first plays in energy long since. This in a world where, to take one example of massive relevance, the UK national electricity grid achieved a first in October by transmitting data down its own wires.
Third, artificial intelligence. This new technology, which has so many potential benefits for society alongside inherent threats, is breaking out all around us. Machine learning of a kind only dreamed of for years is now reality, and applicable to multiple business sectors. In energy, driverless car technology is not just in design phase. Uber is testing the first self-driving taxi fleet, on the streets of Pittsburgh.
Fourth robotics, with which AI will go hand in hand. Toyota, for example, has launched a $400 robot with the intelligence of a 5 year old for use in homes. Why? “This (product) may help people get interested or fond of Toyota, or help in connecting with our customers who have let go of Toyota vehicles”, says a company spokesperson.
Fifth, capital. Gillian Tett has written in the Financial Times recently that our future has become “unfathomable”, and investors generally are particularly ill equipped to cope with it. Banks come high of the inadequacy list. They have lost consumer trust on a grand scale since the financial crisis, and are now leaking customers to alternative service providers of many kinds. One bank CEO says openly that his sector is becoming “not really investable”.
The banks are trying to fight back by grasping the changes underway in use of technology. Some are pitching to central banks a narrative that holds they will become more efficient if they are granted use of a utility settlement coin for clearing and settling blockchain trades. (If you haven’t heard of blockchain, now is the time for a few study hours). UK banks are readying to roll out robot tellers, aiming to improve customer service via learned empathy.
So pity the poor confused and insecure CEOs of the energy industry in their casino, as they try to make sense of a world changing as fast as this.
But not too much. Some of them will grab the chips, shuffle them around, and place the right bets. These people will come to know what it feels like to ride an exponential-company rocket. And, if we are lucky, to improve society as they do so.