How to grow a greener energy grid, with Octopus Energy’s Greg Jackson

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1:25And it's like that when you start a company. Greg Jackson's UK-based company, Octopus Energy, is a hyperscaling disruptor in what's usually a pretty sleepy sector. He's paying people to use less energy and has managed to figure out how to build a whale of a business, or in this case, an octopus of a business, in doing so. Greg says that one of the key reasons he's been able to do this is he and his team have built a culture where team members are genuinely willing to fail. If you're going to innovate, some stuff's going to fail. So it's actually being very grown up about that and giving people space to do it.

2:02I think enabled us to scale horizontally and vertically much faster than a traditional organization. If an innovation is working, we feed it. And if it's not working, we starve it. And it's just a process of natural evolution. Greg says that Octopus Energy has reached about$20 billion in revenue by upending the typical relationship with customers. From leasing electric vehicles to helping build more efficient homes to teaching people how to game out savings, Octopus is driving down energy costs. By selling the same software they use to run their own business, Greg is generating ripple effects across the industry.

2:40It's a fascinating story of scale in an arena that isn't known for fast-moving entrepreneurs.

3:10in nutballs 10 years later. We're like, well, that's just how you do it. We haven't made it just how you do it. This is Masters of Scale.

3:26I'm Jeff Berman, your host. Greg Jackson is focused on scaling not just his own company, but bigger solutions to our global climate crisis. It's a mission that has been central to his identity from a very young age. Greg, welcome to Masters of Scale. Hey, Jeff. Thanks for having me on. It's great to be here. Well, I have to tell you that as I was prepping for our conversation, I read a line that said that you were big on green energy, but I misread it. And I read it as it's saying you had big green energy, which I love that description of you. I'll take that too. That's my new Twitter bio. Yeah, I love it.

4:05I love it. So before we get into what Octopus does and how you all are scaling and changing the world. Where does your interest in energy come from? It's not necessarily the obvious place an entrepreneur goes. So how did you end up here? I think probably three reasons. I mean, first of all, as a consumer, I found energy companies didn't give the kind of service that you got in other sectors. And largely because they came from these kind of very old-fashioned backgrounds with old-fashioned technology and kind of saw themselves as really just providing utility as opposed to serving customers. And so the first thing really was, as a customer, you could see you could do this very differently.

4:42I think the second thing was, I care about the environment. I joined Greenpeace when I was 15, and having built and sold some businesses, I had this opportunity to try and do something at scale that might actually make a difference than what I care about. And I think the third one is, Look, as a business person, energy is a$2 trillion sector globally. Now, it's largely running on technology platforms at three or four or more decades old. Just the opportunity to enter what must be one of the biggest sectors in the world, if not the biggest, and be able to help drive change through digitalization and build a really big business, that's pretty exciting.

5:22Joining Greenpeace at 15 is not something every kid does. What was it about the home you grew up in or you as a child that led you to make that decision? I was brought up by a single mom. She had three kids. We had no money. We didn't have a car. We had to walk everywhere. I remember traipsing around and, you know, you'd see these cars belching out exhaust fumes. And those of us who were walking had to breathe them in. And we didn't get the benefit of being in them. And it kind of gave them this sense of there's kind of an injustice in the world of pollution that applies everywhere. that, you know, some people create it and other people experience it.

5:56And that kind of felt unjust. At the same time, by the way, Greenpeace were in that phase of their life when you turn on the TV news and you see videos of people scaling oil rigs and, you know, putting huge banners up. It looked pretty exciting. And I thought, look, you know, if you can tackle injustice in these cool ways, I kind of found that really motivating. How did you make the transition from Greenpeace to becoming an entrepreneur? I mean, I was only ever a member. Sadly, I never got the chance to go and volunteer. Gotcha. For me, the journey to entrepreneurialism was one way that mum coped with having three young kids and no money was to delegate a lot of responsibility to us.

6:32So from a very early age, I was used to doing all my own tasks and looking after money and earning money myself. And so instead of being spoon fed, I learned to make my own decisions and manage stuff. And I think A great example was mum used to get this money from the government in the UK as a payment to parents, a small amount of money per month. And she said to me and my sister, from now on, I'm going to give you direct to you and you buy your own clothes. And so, of course, instead of buying clothes, I went down the electronics shop and started buying little bits of electronics and learning how to make circuits and then learn how to program computers.

