Energy transitions : business model innovations as a solution for incumbent South African Small and Medium Enterprises

Abstract

The Multi-Level Perspective (MLP) has been applied as a conceptual framework to describe the socio-technical transition in the energy sector in South Africa. The three levels of the MLP being the socio-technical landscape, socio-technical regime and niche provides an elegant framework for business to understand the energy transition that is unfolding. Within the regime, are multiple incumbent actors with business models that are highly established and form an impenetrable barrier to a regime shift or infiltration of niches. The current energy regime has been weakened due to corruption and mismanagement thereby creating a window of opportunity for niche renewable energy producers to enter the regime and move it forward. Within the network of actors in the socio-technical regime resides a group of often neglected Small and Medium Enterprises (SMEs) whose business models have been designed to function solely within the fossil-fuel energy regime. This research study sought to discover the perceived risk of the energy sector SMEs, to understand their business models, and determine if they had enacted or intended to enact any business model innovation in response to the socio-technical landscape pressures exerted on them as incumbents of the existing energy regime. Due to the porous literature on the confluence of business model innovation and transition theory, a qualitative research study was undertaken. Data was collected from a sample of SMEs within the existing regime and analysed to determine their perceptions on the energy transition and its potential effect on the successful continuation of their business models as they were currently devised. The findings revealed that SMEs were highly aware of the environmental pressures that were being exerted on them, however, they did not foresee the complete abolishment of coal infrastructure. In addition, the sampled SMEs exhibited high levels of organisational inertia, and favoured efficiency modifications in contrast to business model innovation.