• Energy as a Service
  • Facebook
  • Utility Transformations
  • Digital Utility Strategies

Energy Service Providers Can Learn from Social Media Growth Strategies

Johnathon de Villier
Dec 18, 2020

Guidehouse Insights

Software requires a different growth strategy than physical products. One of software’s major advantages is its ability to scale. Provided the necessary hardware and network infrastructure is in place, software companies can drive user adoption and platform growth across borders without waiting for complex supply chains, manufacturing, or material streams to catch up. 

No industry has demonstrated these principles more thoroughly than social media. The power sector has never been known for its social media prowess. However, in the age of energy services and X as a service, energy companies are building and deploying software that faces growth challenges similar to those in the social media industry. To solve these challenges, utilities ask: How can we attract new users? Where are market conditions favorable, and can we create them where they aren't?

Widespread Hardware, Network Connectivity, and a Strong Value Proposition Are Key Ingredients for Platform Growth

Social media companies succeed in driving user adoption partly because they maintain a high value proposition while keeping barriers to entry low—their applications are typically free to access. But success also depends on the availability of hardware and network connectivity to deliver that value proposition to the end consumer.

For social media, the magic ingredients are smartphones and an internet connection. Any market that has high penetration of both is fertile ground for user growth. When Facebook began to expand into markets where one or the other was missing, it got creative and announced a plan to unilaterally expand internet access—the bottleneck at the time—using drones. 

The plan met with resistance and was later scrapped when the company realized it was cheaper to work directly with hardware providers instead. Facebook now partners with smartphone manufacturers to ship its app preinstalled on smartphones in multiple African countries and India. Facebook focused on its strengths, software and data collection, and hitched a ride with telecos already working to expand cellular coverage.

Energy Service Providers Should Learn from Social Media's Strategies

Automated demand response, virtual power plants, and local energy markets are three emerging technologies that require smart meters (advanced metering infrastructure [AMI]) and internet connectivity to reach their full potential. Just as Facebook’s growth outpaced smartphone and internet availability, energy service providers may find their growth and expansion in new markets limited by the availability (or lack) of AMI. 

Like social media platforms, the benefits of energy services increase non-linearly as they add users—the network effect. A large, active local energy market with many prosumers provides more competition and better rates for all participants, which increases the value proposition for new entrants and service providers.

As local energy markets become more common, their providers should explore partnerships with manufacturers of distributed energy resources (DER) in solar and storage, EVs, and even connected devices in the home, just as Facebook did with smartphones. AMI manufacturers would be logical early partners in this pursuit.

A few companies have already recognized partnership opportunities. Innowatts, an AI-driven DER management company recently acquired by Shell, is working with meter manufacturer Itron to deploy its technology in utility distribution networks.

A Smart Growth Strategy Is Not Immune to Mistakes

As energy service companies learn from the success of social media platforms, they avoid the pitfalls social media companies have experienced regarding advertising and user privacy. If platform growth outstrips the ability of regulators to keep pace, legal complications and sudden shifts in market conditions can place service providers against policymakers and the public.

Customer energy data is valuable and can be leveraged to better manage distribution systems. But transparency and responsibility are key and customers should clearly understand how and why their data is being used. Companies must stay on the same side as their customers, even as they prioritize growth.