The hit song – a fine line between success and failure

The energy transition can be accelerated through new business models

Updated: 6 maj 2024, 15:05Published: 6 maj 2024, 14:19

Victor Hammar is a Partner at the consulting and auditing firm EY.

The transition to a fossil-free society brings great business opportunities. However, the rapid and complex development means that companies in the middle of the transition are wise to review their business models.

Traditional models are not always enough when your success depends on the success of the entire industry.

To succeed, new forms of strategic partnerships are needed – throughout the entire value chain.

EXTERNAL LINK: Read more about Vested – the model for real strategic partnerships

Victor Hammar is a Partner at the consulting and audit firm EY and has acted as an advisor to many companies through the entire value chain of the electricity and energy sector. He has seen from the inside what is required to accelerate the transition to a fossil-free society.

– In order to achieve success, and this applies both to the individual company and to the industry as a whole, new forms of strategic partnerships are needed that aim to grow and solve new challenges together. We need to go from “what’s in it for me” to “what’s in it for we”.

Collaborations between suppliers and customers are in themselves nothing new. But at the World Energy Congress, which took place in Rotterdam 22–24 May, it was clear that the development in the energy sector is currently very fast in terms of technology development, infrastructure development and market conditions. And the Congress emphasized the importance of strategic partnerships, not least as a way to promote innovation, manage the energy challenges, open up new markets and reduce the risk of individual actors.

Your success requires everyone’s success

– The companies in the transition act in a complex value chain with a limited number of actors – where all parties are dependent on others doing well. Those who develop software for charging stations are dependent on a rapid expansion of charging infrastructure, and the hardware manufacturers are in turn dependent on developments further down the value chain. A company’s success is simply based on everyone’s success.

Given these conditions, it is important that the business model is in line with the long-term results you want to achieve.

– Different types of business models drive different behaviors and results. And here it’s about thinking about the step from very transaction-based business models to real strategic partnerships in some cases, says Victor Hammar.

A leading model for real strategic partnerships is “Vested”. Vested is based on over ten years of research at the University of Tennessee and has been applied by several leading international companies. Magnus Kuchler, who is head of Sweden at EY and has acted as an advisor in over 20 Vested partnerships, sees great advantages in using a proven business model that is completely neutral for all parties involved.

Magnus Kuchler, Head of Sweden at EY.

Fictitious joint venture that creates real value

– Here you define risk and responsibility distribution, common goals, price models, incentive structure and governance together – but without starting a joint company. It is therefore not a case of a Joint Venture or any other type of joint ownership in a project. Instead, it is about moving from a transaction-based business to a relationship-based one.

In a transaction-based business, each party looks out for its own direct interests. You want to maximize your profit and minimize your risk and costs. But in a strategic partnership that uses the Vested methodology, the focus is on driving innovation and long-term value by finding win-win solutions – while sharing responsibilities and risks in a smart way. Here are some points that differentiate a Vested contract from a traditional business contract:

• A results-based financial model is set up with clear risk sharing, which drives the right behaviors and which ensures that the parties win together and lose together.

• The parties agree on a common vision and guiding principles.

• You create a joint fictitious company where full transparency and full trust prevail.

• The participants follow a joint process where the partnership is built together.

• The driving force is transformation and innovation – and joint value creation.

– When we at EY look at industries with a similar rate of development and complexity as the energy sector, we see that many top-ranked companies are moving more and more towards building strategic partnerships. And many of these companies use the Vested methodology to succeed, says Magnus Kuchler.

EXTERNAL LINK: Read more about Vested – the model for real strategic partnerships

The article is produced by Brand Studio in collaboration with EY and not an article by Dagens industri

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