Are Big Energy Companies Still able to Innovate?

Are Big Energy Companies Still able to Innovate?

Eric Morel 24/10/2019 3

In order to optimize and standardize their operational performance, large companies have become enthusiasts of processes and procedures; they have codified their mode of operation, going as far as framing the management of innovation, supposed to remain a land of freedom for ideas and actions.

The goal is understandable because many innovative teams have confused freedom of enterprise and lack of rigor, turning innovation structures into financial ruins. For this reason, many innovation structures had to be closed.

The desire to organize innovation management has always been justified by two objectives: a positive one, aimed at accelerating innovations, adapting them to the needs of the market and reducing risks, setting up a management mode accelerating and developing innovations; a negative one, fed by the fear of the unknown and the fear of cannibalizing historical activities by new ones, which multiplies the barriers to innovation and multiplies the opportunities to kill them by suffocation.

Large companies are a good enough ground for technological innovations because the fears mentioned above are less expressed at this stage, less connected to commercial activities and business. They have the means to do research and even considering patents as an argument touting their technological mastery.

Turning these technological innovations into commercial successes and innovations in the market is more problematic.

Why ?

Because an innovation can cannibalize a historical activity of the company and meet, therefore, multiple internal oppositions.

Because an innovation needs time and resources to compete in the market and the big companies always leave less time and resources for their teams to succeed.

Because an innovation comes out of the standards of economic performance, at least initially, and because systems of cost accounting, more and more developed, turn the spotlight on it alone.

Because launching an innovation on the market requires courage and risk taking, qualities disappearing from large companies at some management levels.

Because the assessment of the risks related to an innovation requires a great intimacy with the market and that the managers in charge of the release of the funds to launch an innovation are more and more distant from the markets.

All this does not mean “no innovation” but “less innovation”. In large companies, innovation is instrumented, developed in the context of large projects to have visibility and support of top management.

The world of energy today has an almost frenzied need for innovation: it expects a lot from large companies: large companies in the sector to pave the way and large industrial companies to offer miracle solutions.

Among the large companies in the energy sector, some make radical and courageous choices to increase their innovative power: ENEL creates ENEL X to bring innovative offers without having to manage, simultaneously, all the challenges of transformation of ENEL.

But most remain in conventional and potentially inefficient solutions: participation in pilot projects, disconnected from operations and rarely beyond the pilot stage, acquisitions of start-ups, often wiped out by a simple integration into the organization of the large company.

Finally, some are trying to develop a culture more favorable to innovation (Eneco, Centrica, E.ON). This can be effective but takes a lot of time.

Start-ups, on the other hand, are more innovative but they sell less easily: they do not have a sufficient financial structure to face the hazards and thus offer less guarantee, if only durability, to their customers.

Today, we are in a unique situation: it is not the energy companies that, for better differentiation or their sustainability, need to innovate; it is the market and the entire community that needs new solutions to solve an unprecedented environmental, economic and social equation.

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  • Anthony Foster

    They are not innovating as of late and they won't anytime soon.

  • Damian Jacobs

    I don't want them to innovate, just wanna pay less my utility bills.

  • Paul Elder

    Bring prices down and consumers will praise energy firms

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Eric Morel

Energy Expert

Eric Morel is a worldwide recognised expert of energy transition and digitalisation. In the past, he has served as VP Corporate Business Strategy and VP Global Smart Grids and Energy Efficiency at Schneider Electric as well as CEO of Ilevo, a telecommunication start-up. He is a founding member and a former Board member of the Gridwise Alliance, the main professional private/public association dedicated to Smart Energy.

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