Digitizing and automating access to energy markets22/11/2018
The GEM Business Unit is the Group's energy risk manager and its access point to energy markets. It also uses its energy management expertise for a portfolio of external customers by developing its own commercial franchise. In 2017 it launched the "Client Centricity" program to put its customers back at the heart of its corporate culture and the development of its commercial offers.
It is in connection with this program that Igal Madar (Head of e-Trading) began leading a project to digitize the entity’s market access activities. Both Igal and Razvan Dordea (Innovation Manager) came to talk to us about e-Client, a project that is being run as a true internal startup at GEM.
Igal, Razvan, before you tell us about your project, can you explain what GEM’s business is and what market access involves?
GEM is in charge of supplying and managing energy risks related to ENGIE's other business: ENGIE sells gas to its customers but does not itself produce gas. GEM secures supply by negotiating purchase contracts with producing countries.
GEM guarantees energy-producing BUs that they will be able to sell at a price higher than their production costs, thereby ensuring the profitability of their power stations. GEM makes these guarantees for BUs that sell electricity (B2B, B2C), ensuring they will have the volumes of gas or electricity sufficient to cope with consumption demand from their own customers, and that they will be able to buy these volumes at a price lower than that at which they sell to the end customer, thus securing a commercial margin.
To do this, GEM has a trading room. Trading makes it possible to constantly adjust our energy purchases and sales to align production volumes with the volumes purchased by ENGIE's customers. For example, energy consumption increases sharply during long cold spells in winter. To cope with these peaks, GEM traders will buy the missing volumes from the markets.
Einstein said that quantum physics was only understood when it can be explained to his grandmother. So if I had to explain the job of GEM to my grandmother, I would say "In France, we don’t produce gas, we buy it from elsewhere. And in France, we sometimes produce more electricity than we need. GEM’s job is to find a balance between these two situations for all the countries that ENGIE works in."
GEM also provides our expertise to external customers by developing commercial energy supply offerings for large industrial accounts and market access and risk management offerings for energy producers and distributors.
Igal, you created and implemented a digital solution for accessing energy markets for GEM’s customers. How did you get that idea?
I come from the world of algorithmic trading, which consists of executing sale and purchase transactions on the markets via machines. In this area, automation is key: it’s about automating trading strategies, meaning giving machines the intelligence to know when to buy or sell to make a profit, and of course, automating the actual execution of these transactions.
I’ve also observed how other markets have changed, including those for exchange rates, which are the most illustrative for traders. In just a few years, their way of working completely changed: transactions have become automated, and market access platforms have appeared.
I suggested to Mircea Caratas (GEM’s Commercial Trading & Origination Director) that we work on applying these practices to GEM’s commercial business: developing a platform for our customers to access energy markets, automate transactions, and develop algorithms to optimize the management of these flows. He immediately supported the idea because of the value this project would bring to GEM’s customers who were requesting this type of solution. That’s how the adventure started.
How did it work before?
Before, when a customer wanted to access energy markets to buy gas or electricity or to cover their risks, they contacted a sales representative by email or by telephone.
The salesperson had to start by verifying that he or she had the right to deal with the customer. This verification step required consulting up to four different teams in the organization, including obtaining credit risk approval.
Once this verification had been done, the sales representative would send the customer's request to the trader. The trader then had to communicate the minimum price at which he or she was ready to process the transaction to the salesperson.
The role of the salesperson was then to negotiate the final price of the transaction with the customer to include a sales margin.
Since customers generally ask for both indicative and firm prices, the process would be repeated several times a day for the same price request. After comparing the prices provided by GEM with those of other companies, the customer would then confirm that they had accepted the terms of the transaction to the salesperson.
The salesperson then had to confirm that the trader had executed the transaction, which would cover the risk on the market. At the same time, the salesperson would summarize the terms of the transaction in an email sent to the client and to the GEM back office.
In short, it was an energy-consuming and not very fluid process with a lot of constraints. Our project was about automating this whole chain of events.
So the idea got launched! Then how did things go?
It took us a few months to think about the organizational setup, then to look for existing or developing technical solutions. We then got a small budget that paid for two people for four months, which allowed us to start the project very quickly.
The first step involved gathering and making available all the information salespeople needed to carry out the prerequisite checks. This kind of customer information is dispersed throughout three or four different systems: one for credit conditions, another for contracts, etc.By working closely with the salespeople and asking what information they needed to carry out their verifications and then seeking to simplify their daily lives, we were able to develop an initial version of the solution that met their needs and provided the necessary value.
We also chose to use modern technologies and architectures to develop this solution. Over the course of a month, our developers had to learn the Microsoft cloud solution, learn how to develop APIs, create services and develop a platform that could be used on a computer or phone without requiring a connection to the ENGIE network. Quite a feat!
