Commercialising innovation: how to take new ideas to 'business as usual'
To decarbonise our energy networks, new ideas and technologies must move quickly from 'innovation' to ‘business as usual’. The Ofgem Strategic Innovation Fund (SIF) deliberately brings together fast-moving entrepreneurs with major energy network companies to speed up this journey. In this episode, SIF Head of Commercial Paul Padaruth explores these challenges, in conversations with John McKiernan, head of innovation at Irish utility ESB, Jo-Jo Hubbard, co-founder and CEO of Electron, and Eric Appleton, Incubation Manager at Energy Systems Catapult.
Links and onward journeys:
For more on the Strategic Innovation Fund: www.ofgem.gov.uk/sif.
To see the 'visual minutes' artwork described in this episode, see Paul's recent blog post on commercialisation: https://medium.com/@InnovateUK_Ofgem_SIF/taking-energy-innovations-from-concept-to-reality-733bcb4ecf3a.
All episodes of Bright Spark are at: www/podfollow.com/brightspark
Transcript
Episode 6 – Commercialising Innovation: How to Take New Ideas to ‘Business As Usual’
[Music flourish]
Matt:
Hello and welcome to Bright Spark. This is episode six. Thank you for being with us. I’m Matt Hastings and, as ever, I’m joined by one of my brilliant Innovate UK colleagues. This time, it’s the Strategic Innovation Fund’s Commercial Lead, Mr Paul Padaruth.
Paul:
Hello, Matt. How are you? Thanks for having me here. A pleasure to be here on what is my first podcast.
Matt:
Well, it’s an absolute pleasure to be with you as well. Paul, your focus is really on commercialising and how innovative ideas that can help drive down carbon emissions can become a commercial reality and how networks can adopt a business-as-usual approach to innovation. Is that fair in a nutshell?
Paul:
Yeah, in a nutshell, that’s exactly it. We are in a really privileged position in this team to affect what happens in the network innovation space and where I see my role, as Head of Commercial for the fund, is being able to help the networks find those innovations that can really transform how they work and bring them into the business as usual. I also have a really key role to look at what the third parties, the ecosystems and the other stakeholders who are involved have to play in that transition.
[Music flourish]
Matt:
Well, Paul, it’s absolutely great to have you here to help us to explore this vital aspect of the innovation journey we are all on. Right, here is what’s coming up in this packed episode.
John:
We need to foster and nurture the start-ups and the entrepreneurs to bring on their tech solutions so that we can use them, develop them and harness the power of their solutions.
Paul:
That’s John McKiernan, Head of Innovation Pipeline at the Irish utility ESB. Also with us is start-up innovator and CEO of Electron, Jo-Jo Hubbard.
Jo-Jo:
For me, the most exciting position at the moment is that integration of all the different flexibility service providers, renewable developers and all these different technologies.
Matt:
Later, we’ll also hear from Eric Appleton from the Energy Systems Catapult about their programme designed to help innovators to commercialise.
Eric:
What are the route-to-market partnerships that they’re going to need? How does a value chain work within the sector that they’re looking at and which are going to be the segments that are going to be most interested in their proposition now? They need to get traction now.
[Music flourish]
Matt:
So, as you can see, this is going to be another cracking episode. I think just before we launch into it, it’s worth taking a little bit of a step back and thinking about why we’ve got a commercialisation function within the Strategic Innovation Fund because it’s one of the first commercialisation functions to be embedded within any grant funding programme within Innovate UK. So it’s different and it’s new. Really, what we’ve tried to do here is address one of the fundamental challenges with innovation; not just network innovation but more broadly and that is how we move from a bunch of research projects into product projects which are developing new products and services which consumers and network users can use and are useful and valuable to them. That’s really what Paul’s job is. Give us a bit of a flavour, Paul, of how you see this working strategically commercially wise.
Paul:
I think we need to think about our fund as a commercial fund. You may have heard the term ‘impact investing.’ It’s becoming more and more fashionable in the current marketplace and it’s about there being motives that are more than just financial return. I think we can classify ourselves as an impact investor. We have a significant pot of money to support transformational innovation in our energy networks that is ultimately to benefit the environment through net zero and also the consumer through reduced bills and better service.
