Samchully Energy Services - South Korea

One of the major town gas companies in Korea.


Download the South Koreai country report with the Samchully case or read below:

Korea report D2_V7 november 2017
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The Story of Samchully Energy Services


Samchully Energy Services is a daughter of Samchully, a company founded in 1955. Samchully started as a supplier for residential and commercial briquettes. Since the late 1980s, when town gas started to be promoted in Korea, and using imported LNG, Samchully became one of the major town gas companies in Korea.


Samchully Energy Services (ES) was founded in 2001. In South Korea’s energy market, businesses are expected to adopt optimized solutions for saving energy, reducing greenhouse gas emissions, and regenerating energy. Early 2001, the Samchully Group launched a Task Force team to create a consumer-focused business structure and established Samchully ES for new business. According to its website , Samchully created a business model following the metaphor of 'Energy General Hospital'. This model centered around diagnosing and treating all the causes of energy issues through diagnosis, consulting, high efficiency material supply, construction and post management of energy facilities.

Samchully ES stepped into this market by providing solutions and services that help its customers reduce their energy costs and change their waste resources into useful energy. This involved a bif shift in the business focus of Samchully. Previously the company was a supplier of a utility (gas), with more or less a monopoly position in many towns in Korea, but now it entered a competitive market focused on energy efficiency equipment. As a consequence, Samchully changed its focus from supplier centered to more consumer oriented.


Samchully explicitly positions itself as a total solutions, a one-stop-shop type of business. It aims to have all necessary technologies available, and in addition, and very important to its proposition, Samchully has a very strong energy efficiency technology engineering capacity,


As a total energy solution company aiming to answer to any energy related need of its clients, it has many energy business areas, and this list of areas is still growing. Below is a list of its business areas: Photovoltaic Power, Waste-to-Energy Power Generation, Global Networks, Biogas Production, Geothermal Heat, Fuel Cell, Power Generation, Building ESCO /EMS, DR, ESS, Industrial ESCO, GHP / Heat Pump, etc. Energy efficiency and Regeneration, although the starting point in 2001 are no longer the primary focus of Samchully ES, but just one of the solutions offered.


Samchully ES experienced a strong growth in turn over and market share in recent years and is continuingly exploring the total energy solutions market for new business opportunities. More on this in a later section.


Samchully’s business Partners entail a great variety of global players. Each specialised in one of the energy (efficiency) technologies Samchully wants to be able to offer its customers. As such all these various types of partnership are formed with many companies in the international market to be able to provide total energy solutions. For example, Yanmar is well known for Yamaha Motor Machine Works since 1912. Samchully ES signed a partnership with Yanmar in 2001 for technology support from Yanmar in the area of CO2 emission reduction, GHP (gas heat pump) technology, etc. The following figure shows this type of cooperation and international network with energy and environment technology companies around the world.

Many types of customers are listed at the website for many energy fields, ranging from home owners to SMEs, Universities, Commercial and Public offices and more industrial customers such as production plants. These different types of customers also need a variety of high energy efficiency technologies including Gas driven Heat Pumps, building and industry energy solutions. Some of Samchully’s projects include plant projects focused on distributed co-generation energy systems, fuel cell power plants, etc., and environment-friendly energy business such as biogas, Industrial water treatment business. Samchully ES provides in addition an online and offline customer service network for custom designed service provision.

These customers often already had a prior relation with Samchully through its supplier role. The daughter company leveraged these existing relationships to enter and create new business areas.

The channels being used to interact with the clients range from the very important physical audits performed at the customers facility, including analyses of processes and their energy needs. But the various support desks of Samchully are a clear channel for interaction. And finally, Samchully has face to face interactions with each client, to make sure that the one-stop-shop or total solution is fully tailored to the needs of the customer.


The activities that Samchully performs range from clear technology implementation, to engineering, to process management, networking, performing audits and in a way becoming a strategic partner for each client. Key resources for Samchully are its database for energy technologies, its engineering capacity and its global network and accompanying platform. Samchully ES claims that its state-of-the-art engineering capabilities and its other process facilitation skills have made Samchully ES one of South Korea’s leading players in the areas of energy efficiency and reducing greenhouse gases.


