The Technology and Innovation Council’s annual dinner enabled utility leaders to meet and compare notes on innovation. Mathew Beech reports.

The Wipro and Utility Week Innovation and Technology Council met for its third meeting and annual dinner on Tuesday 15 March in London.

The meeting came as the Utility Week and Wipro Innovation in UK Utilities: A State of the Nation Report was published, assessing the strength of the innovation culture within UK utilities.

The first area for discussion was the definition of innovation used in the report: “The application of new or novel technologies or ideas in a way that significantly alters of improves established ways of working within the sector.”

There was general agreement that this was a good definition, but as the conversation developed, the council members suggested this definition may be a bit narrow. Their reservations arose around the word “significant”. The council members said that using and thinking only towards significant change could exclude important incremental changes. One delegate said moving the printer from one side of the office to the other could be considered innovative if it led to improvements in how the business operated.

This was a key point that helped shaped the rest of the night’s discussions, which focused on four key themes: culture and innovation; investment and innovation; regulation and innovation; and lessons from other sectors.

The council came to the view that the regulators, in their own ways, are helping to promote innovation, and dismissed the notion that regulators “get in the way”.

Ofgem was praised for encouraging and highlighting innovation via its Network Innovation Competition and Network Innovation Allowance schemes.

The council also stated that while Ofwat has taken a different approach by focusing on regulatory outcomes, it has given the water companies the freedom to innovate provided they reach these targets.

However, with talk of targets came talk of failure – more specifically fear of failure and the way in which this has affected innovation culture in utilities.

Council members said the potential consequences of failures in their critical national infrastructure mean they are more likely to prefer incremental to disruptive innovation. One council member said the utilities would “love to be seen to be doing things but are very nervous. Critical services cannot be jeopardised”.

Despite this conservatism, from a cultural perspective it was acknowledged that the prospect of failure should not be allowed to discourage the generation and development of new ideas among employees. Whether or not an idea is successful, the process of challenging status quo approaches to business and operations must be supported.

Ideas from outside the sector should also be assessed for their relevance to utility innovation challenges, said attendees. Indeed, there was hot debate over the perceived division of sectors into unhelpful silos, which stop innovation in cross-cutting business activities – such as retail – from being shared and transferred freely. The benefits of drawing down innovation from academia were also discussed, with one delegate saying that universities often “have solutions but no problems” to solve – and therefore that industry has a role to play in applying innovation generated elsewhere.

Crucially, it was stated that the application of innovation should be driven by the needs and demands of customers. However, it was also acknowledged that investors and shareholders may not always see customer-led innovation as an enabler for the returns they require. Careful communication of innovation goals, and associated risks to investors and shareholders, is therefore needed and is likely, again, to lead to a preference for incremental innovation, said dinner guests.

One way of clearly identifying and mitigating innovation risk is to support more demonstration and testing at scale. SGN’s project for testing new gas compositions in Oban was mentioned as a good example of this.

Overall, innovation is clearly seen by the council as a fundamental activity, with the survival of some businesses depending on it. How innovation comes about is likely to vary from company to company and sector to sector, and “there is no silver bullet”. However, improving understanding of a range of approaches to innovation, among both industry and regulators, is considered essential.

Discussion topics

1.    Culture and innovation

    • There is a conservatism when it comes to innovation, where the risk of failure could affect critical services. If something goes wrong, there could be a huge impact on the consumer, so utilities often tend to be cautious.

    • Incremental change is as important, and significant, as bigger and more wholesale innovative ideas.

    • Utilities need to foster innovation by giving people the confidence that their ideas will be considered and that there is permission to fail.

2.    Investment and innovation

    • The perception of risk is important. There is the question of whether innovation will downgrade the attractiveness of a utility to investors, or if it leads to greater financial rewards.

    • Change and innovation is crucial for survival. All businesses, including utilities, need to continually innovate and evolve to ensure they are fit for purpose and can continue to operate at the standards required.

    • Innovation could expose shareholders to increased risk. Utilities need to carefully consider how their innovations affect their returns to shareholders.

3.    Regulation and innovation

    • The regulators are supporting innovation in different ways. Ofwat is giving water companies freedom to innovate with its outcomes-based approach, while Ofgem has provided a regulated space for innovation.

    • Regulation is not the driver of innovation, the companies ­themselves are.

    • The regulators are seen as relatively innovative and were praised for highlighting innovation. Ofgem came out highly compared to the Financial Conduct Authority.

4.    Lessons from other sectors

    • Collaboration is key. Teaming up with businesses from outside the sector will help lead to better innovation outcomes.

    • Innovation transcends sectors. It is necessary to think about key verticals, such as retail service, rather than thinking in silos.

    • Change is being driven by customers wants and needs. The expectations from one sector transfer into another, so innovation needs to keep pace with these demands.

Views from the floor:

“Those who succeed in building strong, smart innovation cultures which make the most of available resources – both in terms of people and technology – will form a pivot point for the industry, swinging it in a new direction.”

Arun Krishnamurthi, vice president and global head of
utilities, Wipro

“Collaboration is often identified both as one of the most important elements of a successful innovation culture, and one of the hardest things to achieve consistently in relation to innovation projects.”

KR Sanjiv, chief technology officer, Wipro