[Matt Lecar][August 21, 2006]
In my first column I talked about the challenges of innovation in the utility context. Whether you are an outside vendor trying to sell or a utility employee trying to change the way things are done, you have probably met many of the obstacles I described. The internal business processes of any utility are set up to ensure consistency, control, and compliance – useful for operating a large, complex, high reliability electrical system, but toxic to risk-taking and innovation.
So what is a utility innovator to do?
One strategy that many high tech industries use is to place new efforts outside the corporate headquarters, in a “skunkworks.”
Easenergy: corporate venture as an innovation skunkworks
Easenergy was launched in 2000 as the Silicon Valley corporate venture arm of Electricité de France (EDF), the giant French utility. EDF was looking to the U.S. for new technology and new ideas that could impact its core utility business. Since 90% of world venture capital is still located and invested in North America, it made sense to set up here. I joined Easenergy in 2001 as VP of Projects. I pursued opportunities to leverage partners’ solutions into EDF applications, to drive real business value from innovation.
An innovation case study: Internet-based SCADA
M2M Data Corporation is a Colorado start-up serving utilities and others with large field assets that require remote monitoring and control. (M2M stands for Machine-to-Machine communications.) As contrasted with traditional Supervisory Control and Data Acquisition (SCADA), M2M delivers an extensible, low-cost service, rather than a full-blown, custom-tailored capital project.
Through our intermediation at Easenergy, EDF’s Mexican IPP subsidiary Comego became interested in M2M as a means to solve a recurring problem. The gas trading desk at Comego’s Mexico City headquarters was always the last to hear about any change at the company’s five power plants, all located along the US-Mexico border about 600 miles away. When a plant shut down, the local plant managers were busy fixing the problem and did not want to be bothered calling headquarters.
When Comego tried out M2M, the payback was almost immediate. On its third day of use, the system alerted traders to a plant shutdown, allowing them to avoid thousands of dollars of contract losses on purchases of natural gas to fuel the plant (that they would then have had to resell on the spot market). In subsequent events, the value was proven again and again.
What led to a quick and highly successful adoption in this case was that Comego was itself a small, far-flung subsidiary with a high degree of autonomy. It was able to act quickly to address a real “pain point” in its day-to-day operations. In fact, the CEO was so pleased with the results, he asked M2M to install a flat panel display in the lobby of Comego headquarters, showing his five power plants on a map of Mexico with a graphic of their real time output. The display underlined a strategic message to employees and visitors: Even though they’re far away, these plants are how we make money.
Building from that example, here are a few quick rules you can apply if you are a utility innovator (and that you probably already know if you are a vendor):
- Start small with a niche customer that has flexibility and autonomy
- Identify a real problem with an immediate, quantifiable benefit for that customer
- Beyond the financial business case, look for and underscore the emotional driver that will ultimately make the customer a powerful champion and an advocate within the broader corporation
In a future article, I’ll talk about a challenge that may be even harder – taking innovation from a successful early adoption to a broad roll-out.