Utility Week Live

12 | 15TH - 21ST MAY 2015 | UTILITY WEEK UtilityWeek Innovation Why is innovation hard? Utilities sometimes have to counter their natural instincts to play it safe. I t's common knowledge that innova- tion is hard work. A short search on the internet will reveal hordes of articles exploring why it is so difficult to engen- der innovation cultures in organisations and why leaders so oen fail to understand that innovation is different from other things they must encourage in business as usual. Regardless of the sector they are in, it is widely accepted that barriers to innova- tion for organisations include size and risk aversion. Big organisations can be weighed down by process, bureaucracy and a legacy "way of doing things", which stifle innova- tion. Meanwhile, risk aversion is an obvious hindrance for endeavours that reach out into new territory and which need to be given room to fail. Incumbent utilities – generally large and risk averse – suffer from additional barriers to innovation in the regulated nature of their industry. Innovation in non-regulated sectors is oen driven by competition, and while Ofwat and Ofgem's regimes are, in part, designed to create a safe simulation of com- petitive market conditions, it is hard for them to develop the forward-looking regu- latory models needed for disruptive innova- tion with a long-term view. It is also tricky to create structures that reward risk-takers appropriately without being seen to either distort the market by "picking winners" or, potentially, endangering consumers. Regulation is also inherently problem- atic for innovators because it sets a struc- tured way of thinking about problems and the "art of the possible". At a recent indus- try roundtable debate discussing innova- tion, a representative from one of the big six energy suppliers expressed frustration with the "parent-child" relationship utili- ties have with the regulator, which "stops us from looking to le or right" for inspira- tion. Instead, it results in an obsession with meeting the regulators' requirements, he claimed. That said, there are some who feel that placing too much blame on regulation for the lack of creative thinking in companies avoids dealing with some real, and address- able, problems with organisational cultures. Barriers to innovation It is important, when think- ing about innovation and how to embed it, to identify the difference between disruptive innovation and continuous, sustaining innovation. Disruptive innovation describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up, eventually displacing estab- lished competitors. Continuous innovation is about seeking incremental improvements to products and processes, which may accumulate over time. Both continuous improve- ment and disruptive innova- tion are important and can bring benefits. However, it is easy to fall into a rut of rely- ing too heavily on continuous improvement, which can be perceived as less risky than disruptive innovation. This will lead to missing out on oppor- tunities to create step change or to alter the trajectory of progress. spoke about how the Triangu- lum programme – including a demonstrator in Manchester – is trying to establish "how people will get paid" for the provision of energy and energy services in future cities. Projects like this represent a vital step in realising the energy systems of the future. But, say industry experts, they require a less tangible form of innovation that is too often undervalued and under-resourced. When we think about innovation, we often mean new technology and smart gadgets. But innova- tion is also about behaviour and business model change. Synthotech might seem like the stereotype of the technol- ogy-driven firm. Its innovations include the Tier One Replace- ment System, a mechatronic robot for making remote mains- to-service connections in the gas distribution system. However, although Syntho- tech's product innovations are driven by new ways of manipu- lating and applying technol- ogy, the company's managing director, David Morgan, recently spoke at a major industry inno- vation event about the impor- tance of behavioural change in creating new business models and solving problems. Morgan told delegates to WRc's 2015 Innovation Day that the key question was "is the business, and its people, ready for the challenge of innovation? Is there a plan?" "If there is no plan, then quite simply, the technology is doomed to failure," he said. Giving tips on ways to change organisational culture so that it can absorb innovation more easily, Morgan focused on behaviour. "You can't change behaviours with technology," he said. "You need to consider human and business pro- cesses." Morgan's lessons are par- ticularly relevant to utilities as they attempt to understand how new technologies might affect the way they do business. At Utility Week Live in April, Paul Brodrick, head of con- nected communities at Siemens, IS INNOVATION A YOUNG MAN'S GAME? The utilities industry, like many engineering industries, is hav- ing to come to terms with the skills problems associated with an ageing workforce. But is an ageing workforce also a barrier to innovation? With the superstar status afforded young inventors and entrepreneurs like Mark Zuckerberg (who was just 19 years old when he launched Facebook, based on a game- changing algorithm), you may think that innovation is a young man's game. History shows us this is not necessarily so. Research presented by Harvard Business Review last year revealed that most of the 20th century's great inventors and Nobel Prize win- ners were in their thirties and forties when they made their great achievements. The research also sug- gested that as longer lifespans become the norm, so our peak years for innovation are rolled back. Disruptive or continuous? Change behaviours first

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