An unapologetic interview with Enel's Ernesto Ciorra on how to win in the energy transition
Utilities in the energy transition must be able to do the opposite of what the incumbents have done in the last 30 years, according to Ernesto Ciorra, Chief Innovability® Officer at Enel Group. Ernesto recently sat with the Ampersand Energy Transition and Sustainability Team to share some punchy and refreshing insights. Here are some highlights.
Innovation is like playing poker. You need to pay the pot, check the cards, and if you do not have the right cards, you have to fold. The real champions of poker play all the games, but they leave if they do not have the right hand.
We must be able to accept failures. When I joined Enel, there were projects running for seven years and planned to continue for another three, four years. In ten years, the world has changed. How can you plan an innovation project for so long?
We have a culture program called ‘My Best Failure’ where we invite people to share mistakes they have made while trying to perform their job. The program aims to highlight that we should never stop in front of difficulties and failures but rather that we should learn together from them.
Switching the culture is simple if you 'walk the talk', especially when your CEO is the real Chief Innovation Officer. People respect what leaders do and follow their example.
During Enel's global internal events, its CEO talks about failures as having the courage of treading unknown paths. One needs to take the risk of making a mistake when searching for new solutions and improving his or her way of working. Moreover, we reward successful mistakes, and the people who made mistakes and learned from them get the chance to collaborate on innovation projects within the company.
Self destruct or risk being eaten alive
In 2015, we announced the closure of 23 big fossil fuel-based plants in Italy. Nobody asked us to do this - not the regulators, not the NGOs. We did it because we said they were not sustainable and we wanted to anticipate a slow suicide.
Accept that you can kill the business models that are the food of the company.
In the energy sector, the culture used to be - 'I am the incumbent. I must defend my business and my product. The ones who want to innovate and create alternative products are enemies and I must use my power to eliminate them.'
So, what we are doing is the opposite: we are nurturing new business models, new start-ups, and producing new revenues. Thanks to innovation, step-by-step, we can enter other countries. We are moving on from the traditional business model by providing frequency response and demand flexibility using batteries instead of fossil fuel plants. By disrupting parts of our business, we are conquering new markets. Enel is now the leader for demand response in the United States, UK and Japan.
Energy companies used to be a pipeline business model - invest in networks, manage the network; invest in plants, generate energy; invest in customers, manage customer base. We want to shift to a platform based business model - using other people's assets to make business. We can use the storage capability of business customers, electric vehicle batteries to provide flexibility services. We could monitor the stability of a building by adding sensors and provide measurements to insurance companies.
Stay in tune with the market
Every year, we present the global strategic plan of the company for the next three years. We identify the KPIs that we want to improve on and then we select the innovation project topics according to the KPIs. So our innovation strategy is very much embedded in the business.
We structure our innovation projects starting with real business needs. We continuously ask our managers to share business needs in a digital platform called ‘I need’, as we firmly believe that sharing needs is culturally and operationally a very important activity. It allows us to identify concrete innovation projects from concrete business needs and define the success of those projects in terms of new revenues, incremental revenues, cost efficiency, safety or other non-financial metrics.
In these plans, we focus 5% of the budget on finding new topics, new business models that will not produce results within the next three years but could be ingredients in the upcoming strategy plans. They must be included because otherwise the risk is that we focus only on incremental innovation or on bettering the existing business models.
One of the worst failures I have seen out there is separating the business from the innovation - having innovation on the side with many millions invested in start-ups but not having any concrete ideological link with the business.
At Enel, we do not hand over the innovation project to the business, but rather they are joined from the starting point. This sets us apart from other energy organizations.
Bottom-up we collect the needs of more than 300 managers through the crowdsourcing platform that is open to our 67,000 employees and that is open to the crowd outside the company. We transform their needs into concrete technical or social challenges, and we share these challenges with our employees, with our communities, with our customers, and with the independent innovators.
We have a community of over 500,000 people working on our innovation from more than 100 countries. The community, called openinnovability.enel.com, has helped generate 5,700 ideas allowing us to implement more than 120 crowd-sourced projects.
The Energy sector is being deeply transformed by decarbonisation and digitalisation. To win, or survive, both incumbents and disrupting scale-ups need acute strategic awareness, strong focus, and speed. Please share your thoughts!
Ampersand Partners' Energy Transition and Sustainability practice helps energy companies navigate their fast changing market environment and non-energy clients deliver their net zero ambitions.