Matt:
I agree with that. I think we don’t have shareholders in the same way that a venture capital firm or a private equity firm might have shareholders where they need to deliver financial returns on investment normally to those shareholders but what we do have are consumers as our key shareholders. They are ultimately who we’re accountable to and if the Strategic Innovation Fund can’t return value to consumers, and that value can come in a variety of ways... we can deliver value both in terms of financial savings, we can deliver value in terms of new products and services that consumers can use to make their lives easier and we can deliver value around things like carbon reductions and climate change but ultimately, we are a consumer-driven and sponsored type of venture capital firm and we like to do things a bit differently.
Paul:
That’s right and I think the portfolio of value for the consumer is the approach we should take. We can return benefit, as you said, through a number of different metrics but fundamentally, if they all contribute to the benefit of the consumer, then it’s an activity we should be focusing on following.
Matt:
Commercialisation within the energy networks is often quite a dark science. After running an innovation project, and it could be for three, four or five years, how do we ensure that ultimately that does get embedded as business as usual within the networks do you think, Paul?
Paul:
That’s a really great question and I think we have to be honest with ourselves here that we can’t ensure it. I think what we can do is make sure that we put in place the building blocks and we challenge the barriers that exist to that in practice. We need to be able to help innovation make a business case for why a network should bring it on board but we also need to make sure that an innovation is deliverable. A really key focus for me on the commercialisation journey is being able to look at an innovation and understand or help the project understand what are the limiting factors here for you to be able to deliver innovation at the scale that your customer will require. I think it’s also worth touching on the fact that when we talk about innovation and network deployment, we’re focusing on one or a handful of customers for a potential innovation and a really important part of commercialising the Strategic Innovation Fund is about recognising that this is a global market we’re operating in. If we can help our best innovators commercialise their offering, it’s not just UK networks who can benefit from it and that’s a really important aspect of what we’re trying to deliver through the commercial side of the Strategic Innovation Fund.
[Music flourish]
Matt:
There are a couple of other little angles to this, aren’t there? I think one of the beauties of the Innovate UK partnership with Ofgem is that we can grease the wheels of commercialisation by feeding the insights from innovation back into the regulator so they can look at where there are potential regulatory barriers that might be a blocker to helping some of those innovations being embedded as business as usual. Similarly, we’re working very closely with the UK Government around future policy that needs to adapt and change to enable these innovations to become business as usual and ultimately, how we’re going to deliver net zero is not with a bunch of projects. We’re going to deliver net zero with a bunch of products and services and that’s why we’ve got Paul and the team on commercialisation within the SIF. It’s a really, really important part of our offer.
Paul:
I think we have to show how non-dilutive funding can be used to crowd in private-sector investment and create a market around network innovation. The funding we provide incentivises innovation but it also has to incentivise commercialisation because that is where we create the value for the consumer.
Matt:
How cool would it be, Paul, if we generated the next Tesla just off the back of the Strategic Innovation Fund?
Paul:
That would be cool. That would be cool.
[Music flourish]
So let’s get into the detail now of some of those really insightful chats that we held at the Energy Innovation Summit in Glasgow earlier this year. Bearing in mind we were doing this during the summit, you’ll hear a bit of hubbub and background noise in these chats.
John:
My name is John McKiernan. I’m the Head of Innovation Pipeline at ESB, the Irish power utility.
Paul:
We are standing in one of the walkways of the Scottish Event Campus (SEC) in Glasgow at the Energy Innovation Summit. What we’re looking at right now is a mural that has been painted by some fantastically talented artists which is a representation of the conversation we had yesterday in a session about the barriers to commercialisation. It touches on some of the key themes that came out of that discussion: an understanding of regulation, the resource requirement or the resource drain on small companies trying to get involved in network innovation, the importance of access to funding and many other topics that are really important for companies that are trying to be part of a commercialisation journey. John, I guess this is a good point to ask you about some of these in particular and I know it’s an area that you have a lot of experience in; the access to funding and its importance to innovation as part of the commercialisation journey.
