Surveying a swiftly shifting energy landscape in 2014, Engie, one of the world’s largest energy companies, made a dramatic decision. The nearly 200-year-old company with annual revenue of €67 billion was a major global producer and supplier of energy and owned the largest natural gas pipeline in Europe, but the French company’s leadership saw a bellwether in the sharp drop in fossil fuel costs. This led to what the company calls a “strategic epiphany.” It would rapidly shift the company’s focus toward renewable energy in both Europe and growing areas like India and China while reducing future exploration in fossil fuels.
In 2016, Isabelle Kocher became CEO of Engie and pushed forward the company’s new strategic plans, centered on the idea that the future of energy will be “decentralized, decarbonized, and digitized.” At an event hosted by Stanford Graduate School of Business’s Sustainable Energy Initiative (and detailed in this case study in more depth), Kocher outlined the three guideposts for carrying out Engie’s epiphany, how she views the future of energy, and what it takes to steer a dramatically new course in a large, multinational company.
A Strategic Shift Guided by Three Rules
Kocher says the company developed three guidelines to determine how to allocate its resources for this strategic transformation, especially in the developing world.
- Complete dedication to the energy revolution. The company, Kocher says, will not launch any new oil or coal projects, and intends to dispose of €15 billion in assets in order to reinvest the cash into projects that promote its low-carbon, distributed-energy vision. “When we started one year ago, 81% of our activities were dedicated to global energy efficiency and distributed energy,” Kocher says. By 2018, the company plans to push that number to 90%.
- Work on different time horizons. “We come from a world where the technologies were extremely stable, with no real change for 30 years,” Kocher says. “Now we are in an environment with new evolutions, new technologies, new solutions.” With more potential breakthroughs still in the development stage, Kocher says the company is expanding its strategic timelines, planning for long-term growth on top of short-term returns. In fact, the company plans to invest €1.5 billion on digital and new technologies related to energy. “You have seen the huge progress made by renewable technologies like solar, which is the most spectacular case. But it is just the beginning.”
- Change your culture. “In a decentralized world, we can’t run the company from the top,” Kocher says. The organizational shift involves being less hierarchical, where decisions are made upstream and implemented downstream, and more focused on finding solutions in direct contact with its customers and clients across government and industry. “We have triggered a deep internal transformation program to address cultural change, behaviors, innovation, results orientation, and I’d say connectivity,” Kocher says. “The first duty of our team is not to do what the boss says. It’s to be extremely connected to the plants, the stakeholders.”
Never Too Big to Disrupt
Think disruption is the sole province of startups and VC firms? Kocher says that, especially in the energy industry, that doesn’t have to be the case. “At Engie, we have decided to play a role in this movement and to behave as disruptors,” she says. “Big groups can also behave as disruptors. And I would say that one of the most efficient ways to really disrupt is through scale effect.”
She says that a company like Engie can afford to think and invest long term. “I met a lot of VC firms that say, ‘We started to work on the energy side a few years go. In fact, it is more painful and takes longer than we initially realized.’ But a big organization like Engie has the means to make this energy revolution more rapid and more massive.”
An Energy Revolution, One Way or Another
Questions around major geopolitical energy concerns — such as the withdrawal by the U.S. from the Paris Climate Agreement — may ultimately be less consequential than other inexorable forces. In the developing world, Kocher says, an appetite for energy independence is driving demand for renewable and decentralized energy solutions.
“The people that have the most to gain through this energy revolution are emerging countries,” she says. “They face extremely rapidly growing demand on energy, and they are obliged to serve this need with imported fuels. So it’s a question of independence and access to energy, which is a major issue. More than one billion people have no access to energy in the world. And without energy you have nothing — no health, no education. For the first time, we see ways to fuel this fundamental need in a sustainable way.”
Fuel for Change
One year into Engie’s strategic overhaul, Kocher admits it’s been a rocky ride. “It was a painful year, because it’s not easy to transform a big organization,” she says. “But everything we dreamed is possible.”
Among the valuable insights she’s gained from the process is the importance of a strong vision to carry people through big changes: “Sometimes I have conversations with my colleagues who say this transformation is impossible to avoid. I say, ‘That’s not the point. It’s not that it’s impossible to avoid — it’s something fantastic!’ The lesson I learned is that if you share a vision that is aspirational for people, they will bring extraordinary energy and courage to fuel it.”