Big energy companies are looking to the sharing economy, digitisation, big data, and mega-cities to inspire future revenue streams. In this exclusive interview with Energy Post, Inken Braunschmidt, leader of RWE’s “Innovation Hub” talks about her unique role at the helm of a department that’s not a department. Her job? To think non-utility ideas. Braunschmidt:”We’re really going to the edge of what energy has meant for 100 years.”
Energy companies know all too well that the business model which has served them well for 100 years is not working any longer. That’s why a company like RWE has created an “Innovation Hub”, with the goal not simply of looking into a crystal ball but of developing new, real, sellable products that will contribute “significantly” to RWE’s turnover in ten years time.
This is how Inken Braunschmidt, leader of the RWE Innovation Hub, describes her job. The Hub was created in the middle of last year and tasked with finding completely new business models. In practice, it is focusing its efforts on four areas, says Braunschmidt: big data, disruptive digital business models like Uber and Airbnb, “smart” in and around the house (including the Internet of Things) and “urban concepts” – solving problems for mega-cities, from electricity and communications to mobility and logistics.
“What happens if people don’t own a car anymore? They want to share it. It doesn’t matter if it’s electric or not.”
The difference with the past is the unprecedented focus on the customer, the search for new business models rather than purely technologies, and a conscious effort to look beyond the energy sector. “Why should Amazon be the best drone provider? Why are we not doing this?” Braunschmidt muses.
She has been with RWE since 2004, accumulating experience in reorganisation, restructuring, mergers and acquisitions, and business transformation. Before joining RWE, she worked at the Kiel Institute for Innovation Research. She has degrees in business administration and finance. All of this makes Braunschmidt the perfect candidate to lead a department that’s not really a department but a collection of small teams emulating start-ups. Indeed, RWE is working with start-ups in a way it never did in the past.
“Our task is to find and develop new business models”, Braunschmidt says. This doesn’t mean RWE is abandoning its traditional markets – indeed most of its revenue is still expected to come from the grid, trading and retail businesses in ten years time (if not generation, its fourth current business), and yes work on renewables and energy efficiency is continuing apace, but in addition to all that, expect to be wowed.
Q: How would you describe your job at RWE?
A: I am responsible for setting up innovation. First, note that this does not mean my company was not innovative before. Of course we were. We were quite successful at technology driven innovations. We have a lot of patents.
But it has all been rather technical. Last year we said: “this might not be enough, when we look at what is happening to our industry”. The business model which has worked pretty well for 100 years is not working that well any longer. So the question was: what business models do we need to go into that future energy system? What will customers want from us?
We refocused the topic of innovation in RWE on new business models. It does not mean we stop R&D. We are still doing that, but that is not the task of the Innovation Hub. Our task is to find and develop new business models. It’s not about [developing new] technology or software either – we have that or we partner with externals to get it.
We follow a lean start-up approach. So we talk about one, three, six, nine months to get to a minimum viable product, a prototype. In between we always check: do we go on or do we kill it?
Q: So your product is a business model?
A: Yes. And we decided that it makes sense not to target everything, but to focus on some strategic topics.
We defined those by looking at what other companies are doing. We didn’t only look at utilities. We looked rather more at for example the telecoms industry, the electronics industry (Philips, Samsung etc) and of course at start-ups because we recognise that they are very interested in our market, our customers and the world of electricity. We looked at Google and [its thermostat] Nest.
“The Innovation Hub is set up as close to the business as necessary but also as far away as possible”
We found out that there are major topics we should focus on. We call these “lighthouses”:
- Big data and data insights.
- Disruptive digital business models like Uber and Airbnb.
- “Smart” in and around the house, including the Internet of Things.
- Urban concepts. In the future, more and more people will be living in megacities. We want to solve their problems. This means we are looking for business models not just in the areas of electricity and infrastructure, but also for mobility, logistics, communications, etc.
An example I always use is Amazon. They are working on a drone concept to deliver parcels in one, two, three hours. Amazon was not a drone expert before this technology came along, but they are experimenting with it. So the question from RWE’s point of view is: why should Amazon be the best drone provider, or indeed the one steering and managing this? (Drones run on electricity by the way.) Why are we not doing this?
This is just an example of thinking differently, it’s not that we want to take the drone business off of Amazon! It’s just an example to show how we try not to think like a utility thinks.
Q: Your thinking stretches far beyond the traditional energy business.
A: When it comes to mobility, we already have the technology and know-how on charging infrastructure – I think we’re running the biggest charging grid in Europe in terms of number of stations. But what happens if people don’t own a car anymore? They want to share it. It doesn’t matter if it’s electric or not.
