The Challenges and Opportunities of Scaling for New Energy Companies

Derrick Bowen
Principal, Houston Office

Growing a business is hard, regardless of the sector you’re in. The strategies that work when operating as a tight-knit group where everyone is a jack-of-all-trades aren’t necessarily going to work as you grow into a more mature company.

 

For small and growing companies specializing in new energy and cleantech, the complexities of the industry present unique challenges when it comes to scaling.

 

First off, technology and regulation move especially quickly in this sector. Companies have to be constantly monitoring the environment for changes and opportunities. This is a tall order for smaller organizations that may have a business model built around a particular piece of technology or current market reality.

 

There’s also the problem of uncertain expectations. Investors are still figuring out what to do with this market space. The risk is higher than traditional energy and utility projects, but returns still tend to be slow and steady over a long timeline. There aren’t too many examples of energy startups rocketing to sky-high profits, but there are several high-profile stories of spectacular failures that make investors wary.

 

While the industry has been growing and is expected to continue to grow, the pace of growth has been uneven and companies have had to remain laser-focused on protecting their bottom lines to stay afloat. Otherwise, they have faced “liquidity crises” that required financial rescue of one sort or another.

 

With these unique challenges, naturally, there are also unique opportunities. Traditional energy companies are interested in partnering with or acquiring new energy startups as a way to incubate innovation as they work to change their strategic directions. Their investors are clamoring for them to show progress in the energy transition. An innovative, exciting company can also be a tempting proposition for top talent worried that the direction the world is going will leave their employers behind.

 

Ways to Successfully Manage Growth

For new businesses looking to grow and move past the startup phase, there is hope — but it won’t be accomplished using the same methods that brought on that initial burst of success. Instead, organizations need to employ some key strategies to help manage the growing pains they will encounter.

 

1. Get the most out of your software-as-a-service (SaaS) and cloud-based solutions.

One of the benefits of being a newer company is that you’re most likely running off vendor-supported cloud-based SaaS solutions. These tend to cost less and allow you to be nimbler when it comes to handling data. Not all cloud solutions are created equal, however, so it’s important that you work with products that will help (and not hinder) when scaling. Building on a cloud platform such as AWS can provide a great foundation, and should be paired with cloud-first architectural considerations to ensure you are taking advantage of the cost and scalability benefits the cloud offers.

 

Cheaper or less mature platforms can have disjointed processes and siloed data, which can be major obstacles as your company grows. Look for tools with mature APIs and data integrations that make it easy to get data out of the platform so you can do more with it. Understand what tools other companies in your industry are using and test those to see whether they work for you. While cost-saving is important, you need to also plan for growth.

 

2. Look for prospective partners that match your culture.

The entire market space is expanding quickly, and keeping up is more important than defending your turf. Adopt an infinite-game mindset by looking for partners with whom you can work to grow the whole pie. The challenges of scaling aren’t just financial; they’re also practical and cultural.

 

A good partnership can lead to new referrals and help you set up integrated offerings down the line. For instance, a residential solar company could explore a relationship with smart-home vendors in order to offer a unified view of energy generation and consumption within the home. This could open new customer channels and create unique product positions beyond what any single organization could accomplish. Look to create reusable API products that enable smart integrations with built-in rules engines you can trust.

 

You want to make sure that in your quest for growth, you don’t lose sight of the factors that made you successful in the first place. Find partners that complement these qualities, which are different for every company. You might want to look at how a potential partner treats its people or how it embodies its mission statement. Or you may want to factor into your considerations the size of the company and where it’s located. Whatever pieces you find most relevant to the culture of your company, make sure that potential partners match up well with your people.

 

3. Plan experiments as you scan the market for new opportunities.

While you want to be wary of trying to do too much at once, your company must move beyond its comfort zone and into new areas in order to grow. That means keeping an eye out for new opportunities that could potentially put you in an even stronger position in the shifting energy value chain.

 

Once you identify potential areas of expansion or innovation, create a lightweight business model for each. Outline strategic priorities, define the model’s characteristics, and link it all to customer insights, preferences, and needs you’ve gleaned from your own data. From there, you can run the experiments and assess the outcomes. What are the break-even points? Can you build go-to-market strategies from the results? Balance being opportunistic with having a supportable position. Gather the data you need to back you up and then go into each new arena with confidence.

 

Growing a company is never easy, but the payoff — especially in an industry going through a major disruption — will be well worth it for those who can pull it off. As long as your company can focus on what it does best while still keeping an eye out for new opportunities, it is possible to take on the big, established companies and create sustainable disruption that will completely change the future of energy.

Derrick Bowen

About the Author

Derrick shapes projects with the understanding that the ultimate value of any system is driven by the experience of people in the physical world. He sees web and mobile technology as enablers to combine global markets and increase the availability of resources, ultimately leading to business and social transformation. His focus during his career has been on solving those problems that span the edges between knowledge domains, technology stacks, or functional areas.

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