Tuesday, May 19, 2009

Google's knack for ruining business models

Google may be on the verge of ruining another business model. I have been in several meetings with companies struggling with the Google-effect on navigation and traffic. It is tough to compete with free. It appears they are preparing to do it yet again, this time in home energy management. Recently, Google announced and showed a few screenshots from a Google Labs application called PowerMeter. If you haven’t seen the screenshots, its function is to help consumer better manage their energy usage and, in the end, save money. In studies I have reviewed, most consumers will save from 5-10% simply by being made aware of their usage and making an effort to reduce. Another 15-30% of a reduction can be attained by more significant behavioral and structural changes such as weatherization and programmable thermostats. So the consumer benefit to PowerMeter is pretty clear.

Still, I was surprised to see the amount of positive press the relatively “meatless” announcement received. The reason for my surprise is that the critical element to the function of PowerMeter is the household energy data and although Google’s announcement indicated the participation of a few utility companies, widespread participation of energy companies is unlikely. My experience over the years with several energy providers is that they are not going to simply release the household data to anyone, even other departments in the same company and especially not Google. And if you can’t get the household data, then PowerMeter becomes useless. I did not find any of the reviews that pointed out this concern.

Are there other options outside the energy provider? Sure, there could be an inexpensive bridge from the meter to the internet. However, with the proliferation of different smart meters and various flavors of communication protocols a consumer purchased receiver seems complicated and unlikely. So what is Google thinking? Well, there may be method in Google’s madness – think smart grid net-neutrality where access to the data is regulated to be open and available to the consumer. In this scenario, consumers would have the right to monitor their own smart meter data even through a third party application. This seems entirely possible given that a great deal of tax-payer money is going to build the smart grid.

So what should an energy company do now? In the frequent advice of consultants before the Internet bubble burst, cannibalize or be eaten. The normally stodgy, regulated energy companies must think more like dot com companies. They must look at the entire energy spectrum and create a user friendly service that not only gives the consumer usage information but also helps them better manage their entire energy lifecycle. Energy companies can compete with Google. After all, they are the experts in energy consumption. Most energy companies can calculate the effects of replacing old appliances or refer consumers to reputable energy audit firms. Many of these services could be rolled into a monthly bill for easier affordability. There are a number of energy providers moving quickly to retain their customer relationships; Duke Energy, Florida Power & Light, and Austin Energy are shining examples. I am confident however, that many energy providers will not do so and I expect Google’s PowerMeter to be successful also. The time to build those customer service experiences is now.

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