John:
I’m loving it, yeah. We’re standing here looking at a cartoon mural by the More Than Minutes guys. It’s fantastic and I’m loving the bit where there are people sitting around designing a hang glider and the first guy is jumping on the hang glider and his hang glider says ‘risk.’ That’s a lovely one. Jump off a cliff with something we just designed two minutes ago and see how you get on. There’s a little bit of risk there. We can see here resources and access to funding and these are the challenges. The entire energy innovation ecosystem is represented in this mural. The key thing, I think, is to break down the barriers between small companies working with large companies. The large companies have the resources and they know all of the rules and regulations. They have specialists that, in two minutes, will tell what it will take a start-up months to try and figure out and then the rules change again. Ask somebody who knows, I think, is the key point. The larger companies like the distribution companies and the generation companies have those experts and can provide that expertise to the start-ups. It costs us very little and for the start-ups, their opportunity is that once they see the rules and regulations, they are the quickest to find a path through because they’re the quick thinkers, the entrepreneurs and the navigators. For us, it is about taking that first jump off the cliff. Be in that hang glider. There are two people in the second one and they’re getting a reward. That’s even better. The reward is that if you get a pilot project from these discussions with a large company, that’s when the magic happens. You sign a pilot project, then when you’re raising money from VCs or any other agencies, you can say, ‘I have a blue chip client that likes what I’m doing. We’re doing a pilot. You can talk to them and they will validate that my thesis isn’t a slider. It is reality. My business is just about to go further on this super hang gliding journey.’ [Laughter]
Paul:
If you’re wondering what we’re looking at, we’re going to put a link to this illustration on the show notes for this episode of Bright Spark. Now, John, just staying on the topic of risk, one of the real challenges that we hear when we speak to parties that are involved in network innovation is that innovators seem to take all the risk and networks don’t. How do we change the dynamic there?
John:
Yeah, I think there is pressure on all parties. The larger companies like the distribution companies and the generation companies have to hit net zero and they are looking for solutions. I’m from ESB and we are one of those companies. We’re not technology developers and so we need to foster and nurture the start-ups and the entrepreneurs to bring on their tech solutions so that we can use them, develop them and harness the power of their solutions to hit our targets. Actually, the playing field is kind of levelling a little bit here. The big challenge for the larger companies is that we can’t do 5,000 deals a week and we have to cherry-pick the really good ones and find those good ones. It’s down to the start-ups. If they think they’ve got a really good solution, they should stick their head up, put their hand up and say, ‘I can do this.’ Once they get the attention of the utilities, the utilities then say, ‘Okay, we’ll wrap our arms around this one and do it properly.’
Paul:
That’s really interesting. I think one of the observations we’ve made as part of the Strategic Innovation Fund is that there is a real need for more of a wraparound advisory service for these SMEs and micro-companies. I think that touches on a lot of what you’re saying there that if we can help them be in a better position to understand their product, understand what solution they’re solving and understand what the business case is for their customer, then we can help them go down that risk then, John.
John:
Yeah, I fully agree. Look, it’s all about establishing credibility. A start-up has zero brand and we may have never heard of the person. Who is behind it? What’s their history? Where do they come from? Are they straight out of college? Have they jumped from a large Original Equipment Manufacturer (OEM) and left a perfectly good pensionable job somewhere because they so passionately believe in it? Have they got traction? Have they thought it through? Do they really understand the challenges in the system? If they can convince and sell that dream, if you like, to the people at the utilities, there’s a tipping point and once the relevant subject matter experts in the utilities see that this is actually a serious proposition, they will grab it with both hands because they need it to hit their targets.
Paul:
Talking more about the flow of money, so thinking about the need for early-stage capital and thinking about the need for networks and the wider supply chain to get their piece of the pie, how do we make that work better?