7:08And that led to a bit where, you know, for example, at one point as a teenager, I'd write video games through the local store or in magazines. And I think even though eventually I ended up going to university and getting a proper job at Procter & Gamble, I only ever saw that as being a sort of holding pattern until I went and did my own thing.

7:29Greg Jackson built a successful career working in tech, but he couldn't shake the idea that he could transform the software tools at the heart of our energy grids and help the planet in the process. As a consumer, you could see that energy was providing poor service and actually really bad value. Energy companies were bloated and inefficient. And so we saw the opportunity to build an enterprise software platform for the energy sector that would let energy companies move into the 21st century. I sometimes describe it as like Shopify for utilities, because the idea was we could standardize all of the processes and create super slick, single data set for the entirety of an operation.

8:12And you could literally take your existing customer base, upload them into, our platform's called Kraken, upload it into Kraken, and then run your business from there. So we saw that opportunity and we went to talk to some energy companies. Some of them said, we'd been doing what we'd been doing for a long time. We know what we're doing and we don't need your help. Thank you very much. Other companies said to us, this sounds great, but we're a very conservative sector and someone's got to go first. And we realized if we wanted to sell software into the energy sector, we first of all had to build an energy company to demonstrate just what a digital energy company could do.

8:49And that's Octopus. So we ended up building both our software company, Kraken, and our energy company, Octopus, as kind of yin and yang. Now, you're doing this in the UK, which for our audience who are not experts in energy policy and how this world works, is a very different setup than how things work in the US. Can you just give us a little bit of an understanding of how things work in the UK and how things work in the US before we roll into how you've actually deployed in market? That's right. So in the US, most states, people have the local regulated energy utility. But in In the UK and in Europe, Australia, New Zealand, Japan, and some other countries looking at this too, you have a competitive market for energy.

9:32So the same way that as a consumer, we can choose a number of different wireless networks for our cell phones. In all those countries, you sign up to a plan with an energy company you've chosen. And so we had the opportunity to create our own energy company and then get people to sign up for it. Now, that said, in most countries, the big incumbent energy companies have been the same for decades. And so we were really entering this market where it might be like trying to set up your own cell phone network from scratch. It's that kind of scale of challenge, but it's also that scale of opportunity.

10:09And so that's what we set out to do. The scale of that challenge is not small, right? I mean, you are going in against massive entrenched competitors. How do you even begin to start to build a company that's going up against competitors that have this incredible built-in advantage from their legacy and their base of customers? Yeah, I think it's the same in so many sectors when you're a disruptor. Those incumbents will obviously be thinking hard about their current asset base. What we thought about was customers. And so we started designing the journey, the sign-up journey and the in-life journey from a purely digital perspective that says, how do we make this a much better experience for a customer?

10:50And we basically, instead of thinking about, for example, the energy system and working forwards to the front end of the consumer, we started with the consumer and then worked backwards into the energy system. Now, I've built quite a few companies now, and I think the single biggest thing you can do is sign your first customer. because until then, everything's theoretical. But your first customer, you're able to find out, do your processes work end-to-end? Where are the pain points you hadn't recognized? Where are the opportunities? Because when you see what customers are doing, you discover all the things you could innovate.

11:21You might say it's a bit like Apple versus Microsoft. So both are great companies. But Microsoft, really, its kind of DNA began serving enterprises, where you'd have quite a lot of support staff required to run it properly. Whereas Apple started off like, how do you make a single device on scale to billions of users with no customization and support? And we started at that end. And yeah, the very first customer was a member of our team. And it was a great example of, because we got moving really quickly, we discovered the kind of challenge we were going to face. And we're able to start making sure we're building for that, rather than spending a year and a half kind of theorizing and then discover it was all wrong.

12:02How did you get past that first customer and start getting to scale in the UK? So, interestingly, our very first investor, I went to him with a strategy that was going to be entirely digital, no customer service, but in return, you'll never get a better price. And he said, this is all great, but actually, you need to give the best service in the market. I took his advice, and we worked relentlessly to have a great service. So what we did was, for the first million customers, we had to street fight for our customers. We had to literally find any way we could get of getting them, knocking on doors, telesales, but relentlessly making sure that when they joined us, they got this experience.

