‘It’s only when you see 49-ton trucks in China running on batteries that you realize how serious electrification is’: Octopus Energy CEO Greg Jackson on Europe’s incumbency problem

The brutal business of selling mirrors is not for the faint-hearted. The challenge is category differentiation, given that a mirror has one simple task—reflection. One of Greg Jackson's first jobs was working for a mirror manufacturer which, at best, broke even or made a small profit. And then he had an idea.

"We started making mirrors that had really wide frames," the founder of Octopus Energy (the U.K.'s largest energy provider) told me. "And on a picture [on the internet], suddenly we had a mirror that looked different from everybody else's. And they sold like hotcakes – and that transformed the business."

Approaching a business from a different point of view is an essential ingredient in the hunt for innovation. Jackson's essential insight when it came to mirrors was that, online, every product looked the same. That is what the customer saw. And he realized that if the customer saw something different (a mirror with a wide frame), they might buy it. Which they did.

Not seeing something that is obvious to an outsider is a firm's "incumbency cost"— embedded in the regular behavior of doing the same thing tomorrow as you did yesterday. It is one of the most significant brakes on the ability to grow.

"I think the single biggest factor affecting Europe—and an issue the U.S. is not immune to—is incumbency," he told me. "China and the Gulf are not held back by incumbent industries. Instead they are, at huge pace, delivering the new world. If I look at electric vehicles as an example, there's not an incumbent car industry in China that's struggling to manage the transition to an entirely new technology. But if I look at Europe, European governments and consumers want electric vehicles, but the European car companies have not yet been able to be competitive at building them."

"If we want more growth, we need to allow creative destruction so new companies can deliver the productivity we need"

Chinese electric vehicle sales in Europe are growing rapidly. Chery has tripled sales in Europe in the past year, BYD has doubled, Geely is up a third, and SAIC is up 23%. Taking the four leading Chinese car makers together, their EV market share is now at 14.6%, up from 9.6%, according to the latest figures from the European Automobile Manufacturers' Association. In response to claims of state subsidized dumping by China, the European Union has applied duties of up to 35% on top of the standard 10% import tariff. Chinese cars are still over 20% cheaper to buy.