In a rapidly changing environment, utilities are facing a dual innovation challenge. They need to incorporate innovation into core business processes in order to optimize efficiency across the core business value chain and drive down costs. At the same time, there’s a desire to innovate around new products, processes and services for the future.
As the utilities industry continues to be disrupted, it’s not an either/or choice—both types of innovation are essential to sustaining healthy business growth.
For natural gas utilities, the trends and issues of the past decade are driving the need to innovate, including increasing environmental pressures, the structural challenges of aging distribution systems, a rapidly evolving customer relationship, regulatory pressures, continued utility industry consolidation in the electric and gas sectors, and more. Whatever shape innovations might take—for example, “non-pipes” solutions such as demand response, energy efficiency or storage measures to offset the need for additional natural gas pipelines to meet peak demand—they require a planned and measured approach.
The challenge, of course, is this: How does the utility maintain reliability while creating the agility necessary for innovation?
Here, the answer lies in the conventional wisdom of the three core components of project management: people, processes and technology. But here’s how that wisdom plays out: Focus first on the basic processes and governance necessary for project success. Then identify and put into play the right technologies to aid the project’s efforts. Finally, build a culture for innovation within the utility itself.
While establishing governance processes for every utility project is important, it is even more important when launching innovation projects, which can have differing timelines, staffing needs, funding models and delivery requirements, depending on the type of project. Is this a project intended to maximize efficiency within the existing business, or is the project’s focus on future business needs? Deciding where the project fits and its expected time to value will help determine how the project is financed and which line of business will own and manage the project.
As a rule of thumb, core business innovation typically has a shorter time to value and is usually funded by the business. Future business innovation, on the other hand, may have a longer timeline and is more often financed by a research and development or innovation budget.
Whether the project is short- or longer-term, consistently monitor its progress to ensure that it continues to move forward—both on budget and on track to meet expectations. If, as sometimes occurs, the project is not playing out as expected, you can end it at any point and reallocate the funds to another promising project.
While the time to value and even the culture differs for core business innovation and future business innovation, technology facilitates them both.
The objective for core business innovation is to maximize efficiency and resilience—thereby cutting expenses and improving the bottom line. This can be accomplished through digitization, machine learning and automation; integrating systems of record; and utilizing cloud and analytics technologies to unlock further business productivity. Whether your goal is to better use new data to improve operational efficiency or to become more customer-centric in your approach to service delivery, digitization is a strategic first step with a proven return on investment.
Cloud services, too, are particularly important in core business innovation. The cloud allows a far better deployment of digitization through technology applications. It also takes advantage of the scale of commodity information technology infrastructure, which can reduce IT staff and maintenance budget commitments by 20 percent to 30 percent. So, moving to cloud services frees up both utility IT finances and IT staff to spend more time focusing on future business innovation projects.
Technology applications in future business innovation provide the agility necessary to continue to incent customers with new business processes, products and services. Applications are modular, which means you can iterate and test new business models quickly, and they can “fail fast” when necessary so you can innovate elsewhere even more quickly.
It is worth noting that using this “agile, modular apps” approach—and layering it on top of the utility’s core systems of record—provides excellent business value as well. As customer experience, or CX, products and services become more personalized to better fit customer needs and demands, agile applications are necessary to quickly and continuously determine what works and what doesn’t.
Finally, whether you are exploring core or future business innovation, a complete and connected technology platform allows applications, analytics and more to be more easily integrated, turning data from across the enterprise into more actionable insights with respect to your innovation projects.
Building an internal culture of innovation within the utility enterprise is, at its core, truly democratizing ideation. If you are focused on creating a more customer-centric utility and committed to innovation to get you there, you also need to commit to a common understanding within your organization that good ideas don’t just come from the top.
The first step, of course, is a top-down approach: Executives within the C-suite need to promote innovation as a priority within the company at every level, to create a culture where innovative ideas are nurtured to fruition and thrive across the business.
In discussions with truly innovative utilities around the globe over this past year, there were some striking commonalities in how they are building a culture of innovation across their enterprises. They told us:
Do what you say you’re going to do. It allows you internal social license to create more change, break down the silos and create a positive feedback loop.
For innovation to be a combined mission, it must be a combined effort. Listen, and seek to understand before you seek to be understood.
When someone gives you an idea, sometimes it triggers a great thought. No matter whether the idea will or won’t work, respond to the person who suggested it. Passionate people, when they have an idea and bring it to you, those are the kind of people you want to keep inspired to keep working on it.
Coming up with fresh ideas is an art, but deploying those ideas within the utility is more science than art, and these best practices can serve as a guide. Remember that not all innovation is Big Bang in nature, especially within the utilities industry. Incremental innovation also moves the needle forward to a sustainable business, no matter what challenges the future brings.
Rodger Smith is senior vice president and general manager of Oracle Utilities.