When worlds collide: why, how and where energy companies should work with start-ups
This is part one of an article series by Elena Bou, Innovation Director, EIT InnoEnergy, which explores the philosophy of open-innovation that underpins good collaboration, as well as the why, how and where of how to make a success of energy company/start-up collaborations, drawing on best-practice from EIT InnoEnergy’s experience along the way.
Skim read the annual report of a major energy company from
2010 and you won’t come across many instances of the terms: ‘innovation’ or
even ‘start-up’. Now, it is a different world. Even the slowest moving
established energy companies (perhaps especially the slowest moving) recognise
that innovation is key to survival in a changing market and that collaboration
with start-ups is a good way to go about it. But that is not to say that it is
simple, or that it always works. When the worlds of energy companies and
start-ups collide, it takes careful planning and management to ensure the right
outcome.
R&D run ragged
Of course, energy companies have always been innovators.
Since Thomas Edison first fired up the New York Pearl Street power station in
1882, a parade of innovations in power generation, transmission and
distribution have steadily laid the foundations for modern society. However,
the consumer of the early 21st century is quite different to their
early 20th century counterpart. We demand more: more variety, more
novelty and more energy. The pace of change has accelerated. It is less than 13
years since the first iPhone launched – how many smartphones have you worked
through since then?
The energy world is not fundamentally different. Maybe we
don’t work at quite the breakneck pace of consumer technology, but the
same pressures exist: demand for new products, brands and options. Where does
that leave research and development teams built for and accustomed to a slower
product lifecycle? Exhausted. By the start of the 2010s, the behind-closed
doors model of innovation was showing its limits.
Opening up at an opportune time
One option would have been to simply expand headcounts and
increase spend. However, a new approach to innovation had been building
momentum in other sectors, offering the energy industry a tantalising new way
to find fresh ideas and technologies.
Henry Chesbrough coined the term ‘open innovation’ in 2003, which
can roughly be defined as blending internal with external ideas and paths-to-market
to advance technology. It stands in stark contrast to the traditional secretive
corporate research lab.
By the time the energy industry cottoned on to the approach
around 2012, it was well established. In this sense, the energy sector enjoyed
something of a second-mover advantage, with a well-developed field of open
innovation approaches and experts to choose from.
Lateness should not be confused with a lack of enthusiasm
though – the energy sector has well and truly embraced open innovation and
there has been a marked shift in motivation. While early adopters used open
innovation to accelerate new products to market, today 80 per cent of energy
companies apply the approach to gain access to new business models instead.
This compares to 65 per cent in other industries. The most common way to do so
is to look for outside knowledge and bring it into the organisation, which
occurs mainly through collaborations with start-ups.
Why have energy companies so wholeheartedly embraced open
innovation after over a century of siloed thinking? Simply put, because they
sense change in the air. Consensus has emerged that old business models will
fade away in the future, that the industry is undergoing a paradigm shift.
Decarbonisation, decentralisation, digitalisation,
electrification of heat and transport and yes – ever-higher consumer
expectations – are changing the face of energy. This means that smarter
iterations of the same products won’t cut it – entire new ways of doing
business are required – hence the appetite for collaborating on new business
models.
Open innovation in action
Despite such successes though, open innovation is not easy.
The relationship between a company and a start-up is complementary but
asymmetrical and complex. Even when both parties want the relationship to
succeed it does not always happen.
However, since 2001, EIT InnoEnergy has supported the creation and growth of more than 330 start-ups, of which 90 per cent are partnering with corporations. Over that time, we have learned that, while there is no magic bullet, there are certain factors that work in favour of successful collaboration. In parts two, three and four of this series, we will look at the three golden rules of energy company-start-up collaboration: the why, how and where of open innovation in energy.
