Hydrogen Utilisation Business Model
What is a Business Model? Why is needed?
Firms create value through a variety of factors such as unique resources, innovation, and networks. In this regard, the Business Model (BM) can be considered as the firm’s plan and strategy to recombine performance into systems of interrelated design factors. In other words, a firm can create, capture, and deliver value to customers through its BM by considering the key four design themes of BM: novelty, efficiency, lock-in, and complementarity. Novelty is considered the primary driver of firm performance which is related to the introduction of novel combinations of products and services, creative methods in generating revenue, and novel ways to connect ecosystem actors such as supply chain actors, customers and other partners. Alexander Osterwalder created perhaps the most known BM canvas tool for a holistic understanding of BM in a structured way. Utilizing this canvas provides insights about the firms’ customers, what are the value propositions, through which channels these values are offered, and how the company makes revenue. Firms can use BMs canvas to understand their BM or their competitor. BM canvas is a shared language between a group of people who are brainstorming to have visualization, description, assessment, and occasionally change the existing BM.
While each business model is unique, reflecting the specific business and region objectives, we also found that the overarching topic of green hydrogen utilization brings common issues which need to be considered when one develops the very own business model. Therefore, the HUB Model represents the composite, pre-filled canvas addressing the important aspects of successful hydrogen utilization identified from the analysis of project regional case studies.
Indeed, the proposed business model cannot account for all possible business cases peculiarities; thus, some of its elements might be redundant while some might be missing. Therefore, the tool should not be considered as an imperative guide but rather as a starting point for iterative ideation within the team. For inspirational examples of more specific hydrogen utilization business models, please refer to the project regional case studies.
The canvas incorporates the familiar layout developed by Alexander Osterwalder from Strategyzer. The Osterwalder’s Business Model canvas has been proven by multiple applications, to be easy to communicate and suits well for both face-to-face ideation workshops and online collaboration. The generic guidance for usage of Osterwalder’s business model canvas can be found on the Strategyzer website. Below we outline some aspects peculiar to hydrogen utilization which can be also found in our pre-filled HUB model.
This category includes elements of the cost-side of the canvas (specifically partners, activities, costs and resources), which are specifically required for the utilization of hydrogen. These can be hydrogen suppliers and associated costs and activities, specific resources (both human – e.g. trained personnel or raw resources) as well as access to specific technical expertise and financial instruments (for detailed examples, see our regional case studies).
Very often the HUB model is not created from scratch but appears as a modification of an already existing model (e.g. in case of shifting from diesel-powered equipment to hydrogen-powered). In that case, the structure and many elements of the existing business model remain though may need to be properly aligned with the novel elements introduced by the adoption of hydrogen. These remaining elements are also important for evaluating the novel HUB model, by comparison, with the prior business model and therefore the identification of the business potential of hydrogen utilization in each specific case. In case of new market entry (i.e. when the prior business model is non-existent), it is recommended to compare several alternative models based on various energy carriers. In that case, the traditional (fossil fuel-based) model can be used as a baseline and some of its elements may remain in the consequent (green energy-based) models, thus forming the existing elements category.
This category deals with the revenue side of a business model (customer segments and relationships, channels and revenue streams) and most importantly with the value proposition. The utilization of hydrogen can alter the customers’ segments, and enable new value streams (e.g. by selling by-products or offering complementary services).
The value proposition is the very heart of the business model, therefore it is increasingly important to understand how utilization of hydrogen can be reflected in the customer value, and what is the main contribution and benefits compared to the existing, traditional model. Very often the adoption of hydrogen enables delivering existing value proposition more ecologically and sustainably. However, while that is the most obvious outcome, the opportunities provided by hydrogen are not limited to the simple improvement of an already existing value proposition. A new or extended value proposition enables the attraction of new customers and opens new revenue streams. The small pilot hydrogen utilization case serves as a testbed for verification of technological and business viability and therefore becomes a nucleus for an emerging complex hydrogen ecosystem incorporating multiple business actors and enabling novel customer value offerings. Therefore, we encourage the user to think outside of the box and explore new opportunities enabled by hydrogen.