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Keys to Building a Successful Innovation Program within the Utility Industry
By Joel Miller, Principal Supervisor, Energy Management Tools, DTE Insight, DTE Energy
I find it fascinating that the industry created by Edison, one of the most prolific and successful inventors, finds itself vulnerable to disruption. Utilities now find themselves competing with very significant, savvy, and aggressive challengers who are willing to experiment wildly. The century-old first mover advantage is now being eroded by direct free market competition. Currently, these competitors are entering the energy markets using point solution technologies, such as solar generation and energy storage. The utility business model focus on regulatory compliance is enabling a competitive advantage to these emerging technologies, which can quickly evolve into integrated micro grid and grid-edge integration offerings.
“Just because something doesn’t do what you planned it to do doesn’t mean it’s useless.” — Thomas A. Edison
For example, when I lead a team tasked to develop an energy monitoring solution, the goal was to leverage the smart meter technology being deployed with mobile devices to understand behavioral energy savings. Our interest peaked when reviewing several reputable projects and studies, that indicated customers had materially saved energy by monitoring their usage. This single sided business model was very promising, however, what customers wanted was much more than energy monitoring. What they wanted was a trusted advisor, the utility, to provide a solution that enabled safety, security, comfort and convenience which rationalized the technology investment with energy savings.
The breakthrough was not energy savings or monitored security, but the ability to reduce the chaos of operating a home through optimized systems connected to the smart grid. The living example of this is the connected thermostat. Customers are adopting this technology with the promise to live more comfortably and more efficiently. Other smart home devices can find similar opportunities—as we manage and automate the energy consumption of connected appliances throughout the home.
“Opportunity is missed by most people because it is dressed in overalls and looks like work.” — Thomas A. Edison
To accomplish more breakthroughs, innovation leadership needs a business structure which empowers its team. Each day, they need to be engaged with their best energy and the determination to fight off the forces of competitive market disruption, immunized from the corporate “anti-bodies.” It is also essential to ensure that every person in the enterprise is viewed as a resource for potential new ideas. It’s the end game of the innovation team is to be comfortable with uncertainty to even have a chance to unlock unexpected and dramatic new business models. Their job is to translate customer insights into viable products and services, and thus harness the forces of disruption for new growth opportunities for the utility.
The end game of the innovation team is to be comfortable with uncertainty to even have a chance to unlock unexpected and dramatic new business models
Their role is to do the heavy lifting of conducting the experiments to move a project from the unknown to a viable business model. They accomplish this by testing hypotheses about desirability, viability and feasibility. Each incremental project phase explores the unknown to reduce the market and competitive risk by eliminating the remaining ambiguity. Market transformation can only be accomplished when the business is confident that the program results achieve the comfort of certainty.
“The chief function of the body is to carry the brain around.” — Thomas A. Edison
The innovation team must have a clear vision and a method to resolving the madness. They should provide a clear pathway for moving ideas from creators to the commercialized business, and be highly effective in identifying risks and resolving uncertainties. The road signs along this journey are the metered investments, the speed of capturing an opportunity and consistently evaluating the alignment with strategic priorities. It becomes about managing portfolios of opportunities with a clear understanding that each business model has an expiration date. The innovation team should provide guidance on capturing opportunities before they elapse.
“Many of life’s failures are people who did not realize how close they were to success when they gave up.” — Thomas A. Edison
There is no dismissing that this is a messy process, but with the right team will create opportunities and determine the moments to persevere, pivot or expire an innovation project. Below are the top ten remedies I consider to minimize innovation clutter:
1. Be definitive in developing strategic alignment to the regulatory, customer and utility’s wants and needs.
2. Leverage wide and deep idea sourcing to create a diverse collection of ideas, and allow the person with the passion for the idea to have a developmental leadership role to create a virtuous cycle.
3. Be discrete when processing and managing the ideation portfolio. Be cognizant that all ideas have a “best used by” and “expiration” date.
4. Be decisive when allocating the investment budget. If you don’t have tens of millions of dollars to invest, consider a “grant” system with merit based and result biased rounds of funding.
5. Be critical when assessing a project’s readiness for the next round of investment. Nothing breaks the virtuous cycle of ideation like zombie projects, which just keep getting funded.
6. Build on the virtuous ideation cycle by recruiting team members to work on projects as a mentoring opportunity to develop future creators.
7. Use a dynamic project management system (e.g. Scrum 3.0) to plan and prioritize the hypothesis to be tested and the tasks to be completed within a project.
8. Be strategic and leverage the right tools and process needed for the maturity of the project. If you have a new product or service that is still in the incubation phase, use tools like Design Thinking. When a project is ready to be integrated back into the business, leverage Lean Six Sigma tools.
9. Seek conclusive validation that each project is moving closer to commercialization. Adopt the Build / Measure / Learn cycle to tests the incremental hypotheses.
10. Develop an innovation system and produce a hypothesis roadmap for the journey. Nothing hurts a project more than losing sight of the vision and you can’t describe where you currently are or where you’re going.
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