Is blockchain a gamechanger for the energy sector?

Is blockchain a gamechanger for the energy sector?

Written by Oliver Buckley, Senior Associate Director, Energy Practice

Is blockchain a gamechanger for the energy sector? Or is it doomed to fail?

Some days I get incredibly excited by a tech company’s latest ‘revolutionary’ blockchain announcement. If I could point to an area of the economy where innovation is happening at a rapid rate, it’s blockchain.

Whether it’s the latest peer-to-peer trading offer or the tokenisation of power generation, ideas are out there and entrepreneurs are looking to make things happen.

But the rational side of my brain also poses a raft of questions: 

  • Can blockchain really work in a low value commodity sector like energy? 
  • Will utility firms be able to trade successfully using blockchain technology? 
  • What will be the energy consumption for blockchain solutions?  
  • Will blockchain technology put our energy system under strain? 

These are some of the issues that will be discussed at Madano’s blockchain for energy event on 5th June.

I remember from school how the brightest kids in the class wanted to join oil companies.

Now what I see is a wave of exciting new energy technology companies challenging the status quo.

This is why multinationals have been eyeing up companies with a blockchain offer.   

Earlier this year, Shell acquired a stake in UK-based start-up Applied Blockchain, a developer of blockchain solutions for clients in a range of fields including banking, telecoms and automotive.

Last year, Centrica invested in LO3, the blockchain company behind the Brooklyn Microgrid project. Centrica announced in April the rollout of a project in Cornwall in partnership with LO3 that will test multi-party peer-to-peer trading for 200 businesses and homes.

Other majors have displayed their interest in blockchain, for example, BP announced in April that it will consider partnering with blockchain start-ups doing initial coin offerings.

If large, established companies are making these serious investments, it’s a signal that there could be a bright future for these technologies. Then again, it might just be a relatively low-risk hedging strategy by these large companies to make sure they have their ‘skin in the game’ in case blockchain technology takes off significantly and profitably.  

It’s only natural that there is scepticism. Is this healthy scepticism? That’s what Madano’s blockchain for energy event on 5th June will explore in more detail. A rich mix of stakeholders from the energy industry, business, academia, Government and media as well as the technology developers themselves will debate the pros and cons and present their own vision for the energy future.

Madano helps clients define their strategy and deliver objectives through insight, creativity and communication. If you’d like to know more about our expertise in energy, resources and sustainability please get in touch.  

If you’d like to learn more about Madano’s blockchain for energy event taking place on Tuesday 5th June 2018, please email me.  

Google is bigger than Denmark… well, by 2028. And here’s why it matters.

Google is bigger than Denmark… well, by 2028. And here’s why it matters.

Written by Gareth Morrell, Head of Insights & Dominic Weeks, Head of Technology

As the dust settles on the Cambridge Analytica revelations and the congressional appearance of #zuckerberg, the implications of the rapid rise of GAFA (Google, Apple, Facebook, Amazon) on our daily lives are starting to become clear to us all. One immediate impact of the events of the last few weeks has been we’ve probably all had the shock of realising exactly what these companies know about us.

Sentiment seems to have wavered between outrage and apathetic resignation – “my data isn’t that valuable anyway” – and even some social scientists questioning the likely impact of Cambridge Analytica’s efforts.

However, when examining the financial clout of these companies and the growth trajectory they are currently projected to be on, it sets a new context for considering the information they hold, the social, cultural and political influence they wield. The intriguing question is whether us users care enough about this potential threat to democracy to give up our access to a lifetime of cat videos (amongst other services that these companies provide).

Taking the long view, is it even a problem that these companies are growing so quickly? There have always been huge companies: as far back as the 17th century, researchers estimate that the Dutch East India Company was worth the equivalent of today’s top 20 companies combined. Looking purely at revenue, there are also companies that are far bigger today than Alphabet (Google’s holding company) and Facebook – Walmart’s revenue is four times Alphabet’s and 10 times Facebook’s.

There are two factors, however, that drive the extra focus on these companies and legitimise the recent concern over their real and potential impact on democracy and civil society.

Explosive growth

The first is the explosive rate of growth. Alphabet already has an annual revenue ($110bn) greater than the GDP of Morocco. In the past ten years, this revenue has grown on average by over 20% per annum; Facebook, with a revenue of $41bn in 2018, has grown more than 40% per annum in the same period. On top of this, current market valuations of Alphabet and Facebook are 7-8 times their revenue, suggesting that, despite negative recent impacts on their valuations, investors expect similar growth in the future.

Projecting forward then, even assuming 15% growth over the next ten years, Alphabet will have an annual revenue of $515bn by 2028, making it equivalent to the 29th biggest economy in the world, larger than the GDP of Denmark (assuming a 3.5% growth rates in GDP). By that time, Alphabet’s revenue will also be almost the same as Walmart’s, just 10 years on from being one fifth of the size. And while it took Walmart 70 years to become a company with a revenue over $500bn, it will have taken Alphabet just 30. Expediting that growth is the ability to reinvest profits given high margins. This is reflected in their revenue per employee: Alphabet makes a fairly staggering $1.25m a year for every person it employs; Walmart makes $200k.

Selling persuadable minds

The second factor that legitimately turns the spotlight on these companies is that the nature of their business models is fundamentally different from the mammoth companies of the recent and distant past. They aren’t selling finite physical commodities where more raw materials are needed to produce more revenue or expensive high-end services where the market is smaller. Alphabet and Facebook are, after all, primarily media companies, and the product they sell advertisers is the opportunity to persuade us of something – but it costs them almost nothing extra to deliver ads to 100 people or 100 million people, though they will obviously charge more. As such there are fewer natural commercial limits to the growth of these companies. 