John:
Yeah, I mean it’s seed money all the way from family and friends to the VCs and sometimes large utilities can invest as well and maybe acquire them even. There’s Innovate UK and Catapult. They’re there for a reason. Use them. If you haven’t, why not? There are people there dying to find good opportunities to row in behind. We’re participating in the Free Electrons programme. It’s the same idea. We’re trying to find the best companies and the most worthy people who have put in enough thought and intellectual capital into absolutely cracking a problem that we need to solve to hit net zero. Once we identify them, we absolutely wrap our arms around them. We are happy to but there’s a step or a cadence. If Innovate UK have picked them, that’s a big badge of honour. If they’ve gone through one of the larger programmes successfully like Free Electrons or something else, they’ve been selected and they’ve passed a test. Every time you pass a test, you build more credibility and you start to build that brand. One of the key advantages, I would suggest as well, for start-ups, whether they’re raising money or trying to grow a market share, is if you can append yourself to a power utility, you’re halfway there because you can lean on their brand. In the Free Electrons programme, for example, there are 80 million customers and that’s a lot of doors to knock on if you’re a start-up but if you get into the programme, you’ve got a direct channel. You have sponsors and you have people who are not technology developers and they’re not trying to reverse engineer your intellectual property. They actually want you to be the best. They want to get your product to market because it makes us look good.
Paul:
One of the things I’m really interested in is your experience, over the years, of working in networks. I’m interested firstly in what the journey has been like for commercialisation and how that’s changed over time and also, what the networks still need to do, particularly in terms of culture, to try and address or try and support more innovation to make it through to business as usual.
John: ies. I think it was coined in:
Paul:
It’s a key measure of a functioning marketplace that venture capital wants to get involved and I think if we’re seeing, as you’re talking about, these unicorns really coming to the fore, it’s a sign that we’re starting to see that operational market. What’s really important for me is that we try to develop how SIF can support network innovation. It’s really about being aware of what is happening, focusing on those barriers that remain and finding the solutions to help the whole ecosystem benefit from this.
John:
Yeah, and money can travel to different sectors. There are hot sectors and there are cool sectors. If people want to invest in Porche or whatever, that’s all fine and dandy but actually, the professional investors and the institutional investors just want to get their money back and they want to be pretty sure. Actually, energy is one of the sectors which touches everybody. Everybody needs energy to drive their business and now we all have to decarbonise. Every business needs to decarbonise and so every business needs to become energy efficient. This whole energy sector is now reaching out. It touches all sectors and so suddenly, the amount of cash being mobilised into the energy sector is quadrupling. The excitement factor has picked up and is elevated by the situation in Europe at the moment. Obviously, they want to suddenly go green. There’s no premium to go green. It’s actually solving the trilemma. It’s actually more economical to go green. You’re more sustainable, you’re saving the planet and you’re going to make some money.
Paul:
I really appreciate your insights there. Thanks for taking the time and spending it with me on this Bright Spark podcast.
[Music flourish]
Great to hear from ESB’s John McKiernan there. He set out really nicely what’s driving the need for new solutions in energy systems and how there are huge opportunities for innovative small companies in this space.
[Music flourish]
Matt:
So this is one of those classic collaboration dilemmas. Very much a tortoise and hare-type partnership or a David and Goliath, if you will, where we’ve got these huge, big organisations in the shape of networks and utilities which can have in excess of 10,000 staff and these lightning-fast start-ups and SMEs who like to move quickly and break things. So really, we are I suppose almost like some kind of bizarre network innovation wedding planner [laughter] where we’re trying to bring together these two interested parties, help them to find common ground and work together to ultimately deliver some innovations that maybe neither of them thought were possible.
Paul:
I think that’s spot on. One of my observations in any commercialisation journey is that the business drivers for every party in that innovation are different and it’s really important that each party understands what everyone else’s business drivers are. There has to be compromise. You cannot get commercialised innovation without being aware and accepting of what everyone is trying to achieve.
Matt:
Yeah, I completely agree with that.
Paul:
And, Matt, those challenges that we’ve just been discussing were something that came out of one of the sessions that we held at the Energy Innovation Summit. The mural we were looking at, that you heard John talk about, was created by two artists to show the themes coming out of the commercialisation workshop. There were loads of network companies and innovators there and so we asked them to explore in depth some of the commercialisation opportunities and barriers. If you want to read what they said, I wrote it up in a blog post where you can also see the mural image. We’ve put the link in the notes to this episode of Bright Spark.
