Innovating for Our Survival Part 2: Are We Going Fast Enough?

Flipping back to 2023, we could argue that we find ourselves on the same precipice Edison stood on while inventing the light bulb. But this time, the new opportunity is to transform the grid to lead the clean energy transition and build a more reliable system overall. This is the biggest challenge we’ve seen in the last 150 years. How exciting is it to know that this opportunity is occurring in our lifetime? It is a challenge we’ve been called to lead.

In part 2 of our series “Innovating for Our Survival”, we focus on the pace of utility-driven innovation. Of course, utilities' regulated, risk-adverse nature is a drag on innovation (we covered this in Part 1 of our series). But outside of that, much of what stifles innovation could be classified as a human systems challenge requiring organizational change management and design thinking to more rapidly solve problems. Here, rather than focusing on what impedes utility innovation, we focus on four opportunities entirely within utilities’ control to innovate faster.

Opportunity 1: Rapid Experimentation and Creating Safe Cultures of “Learning by Doing”

Fear of failure destroys the innovative spirit. Fear mostly stems from economic pressure engineers face when they cannot recover costs on innovative ideas that don’t work out. But, as Edison demonstrated, we can’t innovate or learn without those “failed” projects. They are a vital and valuable step in learning necessary to drive the desired result. The lesson from Edison is to start small and fail fast. Which, dare we say, may be a much more affordable way of innovating.

How can utilities overcome this fear to drive rapid experimentation? By applying research related to creating psychological safety, a concept that has been around since the 1999s, thanks to the work of The Fearless Organization by Amy Edmondson at Harvard University and the groundbreaking study conducted at Google. This form of safety is defined as acting and engaging in a team without fear of negative consequences.

Safety that leads to creative thinking has a payoff. According to McKinsey’s Award Creativity Score (ACS), there is a tangible link between an organization's knack for creativity and financial performance. For example, of the firms McKinsey deemed creative, 67% showed above-average revenue growth, 70% exhibited above-average returns to shareholders, and 74% scored above-average net enterprise values.

While it is clear that cost-recovery remains an obstacle for utilities’ ability to fund innovation in any way that could compete with the likes of Silicon Valley budgets, the one opportunity we have in front of us is free: build trust and unleash creativity and innovation through safety. And safety is a topic utilities know a lot about.

Opportunity 2: Let Disciplined Process and Data Drive your Innovation Program

It might seem counter-intuitive, but creativity and innovation do evolve out of chaos; they come from disciplined processes. When employees disengage from an innovation process, most likely it is because they:

1. Don’t know how to participate.
2. Don’t know what is expected of them.
3. Don’t know what to expect for their contribution.
4. Participated, but their time was not reciprocated with any value back from the organization.
5. Participated and had a bad experience (don’t feel it’s safe to share ideas again).

When utilities give their employees a clear process to innovate and a way to guide and measure their efforts with transparency, this can lead to faster decision-making where everyone understands “the why” behind the decisions. We can align around purpose and vision. We become mission-driven.

Purpose and process are also important for ideation. When employees bring an idea to the table, they want to know what they can expect in return, where they stand in the process, and what comes next. They can also better attach to the mission and rally the organization around their ideas. Pitching new takes courage – especially due to our propensity to revert to default mode thinking which wants to resist change. Let’s be real. It’s easier to sit on the sidelines and play the Monday morning quarterback than spend political capital putting your neck on the line for an idea you believe in if your organization does not embrace psychological safety, purpose and process.

Avoid the propensity to revert to making decisions by committee. This lengthens the pilot lifecycle which is dangerous. Remember it is always easier to revert back to the “old ways of working.” Even when innovators are excited about the results of a pilot, those who have to implement will most likely not want to change. Involve them at the beginning. Ask for input in the field tests but be clear about owns the final decisions.

