Preface: While this sector has successfully exceeded their annual remits for decades, how might its C-Suite leaders avoid the challenges that many other once-successful entities have experienced? This Q&A is part of a series inspired by Fortune’s Most Admired Company rankings.* The process includes interviewing executives and professors for their insights on the specific attributes that are measured to derive these rankings and their potential role in company transformation. As global companies strive to compete, what strategies can help speed transformation? In this interview, Professor Mara Prentiss shares her insights on innovation’s role for successful change.
*Key attribute measurements for Fortune’s Most Admired Company rankings include: innovation, people management, use of corporate assets, social responsibility, quality of management, financial soundness, long-term investment value, quality of products and services, as well as global competitiveness. Per the recent 2015 findings, Apple has been the top ranked Fortune Most Admired Company for an unprecedented eight consecutive years.
Q. What a difference three decades can make. In 1979, General Motors (GM) employed more Americans (about 619,000) than any other single company at that time. Fast forward to 2009, the company had approximately 235,000 worldwide staff. What lessons learned might this sector’s C-Suite executives consider as they lead their teams?
A. The revolution is already here and C-Suite leaders need to recognize the importance of supporting an innovative work place to survive the rapid changes that are taking place. Last year for the first in the United States, there was more power provided by rooftop (residential) versus commercial solar offerings. And frankly, it’s not surprising given the enormous shifts that have occurred in this industry across the globe. For example, summer days in Germany have now provided more energy (via solar) than all other energy sources combined. For American energy & utility companies, imagine if their existing product offerings were to have to shift to meet such demand? Would their current operating models enable them to shift in an agile manner?
Q. So, what three recommendations for change would you recommend for these companies?
A. Well, I’m not a business school professor at the Harvard Business School, I’m a physics professor at the university, but here are some ideas for your readers’ consideration. First, the acceleration of the internet of things and the falling cost of computational power makes it much easier to analyze the Energy and Utility ecosystem such that prudent companies can better optimize the supply and demand for energy. Increases in interconnection and the emergence of the “smart grid” further increase such opportunities.
Second, for US companies, they need to step up their ability to deal with new competitors. For example, consider Tesla’s new products (batteries for stored energy that can be used by homeowners). This product is essentially a repackaged Tesla car battery that their company has creatively marketed in an entirely new space that most people would not consider as a core competency for them. The emergence of solar leasing is also transforming since it removes the capital barrier for home owners wanting to exploit solar energy. Moreover, per your Q&A with HBS Professor Linda Hill and her reference to the innovative practices by China-based wind company, Envision Energy; US companies need to understand that such entities, which may not be on their radars today, are potential formidable competitors given their focus on speed. And for most people, speed is not a cultural trait that normally comes to mind for the energy and utilities industry.
Third, I believe energy and utility companies have so many untapped opportunities for their markets. For example, consider the simple analogue of using shampoo each day. You don’t need to use the entire bottle that is contained in your shower, you require just enough for your daily needs. Similarly, distributed storage of energy can be better optimized for this ecosystem of users than grid scale centralized storage. Moreover, the smart companies will figure out how to creatively reposition their brand and image for their products and services. Their C-Suite leaders need to help lead their teams to ideate around how can they change the mindset of their customers in terms of energy’s cost, value, and impact to society? As a fellow baby-boomer, you’ve seen how the water industry has turned a commodity into premium-priced goods. For example, when you were growing up, how many people were paying for bottled water? Back in the 1960s and 1970s, water was a product that was considered almost a given right for access at a low cost and on demand. Similarly, energy is viewed by many in that same lens, so the good news is that smart companies will seize upon this potential opportunity.
Dr. Mara Prentiss is the Mallinckrodt Professor of Physics at Harvard University. She graduated from Wellesley College where she received a BA with a triple major in Physics, Math, and Philosophy and high honors/Phi Beta Kappa. She did her graduate work at MIT where she was elected to Sigma Xi. Thereafter, Dr. Prentiss worked on the Technical Staff at Bell Laboratories. Since joining Harvard in 1991, she received several awards for research and teaching and was elected a fellow of the American Physical Society. She has published more than 100 research papers. Finally, Professor Prentiss has published a number of articles and books, including her most recent one, Energy Revolution: The Physics and the Promise of Efficient Technology (Harvard University Press), that was recently featured in the Harvard magazine.