Talking about Ubiquitous Power Internet of Things Part 2: Sober Thoughts on Business Model

The ubiquitous power Internet of Things proposed by power grid companies is essentially a strategic transformation rather than the application of new technologies. As a technical aspect, the ubiquitous power Internet of Things includes the realization of cyber-physical networks, the application of ubiquitous technologies, wireless private networks, etc.

However, ubiquitousness is a top-level corporate strategy at a higher level than technological strategy. Most current interpretations consider it as a technological strategy or pilot it, but ignore the significance of grid companies using ubiquitousness as a strategic transformation for the next 5-10 years.

Here we briefly analyze some of the strategic logic of power grid companies in integrated energy business (i.e. external business).

1. Competitive advantages and disadvantages of power grid companies in the field of integrated energy business

Integrated energy business includes two aspects: integrated energy system and integrated energy service. The former is more inclined to engineering system, such as energy storage, distribution, trigeneration, multi-energy coordination, etc.; the latter is more inclined to soft service, such as demand response, virtual power plant, electricity sales service, operation and maintenance service, etc.

1. In terms of integrated energy systems, the advantages of power grid companies lie in their understanding of power systems and technical accumulation, as well as their business advantages in system connection, customer coordination, project resources, and electricity fee recovery. The disadvantages are that the investment mechanism is not flexible enough, some projects have internal conflicts of interest, and there is no core competitiveness in non-electrical technologies (cold, heat, gas, etc.). At present, most integrated energy systems focus more on multi-energy coordination, multi-energy co-supply, and multi-energy complementarity. Power grid companies do not have outstanding competitive advantages in technology, engineering, and operations. Most projects remain in the pilot stage, and the profit model is not clear enough.

2. In terms of integrated energy services (services in a narrow sense, specifically soft services), the advantages of power grid companies lie in customer resources and marketing channels, while their disadvantages lie in institutional constraints, lack of service awareness, insufficient understanding of customers, and uncompetitive service costs.

In general, whether it is energy systems or energy services, power grid companies currently do not have an "overwhelming" advantage in competitive businesses, nor have they accumulated strategic core competitiveness. There are even conflicts of interest between some competitive businesses and regulated businesses (such as energy-saving services and electricity sales assessments).

Therefore, at present, power grid companies have not made any real innovation in integrated energy business. They have only put more traditional businesses such as energy system investment (in parks and user sides), distributed investment, energy-saving projects, and equipment operation and maintenance services into the framework of "integrated energy services". No matter how they are packaged, the essence of their business has not changed fundamentally.

Only by starting from this most simple current situation can we further think about the future layout and path of power grid companies in competitive business areas.

2. The digital “leapfrog strategy” that cannot be implemented

During World War II, the U.S. military adopted the leapfrog tactic when fighting in the Pacific. That is, when faced with certain small islands with heavy defenses, they chose to skip these islands and directly attack the next island to cut off its logistics chain, so that these small islands would fall on their own.

The power grid company proposed the ubiquitous power Internet of Things in the competitive business field, that is, it wanted to skip the "energy system engineering" and "traditional energy services" that do not have core competitiveness, and directly jump to "data businessization" through ubiquitous Internet of Things investment, establish a huge user-side data platform, and lead a new ecology.

In fact, Internet companies do just that. The digital ecosystem represented by smartphones has skipped MP3 and feature phones, and also skipped the competition in retail channels, and established the ecosystem of Internet e-commerce. However, there is a huge premise here, namely, the "popularization cost of digital terminals". On the consumer side, it is through the efforts of manufacturers such as Xiaomi, Huawei Honor, OPPO, and vivo that the "thousand-yuan smartphones are available in rural areas" have been realized. Consumers pay out of their own pockets to buy smartphones, and then APP and Internet business models can achieve the "digital leapfrog tactics" in a "zero marginal cost" way. In terms of strategy, the premise is to complete the digitalization of terminals with the help of consumption upgrades.

Personally, I think that in the field of integrated energy business, this "digital leapfrog strategy" is not feasible. The key is who will pay for the cost of terminal digitization and network digitization. The digitization of the B-side is not as simple as the popularization of smartphones on the C-side. For corporate users, digitization must find the most appropriate balance in terms of cost, value, price, privacy, etc.:

On the one hand, if it cannot generate considerable value at the moment, enterprise users will not pay for the cost of digitalization, which is also the fundamental reason why the industrial Internet cannot be promoted on a large scale;

On the other hand, even if power grid companies are willing to bear the costs of digitalization (not to mention whether ubiquitous costs can be included in transmission and distribution prices in competitive fields), customers will not be willing to expose their production privacy to power grid companies unless they see a closed value loop.

Therefore, if the ubiquitous Internet of Things does not have a practical implementation scenario in the competitive external business link, and only stays at some imaginary customer needs of power grid companies, or only relies on government policies to promote it, it will not be able to be truly market-oriented.

3. Only those who understand customer needs can grasp the future of the industry

Grid companies have an incentive to avoid being “piped”, so they have proposed a content (integrated energy service) strategy. This is the same as the user services proposed by mobile companies.

In order to avoid being piped, mobile companies have also done a lot of work, such as cooperating with governments/enterprises to provide government and enterprise mobile services (such as virtual networks) and campus network services. This is similar to the current cooperation between power grid companies and industrial parks and large enterprises to develop integrated energy networks for industrial parks and large enterprises.

But what is the development history of mobile Internet? From WeChat and Weibo to Taobao Mobile and DingTalk, to Tencent Video, Douyin, Toutiao, and Xuexi Qiangguo. A large number of real needs of mobile customers have not been captured by mobile companies. Mobile companies hope to attract users through cooperation with the government and industrial parks, but they are almost vulnerable in the face of meeting the real down-to-earth customer needs. Although China Mobile has also spent a lot of money, from Fetion to Migu, and has made a series of Internet content innovations, there is always a layer of paper between it and meeting customer needs, resulting in it being reduced to a pipeline in the field of mobile Internet.

In terms of down-to-earth and personal service, China Mobile has no chance of competing with Zhang Xiaolong, who truly understands customers 24 hours a day and regards satisfying customer needs as his entire life. The same goes for the power grid.

Looking back at the "Ubiquitous Power Internet of Things" plan presented by the power grid companies, I personally think that "the internal business ideas are clear, but the external business is not detailed." The internal business is something that the power grid companies are familiar with, so they are naturally familiar with it; but there is almost no description of the external business, which shows that the power grid companies do not understand the mechanism of competitive business, and what kind of business architecture and technical architecture are needed to meet it.

Whether it is the Internet or the energy Internet, in a competitive market, whoever understands customer needs has the right to speak. This right to speak has no direct relationship with the physical connection between the customer and the network, but depends on who can truly understand the needs of the post-meter business and close the value loop. At least for now, a large number of energy service providers, power sales companies, and energy-saving companies are competing for the right to meet customer needs.

The most terrifying thing for the power grid is that in the field of lightweight user-side services, these emerging forces have obtained customer traffic through content services, but the power grid has almost no ability to resist. Just like Douyin customers use mobile traffic but are not too attached to mobile, mobile can be satisfied with the huge number of customers, but the real customer value has been harvested by Internet companies.

The construction of ubiquitous Internet of Things by power grids, like the construction of 4G by mobile companies, may promote more content services. However, mobile companies have not gained the right to speak on content business in the 4G era. As for the power grid's distribution of smart terminals, just like mobile companies giving away mobile phones in the 4G era, it is a basic strategic judgment that you cannot give away an Internet industry.