Based on the above it is clear that Samchully is a company with a strong technology base, which started out as a technology and energy supplier, but which in time did realise that its customers needed help meeting the necessary energy savings and efficiency requirements set by the Korean government.

As such Samchully grew into a company providing technologies but with add-on services that do focus on the use phase as well, not only on the interaction phase until transaction.


Samchully as a cost structure which is also clearly in between a product and service type of model, with many costs related to the database and technologies, but also costs for maintaining the platform that allows the company to deliver the total solutions, and several of the costs relate to the monitoring and verification processes and installation of facilities at the customers location.

The revenue model Samchully is using is very much service oriented, with a clear focus on the use phase; i.e. profit sharing from the realised energy saving, next to fees for consultation from various types of solutions provided including waste to energy, B2B solutions, etc.



Value Propositions

The bundle of products and services that create value for Samchully’s customers can be summarised to be custom-designed, tailor-made energy efficient, environmentally friendly solutions for customers with a full range of one-stop solutions and services, ranging from technology proposals and financing to EPC and post- management assistance.

Interestingly enough the value proposition of Samchully is not described as realising energy savings for its customers, but decreased operational costs, easy process management, easier process quality monitoring, ensuring constant delivery to the clients of their clients. The energy savings almost become the means to achieve and pay for the rest of the services.


Dynamic Capabilities

Based on the description above we can hypothesise that Samchully demonstrates several key capabilities leveraging success. In terms of user sensing, and technology sensing, it is clear that Samchully incorporates its user centeredness in may activities, from the user sensing activity of the audits at the facilities of customers, and the face to face meetings aimed at understanding what tailoring is necessary to meet the customer’s specific requirements with respect to operations and process optimisation.

However, Samchully could even be said to be user following, in the sense that they expand their business based on the expanding needs of their customer base. Where Samchully initially was a clear technology provider or energy supplier company, it slowly built its business to be not only a tech and energy supplier, but aims to solve many more customer needs such as need with the official permitting and tendering process for new energy systems, organising the financing, sometimes in the form of an ESCO. And it is clear from the available material that Samchully performs well in turning the senses user needs into clear products and services, thus demonstrating good conceptualising capabilities.

One of the ways Samchully facilitates this conceptualising up is by means of the Samchully Energy Research Institute, an industry led think tank which was already set-up in 1990. At this institute research and development takes place. This institute also aids the sensing, by analyzing trends and thought leadership in the energy community.


The global platform and international partnerships Samchully has created to be able to offer any needed solutions to its customers testifies of good orchestrating capabilities. Whatever a customer needs, Samchully either makes sure in-house expertise is available or its makes sure it partners with the necessary expertise.

In terms of stretching capabilities, the figure below demonstrates a clear attempt of the company to create a service oriented focus in the whole company. After it realised it needed to start providing total energy solutions, existing separate activities in the company were grouped together, and separate support desks were combined to be able to provide a one-stop shop solution.


The market performance of Samchully ES indicates its success at delivering the total solutions. According to Samchully, the key to the growth of Samchully ES's business model is to meet consumer expectations. It recorded sales of around USD10 Million in 2010, grew rapidly with sales of USD50, USD85 Million in 2012, 2013, respectively. For the year 2016, the sales record USD 145 Million. Orders received by 2014 are reported to have exceeded USD 200 Million.


Samchully ES is ambitious in terms of scaling up. Next to specialising in the provision of total energy solution Samchully ES is now expanding its business to the use of waste as energy and becoming a manufacturer of biogas with biogas-based power plants, and water processing plants.


Context

Samchully is rather ambitious in its aim to become a total solutions provider. And is very much aiming to become a true service company. Many of its business model building blocks are turning towards the service logic, and Samchully is in a clever way using the context of laws and regulation to follow demand, and adapts its proposition based on good user sensing. The South Korean government for example made the implementation of energy use diagnoses mandatory as a means of enhancing the efficiency of high-energy-consumption businesses. And Samchully quickly followed with good diagnosis services.

Samchully has many potential competitors from PV, EV, Bioenergy, Waste-to-energy, wind, etc. as their business area requires them to install more than one renewable energy sources. Society and institutional players are becoming more aware of the potential service of a one-stop-shop or total solution, but is not quite there yet. Issues around certification that is still focused on individual technical elements is a clear indication of this.



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