The fact that they trade in the information we provide them means they have an inevitable influence on social and political debate and therefore attitudes, whether deliberate or not. This make these information giants a very different proposition to transactional companies of the past. Jamie Bartlett has discussed at length (most often in a series of connected 280 character segments but elsewhere in more traditional forms) the fundamental challenge this represents for democracy. In particular, the specific tailoring of content just for us is perpetuating a fickle and fractured politics, incentivising and rewarding short-termist politicians, contributing to potentially harmful periods of political inertia. At a time when some of the greatest challenges we face, such as an ageing population and a warming planet require long-term solutions, this is particularly concerning.

So what to do?

The recent congress hearings suggest that politicians don’t currently have the wherewithal to even identify the real challenge to democracy, never mind work to mitigate it. That leaves the companies themselves and us the users to pick up the mantle. There’s an opportunity here for these companies to provide some vision and leadership for their new but growing industry. If one of them can devise a new business model that provides more user, grass roots control in a way that maintains to even improves revenue, then the company may well be ahead of the game – just look at what embedding sustainability has done for Unilever.

Recent moves by Facebook to move the data of 1.5bn users out of the EU and therefore out of the jurisdiction of the imminent GDPR suggests it might not be them. Can we, the user, force their hand in this and encourage a shift in the way these companies view themselves and their role in society? There will no doubt be consumer pressure on companies like Google and Facebook to change as we all become more aware of the data they hold on us. But will we really withhold our data if it means we can’t access the things we all now rely on? Sure there might be a spike in people following the message of #deletefacebook but this may not continue. Put down the device you’re reading this on just for 30 minutes and see how you fare – it could be harder than you think.

View our infographics on the growing global influence of digital media companies

The real retail therapy

The real retail therapy

Written by Mark Dailey, Partner

For once the big story was not about China. Yes, the latest international summit of shopping centre operators, owners and retailers was held in Shanghai (ICSC RECON China event) and some of the stats about China were as impressive as ever:

  • Highest level of e-commerce penetration in the world at 19.8%
  • 2 of the top 6 data companies in the world (Alibaba and Tencent)
  • China fuelling Asia-Pacific’s  eclipsing of North America in total consumer spending by 2023

But the big story was about retail itself. Old fashioned bricks and mortar type retail where you actually go in a shop and buy something. 

Two massive pieces of received wisdom have dominated the retail world in the past decade. First, that e-commerce, digital online sales, is ravaging old style retail. That store-based retail is dead, a fading business model being rapidly replaced by delivery drones speeding from huge Amazonian warehouses on the edge of town and funky neighbourhood click and collect centres. 

And secondly that the industry is still reeling from the advent of e-commerce, the ultimate disrupter – and hasn’t yet come to terms with what this emerging digital business model should look like.

Like many things in business, the reality is far different from the headlines turned out by journalist’s too busy surfing from their sofas to wake up and smell the retail therapy going on.  

The shock effect of e-commerce on retail is over. Most retailers have learned how to cope with and integrate digital sales into their overall business model.  The key watchword in retail now is convergence – online converging with offline shopping in a seamless, integrated offering to the customer.  Retail isn’t dead – bad retail that cannot offer all the benefits of online but with a great customer experience is dead. 

But there’s more going on than just coping and integrating. Bricks and mortar retail is making a comeback.  Sales of real books have overtaken kindle e-readers. Amazon, Alibaba and Tencent (in Asia Pacific) are opening real stores in response to customer demand.

Word at the International Council of Shopping Centres (ICSC) conference in Shanghai is that China at just under 20% of online sales is probably topping out and that this figure may be something of a natural overall ceiling on e-commerce. Countries like the U.S. at 10% have room for growth, but moving country stats and key segments like electronics, much beyond 20% will be difficult.    

In fact, the three fastest growing trends in retail right now have nothing to do with e-commerce. They are:

  1. Growth in food and beverage – now representing over 40% of gross leasable area in most modern malls
  2. Experiential retail – not buying stuff but having an experience, whether that is hot tub cinemas on mall rooftops, in-mall mobile basketball courts and ice-rinks or baby canteens, where toddlers belly up to the bar to get served
  3. Healthcare – for aging baby boomers keen to check pacemakers and stock up on pharmaceuticals while doing a little window shopping   

If 2008-2012 was about economic recovery and 2012-2017 about coping with the tsunami of e-commerce, the new challenge from 2018 onwards is about harnessing the power of big data to more deeply understand customer needs and wants.

The cutting edge retailers have moved on from figuring out how to work with digital sales. Like many businesses, they are now deeply into you. Using all kinds of data to predict what you want, proactively offer it to you and make it easy-as-pie to buy. 

This is the real retail therapy going on right now. The story of how your friendly neighbourhood retailer is moving way beyond the digital selling platform debate of a few years ago. And getting in your face – literally.  

As usual it’s Asia-Pac we need to look at to glimpse the future and here are some of the techno-trends soon coming to a mall near you:

  • Facial recognition is well advanced in Asia-Pacific. If you hesitate on your purchase – they see it and are fast working out why
  • Voice recognition and smile-to-pay systems where you literally ‘put your money where your mouth is’
  • Virtual changing rooms – why bother trying the outfit on when you can save so much time by having the outfit projected onto a screen-grab of you
  • Robot trolleys – no not bored husbands but real robots that take your shopping to your car for you and return themselves to the trolley park 

Thirty years ago, six of the world’s 10 largest companies by market cap were energy firms. Now they are data firms – 4 in the U.S. and 2 in China.  Data is the new oil.

And it is this focus on data and what it can tell retailers about what we want and why, that is the real retail therapy going on right now. Not some already settled debate about on-line or off-line. 

Madano is an insightful, effective, high quality communications consultancy with a strong track record in generating insight and the delivery of major programmes and campaigns in the built environment sectors.

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