Jorge Leis: Energy Management in the Age of Disruptions

Read the transcript below.

JORGE LEIS: Well this is the third in a series of Bain briefs on dealing with uncertainty in the energy industry. Uncertainty is nothing new to the industry. But what is new is that recent disruptions have fundamentally changed the competitiveness of primary fuels, and have created an energy system that is that much more tightly integrated—not only across the primary fuels, but globally as well.

Now, because tomorrow's disruptions are based in today's trends, we analyzed dozens of trends and identified 12 potential disruptions that could materially impact the energy landscape by 2030, such as a surge in OPEC production or the rapid penetration of electric vehicles, to name two.

Now, around these potential disruptions, we developed three scenarios that cover a broad spectrum of potential outcomes: Oil and Gas Superabundance, which is a case where oil and gas is plentiful and cheap; Green Transformation, in which aggressive technology advancement and policy changes accelerate the adoption of renewables; and Market Montage, which is a midpoint, if you will, of potential disruptions and outcomes. Now, the results of our analysis imply that there are three key imperatives for energy executives today.

The first is that if you haven't already, you really need to integrate scenarios into your strategic planning process. Scenario analysis remains the fundamental tool for planning under uncertainty. Secondly, you should combine top-down and bottom-up analysis to efficiently generate actionable insights.

Top-down, so that you can capture these global dynamics and this growing linkage between primary fuels. And bottom up, so that you can generate proprietary points of view at a level that is sufficiently granular that you can identify where and how to influence the outcome in your favor. Now this ability to think globally, but act locally, is going to increasingly be a requirement for success in the future.

And the third imperative is that energy executives today have to think about how to retool their business models to be competitive weapons. The coming age of disruptions is going to produce a lot of turbulence in the industry. And periods of turbulence invite new entrants and new business models that further disrupt the industry. So energy executives have to introduce the innovation skills and agile processes to fine-tune their business models, and prepare for a fundamentally different competitive environment in the future.

Read the Bain Brief: Energy Management in the Age of Disruptions