Z courageous in the age of disruption
petrol was sold by chemists as a sideline, but in 1905 the first specialist petrol station was created in Missouri and a few years later Gulf Oil created the drivethrough petrol station.
And the rest was history. Now, there are about 1100 petrol stations in New Zealand which sounds a lot, but is well down on the 4000-odd stations we had in the early 70s, before carless days, the oil crisis and the birth of today’s ‘‘mega stations’’, created by the big petrol companies. Not to mention the acquisition activity that killed brands such as Europa and Shell, and the realisation that old storage tanks were uneconomic to replace.
Today, those companies’ business model is under threat, driven by disruption on multiple fronts. This includes the rapid uptake of electric vehicles (how many Nissan Leafs and e-bikes did you see today?), the directional move to carbon-neutral solutions and the implications of driverless and ownerless vehicles.
Against this background the recent announcement by Z Energy that it is investing $46 million to take a 70.1 per cent stake in retail electricity supplier Flick Electric makes perfect sense. Not just the obvious sense in eating yourself before someone else does, but also choosing an acquisition which realises disintermediation is the future.
Flick Electric was one of the first power companies to give retail customers direct access to spot wholesale prices. Flick scared the bejeepers out of other power companies by being 100 per cent clear on charges made by all the companies in the chain and its own margin; and speaking as a customer, I know that Flick manages to do this in a way that is seamless to consumers.
Z Energy has been on this course for a while now. Two years ago, it brought the environmentalist movie An Inconvenient Sequel – Truth to Power to New Zealand. Then last year its ‘‘What is next?’’ strategy disclosed to investors its plans to expand into future fuels (think electricity) mobility (think ownerless vehicles) and the last mile (think retail logistics).
The first two make perfect sense, whereas the last one might be more difficult. New Zealand Post has seen the last mile as being one of the last remaining jewels in its ageing crown, but has failed to monetise it as efficiently as it had hoped.
Meanwhile, Post’s actual performance in final-mile fulfilment has dropped through the floor in my experience. Whether Z can do any better will be interesting to watch.
More broadly, Z has the courage to eat itself, rather than be eaten by others.
It’s a courage that Sony didn’t have when it chose to stick with an outdated monetisation model for sound files in 2002. While Sony’s software division saw the potential for a cheap, universal and consumer-centric model for music, Sony’s music and hardware divisions thought it was the antiChrist. Steve Jobs saw the opportunity and launched iTunes and iPods, and again, the rest is history.
But it’s a courage that Fairfax Media did have when it bought Trade Me, a business which was absolutely eating its classifieds division, in 2009. And a business that ended up delivering Fairfax about $3 billion of value before it exited in 2012.
Going forward, it’s a courage that many companies will need as they try to come to grips with the frictionless distribution ability of the web, the disintermediation it brings to margin-based businesses and potential to customise service to the level of the individual. One of the learnings I got out of shooting a season of our Start Me Up TV series is that sometimes people will forsake innovation in favour of holding on to yesterday’s dreams. If that’s an old vehicle, then it’s perhaps understandable. If it’s a commercial business, then it’s probably suicidal.
Mike ‘‘MOD’’ O’Donnell is a professional director, adviser and part-time bogan. His Twitter handle is @modsta and his new show Start Me Up starts screening on TVNZ Duke on September 25.