Asset transformation and the challenges to servitize a utility business model

The traditional energy utility business model is under pressure, and energy services are expected to play an important role for the energy transition. Experts and scholars argue that utilities need to innovate their business models, and transform from commodity suppliers to service providers. The transition from a product-oriented, capital-intensive business model based on tangible assets, towards a service-oriented, expense-intensive business model based on intangible assets may present great managerial and organizational challenges. Little research exists about such transitions for capital-intensive commodity providers, and particularly energy utilities, where the challenges to servitize are expected to be greatest. This qualitative paper explores the barriers to servitization within selected Swiss and German utility companies through a series of interviews with utility managers. One of them is 'asset transformation', the shift from tangible to intangible assets as major input factor for the value proposition, which is proposed as a driver for the complexity of business model transitions. Managers need to carefully manage those challenges, and find ways to operate both new service and established utility business models aside. Policy makers can support the transition of utilities through more favorable regulatory frameworks for energy services, and by supporting the exchange of knowledge in the industry. - Highlights: •The paper analyses the expected transformation of utilities into service-providers. •Service and utility business models possess very different attributes. •The former is based on intangible, the latter on tangible assets. •The transformation into a service-provider is related with great challenges. •Asset transformation is proposed as a barrier for business model innovation.