12:38And then setting up a referral program so that they would tell friends about it. As you say, you can't try it before you buy it. But if someone you know has tried it and tells you it's great, and then it is great, you will tell other people. That was really the recipe to street fight our way to a million. And then through our brand and momentum, keep building to the point where today we've got 7.1 million customers in the UK, nearly 2 million in other countries now, and rapidly growing on the same scale. And from a revenue perspective, how big are you now? Around$20 billion. Yeah, that's not bad.

13:15It's a pretty good scaling journey. Greg, you referenced the importance of getting your first customer for Octopus, but that was inspired in part by needing to get your first customer for Kraken and understanding that the market was not there yet. So what I'm understanding is that Kraken's first customer was actually Octopus. Is that right? Right. And so once you were showing that Kraken was working for Octopus, how were you able to go back to those stodgy energy companies who had shut the door on you at the beginning and persuade them that you had a better solution for them? Yeah, there are two parts to that.

13:50The first thing, we initially licensed Kraken to a small energy company, not a stodgy one, because we wanted to build a test. Again, a bit like getting our first customer, it was an internal customer on the consumer side. Our first software customer was a small one that we could, if things were going wrong, we'd be able to over-resource and make it go right. As it was, it went like a dream. So now we've proved that Kraken could not just support Octopus, it could also support, in this case, a company called Good Energy. Great company. And Octopus at the time, and still, was doing extraordinary innovation in the market.

14:27I'll give you a couple of examples. So on days when it's windy and sunny, we give customers cheaper energy because the system's cheaper. And we'll do it for the half hour, the hour or three hours. On days when it's very sunny in certain regions, we'll give people free energy. Because otherwise, the grid is going to turn off the solar farms, and we'd rather give it to our customers cheap. If you've got an EV, you can pair it with Octopus, really with Kraken through Octopus. And we automatically schedule the charging. Each car gets a different schedule every day. But in return for that automation, it's seven times cheaper to drive an EV than it is to drive a gasoline car.

15:06And by the way, if you've got… Because you're scheduling the charging at the time when the cost of the energy is lowest. Exactly. When the grid's empty, when your local network's empty, when it's sunny and when it's windy. Obviously, Kraken looks at 5 billion datelines per day to do that for EVs. But that optimization enables us to make the most of a renewable system, as opposed to in the old world, renewables would add to the cost of the grid. Doing this stuff, they can reduce the cost. We even now work with house builders to build homes where we guarantee no energy bills for 10 years because they've got a combination of solar panels, heat pump, battery, and smart hot water.

15:46We optimize that, and we guarantee no energy bills. I mean, even with solar, how can you do that? The way we do it is it's all with this insight that the grid price varies. It basically plays in every country. The grid price varies every half hour, every 15 minutes, whatever, depending on the market you're in. What we can do here is when it's sunny, the grid price is usually low. So we put most of the electricity from your solar panels into your battery. We might also use some of it to heat your hot water. then as the grid price gets higher during the evening we'll empty the battery onto the grid and the amount we get paid for that pays for us to take from the grid and when it's dark typically in the early hours of the morning when the electricity is very cheap so that overall we're earning from what we put on the grid that it costs us to take it from the grid and then because we've got a smart heat pump in there most homes will hold heat for maybe three or four hours, right?

16:44So then we'll heat the home during the period when electricity is cheaper, and we'll use no heating at all during the most expensive time, or very little. You'll still be your target temperature, but the cost to heat the home has dropped dramatically. And so we're able to optimize all of that, and a bit more actually, and then give you, we guarantee no energy bill. Right. So you're able to sell high and give away for free is effectively what you're doing. Given the challenges of climate change, heat waves, catastrophic storms, how does that affect this calculus? I mean, there must be days where the energy grid in the UK is strained beyond imagination.

17:24So how are you dealing with that? Yeah, I mean, so first of all, because we've got a battery in the home, on the day it's strained beyond all calculation, there's going to be a point when the electricity price is very, very high. So we can still empty the battery at that time. So even if we're filling up at another time, actually, that strain works both ways. And so, look, through Kraken, we were able to take literally tens of billions, if not hundreds of billions of data points for houses that already had this kind of technology, and look at how they behaved in every scenario, and then model them against these kind of different optimization techniques.

