EV STRATEGY ENERGY PRICE CAP REDUCED TO 6 MONTHS What does the future hold for EV running costs and the shift to decarbonised transport?
The reversal of most of the mini-budget has seen the energy price cap period, previously set for two years, reduced to just six months - until April 2023, which now increases the uncertainty for anything related to energy.
ADAPTING STRATEGY TO UNCERTAINTY
Business models aren’t created in a vacuum, external forces and trends shape them. With falling fuel and rising energy prices, the motivation for a shift in direction to EVs weakens. It feels easier to remain wedded to the status quo of running compliant petrol, diesel or PHEVs.
So if commercial high-mileage fleets are to successfully shift to electric, what components are required to accomplish this?
FRAMEWORKS FOR THE FUTURE
In such uncertain economic times can any strategy navigate a way forward?
EVs present a difficult choice for many industry stakeholders because turning thoughts into actions requires planning and strategy, and the marketplace has yet to establish any precedent. Establishing a new market brings uncertainty at the best of times, because of this, it might be interesting to briefly explore four established strategic actions created by Professors of Strategy, Kim and Mauborgne in 2004.
‘FOUR ACTIONS FRAMEWORK’ & ‘VALUE INNOVATION’
This framework is most effective when used to demonstrate ‘value innovation’ and to break the trade- off between value and cost. It can be most useful when looking for ways to get from established markets to those untapped. Or, in this case, it might apply to industry stakeholders planning a business model from ICE to electric.
VALUE INNOVATION
Creating value for both consumers and companies or ‘value innovation’ is the cornerstone of any market- creation strategy, since value for buyers comes from a product’s utility minus its price, and value for companies comes from a product’s price minus its cost.
Innovation and value are equal parts of value- innovation - When you don’t innovate, you’ll only create incremental value, which is good but doesn’t stand out.
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Often, innovation without value is technology-driven, market-leading, or futuristic, and reaches beyond what buyers are willing to pay for.
The achievement of value innovation requires alignment between utility, price, and cost. i.e. your bottom line will go up if you eliminate and reduce the things that make the industry competitive. And - by adding elements non-existent in the industry, buyer value rises.
The strategic advantage of exploring untapped markets, such as EVs, means they are not, by definition, crowded. Demand is instead created rather than fought for.
APPLYING THE FOUR-ACTION FRAMEWORK Breaking the value-cost trade-off
Applying this simple framework to the EV marketplace can uncover the start of a value-innovation EV business model.
Eliminate and Reduce - Costs. Raise and Create + Value.
Begin the process of transforming your business by asking these four questions:
•Would it be better to eliminate any of the factors the EV industry takes for granted? (e.g. eliminate the inconvenience of public rapid charging networks?)
• Should we reduce certain factors below industry standards? (e.g. reduce the cost to charge in public).
• How can we raise the bar above the industry standard? (e.g. increase the number of proprietary private hire and taxi company-owned rapid charging hubs).
• Should we create anything the industry hasn’t? (e.g. reservable charging bays)
We are a strategic consultancy, specialising in the rapidly evolving EV marketplace. We help companies needing to take the right action with strategies for navigating uncertainties that come with unknown markets such as EVs.
If you need advice please do get in touch.
Article supplied by Tim Scrafton The Connect Consultancy 0161 635 6553
hello@theconnectconsultancy.com
NOVEMBER 2022 PHTM
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