Download The machines are marching. What is the next move

The machines are marching. What is the next move of the Energy
Sector and where are our lawyers?
Our latest iLex LegalTech Article is written by Zsolt Bertalan Chief
Executive Officer of MVM Group Smart Future Lab Zrt. about the brand-new
challenges of the Energy Sector and its lawyers are facing.
Lately we can read about the UK's EU referendum all over the places. It is
indeed a historic event. For me it has a symbolic importance, that on the day
when the results of the voting were announced the headline on the cover page of
the Economist was this: March of the machines, a special report on Artificial
Intelligence. Of course The Economist is full with Brexit related articles as well,
nevertheless it is clear that the editors even these days believe it is important to
talk about the social and economic consequences of the ongoing technology
revolution. They are not alone with this view. IBM published a study in
November 2015 which summarizes the results of 28 000 interviews made with
C-level executives between 2003 and 2015 coming from diverse sectors and
geographies. One of the key outcomes is that the executives ranked technology
as the most important external factor they need to keep close watch on from
strategic perspective. In Energy and Utilities traditionally regulatory
environment is the single most important external factor, however even in this
industry now technology is considered more and more important and become
focus area for the managements.
No surprises. Energy and Utility and especially power generation and
distribution is experiencing radical shifts. There is more and more focus on
energy efficiency, customers are becoming better informed, distributed energy
generation mostly based on renewables is rapidly gaining share. Traditionally
giant corporations generated power in giant power plants and distributed it in
one direction to the consumers similarly to the way traditional television
broadcasting works. Contrary the modern smart grid works like social media:
industrial and retail consumers are not only consuming power, but also
generating for instance using solar panels. They are becoming power consumers
and power generators in the same time. The number of the players and the
complexity of their interactions is elevating to a new level. Well informed
consumers are also becoming more and more demanding.
The drivers of the changes in Energy and Utilities are the so called
cleantech companies. They are typically startups combining deep industrial
knowledge and business model innovation with cutting edge
infocommunications technology. These emerging players are targeting areas like
renewables and e-mobility. Annual cleantech investment in North America,
Europe, Israel, China, & India was around $500 Million in 2001 while in 2008
exceeded $8 Billion. Today market capitalization of Tesla only exceeds $31
billion.
While the valuation of the leading cleantech startups is skyrocketing
traditional energy corporations are struggling. As an example the market value
of the two German utility giants E-on and RWE has dropped to a fragment of
what it was some years ago. Reasons are complex but emerging technology
challenge is definitely one of them. Corporations are forced to react to the
changes. Leading players are opening up they own technology incubators and
also investing in cleantech startups.
Client focus, sustainability and innovation are key elements of the recently
announced new strategy of MVM Group. I am thrilled about playing a role in
this exciting transformation as General Manager of the newly established
subsidiary of MVM called Smart Future Lab. We are offering valuable
partnership for cleantech startups. The ones who chose us to work with can not
only count on equity investment, but also can access the industry expert network
of MVM and can validate they concepts collaborating with real life clients of the
MVM Group and finally our dominant market position in our home country can
also make us attractive partner for the ambitious innovators.
In the keynote of this discussion series of Ferenc Pongrácz he referred to
the famous statement of Marc Andreessen: Software is eating the world. He
agreed that IT driven technology and business model innovation is indeed
reshaping complete industries. According to Pongrácz even the most
conservative disciplines like Law are no exceptions. As an Energy and Utility
professional and experienced corporate executive I can just confirm that we
cannot be successful without innovation at MVM either. In our new world all
corporate functions need to adopt including our legal departments and external
Legal Councils. When a large corporation like MVM group with thousands of
employees is partnering up with startups who are making decisions is an
extremely rapid way in an environment where speed to market and instant
reactions to the changing environment is question of life or death, then we also
need to be faster, more flexible and more customer oriented. We also need to
balance the traditionally risk averse mentality of the legal profession and the by
definition risk-taking mentality and high level uncertainty of the startup world.
Meanwhile we must be transparent toward our investors and owners and
maintain a rule based professional business environment where all decisions are
properly documented. It is not an easy call. Therefore, I believe we also need to
use the achievements of the LegalTech revolution since in order to be successful
key corporate functions like the Legal one needs to only follow the technology
and business trends, but shape them.
Zsolt Bertalan
Chief Executive Officer
MVM Group Smart Future Lab (SFL) Zrt.