After three months we were able to present our vision of the project, the methodology we wanted to use and especially to demonstrate an initial version of the solution. We managed to get the BU’s management committee on board and got a bigger budget to continue developing the project. That was in December 2016, and we had just raised a budget of €1M for the following year.
Being agile and close to IT above all!
Over the next 6 months, we focused on refining the first version of the solution to ensure that the information shown to salespeople was accurate. We chose to name the version "Client 360" because it provides a complete view of the customer information available in our systems.
The next step was to develop the platform so that our customers could see market prices and send us their price requests. We had to make two major decisions for the rest of the project: the design of the user interface, and which products would first be available on the platform.
To do so, we did a technological benchmark to compare the solutions provided by our competitors. Our challenge was to offer something that would differentiate us, even at this first stage of the platform. We also consulted our clients and conducting a dozen interviews across Europe. Last, by analyzing our customer portfolio with our sales representatives, we identified the products that would be offered first in order to have the widest possible impact.
In June 2017 we started developing the client platform, which we call EGMA for ENGIE Global Market Access. In August 2017, we released the first MVP (minimum viable product), which we tested at full scale in-house, asking our salespeople to use the platform as if they were customers themselves. We received a lot of feedback, which allowed us to improve the solution and make sure it ran smoothly.
In February 2018 we presented the platform to around forty customers at the E-World show in Germany. They were impressed by what we had accomplished in six months and everyone was eager to try the solution out. The first transactions were completed in March 2018, and since then we have given 3500 price quotes and made 1400 transactions directly from the platform with external customers and exceeded €1,000,000 in earnings by the end of October 2018!Now we are continuing to develop the platform, first by expanding the range of available products - we started with gas and electricity will be available by the end of the year - and then promoting the solution among the ENGIE BUs that are GEM’s customers. For them, the platform is an opportunity to simplify their processes.
What does this project mean for GEM?
EGMA is structurally changing much of our way of working.
At first the salespeople perceived the project as a threat: "I am being replaced by a platform", "I will lose relationships with my clients". By listening, sharing information and accompanying them along the way, we managed to get over this impression. Today our sales people are fully engaged in marketing the solution and are committed to continually improving service for their customers since they have come to realize the competitive advantage it provides.
Up until now a salesperson would manage between fifteen and twenty price quotes per day. Today these are managed by the platform, which allows the salespeople to focus on developing commercial relationships: going to see customers, thinking about new solutions, defining new products. They get to do more rewarding tasks and have the freedom to manage their time!
The support teams, who were used to being asked to do things by sales representatives, have been freed from many of the requests for approvals that are now automatically processed by the platform. We needed to reassure them that the solution was reliable and that an approval given automatically was just as valid as an approval given by an analyst.
In the end, about forty people from five or six different teams have seen their work change. Now they share the same information as part of our movement towards integration and collaboration.
Beyond this cultural change, the project has also brought about new business opportunities. By automating the operational chain we reduce our cost-to-serve, and customers who we were previously unable to provide quotes for because they were too small to be profitable are now at the heart of our business development strategy.
What aspects contributed to making this project a success for you?
There are three main ones: the strong sponsorship from the business side, our capacity not to spread ourselves too thinly and to prioritize ways to develop the solution based on value created for the consumer, and lastly the wealth of knowledge gathered from customer feedback, which was essential for continuously adjusting our focus and avoiding the tunnel effect.
Thanks to this approach we have been able to deliver a platform that our customers can use in just one year, which generates revenue for GEM and covers the basics of our business. Obviously, we have many ideas to improve and enrich the solution, but we will achieve them gradually, and only if the customer need is confirmed.
And your customers? How do they perceive this project?
We help transform our customers through digitalization, and we help them be better at what they do by enabling them to simplify their own operational chains: whereas they used to send us the same price requests several times a day, they can now view them in real time on the platform and just have to make a few clicks to make the transaction. It's an improved service and saves time for them too.
"This project is representative of the customer-oriented approach that we want to promote within GEM," explains Arnaud Sanchez, who is in charge of the Client Centricity program. "We encourage our teams to create new services based on customer needs, to involve them in the design process and to collect their feedback as part of a "test and learn" approach. In a field where there is a lot of competition and rapid change in our markets, working in agile mode is essential for not missing out on commercial opportunities."
A last word to conclude?
We realized that this project is creating another image for ENGIE, one of a company capable of innovating and that is resolutely digital. Within the Group, we provide proof that it is possible to develop projects in an entrepreneurial way and to develop digital solutions that create value based on a project-oriented approach led by the business to do business.
We are proud of our accomplishments.
Source: Christine Leroy