GREG JACKSON: I think a benefit of having built several companies over time is when you move house, you’ve got the opportunity to leave behind all your clutter and start again. It’s like that when you start a company.

JEFF BERMAN: Greg Jackson’s UK-based company, Octopus Energy, is a hyper-scaling 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.

JACKSON: If you’re going to innovate, something’s going to fail. So it’s actually very grown-up about that, and giving people space to do it, I think, enabled us to scale horizontally and vertically much faster than a traditional organization. If an innovation is working, we feed it; if it’s not working, we starve it. It’s just a process of natural evolution.

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

I’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.

JACKSON: Hey, Jeff, thanks for having me on. It’s great to be here.

BERMAN: 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 as saying you had “big green energy,” which I love as a description of you.

JACKSON: I’ll take that too. That’s my new Twitter bio.

The three reasons why Greg Jackson landed on Octopus Energy

BERMAN: Yeah, I 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? Joining 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?

JACKSON: I think probably three reasons. First of all, as a consumer, I found energy companies didn’t give the kind of service that you got in other sectors, largely because they came from these old-fashioned backgrounds with old-fashioned technology and saw themselves as just providing a utility, as opposed to serving customers. So, the first thing really was, as a customer, you could see you could do this very differently.

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 in something I care about.

And I think the third one is, look, as a businessperson, energy is a $2 trillion sector globally. It’s largely running on technology platforms that are three or four decades old. Just the opportunity to enter what must be one of the biggest sectors in the world, if not the biggest, and to be able to help drive change through digitalization and build a really big business — that’s pretty exciting.

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’d see these cars belching out exhaust fumes, and those of us who were walking had to breathe them in. We didn’t get the benefit of being in them, and it kind of gave me this sense of injustice in the world of pollution. Some people create it, and other people experience it. That kind of felt unjust.

At the same time, Greenpeace was in that phase of their life where you’d turn on the TV news, and you’d see videos of people scaling oil rigs and putting up huge banners. It looked pretty exciting. And I thought, if you can tackle injustice in these cool ways — that kind of motivation stayed with me.

Early sparks of entrepreneurship

BERMAN: How did you make the transition from Greenpeace to becoming an entrepreneur?

JACKSON: I mean, I was only ever a member. Sadly, I never got the chance to go and volunteer. For me, the journey to entrepreneurialism was one way my mom coped with having three young kids and no money: she delegated a lot of responsibility to us. So, from a very early age, I was used to doing all my own tasks, looking after money, and earning money myself. Instead of being spoon-fed, I learned to make my own decisions and manage things.

For example, my mom used to get this money from the government — a small amount per month in the UK that goes to parents — and she said to me and my sister, “From now on, I’m going to give it directly to you, and you buy your own clothes.” Of course, instead of buying clothes, I went to the electronics shop, started buying bits of electronics, and learned how to make circuits and program computers.

And that led to a bit where for example, at one point as a teenager, I’d write video games and turn through the local store or in magazines. And I think even though eventually I’m going to university and getting a proper job at Procter and Gamble, I only ever saw that as being a sort of holding pattern until when it did my own thing.

The opportunity to reinvigorate the energy sector

BERMAN: Greg 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.

JACKSON: As a consumer, you could see that energy was providing poor service and really bad value. Energy companies were bloated and inefficient, 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 the processes and create a super slick single data set for the entirety of an operation. You could literally take your existing customer base, upload them into our platform — called Kraken — and then run your business from there.

We saw the opportunity and went to talk to some energy companies. Some of them said, “We’ve been doing what we’ve 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, “This sounds great, but we’re a very conservative sector, and someone’s got to go first.” We realized that 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. That’s Octopus. So, we ended up building both our software company Kraken and our energy company Octopus — that’s kind of the yin and yang.

BERMAN: Now you’re doing this in the UK, which, for our audience who are not experts in energy policy, is a very different setup than how things work in the U.S. Can you just give us a little bit of an understanding of how things work in the UK and how things work in the U.S., before we roll into how you’ve actually deployed in the market?

JACKSON: That’s right. In the U.S., most states have a local regulated energy utility. But in the UK, Europe, Australia, New Zealand, Japan, and some other countries, you have a competitive market for energy. So, the same way that as a consumer we can choose from a number of different wireless networks for our cell phones, in those countries, you sign up to a plan with an energy company you’ve chosen. We had the opportunity to create our own energy company and then get people to sign up for it.

That said, in most countries, the big incumbent energy companies have been the same for decades, 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, and that’s what we set out to do.

Competing against big, established companies

BERMAN: The scale of that challenge is not small, right? I mean, you’re going in against massive, entrenched competitors. How do you even begin to start to build a company that’s going up against competitors who have this incredible built-in advantage from their legacy and their base of customers?