All of this offers ideas for new business models and services. Why are we not working on something to be the Uber for the energy industry? It would be better to do it ourselves rather than somebody else coming along like Uber did, or Airbnb. We would like to be the Uber for energy.
What would have happened for example if a telecoms company had invented WhatsApp? The amount of text messages is declining because people use WhatsApp and other services which are for free. We all know they’re not for free really because of the data, but why should I pay for an SMS?
Q: How would you compete with all these start-ups though? How do you distinguish yourselves from them? What can you bring to the table that they can’t?
A: Three things. One, we have 23 million customers in Europe. That is definitely an asset, also for a start-up that wants to scale up, reach a certain customer base. And we know our customers very well. Two, due to the fact that we were more technologically driven in the past, we really have something to offer. For example, we were very early movers in smart homes and connected devices – I would even say too early (we started 7-8 years ago). We have IP, technologies and platforms up and running. And three, we can offer support in areas a start-up does not typically have resources for, such as regulatory and legal experts.
“After 2-3 years you will see innovations “landing” in the corporation. But it will need another two, three, four years before the culture really changes”
We are an interesting partner for start-ups. We already have some co-operations in place and we are founding our own.
Q: So is partnering up and bringing in external expertise central to the work you do?
A: Yes, it is essential in two ways. One, start-ups bring fresh ideas, different products and a very customer-driven approach. Two, they bring a different kind of culture. This helps us embed even more entrepreneurial thinking. It’s really by working together that we learn.
It is not just start-ups we partner with. It can also be another innovative company, another big corporation. But working with start-ups is the biggest change from the past, when I would say we struggled to work with them.
Q: Big, established companies are not the most obvious places for fast innovation. You’ve tried to create a start-up culture within your unit. But how do you fit with the rest of the company? How important are you to RWE’s overall strategy?
A: The first thing you need is strong support from your top management and we have it. From them, we not only got the task to develop new business models and add significantly to RWE’s EBIT (Earnings Before Interest and Taxes) in a few years time, we also got the task to positively influence the company’s DNA.
It means the Innovation Hub is set up as close to the business as necessary but also as far away as possible. On the one hand we have great assets to offer and can benefit from that connection to the business, while on the other hand we need to be free to think non-utility ideas.
The Innovation Hub we built – just to give you an example of what is really different – is not a department. I am heading an entity, a team, a platform which does not have an organogram. We are a network organisation. We have people from inside and outside the company, from different countries, on different kinds of contracts etc. We work on proof-of-concept in little start-up teams. It’s a flexible, agile structure. You can put people together fast and if you kill a concept, you can move them on to another topic. It’s the “amoeba” principle applied very successfully in innovative companies such as W. L. Gore, maker of Gore-Tex, for example.
Q: To get a better idea of your significance, how many people work at the Innovation Hub? What’s your budget? What’s your turnover?
A: When people ask how many of us work here, I always so I don’t know exactly because we are a network organisation. But it’s about 80 people.
So far, we are a cost centre. There is no turnover or EBIT coming in yet because we just started in the middle of last year. What I can say is that we have a dedicated budget line that is good enough for us to do what we do and be successful. The goal is that within ten years, we should add significantly to the company’s EBIT.
The target is to earn money as soon as possible. But you can’t expect the millions to come in after one year. It will take time. Next year, at the latest the year after, we have to show the money and not just that we have nice prototypes, that we have customers who love it but don’t pay for it. It’s all about finding new business models that we can earn money with, that customers want and pay for.
Q: Within your four “lighthouse” topics, can you give some examples of what business models you are investigating?
A: Yes. An example from big data is that we asked ourselves “what would happen if we could answer our customers’ questions before they asked them?” We know the cases and incidents that prompt questions, after all. So we found a solution to this. It is good for the customer and we can reduce costs, for example for call centres.
“In that energy system, it’s much more about sharing. … you go onto a platform and say “I have electricity left over from wind” or “today I want to order some electricity from wind”. It will be like ordering an Uber”
In the area of decentralised management, we are building a start-up to manage and optimise energy management in the home. Just imagine you have solar on the roof, micro-CHP in the cellar, a battery on the wall and an electric car. At the moment it’s simple but maybe a bit boring too – what if you could produce more energy and trade it? The customer today is not able to trade really, if he has a surplus. What if you could share it with your neighbour? That’s also not possible today. The question is how to optimise these prosumers? How to manage them, depending on whether they want to be efficient, earn money or have fun? We are building a start-up doing that.
