Innovation. It’s probably the most overused word in technology these days but one that is truly not understood. It is oftentimes conflated with disruption, which is different and also misused. I like the NSF definition of innovation which says ‘Innovation is a series of steps that begins with imagination, and results in the creation of something of value for society’. I like that definition because it uses the word ‘steps’. Contrary to what most think there is a structured and stepwise approach to being innovative.
A Stepwise Approach To Innovation.
Organizations, of all forms, tend to be made up of five areas that must be impacted for innovative changes to truly take place within said organization. I’m reading more about the structured approach to innovation because there is a lot from this thinking that can be applied to the utility industry. The five areas are
1.Strategy: Are we as an organization focusing on asking the right questions or are we just maintaining the status quo? Are we incentivizing the right things? What is our approach to failure? Who are the stars and what makes them stars on the teams? Are we intentional about innovation? Is it a strategic priority? Or are we paying lip service? Do we make projections of future performance solely based on past results? The answers to all these questions matter.
2. Process: All process definition follows a logical sequence of identification, selection, development and change implementation. Most organizations, even the ones that do this well, are more likely to do this linearly. An innovative organization does this in an iterative way (image below). What the extremely innovative companies do is embed this loop approach in all the sub processes that make up sales, hiring, product development etc. It boils down to building agility into all your processes. Adobe figured out the process of innovation to the point that they put it in a box, because it is truly a process and should be replicable for it to truly become a culture.
An organization’s makeup and the areas that have to change for innovation to work in your organization.
3. People: The people element of this truly means the culture. Does your culture stifle the freaks and geeks that might actually have the game changing ideas that you can wrap the innovation process (above) around to bring the idea to market? Is your culture disciplined about seeking out these ideas that aren’t tied to your old business models? Adobe funds ideas and innovations from its people, regardless of how dumb it might seem.
4. Infrastructure: How does technology amplify or stifle the culture you are creating? If you are a distributed company are you using the tools that truly enable innovative collaboration? Are you attached to the infrastructure that has stifled innovation in your organization? Are you willing to let that infrastructure go and integrate infrastructure that promotes agile responses to truly innovative products/services that come as a result of an innovation process loop (above).
5. Partnerships: which sort of companies are we working with? Are they accelerants or retardants of your new approach to innovation? Walmart (say what you will about the company) spent a lot of time improving their internal operations and even built an innovation lab to take advantage of the gobs of data the company has about itself and their partners. The company partnered with new innovative companies and requested that its old partners step things up too. It’s kept Walmart in the game and will keep it that way as long as this approach is maintained.
Applying The Approach To Mature Companies (like Utilities).
Why is the utility industry currently so flawed and unable to adapt to the changing landscape? Because the design of the utility in its current state itself is flawed. Without boring you with the technical details I’ll briefly explain a core part of why the utility is unable to quickly adapt to the changing landscape, which is the Cost of Service Regulation (COSR). COSR essentially means that for utilities to make money they have to build things. Big things. The bigger the thing the utility has to build the more money it can make. That is the fundamental structure of the current utility design preventing the utility from making money off the power it sells you (that’s sold at cost). But that design falls apart in a world where (in the extreme case) the biggest thing you have to build is a solar panel on a home (and if Elon Musk has anything to say about it you’re building it right into your roof). The industry suffers from both a business model and a product flaw.
So how do you fix these flaws innovatively? Utilities will have to apply design thinking. The concept of what a utility is has to be redesigned. From the scratch. The utility has to become
- People/consumer centric: what does the future utility consumer need and want? how can the utility equip its employees to be able to deliver on the future needs of that customer?
- Get creative: what are the possibilities, without the current constraints of the utility model? How does the utility change its operations to deal with the new needs? Where does new technology like blockchain fit in the new models? Or is the future of the industry retail products like solar array kits or battery packs?
- Comfortable with failure: how can we simulate future experiences to learn from the failure that is inevitable? How can the utility go back to the start of the process and redo things with the learnings from failures to improve things for the customer and capture some of the value created? And also importantly, but counter to the traditional approach of the utility, the utility has to move through #1–4 above rapidly.
- Open to new partnerships: which types of companies is the utility working with? Old partners that provided solutions that have served in the past but are now obsolete? Or new partners developing novel ideas borne out of a true understanding of that future customer?
New water concept. Future of the water utility?
The most innovative companies take a full company scale approach to innovation. Not two-day sessions that lead nowhere but a focus on developing a full-scale innovation culture. It touches on a systems thinking concept; if one part of a system starts to do things differently from the rest of the system there can only be two outcomes, either the system expunges that different part or kills it. A great book for making this approach cultural is ‘Change by Design’.
Unless mature companies change their whole systems, a process of change that is often painful for mature companies, little to no true innovation will actually come out of these organizations. The outcome is that these companies end up dying. Bold prediction; expect to see some mature company deaths in 2017. Especially the ones that aren’t pushing an innovation agenda.
I provide product marketing to energy and tech companies through Harper Jacobs & utility consulting at Asha Labs. And buy 40 Semi-Obvious (Startup) Lessons. Sign up for my Polymathic Monthly Newsletter here, I guarantee you’ll love it.