17:59weeks. And so we've run so many simulations that even our very conservative finance function got to the point that we were comfortable underwriting this proposition. And frankly, it's working brilliantly for us. But more importantly, it's great for customers. The peace of mind of never having an energy bill, it's mind-blowing. And then by the way, for house builders, where they're working in the private housing market, these houses are obviously very attractive and they sell fast. And when we're working in the market for social or public housing, The people who need it most can start escaping from energy bills.

18:33By the way, we got onto this because you asked about how we then sold Kraken to the stodgy sector. The interesting thing is all these proof points. What we were able to do was, prior to us building Kraken and Octopus, some people said, maybe one day these things will happen. By actually doing it, we could give those companies enough confidence. They're not old and stodgy now. The ones that worked with us have been forward thinking. But we could give those companies enough confidence that Kraken could deliver these benefits for them and their customers too. And as a result, Kraken now serves as more than 50 % of the UK energy market.

19:12So we've gone from 0 % obviously eight years ago to more than 50 % now. And it's rapidly growing with brilliant clients in a whole bunch of countries. So one of the many interesting things about your business is Octopus is a big and scaling business on its own, powered in part by Kraken. You are now making Kraken available to Octopus competitors, right? So it's not obvious that one would say, I want to actually empower our competitors to use the same software to provide an equal quality of service or competitive quality of service. How did you reconcile that? It's a great question. Because from the very beginning, our first insight had been we wanted to build a technology platform to disrupt this sector.

20:00It was always our kind of business plan that we would license Kraken to other companies. But because Octopus grew very quick, I mean, Octopus was really just the demo client. It just happened to grow very big and become successful in its own right. When we spoke with our board about licensing Kraken to other companies, they were saying, look, why would you give away your secret sauce? And by the way, when I was speaking to the companies, their CEOs would say to me, why would we put all of our customers on your technology? And I guess there's a signal there that says if both sides are worried, maybe there's something quite interesting, right?

20:36But my perspective was like, once you do something with technology, you've proved it can be done, then sooner or later, others will copy it and do it too. And you see that in every bit of technology innovation. And so if other companies are going to end up on Kraken-like software, I'd rather them on Kraken than funding someone else to build different. Now, it's really hard to build enterprise software, big-scale enterprise software that works like this. But as soon as someone would do it, and I'd much rather we were that someone, frankly, in terms of them competing with Octopus, first of all, Kraken's like an operating system, And you can put apps on it.

21:14So in the same way as when we all buy a phone, it comes with the standard apps. And we'll keep some of those and we'll change others and download more. So Kraken's clients can do that. So their businesses can be very, very different than Octopus. But secondly, even if they're competing against Octopus, if they do better than Octopus, I'm over the moon. Because that means Kraken's done its job. And Octopus just needs to get better at it.

21:58More with Greg Jackson about the opportunities and the roadblocks he sees ahead in just a minute.

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23:55You can find this episode and more on the Masters of Scale YouTube channel. So, Greg, as we sit here, we've had yet another summer where the energy grid in Texas has been strained and unable to keep up with demand at times. I'm in California where we face a persistent risk of fires that can take down the energy grid. We've got cyber threats to an aging infrastructure of our energy grid here. When you look at the US market, where do you see the opportunity for rapid and essential improvement? Yeah, so look, I mean, first of all, I'm glad you raised that backdrop. The extreme weather events we're seeing now are not just weather patterns.

24:40Humanity's use of the atmosphere as an open sewer has led to an exponential increase in extreme weather. Our systems are not designed to handle this. If we're seeing some extreme weather now, it only gets more and more extreme as we melt more ice. So first of all, this is real. Each year we're putting record amounts of carbon in the atmosphere. So even though we're increasingly building renewables and things like that, the reality is we're not doing anywhere near enough. And I think, look, when humanity looks back on this period, maybe the 2050s or something, I can imagine the SA question. The essay question is, given that by the 2020s, renewable power was already cheaper than fossil fuels, why did people not transition faster to a solution that was going to be better for the economy, better for the climate, better for local air pollution, and better for national security?