You’re listening to the Bright Spark podcast from Innovate UK.
Matt:
To find out more about our work delivering the Ofgem Strategic Innovation Fund, head online to Ofgem.gov.uk/SIF. That link is in the show notes, the description that accompanies this episode in your podcast player.
Paul:
There are plenty of innovators and entrepreneurs already succeeding in this space and making great progress; changing the landscape of energy distribution. Here’s one of those right now.
Jo-Jo:
I’m Jo-Jo Hubbard. I’m the CEO and co-founder of Electron and we build software for energy and flexibility marketplaces.
Paul:
Jo-Jo, it’s really nice to meet you. Thanks for taking the time to chat with us today. We’re standing in front of your stall for your company, Electron. Why don’t you tell us a bit about it?
Jo-Jo:
We, essentially, build software that we provide and in terms of a marketplace, it’s a service that lets the network operator, operating as a DSO, pay local generators or local flexibility to turn up or down at the right time and the right place in order to ease congestion on the grids. What I think is quite unique about what we do is we also enable generators, let’s say, who have been curtailed due to lack of network capacity to buy their way back online or electric vehicle charging stations that want to charge more cars than they have network rights to and to buying more access to the network by paying other people to use less power at that particular time and that particular location. It’s all around using power at the right time and in the right location right down into the distribution grid because, essentially, with the renewable transition, everyone is using more and more grid at the local level but they don’t need to use it at exactly the same time at exactly the same place. So let’s use it more efficiently.
Paul:
This is a real sweet spot area just now for our networks.
Jo-Jo:
It’s pretty sexy.
Paul:
It must have been easy for you to make this business a reality then.
Jo-Jo:
[Laughter] Yeah. I mean it’s been quite a journey and, as you can imagine, the market has changed quite a lot in the last six years since we started. I think, in this space, there’s a lot of early access to innovation funds to try out a bunch of different models and say, ‘How does it work in the UK? How does it work in Canada?’ We did South Korea. We did Switzerland. We did California but it took quite a long time to work out what the repeatable technology platform or backend looked like that served all of those different locations and all those different market types. That, for us, really has been the commercialisation journey. We’re finally at a place today where we’re selling software as a service and people are using things we’ve already built instead of doing it completely bespoke every time.
Paul:
That’s really interesting. Thanks, Jo-Jo. One of the words you used there that I’m really keen to understand more about is your offering being repeatable because for a company to be successful at scale, you have to have something that is repeatable. Can you talk a bit more about how you came to that?
Jo-Jo:
Yeah, I think we made quite a lot of the hard trade-offs early on because we started from the fact that it had to work in different countries, it had to work in different levels in the network and it had to work for different types of flexibility products. I talked about things DSOs are buying and that’s one person buying for many people and then things that wind farms are buying and that’s kind of many to many markets. So we started with that as our problem statement. The way we learnt that it worked was learning by doing and there was no other way to do it. I think that’s one of the real challenges and exciting things about this space. The next big challenge for us is then working with customers who are used to doing this completely bespoke thing and explaining what the benefit is of doing something that’s already been proven and that already works. I think we’re only just at the very beginning of that transformation from DIY with a consultant to buying SaaS.
Paul:
How do you make that first contact with a network? How do you start interacting with them to really understand what their problem is, firstly, for you to build what a solution might be and to help them understand how this can solve their problem?
Jo-Jo:
In the network space, I’d say the problems are kind of transparent. You can come to a conference like this and you can hear all sorts of problems. You can read any of the position papers or submissions. There’s so much information about what the problem is. I think when you actually start working on building a market platform, you really learn what the problem is. The problem we’re solving isn’t that we need flexibility. It’s that the way they’re getting flexibility right now is through five-year bilateral contracts and what they really need is, say, a more dynamic way of entering and leaving constraints because that’s going to get liquidity into the market. That’s going to make a battery operator decide to provide a service; whereas, the battery operator doesn’t want to sign up for five years. The problem evolves as you actually do the project but I think it’s quite easy in this space just to come to a conference like this or read some papers and hear about the vast amounts of transformation that has to happen.