JACKSON: Yeah, so 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. So, we started designing the journey — the sign-up journey and the in-life journey — from a purely digital perspective that asks, “How do we make this a much better experience for a customer?” Instead of thinking about, for example, the energy system and working forward to the consumer front-end, we started with the consumer and then worked backwards into the energy system.

Now, I’ve built quite a few companies, and I think the single biggest thing you can do is sign your first customer, because until then, everything’s theoretical. But with 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? When you see what customers are doing, you discover all the things you could innovate.

You might say it’s a bit like Apple versus Microsoft. Both are great companies, but Microsoft’s DNA began serving enterprises, where you’d have a lot of support staff required to run it properly. Apple, on the other hand, started off with the goal of making a single device that could scale to billions of users with no customization or support, and we started at that end.

Our very first customer was a member of our team, which was great because we could get moving really quickly. We discovered the kinds of challenges we were going to face, and we were able to start making sure we were building for that rather than spending a year and a half theorizing and then discovering it was all wrong.

Inside Octopus’ scaling strategy

BERMAN: How did you get past that first customer and start getting to scale in the UK?

JACKSON: It’s interesting. 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’d 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 provide great service.

For the first million customers, we had to street fight for our customers. We had to find any way we could to get them — knocking on doors, telesales — but we were relentlessly making sure that when they joined us, they got this experience. We then set 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: street-fighting our way to a million customers and then, through our brand and momentum, building to the point where, today, we’ve got 7.1 million customers in the UK and nearly 2 million in other countries, and we’re rapidly growing on the same scale.

BERMAN: And from a revenue perspective, how big are you now?

JACKSON: Around $20 billion.

How Octopus got their first products into the market

BERMAN: That’s not bad! It’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?

JACKSON: Right. And so, once we were showing that Kraken was working for Octopus, we went back to those stodgy energy companies who had initially shut the door on us to persuade them that we had a better solution for them.

There were two parts to that. The first thing was we initially licensed Kraken to a small energy company, not a stodgy one, because we wanted to be able to test it. A bit like getting our first customer was an internal customer on the consumer side, our first software customer was a small one where, 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 proved that Kraken could not just support Octopus, but could also support, in this case, a company called Good Energy — a great company. Octopus, at the time, was doing extraordinary innovation in the market.

I’ll give you a couple of examples, right? 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 — or 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.

BERMAN: Because you’re scheduling the charging at the time when the cost of the energy is lowest.

JACKSON: Exactly. When the grid’s empty, when your local network is empty, when it’s sunny, and when it’s windy, Kraken looks at 5 billion data lines per day to do that for EVs. That optimization enables us to make the most of a renewable system; as opposed to the old world, where renewables would add to the cost of the grid, doing this stuff 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, a heat pump, a battery, and smart hot water. We optimize that, and we guarantee no energy bills.

BERMAN: I mean, even with solar, how can you do that?

JACKSON: The way we do it is it’s all with the insight that the grid price varies in most places. In every country, the grid price varies every half-hour, every 15 minutes — whatever, depending on the market you’re in. So, when it’s sunny, the grid price is usually low. 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 energy from the grid when it’s dark, simply in the early hours of the morning when electricity is very cheap.

Overall, we’re earning from what we put on the grid, more than it costs us to take it from the grid. Because we’ve got a smart heat pump in there, most homes will hold heat for maybe three or four hours. So then, we’ll heat the home during the period when electricity is cheaper, and we’ll use little or no heat during the most expensive time. You’ll still be at your target temperature, but the cost to heat the home has dropped dramatically. We’re able to optimize all of that — and a bit more, actually — and then give you, or guarantee, no energy bill.

BERMAN: Right. So you’re able to sell high and give away for free, effectively, what you’re doing. Given the challenges of climate change, heat waves, and 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. So how are you dealing with that?

JACKSON: Yeah, I mean, first of all, because we’ve got a battery in the home, on the days when the grid is 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. Even if we’re filling it up at another time, that strain works both ways.

Through Kraken, we’re able to take literally tens of billions, if not hundreds of billions, of data points from houses that already have this kind of technology and look at how they behaved in every scenario. We then model them against different optimization techniques, running so many simulations that even our very conservative finance function got to the point where we were comfortable underwriting this proposition. Frankly, it’s working brilliantly for us. More importantly, it’s great for customers; they have the peace of mind of never having an energy bill. It’s mind-blowing.

For house builders, where they’re working in the private housing market, these houses are obviously very attractive, and they sell fast. In the market for social or public housing, the people who need it most can start escaping from energy bills.

