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Utilities Can Encourage Innovation Without Being Tech Giant

Here’s a short essay contributed by Earl Simpkins, principal, Varun Bhatnagar, senior associate, and Amy Zhao, associate consultant, over at Strategy&, the strategy consulting group at PwC US. You remember Earl; he wrote an essay in the May 2018 issue of Public Utilities Fortnightly.

 

Utilities face a tough challenge when it comes to infusing innovation into the way they work. A multitude of external forces are reshaping the power sector and pressuring utilities to adopt a variety of differentiating innovative tactics to stay competitive.

Based on research by Strategy&, the strategy consulting business at PwC, utilities still have work to do to advance their innovation strategies, with culture acting as a key enabler. In fact, in the Global Culture Survey conducted by Strategy&’s Katzenbach Center, eighty-seven percent of energy and utilities professionals say their organization’s culture must evolve in the next five years to succeed. Additionally, sixty-five percent of respondents believe that culture is more important than strategy and operating model.

With mounting competitive pressures, utilities may be tempted to conflate “innovating” with “becoming like a Silicon Valley tech company” and embracing an enterprise-wide culture of fast failure and experimentation, even though not all tech company’s cultural traits are desirable or transferable to the utility industry (and vice versa). Utilities are often characterized by cultural traits that run counter to those found in most innovative companies, with a relentless focus on safety, reliability, and operational excellence. Many utilities pursue incremental improvements, are risk averse, and follow established processes.

If utilities cannot simply, immediately, and broadly “replace” the cultural traits in their organization, how can they retain their respective competitive advantage in the market? And how can they evolve while not losing sight of the culture that defines them today? Taking a look inwards instead of outwards for inspiration is key.

In our experience, there are three considerations a utility must be able to address — each with key questions to answer:

Define a clear cultural aspiration: What do you really mean when you say “innovation”? Where and how do you want it most applied?

Understand and harness existing cultural strengths in your organization: What are the strengths of your utility’s culture, and how can you tap into them? How will they reinforce and enable a culture of innovation?

Prioritize a handful of behaviors to adopt: What are the “Critical Few” things you can start doing differently right now and over time to embed a culture of innovation?

Define a clear cultural aspiration: What do you really mean when you say “innovation”? Several utilities have innovation agendas or an innovation organization. But the most important component of the innovation agenda is its purpose. Having a clear goal in mind that underpins the activities is important to focus ideas that get to implementation and outcomes. For example, one utility’s innovation agenda is driven by customer-centricity.

Shifting to a culture of innovation to reinforce strategic priorities and find new growth opportunities is a move some utilities are making. For example, innovating around improvements in operations or enhancing the customer experience are examples of alternative actions some utilities are taking. By reframing an “innovative culture” as a culture that enables customer-centricity or safer operations, the path forward to shift the culture becomes much clearer to the entire organization and is more easily embraced.

Ask yourself: What is the cultural aspiration around innovation for my organization? What do I hope to achieve from a culture that fosters innovation in order to win in the market?

Understand and harness existing cultural strengths: What are the strengths of your utility’s culture, and how can you tap into them?

Our team recently supported a major U.S. utility that sought to achieve a stronger focus on customer-centricity by measuring customer satisfaction scores. During our analysis, we made a key discovery about the utility’s culture — a relentless passion for service. The linemen considered themselves the heroes in their communities – the ones who could save the day for towns and cities by restoring power after a major storm. The company leveraged this passion for service to build emotional commitment around their new customer satisfaction metric. As the movement grew, employees realized they were enabling the utility to be a “hero” for all their customers — a new expression of their pride to serve others.

This utility introduced a new class of performance metrics — which serve as key signals to employees about what the company values as important in the workplace. Support from both formal leaders (who demonstrate the importance of these metrics) and informal leaders (who influence others without formal authority) are necessary to bolster the staying power of performance metrics to enable innovation from the top-down and bottom-up.

Ask yourself: What are the holistic metrics that matter to my organization, and how can I use formal and informal means to capitalize on these cultural strengths?

Prioritize a handful of behaviors to adopt: What are the “Critical Few” things you can start doing differently?

One large west coast utility asked itself what it could do better with the data it had. This question led to the creation of a cross-functional group of roughly seventy employees who have embraced an agile methodology to release mobile apps to digitize field operations, including asset inspection and corrective action.

When engaging in a cultural transformation, it is important to start small: Focus on high-impact but small-in-scope pilots that can promote innovative traits and address specific business problems through innovation. Focusing on a “Critical Few” set of behaviors is what will move the needle when it comes to encouraging the organization to do things differently. By focusing on a critical few areas of the business, innovation can be encouraged without having to boil the ocean to achieve it.

Ask yourself: What are the Critical Few behaviors that can drive my organization’s cultural aspiration around innovation? Where do these need to be deployed to start a movement to drive lasting change?

Integrating innovation within the culture doesn’t mean utilities must have a “new revenue stream” or “fail fast;” but it does mean that defining, implementing, and sustaining a culture of innovation can be a powerful tool for utilities seeking to enhance their established core business. With a sustained focus and regular measurement of progress and performance, the impact of your cultural evolution movement can be long-lasting, self-reinforcing, and differentiating in the evolving power industry.