Paul:
It’s a recurring theme I’ve heard from the discussions I’ve had over the last couple of days that having that face-to-face interface is a real inroad to trying to understand those problems and it’s something that we can’t necessarily replicate remotely. Something I’m really keen to understand is how you deal with competition. It’s a competitive market out there and there are a lot of innovators trying to innovate around flexibility but you seem to be able to stay ahead of that curve and ahead of the competition. What’s your secret sauce?
Jo-Jo:
[Laughter] I can’t tell you that. No, it’s not really how we think at the moment. It’s not competition; it’s growth mindset. What we’re doing in the distribution level flexibility markets... it’s such early days and the UK is moving ahead of Europe and ahead of North America. They’re going to catch up but I think, at the moment, it’s more a sense of getting people to understand that you don’t just have to turn off a wind farm. You can do Demand Turn Up. You can get a wind farm to pay a diesel generation thing to turn down. It’s more of an education thing. I don’t think we’re in a space yet where the market is saturated and we’re trying to win a contract from X, Y or Z player. I think we’re kind of communally in a proposition communication thing. I think one of the problems we had is we didn’t start by saying, ‘Here’s a flat, static procurement platform that you can have tomorrow.’ We started by saying, ‘We need to have something repeatable. We need to have some continuous scalable trading platforms,’ and that takes two years to build something like that. You’re building it while you’re doing these projects. I think we got quite good at saying, ‘Here’s the end state. Here’s what we can do today.’ Innovation in this space is a team sport. We know all the people who are buying and selling. We know what their problems are and we speak to them. There are other stakeholders in this space, like yourselves, Ofgem and BEIS. You can’t go into a dark room and build the best software ever in your garage and then raise £50 million from a VC and be everywhere in this space. Innovation is a team sport. You do it by projects and you do it by solving problems for individuals I think.
Paul:
No, that makes a lot of sense. One of the things that I’m keen to ask you a direct question on was you talked about the need to educate. Who do you need to educate and do you see that breakage there, if you like, as one of the key barriers to commercialisation for companies at your stage of development?
Jo-Jo:
Yeah. Who do you need to educate? From the top down, everyone. It’s regulators, DSOs and ESOs and they’re educating us. It’s a two-way education thing. I think to try something like Pithia, you have to tell someone why what you’re doing matters to them because there’s so much noise in this space right now. I think the very, very first thing is about understanding and saying, ‘Here’s the problem you care about most and here’s the bit of it that I’ve solved. Here’s why I’m worth your time.’ I think it’s that.
Paul:
It’s business plan 101, isn’t it?
Jo-Jo:
Yeah.
Paul:
What is it that’s going to make you happier? Here is a solution for it.
Jo-Jo:
Yeah.
Paul:
Really useful. What’s next for your business?
Jo-Jo:
Oh, gosh! Well, we’re scaling now. Essentially, we’ve got a repeatable SaaS platform. We’re beginning to introduce a couple of interesting flexibility markets. We really, really want to set a standard for this dynamic, continuous network capacity optimisation function. We see ourselves in a couple of more locations in the UK soon, I hope, but we want to take this to North America. We want to take this to Europe. I think the UK has got a real opportunity right now to export our first-mover regulatory advantage in pushing local energy and flexibility markets into these other countries that are similarly at 40% wind and solar today and want to get to 80%.
Paul:
It’s a really exciting time then. You’ve managed to go through that first hurdle of commercialisation from the start-up to a commercial product.
Jo-Jo:
Zero to one.
Paul:
Zero to one [laughter]. Now you’re on that scale-up process, do you see barriers that are similar to barriers you’ve already faced or are there new barriers?