By the way, we got onto this because you asked about how we sold Kraken to the stodgy sector. The interesting thing is, all these proof points — because what we were able to do was, before building Kraken and Octopus, some people said, “Maybe one day these things will happen.” But by actually doing it, we could give those companies enough confidence. The ones that worked with us, who were forward-thinking, could trust Kraken to deliver these benefits for them and their customers, too. As a result, Kraken now services more than 50% of the UK energy market. We’ve gone from 0% eight years ago to more than 50% now, and it’s rapidly growing with brilliant clients in a whole bunch of countries.

The strategy behind licensing Kraken to competitors

BERMAN: One of the many interesting things about your business is that Octopus is a big and scaling business on its own, powered in part by Kraken. You’re now making Kraken available to Octopus’s competitors, right? So, it’s not obvious that one would say, “I want to empower our competitors to use the same software to provide an equal quality of service or a competitive quality of service.” How did you reconcile that?

JACKSON: It’s a great question. From the very beginning, our first insight had been to build a technology platform to disrupt this sector. It was always part of our business plan to license Kraken to other companies, but because Octopus grew very quickly — it was really just the demo client, and it 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 like, “Why would you give away your secret sauce?”

When I spoke to those companies, their CEOs would say to me, “Why would we put all of our customers on your technology?” There’s a signal there that says, if both sides are worried, maybe there’s something quite interesting, right? But my perspective was, once you do something with technology and prove it can be done, then sooner or later, others will copy it and do it, too. You see that in every bit of technology innovation.

If other companies are going to end up on Kraken-like software, I’d rather run Kraken than have someone else build a different one. It’s really hard to build big-scale enterprise software that works like this, but sooner or later, someone would do it, and I’d much rather we were that someone.

In terms of them competing with Octopus, first of all, Kraken is like an operating system, and you can put apps on it. So, in the same way that when we all buy a phone, it comes with standard apps — we’ll keep some of those, change others, and download more — Kraken clients can do that so their businesses can be very, very different from Octopus. Secondly, even if they’re competing against Octopus, if they do better than Octopus, I’m over the moon, because that means Kraken has done its job, and Octopus just needs to get better at it.

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

[THEME MUSIC]

Welcome back to Masters of Scale. You can find this episode and more on the Masters of Scale YouTube channel.

Moving to renewable energy in the U.S

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 U.S. market, where do you see the opportunity for rapid and essential improvement?

JACKSON: Yeah, so look, first of all, I’m glad you raised that backdrop. The extreme weather events we’re seeing now are not just weather patterns. Humanity’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, right? Even though we’re increasingly building renewables and things like that, the reality is we’re not doing anywhere near enough. I think, when humanity looks back on this period — maybe in the 2050s — I can imagine the essay question: “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?”

When you stand back and look at it, what we’re doing now is not rational. We’ve never, as a species, been able to create cheaper power than we can today from solar and wind at the times it’s windy and sunny. Starting from that perspective, you’d say, “How can we use as much power as possible at the times it’s windy and sunny?” Because, of course, when it’s not windy and not sunny, renewables are far less effective. But the first thing should be to start shifting our economy to maximize energy use at those times.

Now, that doesn’t mean every consumer has to check the current weather before they do anything. It means utilities — companies like ours, with technology like Kraken under the hood — should shift as much power to those times as possible. I mentioned earlier the charging of electric vehicles. Just in the last year and a half, just in the UK, and just with Octopus, we’ve created an electric vehicle fleet that is 1.3 gigawatts of smart charging. That’s 1.3 gigawatts we can shift around. Now, no one knows what a gigawatt is, but it’s roughly equivalent to a nuclear reactor.

Moving to renewables is not like moving from a brown caterpillar to a green caterpillar. It’s like going from a brown caterpillar to a butterfly. We’re fundamentally changing the way it works.

The hurdles of digitizing the U.S. energy systems

BERMAN: It seems to me that in the U.S., our energy companies are largely run by, I’ll use your word, “stodgy” older executives. They make insane amounts of money. It’s not clear that they understand the opportunity that would come with digitization. You’ve been able to achieve that so effectively in the UK. How could you see that actually happening in the U.S.?

JACKSON: I think many of the people I’ve met that run U.S. utilities are really forward-thinking. They have a very dedicated mindset to their customer base, but their customer is the regulator. All the time, they’re thinking, “What will the regulator think of this? How can we take it to the regulator?” And some of the revenue models — if you’re paid on a cost-plus basis — you don’t have the same incentive to be efficient that you might in different models.

