The place for purpose-driven business

The power company that encourages you to buy less of what it sells

Johanna Scott

01 November 2016

Some might scoff at the idea of an energy company that not only allows you to transparently track your spending, but also helps with suggestions on how you could save your dollars – namely by using less of what it sells.

Sounds like a “lifestyle business,” they may say, inverted commas firmly formed in judgement. Or at best, a rosy eyed start-up with a mission that’s bound to come unstuck when the true tests of business – profit and growth – come into play.

Would it surprise you then, to learn that this is the practice of a business that forms part of a 6.5 billion dollar publicly traded company?

Powershop, owned by Meridian Energy, is an electricity retailer with a sophisticated app to help its customers track their energy usage. In addition, their parent company contributes renewables to the national electricity grid (more on how that works later), as well as offsetting customers’ carbon emissions so their energy usage is 100 per cent neutral (more on that later too).

powershop_app

According to its straight-talking CEO, Ed McManus, the traditional model of customer / energy provider relationship is inherently flawed.

“We’re the power company that does not have ripping customers off at the core of its business plan. Most Australian retailers operate a loyalty tax – the most loyal customers get the worst deal.”

According to Ed, if you’ve been with a provider for a number of years, it’s likely you’re paying more than you should – and certainly more than you used to. Most models work by luring new customers in with a good deal, and when it inevitably ends, the bills are so confusing you have little idea how much energy you’re actually using or at what rate. In most cases, McManus says; the retailer – not the customer – wins.

“You are confused and they make more margin from you. It’s bullying.”

Short-term thinking equals bad business

The pursuit of profit has not always been synonymous with best business practice.

McManus spoke of W. Edwards Deming, Peter Drucker and other management thinkers of the 1950s onwards who advocated for the fact that the purpose of business was to create and keep the customer. Treat the customer right, the theory went, and business success will follow, because people can’t help but boast about your company to their friends.

Then the 1970s brought with it a new kind of thinking – that it was unethical to “play” with people’s money. And so followed two decades and a very different kind of model, one that prioritised value to the shareholder, above all else – even customers, job creation or growing the company itself.

So what does 21st century thinking bring to business?

“We operate a very large, ultimately, for-profit business. We believe profit and purpose can be balanced – if you take a long-term view. Corporations often take the short-term view. Doing the right thing by our customers is always number one, and that will pay off in the long term.”

powershop-car

So why aren’t more businesses operating in this way?

“It’s not easy, particularly in a traditional corporate business environment. It can be hard for the traditional corporate person to unwind from short-term thinking. Profit is like heroin.”

Presumably McManus means the ecstasy and addiction of the drug, not the horrible come down … but now we’re using this analogy, there is much that can be said about the proverbial eventually hitting the fan. What may feel good now, soon becomes very bad for business, and the flow on effects impact more than those immediately involved.

Because for all of this talk of customer service being good for business (a delicate balance of profit and prosperity), there is a crucial foundation fortifying the future of any purpose-led business – and that’s ethics.

“We deal with financially struggling customers everyday on the phone. If it was your sister or brother on the end of the line – how would you treat them?”

(The company responds by assisting customers with how to reduce energy bills by providing them with simple knowledge around usage. Their smartphone app allows users to see exactly how much power they’re using, so they can make changes immediately to save money. They also provide simple tips such as: On a hot day, every degree below 23 on your air conditioner can increase your bill by up to 10 per cent. So leave it on 23, is the advice).

McManus – who, in his career has moved from research scientist to marketing and management – is not one to promote the idea that business people are flawed beings: “The vast majority of people want to do the right thing. But if they are incentivised and driven by short-term outcomes, then they will behave accordingly. We need long-term thinking that incentivises people to do the right thing.”

Leading with purpose

Rolling his eyes at the long-winded, cheerleader-like profiles that have become popular on LinkedIn, McManus instead chooses to feature a small excerpt from T. S. Eliot’s Little Gidding on his profile. The poem has meaning for the CEO in its spirit of adventure.

“Life is about exploration. I like to be always a little bit out of my depth… always learning, and arriving in all the places for the first time.”

Leader of both Meridian Energy Australia and Powershop (part of the Meridian Energy corporate group), McManus came to the company because he welcomed the opportunity to contribute positively to the world.

office

“I have two daughters, and if all indicators continue as predicted, the planet will be fundamentally different to what it is today in their lifetime. I looked at our industry where 80 per cent of Australia’s electricity generation comes from fossil fuels, the opportunity to make a small contribution through renewables was an attractive thing.”

In addition to encouraging transparency and control around energy usage, Powershop customers are supporting a company that only invests in renewables as an alternative energy source. It’s worth nothing that the process (on Powershop’s end) is not simple. Consider that all energy consumed by the average user comes from the grid. Powershop’s parent company Meridian Energy contributes 100 per cent renewable energy to the grid generated by its two wind farms in Australia.

“While it’s true to say everything we generate is renewable, our electrons go into the grid and there they are mixed with other energy. Imagine a lake with little streams and rivers feeding into the lake. Our streams are clean, but most of Australia’s streams are dirty water.”

Powershop’s response? To calculate how much carbon is being released into the atmosphere per customer (“not by us”) and offset that carbon so every customer’s electricity usage is carbon neutral.

For the even greener minded folk, Powershop allows you to purchase “GreenPower,” which assists in increasing investment in renewables. Powershop allows purchase of GreenPower from Meridian as well as non-Meridian renewable sources. Understanding the pressures of living costs, Powershop allows its customers to purchase GreenPower on demand with one click, through the app, and the commitment to purchase is always flexible.

The age of the engaged customer

McManus believes that more and more people are engaging with businesses and voting with their dollars.

“We speak to customers every day, older people in regional areas, they are seeing change in the climate. It’s broadly felt. 90 per cent of Australians believe we need to be doing more about climate change. Electricity generation in this country is the largest source of carbon emissions. We have to transition toward something more sustainable. People want a strategy for how they can use less energy.”

If Deming and his contemporaries were correct, then a business that puts profit ahead of anything else is not going to be much of a business at the end of the day. And a business of profit and purpose – much like Powershop – is the only way forward.

Catch Ed at Purpose 2016 along with speakers from Xero, Intrepid Travel, Lush, Mindfulness Everywhere and plenty more. Buy tickets.

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