In urban concepts, based on the know-how and IP we already have, we are looking at business models to support customers in big cities having cars, sharing cars, or being mobile in any way.
Then there’s the whole topic of wireless power. Think about all the cables and charging devices you have. Imagine you don’t need any of this anymore because you can put your mobile on the table and it starts charging. That’s another business model we’re working on.
Q: You’ve not talked in typical energy terms: renewables, for example, you haven’t mentioned. RWE has said it wants to become an “enabler” of renewables. How does this kind of innovation fit with what you’re doing?
A: RWE still wants to become an enabler of renewables, but it’s not my task. We have our own company doing that, Innogy. Partnering is not only about external partnering. It also means internal partnering. I’m not responsible for renewables, but we if we need our colleagues, we can call on them.
The Innovation Hub really goes beyond existing efforts. It doesn’t mean we neglect our business, but we’re really going to the edge of what energy has meant for 100 years.
Q: To what extent can you draw on the technical legacy of RWE to help with this?
A: If we can use the technology, we do. People forget sometimes that we are already managing a decentralised world on a large scale. We steer our grid and power plants so that everybody has electricity and there are no black-outs – that’s an asset. Why should we not do that on a very small scale, at the level of the prosumer?
Q: Who is shaping this future energy world in your opinion? What will determine the potential of your new business models?
A: Energy policy is still important. But there are other topics – data security for example. We have one of the most developed data security systems in the world in Germany. The legislation is very strict. We have to deal with that and still find a way to work with our data. Some of this legislation is 20 years old and needs to be updated. Twenty years ago no one was aware that we would all have a device in our hand with a computer capacity bigger than the first moon rocket!
Q: Do you see RWE as a whole changing over time? And what kind of timescale are we talking about?
A: I think it’s possible but not in one year. RWE started its transformation three years ago with [CEO] Peter Terium. As our company changes to become more open, entrepreneurial, faster and outward-oriented, after 2-3 years you will see innovations “landing” in the corporation. But it will need another two, three, four years before the culture really changes. Also for that we looked at other companies and the journey time is 5-10, not 1-3 years.
Q: How would you describe the RWE of the future?
A: RWE will have an important position in the future energy system. We want to be an innovation leader. We will be a trusted partner of the existing energy system, but also a very agile, innovative, entrepreneurial company for the new system.
Q: Is that possible within one company?
A: I think it’s possible as long as in that vision it’s very clear what everybody adds and that everybody knows that what they’re doing is adding value. Everybody must have a sense of what their job is. Then it’s about working together.
Q: Where will the RWE of 5-10 years from now be making its money?
A: In 10 years, it might still come from our traditional business model. In many areas in Europe the grid is a regulated business, so we will still do that in ten years. We will also still have retail customers and earn money with that. The innovative part will be significant but it won’t be the bigger part.
There are four areas in our business model today: 1) generation 2) trading 3) the grid and 4) retail. Of this value chain, we really have trouble in generation. That part of the value chain is not earning the money of a few years ago. But the other three areas will earn money ten years from now. So it’s not that the whole business model is going away, but an important part of it.
Q: How do the new business models differ from the current model? What is the essence of the change?
A: It’s really about putting the customer and his needs in focus. (That might not be the electron any longer.) It’s about business models that use insights based on data, that depend on people using digital devices like smart phones, and that are based on peer-to-peer sharing. It’s not selling energy efficiency, but can we provide safety, security, and health in homes? People are interested in safety, comfort and sometimes fun. It’s about delivering these aspects.
Q: What is your vision for the future of the energy system in Europe?
A: Europe is really the most difficult case compared to Asia, the US or others. It will be even more decentralised than today. We will have even more renewables. A very important new technology will be the large-scale battery, or maybe storage is a better word. It will be a system which is highly electrified. We will have more and more devices, and electrical cars.
In that energy system, it’s much more about sharing. It’ll be very easy: I have a solar panel on my roof and you, my neighbour, don’t have one so I share mine with you. Or you go onto a platform and say “I have electricity left over from wind” or “today I want to order some electricity from wind”. It will be like ordering an Uber.
Q: Are you also looking to innovate beyond Europe?
A: Yes of course. We have established Innovation Hubs in Silicon Valley, Berlin and Israel. We have to think in an international context, we have to be where innovation happens.
This is the third in a series of interviews published by Energy Post ahead of the KIC InnoEnergy Business Booster event in Berlin on 21-22 October. The other interviews were with David Arfin, inventor of the solarlease, Ad van Wijk, Professor in “Future Energy Systems” at Delft University of Technology in the Netherlands. For more information on the event, please click on the banner below.