Offshore wind is expected to play a significant role in the global transition towards renewable energy. However, despite the promising future of the offshore wind industry, there are still major challenges that need to be addressed.
One key challenge is the lack of proper market development, which is causing billions in lost revenues as it takes too long to reach an operating and revenue-generating asset.
However, if you are using a Market Development Model, you can reduce time to market significantly. Sometimes two years or more.
Typical timelines of projects with and without applying the Market Development Model. Copyright: Naver Energy - Niels Nielsen.
Best-in-class market development cases have all demonstrated true entrepreneurship and proven dinosaur thinking wrong. Result: Reduced time to market by up to two years.
It is essential to recognize that developers cannot drive industry build-up alone. Other key industry stakeholders, such as OEMs, must contribute more to developing emerging markets to achieve significant upside and promote the necessary clarity for Return on Investment. By implementing these strategies and involving all industry stakeholders, companies can build markets while reducing risk and increasing value in parallel with normal project development. A great example is South Korea which all of a sudden has grown to a strategically important offshore market for developers and supply chain as some key stakeholders and decision-makers were mobilized at the right time with the right motivation.
Scouts are key
If you plan something similar in your region, you must understand the market and its dynamics in-depth. Doing so requires both presence, investments, time, and various sources of intelligence for analysis, but also a collaboration with both internal and external stakeholders to verify assumptions and concepts and to build up momentum for successful deployment.
The center of the Market Development Model is the actual Market Development program, which steers the iterative process of developing an opportunity from scouting to deployment and scaling. Using program management, this process becomes the link between the company strategy and various sources of market intelligence.
The process is split into:
- Scouting; is where the identification and ideation of a new opportunity occur. Ideas and opportunities can arise from both inside and outside the company and will undergo a light assessment with the market deployment team itself. This phase requires minimal resources and costs.
- Conceptualization; is where the opportunity is developed into a concept to build attraction and prepare for further verification. This is done through initial desk research and field engagements to both state assumptions and develop a concept value proposition. This phase requires a low level of involvement and costs.
- Verification; is where uncertainties are reduced by testing the concept assumptions and making cross-functional due diligence on risks, challenges and potential mitigations. Furthermore, the business model is fine-tuned, and a go-to-market deployment plan is developed. This phase has a medium level of functional involvement and costs for verification. First investments e.g. satellite office and first hiring would typically take place in this phase.
- Deployment; is where the implementation occurs, i.e., growing staff, initiating procurement, setting up JVs, signing contracts, executing on contracts, etc. This phase requires a high level of functional involvement and a high level of costs & investments.
- Scaling; is when a new growth opportunity is ready to be further scaled into e.g. new countries or new segments, i.e., growing a now established market.
The development process depends on intelligence and guidance from various sources. The four primary sources are:
- Outside-in; the holistic view of a market where the opportunity spaces open up and are assessed in relation to trends, demographics, economics, etc., (more on that in the next sections).
- Regulatory; the assessment of current legislation and frameworks (and how they might change in the future), the political landscape, and how the public and private opinions and interests influence this.
- Industry; where the competitor-, customer-, and supplier- the landscape is assessed both specifically to the market in question but also what else the industry does well and not so well
- Advisory; the “fact-finding” view from various sources including market reports, outlooks, analysis, site data such as geotechnical and geophysical, etc.
The Market Development Model. Input from the different sources will each have a good and essential view on the market in question, but no matter what number or estimate they provide it will (with a very high level of certainty) never end up being exactly that. However, the truth will be somewhere in the middle. Copyright: Naver Energy - developed by Niels Nielsen
Opportunities are often missed
Companies often miss out on major opportunities and risk getting disrupted due to tunnel vision and a focus on current assignments and short-term KPIs. To avoid being left behind, they must plan for the future based on more than just their current knowledge.
History is littered with examples of people underestimating the future, like Wilbur Wright, who famously said in 1901 that man would never fly. Two years later, he and his brother Orville became the first to do so. I bet someone in the wind industry has made statements like: "Turbines will never get bigger than this", "floating wind will not happen" or "this opportunity will never materialize"......
Another common mistake is assuming that emerging markets will develop at the same pace as previous ones. However, developing complex industries in emerging markets is challenging, and companies must learn from established markets and take best practices into account. Fortunately, according to the World Bank, some new markets can build an offshore wind industry in just five years, as opposed to the 30 years it took Europe.
To avoid such pitfalls, special innovation teams should be established. Smaller teams with 100 per cent dedication to finding and maturing new opportunities, with ringfenced budgets, time, and the mandate to steer and manage the opportunity. Over time, they can gradually hand over responsibility and ownership to the main organisation. By doing so, companies can stay ahead of the curve and avoid disruption.
