The document summarizes best practices for innovation at electric utilities based on interviews with 22 utility innovation leads. It finds that top financial performers align innovation with corporate strategy and engage throughout the innovation lifecycle from pre-commercial to scalable stages. A good innovation strategy defines innovation, sets bold long-term aspirations tied to corporate goals, and links activities to the strategy. Top performers also commit dedicated resources and ensure key functions are represented on innovation teams. The document aims to start an ongoing discussion among utility innovation professionals.
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Best Practices for Innovation at Electric Utilities
1. Best Practices for
Innovation at Electric
Utilities
September 21, 2018
Josh Gould, Department Manager, Utility of the Future, Con Edison
2. • To do (belatedly) what we promised long ago:
• Play back findings from our utility innovation best practices conversations
• To work on our not-so-secret ulterior motive:
• Engender community of utility innovation professionals to continue
gathering after this discussion (both online and “off-line”)
• Last but certainly not least…
• To thank everyone for their time, insights, and conversations which
resulted in the materials that follow
2
Purpose of today
3. Why we spoke to peers: Evaluate innovation strategy &
tactics
• What should our
innovation aspiration be?
• How does our innovation
strategy relate to our
corporate strategy?
• What specific value does innovation
provide?
• To what degree is innovation value tangible /
measurable?
• What do you seek to achieve with
innovation and why?
Execution
Strategy
Structure &
Process
3
• How is your innovation team staffed and
structured?
• Describe your innovation intake and
management process?
• What metrics do you use to monitor and
measure innovation?
• How should we manage
and govern innovation?
• What should our
innovation process be?
• How are you seeking to change and/or
improve your approach to innovation?
• How and why do you prioritize and
sequence certain activities over others?
• Do we have resource and
capability gaps to address?
• How do we sequence and
prioritize our activities?
Representative Questions Internal ImplicationsFocus Areas
4. What we did (specifically)
Description
• Interviewed key innovation leads at 22 primarily Investor Owned
Utilities (IOUs) (included 3 munis, co-ops)
• Standard list of questions / subjects but left room for “improv”
• Spring and summer 2017
• Most interviews conducted via phone, a few occurred in person
• Primarily U.S. utilities (18 of 21)
• ConEd promised we would not cite interviewees by name and
would “read out” our anonymized findings (this document)
Other
Details
Who and
what
How and
when
4
5. 5
Why innovation matters
HighMediumLowCoverage of key activities by stage
Top Five TSR, 5-yr
rolling as of 4/171
Aligned with
corp. strategy
Pre-
Commercial
Early
Commercial
Scalable
Utility A High
Utility B Medium
Utility C High
Utility D High
Utility E High
1. Based on rolling five year Total Shareholder
Return as of 04/2017
Bottom Five TSR
Performers1
Aligned with
corp. strategy
Pre-
Commercial
Early
Commercial
Scalable
Utility F Medium
Utility G Low
Utility H Low
Utility I Medium
Utility J Low
Pre-Commercial:
University/Lab
Partnerships, IP co-
creation, internal R&D,
incubators (in-house or
external)
Early Commercial:
Tech scouting, demos
& pilots
Scalable: Scalable
companies & products
(not assets) via active
LP, VC partnerships,
direct investments
Our research suggests: 1. Innovation correlated with improved financial performance; 2. Top financial
performers a) Align innovation to corporate strategy and b) Engage throughout innovation “lifecycle”
6. What a good strategy looks like
Elements of
innovation strategy
• Company specific definition of innovation
• Clearly sets boundaries for innovation
Definition1
Aspiration and
priority focus
• Bold, specific, and timebound statement of where the
organization aspires to be in 5-10 years
• Consistent with overall corporate strategy
• Clearly defined areas where company will focus innovation efforts
and resources to achieve the aspiration
• Specific enough to also inform where not to focus
2
Corporate goals
and innovation
contribution
• High-level, strategic objectives in which innovation plays a role;
clearly identifies amount and timing of value generated by
innovation
• Sufficiently well-defined to have meaning / drive accountability at
department level
3
1Based on review of innovation cases across industries, including outside utilities.
Success factors1
7. We tried to follow best practices vis-à-vis the definition…
Development and scaling of new
technologies, ways of working, or
business models…
to solve the most important
problems…
…and achieve step change
improvements in safety, operational
excellence, and customer experience
Con Ed Definition Rationale
• Focus on problems and solutions
with highest impact
• Innovation should support overall
corporate strategy
• Innovation resources should be used
to address hard problems that have
uncertain solutions or outcomes
• Both development and scale needed
for success
• Focus on what is new to the
organization
• Different types of innovations are in
play (not just technology)
8. And via aspirations and goals…
Innovation
aspiration Corporate goals
▪ Improve safety
Industry-
defining safety ▪ Reduce O&M
and operational
excellence
▪ Improve capital efficiency
How this will be
used:
▪ Track how innovation
initiatives contribute to
reaching Con Ed’s
corporate goals
▪ Drive accountability
Utility customer ▪ Improve customer experience
of the future
Sustainable ▪ Increase non-traditional
enterprise for earnings
the next century
9. 9
Top performers also link strategy to
innovation “channel” activities
Very highMediumVery low
Volume
Strategic
relevance
Quality (i.e.,
actionable)
External
channel
Ad hoc inbound
Conferences
Rest of R&D
Incubator investment
($10MM)
VC Partnerships
VC - Active LP
($10 - 50MM)
VC - Direct invest
($50MM+)
Pilots & Demos
EPRI
Universities, lab
Varies
Varies
3-10
3-7
1-5
1-5
1-5
2-5
2-5
3-15
Pre-Commercial
Early
Commercial
Scalable
Low cost, but
scattershot,
inefficient
Limited insights,
some actionable
opportunities
Pre-screened
opportunities but
requires time
commitment to
execute
Valuable insights,
but good
execution requires
limited number
Uncertain financial
commitment,
requires culture &
experience to
execute
Valuable
innovations,
limited scope (low
volume, long-lead
time technical &
system-focused
solutions)
Takeaways
Years to impact
10. 10
But strategy without resources=hallucination
Research suggests top performers commit people with relevant skill-sets to innovation full-
time, co-locate teams with “core” business, & ensure all key functions are represented
11. 11
Other takeaways from top performers
Strategy &
Priorities
Structure &
Process
Execution
A
B
C
Key Question Best Performers Desired End State
What does the
utility want to
achieve with
innovation and
why?
How is the
utility going
to innovate?
What does the
utility do, and
when?
Priorities: Clear innovation
priorities based on utilitystrategy
Goals: High-level, but measurable,
goals based onpriorities
`
Organization: Org generates/finds,
assesses, and adopts innovation
consistently
Governance: Accountability,
resourcing, metrics,and
information sharing across org
Process: End-to-end process for
moving ideas/tech to action/impact
Portfolio: Prioritized, coherent,
time-risk balanced portfolio of
initiatives
`
Resource Allocation: Resources
allocated against priorities&
portfolio
Innovation strategy,
priorities and goals
linked to corporate
strategy
Coordinated innovation
structure with governance,
proactive, commercially-
focused capabilities and
well-defined, end-to-end
process
Resources allocated
against prioritized,
coherent, time-risk
balanced portfolio
12. We want to keep learning from you –
Josh: gouldj@coned.com
https://www.linkedin.com/in/joshuagould/
12
Let’s make this the beginning (not the end)