Often, the companies are very forward-thinking; by the way, the regulators are often forward-thinking, too. But the challenge is that no one has the incentive or the route to market to very rapidly iterate and test ideas. It’s very, very hard on old technology. All of our rivals in Europe and the UK were in the same place. You’d have an idea for a new product, spend a year specifying it on PowerPoint, then a year rolling it through a program management system, and then a year testing it in the market. Whereas with Kraken, we have an idea for a new product on Monday, we’ve got it live with some customers by Friday, and by the following week, we’re able to see what’s working and iterate it going forward. That’s literally 50 or 100 times faster, and it’s very low risk.

One of the challenges in those regulated sectors is if the regulator wants to put a new rate idea out there, they’ve then got to negotiate with the utility. Then the utility has to try to somehow do it through ancient systems. So, the first thing you need is modern systems, and the second thing you need is an agreement between utilities and regulators that allows for experimentation — where you can test ideas — and a reward system that lets utilities and regulators benefit from that.

Otherwise, I think everyone’s paralyzed because they don’t have the ability to do low-risk, high-frequency testing. If you have to do something across your entire customer base all at once, over a long period of time, and it costs a lot of money, you’re very, very, very averse to trying it.

Greg Jackson’s hope and gloom about the future of energy

BERMAN: Yeah. What are you most pessimistic about, and what are you most optimistic about with regard to our energy future, Greg?

JACKSON: I’m incredibly optimistic that the cost of renewables keeps falling. I mean, the numbers are insane, right? Batteries are falling at 13% per year. They’re 93% cheaper than they were a decade ago. Solar has beaten that — solar fell by 50% over the last 18 months, right? And wind is coming down rapidly as well. So all the components for running an energy system in a cleaner world are getting cheaper. By the way, through smart tech, we can do things like get an extra 40% peak load through a transmission line, just through smart tech and digitalization. We can make all of this much cheaper for consumers.

On the consumption side, EVs are getting cheaper every year. All the technology around EVs is getting cheaper. Heat pumps are getting cheaper, domestic batteries, domestic solar — so clean energy is getting cheaper every year. Meanwhile, fossil fuels are not. In a lot of the world, at one point, the price of natural gas in Europe was 15 times the normal rate. That was what the energy crisis was here, and we can escape all of that. So, I’m optimistic that the solutions to the problem are cheaper than the problem.

I’m pessimistic that there are so many vested interests. If we think about the tobacco lobby — they managed to delay action on tobacco for 40 years, initially by denying there was a problem, then offering solutions that didn’t really work, like low tar and filters, and just dragging their feet. We’re seeing the fossil fuel industry doing the same. I’m not going to demonize them. The interesting thing is, with the tobacco industry, once it had done all that dragging, you end up in a world where the tobacco industry said, “Look, tobacco is bad for people, but some people like doing it.” As a result, they’ve had 35 years of superior returns on the public markets.

In the same way, the sooner fossil fuels just say, “Look, fossil fuels are bad for the planet, bad for the environment. But today, we all use them. We shouldn’t demonize them because, I mean, I use fossil fuels; I’m sure you do. I’m not going to demonize it.” But they should say, “We should be an industry in runoff mode.” They could have decades of superior earnings in runoff. We’ve been through this before with tobacco; I just hope we go through it faster on climate. Because the faster we do it, those companies will be better off when they’re not putting a foot in both camps, and society will be better too.

How electric vehicles have transformed China

BERMAN: And what do you think we can do to accelerate that change? What’s the biggest thing we can do to move the needle there?

JACKSON: I had this incredible experience. I visited China a month ago. Cities like Shenzhen, Beijing, Shanghai — five years ago, people wore masks in the street, not because of COVID, but because of the air pollution. That’s all gone. Every single two-wheel vehicle is electric, all the taxis, most of the buses, a very high percentage of cars — 54% of the cars sold in China this year so far are electric. I think we need to look at what’s happening in an economy where the leadership sees that these are better solutions and makes policies accordingly.

Whereas I think a lot of Western economies are held back by industries that lobby to keep things the way they are. It’s not just the fossil fuel industry — it can be things like the auto lobby. It’s incredible; the Ford CEO went to China last year and was palpably shaken when he saw how far ahead they are. So, I think it takes brave leadership to see we are going to get left behind if we don’t do this. Let’s look at the really big picture and find a way to take the workers — and even the investors — in those industries into a better future, while transforming those industries or letting some of them run into runoff mode. They’ll be better for it.

Honestly, Jeff, it’s been a great conversation. Thank you for giving me the chance to talk.

BERMAN: Greg Jackson’s passion for the planet is a powerful driving force behind the hyper-rapid scale of Octopus Energy. From innovative relationships with customers to modernizing the power grid with machine learning, he is building new ways of doing business. You can tell that Greg’s own infectious energy is a key catalyst driving his company to continuously innovate, and there is so much more to come.

I’m Jeff Berman. Thank you for listening.