I have the best job in the world. Every day, I talk with smart people from around the world about an industry that fascinates me. I am having a ball!
Immediately out of college, I worked for state government. Many of us were bored stiff, and there existed a curious ritual of telling others how busy we were. We were cogs in a very old wheel. As my career advanced, I developed a love for the policy challenges and technological innovation of the electric industry. But there was also something stifling about working in the corporate culture of a regulated utility. In many ways, it moved and acted like the state agency regulating it.
There are some parallels between those busy government workers and the utility industry’s culture of innovation. Don’t get me wrong, there are very innovative utility projects, and T&D World routinely features them, but having an innovative project is different from having a culture of innovation.
The Utility Death Spiral
Declining usage, increasing costs, and distributed energy resources challenge the traditional utility business model fashioned on monopoly services in an environment of perpetual economic growth. To avoid the clichéd “utility death spiral,” the industry needs real solutions that address resilience, customer engagement, digitalization, and attracting the workforce of the future. A centralized electric grid will always be needed to provide reliable and affordable electricity, but all utilities will not survive this disruption. Those that do survive will be the ones that can innovate and adjust rapidly to our evolving environment. Buzzwords won’t cut it.
Many utilities have launched innovation incubators to collaborate with technology companies and develop solutions for common challenges. While there are worthy reasons to collaborate with outside organizations, this won’t provide the necessary industry solutions. Creating innovative ideas to bring back to the organization is one thing, but fundamentally creating an innovative organization is much more difficult.
I recently spoke with organizational and business strategy expert, Dr. John Aplin, who has bought more than 200 companies and served on over 30 boards during his career. Aplin’s extensive and unique business experience has helped him develop an organizational cycles model, which describes the characteristics and challenges of organizations throughout various stages of development.
In short, there are creative and maintenance models of an organization. Immature companies experience an intensely creative and entrepreneurial phase. However, success during an organizational phase inevitably produces a crisis that constrains progress and growth. Thus, the creative phase is followed by a control crisis. Following the resolution of the control crisis, the more mature organization enters a maintenance phase. Organizations in the maintenance phase are not unlike utilities. They are stable, rational, analytical, and have an evaluative ethos. They are also management heavy, have a bureaucratic structure, threatened by change, and have low motivation. Throughout time, these mature organizations must work through what Aplin calls a “stagnation crisis” to get back into a re-creative phase.
The utility industry is currently experiencing a stagnation crisis. I asked if highly regulated companies, like utilities, were capable of being creative organizations? He agreed that it is very hard. “It is a system intended to prevent radical change and to ensure that certain things happen. A maintenance organization will tolerate inefficiencies to avoid unpredictable situations.” Parts of the utility organization really do need to be highly regulated. Aplin said the key is not being either a maintenance or creative organization, but rather being both. Utilities should strive to be organizations that provide predictability and consistency while also being forward-thinking, creative, and innovative. Semi-autonomous business units, without interference and intrusion by the traditional organization, are one way for utilities to achieve this result.
Leaders of the Pack
There are examples of these sorts of efforts within the utility industry. Utility innovation centers like those at Duke Energy and AEP come first to mind. Like the semi-autonomous organizations described by Aplin, the culture of these innovation centers is so drastically different than that of the traditional utility; they must be in a different physical building for it to work correctly.
AEP Charge was created to “power what’s next” for the utility. Charge has technologies and capabilities that were previously not available or in use in the industry. It works with internal business partners to efficiently and cost-effectively realize their visions and re-imagine the industry. Similarly, Duke Energy has a digital transformation accelerator known as Lighthouse. There, more than 400 employees work on company-wide initiatives. Lighthouse has developed new products using AI, machine learning, automation, and more. New products developed by both innovation centers include mobile applications for field operations, robotics to expedite tedious accounting operations, analytics for predictive maintenance, advanced decision science-based systems with revenue loss detection capabilities, and 3D-printed test switch isolators. These semi-autonomous organizations are the innovation leaders of the utility industry.
A re-creative phase for utilities is in order and will work to serve customers in new ways while also helping employees work more efficiently and effectively.