Jo-Jo:
I think that the barriers are probably substantially similar on a kind of macro level but the story around the barriers changes all the time. We’ve kind of told the ‘now more than ever’ story for the last six years. When we first started, it was like, ‘Now more than ever because you’ve got all these renewables connecting to the grid.’ They were like, ‘Now more than ever because we’re committed to net zero.’ The recent gas crisis is like ‘now more than ever’ more than anything else because the thing that we balance the grid with today is gas. The thing we’ve got to balance the grid with in a renewable world is flexibility, clean flexibility and demand side flexibility, for example, batteries but also electric vehicles and storage. I think everyone thought gas was a transition tool for longer and now people realise we need flexibility first. We’re telling the ‘now more than ever’ story in a different way and there’s more of a reason for someone to provide flexibility services if you’re saving £600 a megawatt hour instead of £60 a megawatt hour at wholesale. I think the end goal has always been the same because we know about the net-zero transformation and the story we’re telling or the key motivating factor has changed. So I think, for us, the challenge is just keeping educating people about why this is still the thing that’s solving the biggest problem and why it’s still got to be now.
Paul:
That’s a really good overview and I want to thank you for taking the time to tell us about your company on this episode of Bright Spark. Before I finish, if you were to give one piece of advice to a start-up now, what would that be?
Jo-Jo:
There’s a lot of opportunity right now in our space to do innovation by integration. There are so many different people who will tell you that their hardware is better than anyone else’s or their tech is better than anyone else’s or their visibility but I think that a lot of the money left on the table in the clean tech space right now is just because of the inefficiencies of this person not talking to this person. I think, for me, the most exciting position at the moment is the integration of all the different flexibility service providers, renewable developers, all these different technologies, the emerging DSOs, TSOs, ESOs and FSOs. I think it’s focusing on integration on the platforms that bring all this noise together and then optimise network capacity in renewable generation.
Paul:
Super. Thanks very much, Jo-Jo.
[Music flourish]
Matt:
It’s just great to get that firsthand insight from a company like Electron; seeing them on their journey, growing, scaling and following this path to commercialisation.
Paul:
There’s no doubt that support is out there. The SIF, of course, is here to encourage and reward innovation and support that transition to business as usual. Another organisation that helps brilliantly is the Energy Systems Catapult.
Eric:
I’m Eric Appleton. I’m Incubation Manager at the Energy Systems Catapult and my role is to help innovative companies to grow their businesses and to help them commercialise.
Paul:
I’m really interested to speak to you, Eric, about the role of commercialisation as we try to support network innovation. I was fortunate enough to be an observer in one of your incubator sessions for companies that have got real potential in this space and I wonder if you could tell us a little bit about some of the challenges you see for early-stage innovations as they try to find a market and to commercialise their offering.
Eric:
Yeah, so I think there’s no end of really good technology innovation out there. What a lot of innovators struggle with is how to make a business out of that. So what we try to do, through our programmes, is to bring the commercialisation element to the fore; so not just look at how they need to progress their technology and that’s all really important but how they’re actually going to get to market. What we’ve observed in the last few years is that they need help articulating their proposition and so we do a lot of work around what is a value proposition to the end customer. What problem are you solving? What need is it serving? What’s the underpinning business model? There are a few organisations that do similar things to that but then we take it a step further and you start to look at other elements about their funding needs and their team. Have they got the right people for the stage that they’re at but also how are they going to get market? What are the route-to-market partnerships that they’re going to need? How does the value chain work within the sector that they’re looking at and which are going to be the segments that are going to be most interested in their proposition now? So not just in five years’ time when regulation changes and the policy landscape is receptive but they need to get traction now. We do a lot of work around route-to-market partnerships and segmentation so they can really understand who to target within the limited time and money that they’ve got so that they can be successful.
Paul:
It’s about shifting the mindset of innovators. Eventually, they have to become business owners and not innovation owners and that isn’t an easy thing to do. How do you go about trying to help people understand that there’s more to their business than just their innovation?