When innovation is taking too long, it is often a self-fulfilling prophecy to kill projects. It is always scarier to say “yes” to something new. How will you know when the process is taking too long? You can measure it to know how many days each idea is spending in each stage. Watching how long it takes your ideas advance through the process can tell you a lot about how it will be adopted by the organization.

Figure 2: Image from the InnovationForce InnovationWorks dashboards reporting on performance and psychological safety KPIs (learn more at www.innovationforce.io)

The innovation process should have pre-defined steps that are measured with KPIs that can be shared transparently to show the results of an innovation program back to the organization. But the point of the process should not be bureaucratic; it must be agile. Lean principles and design thinking can be used here, and workflows can be automated in software that can report on and scale your innovation programs across the entire workforce.

Opportunity 3: Start Small, Go Fast

We also need to encourage innovators to start small. Pilots become unruly and unmanageable when they are too big, and then we lose the “why” behind the original problem we set out to solve in the beginning. Instead of running a few big projects, it might be better to run many small experiments where ideas are prototyped, learnings and value propositions can be captured and built into larger business plans and pilot projects later. It worked for Edison, why not your utility?

The point: start small with an investment of time and capital to test ideas quickly and just get started. something. Until recently, innovation needed to be long lasting and built to withstand generations. Now, we must keep pace with the more rapid technology adoption cycles being ushered in by digital transformation. This will cause us to go faster and introduce smaller, more rapid cycles of improvement over time that will lead to long-lasting results. The grid will become digital, it will be more agile and it will be continuously improving – similar to the way the light bulb has improved over the last 150 years.

Opportunity 4: Set Bold, Ambitious Goals

Finally, I think the greatest example of psychologically safe cultures in action are those that can set bold, ambitious goals. When employees commit to experimenting to reach stretch targets even when budgets and resources might be constrained, they tap into truly creative and “out-of-the-box” thinking. Sometimes doing more with less can be an advantage. Even Apple, with its multi-trillion dollar market cap, started in a garage. Edison set up his first lab in a basement. Ambitious goals and shoestring budgets can create a sense of urgency and connect each employee to the “why” or their greater sense of purpose.  The best ideas do not always come because they are well funded. Most of the great ideas come out of necessity and a sense of urgency.

To drive up engagement, remember to celebrate milestones in the process – regardless of the decision made at the pilot's end. Results should be measured in each step of the process, reported up through the organization, and celebrated then. This can be done by measuring and regularly reporting out a set of KPIs the organization can agree on and, dare I say, be compensated on.

Final Thoughts

In conclusion, the past 40 years have shown the pace of innovation has been slow and the investment in R&D small. Utilities will need to find new ways to catch up quickly to face the next 40 years – particularly with decarbonization targets in 2030, 2035, 2040 and 2050. And they must take this on while their customers’ needs have changed. Today’s energy consumer (whether residential or industrial) is embracing energy efficiency, smart thermostats, LED lighting, PVs, EVs, backup generation, and energy storage, in many cases without the help of their utility partner.

As consumers use energy differently and begin selling power back to the utility (becoming a prosumer rather than a consumer), the entire business model of the utility will change. We’ve seen this in many other industries – in particular, print and social media with the creation of the Internet, where content consumers became the creators putting many out of business. How can utilities bravely, and creatively take on their new role in the energy paradigm and create stickiness with their products and services?

This challenge combined with the mission to abate carbon emissions means it is not a time for less innovation, it is a time to double down and innovate more and innovate faster.

With a documented process that creates psychological safety, mission-driven stretch targets, and trusted data insights that drive transparency around decisions, employees can set out to solve the audacious problems more fearlessly. When employees know they will not be punished for the result of their experiment but rewarded for their learning, the bolder ideas – the ones we desperately need now – can be championed.

Let us know what you think by commenting below and be sure to join us on May 31 for an Energy Central PowerSession on the topic of innovation where we will be joined by utility leaders from PGE, PECO, an Exelon company and the Harvard Business School. Register today!