Eric:
It’s a good point you make and I think there’s some statistic somewhere that about 80% of founding CEOs don’t actually go on to take the business forward into full commercialisation because it’s a different type of person and skill set that’s needed to scale a business to the one that comes up with the idea and gets it initially off the ground. So I think that’s where we talk a lot about the team and what sort of skills they might need and where the gaps are depending on what stage they’re at. We look at the innovation journey and we’ve got this framework called the Innovation Journey Framework. It starts with ideation, then goes to a discovery stage and then into incubation and scale-up. So depending on the stage that you’re at, you’re going to need different skill sets and so we’ve come up with how to map that out and see where they are in terms of maturity. At any given point, they might be more technically mature than they are from a team or a commercial perspective.
Paul:
Eric, it’s been really interesting hearing you talk about the challenges that innovators face in commercialisation. Of course, the only one party, when it comes to commercialising an innovation, there’s a customer as well. In the network innovation space, they are typically DNOs. What are some of the real barriers or challenges that DNOs face when trying to deal with innovation and bring some of those technologies on board?
Eric:
It’s a good question. I think there’s a raft of innovation, projects and opportunities that innovators can get involved in and they get funding for that but then making that jump from an innovation project to being business as usual is where there’s a huge gap, whether it comes down to the procurement steps you have to go through and the systems that you have to be registered with, those are big barriers for small companies. Having the working capital and the balance sheet that is maybe required to participate means that, ultimately, they’re forced down a route of partnering with larger companies and more established companies. Ultimately, potentially, they need to sell out their company to those organisations just to commercialise their technology.
Paul:
Yeah, it’s an issue that I think we’re starting to notice as well. The industry is governed by the Utilities Contract Regulations and we’ve heard two sides of that story. One is that procurement works because it allows for networks to understand what the most up-to-date technology is to make sure that if they’re procuring something, they get the right offering at the right price and that they stay on the right side of regulation. The flip is that networks can work with SMEs over a number of years to build strong relationships and, ultimately, after a pilot has proven that something will work, they have to go to open tender and that SME might not be successful in that. We see that as a challenge for SMEs wanting to enter the sector.
Eric:
I don’t think I’ve seen a solution yet. Maybe we need some innovative solutions around the procurement framework and so from a commercial perspective and a contracting point of view, making it less of a barrier for SMEs to work with. In procurement terms and payment terms, for example, I’ve seen innovators getting contracts with large network operators. They might be on 90-day or 128-day payment terms. For an SME with limited cash flow, that can kill the company. So I think we need to see contracts that are appropriate for the size of the organisation that they’re dealing with and that makes it easier to do business and removes that friction.
[Intermittent buzzing sound]
Paul:
Eric, that buzzer signifies that there’s been another good idea over in another stall but it also signifies the end of our time, so I’d really like to thank you, Eric, for taking the time and joining on this episode of Bright Spark. Thank you.
Eric:
It’s a pleasure. Thank you very much.
Matt:
What a great chat then with the Energy Systems Catapult’s Eric Appleton. Eric talked about their Innovation Journey Framework. It’s very similar to our own Giant Leap Together model of challenges, ideation, incubation and acceleration.
Paul:
There are some real similarities there and definitely some real synergies. I think, from our perspective, an area where we get involved much earlier is in the challenge setting. We have a real role to play in understanding what the key challenges are for our energy networks and helping to develop what our next round of challenges looks like based on those.
Matt:
That is really how we will work together to bring these new ideas to commercial reality and help the companies to grow and flourish and be part of driving us towards the net-zero goal. It’s also how, we hope, the UK can achieve that aspiration of becoming the Silicon Valley of energy. So, listen, thanks so much, Paul. You’ve been an excellent co-host.
Paul:
No problem. Nice to be a part of it and thanks for having me.
[Music flourish]
Matt:
You have been listening to the Bright Spark podcast. Remember, this is episode six and so if you’re discovering us for the first time, go to whatever you listen to podcasts on and search Bright Spark to find the previous five episodes. There is also a link in the episode description.
Paul:
To find out more about the Strategic Innovation Fund, find us at Ofgem.gov.uk/SIF.
Matt:
Bright Spark is a Bespoken Media Production for Innovate UK. Thanks for being with us. See you next time.
[Music flourish]
Transcribed by
PODTRANSCRIBE
