It has been just two years since the French multinational Schneider Electric set up an innovation center in Silicon Valley. But already, the outpost is helping the $30 billion company experiment with new services and business models.
One of the first examples is an offering that uses connected devices inside a consumer’s home to help them save money on their electric bill. Vice President of Innovation Paul Campbell likens it to what Uber has done in the ride-hailing market and what Airbnb is doing in the room-booking space.
The energy management and automation leader, with 170,000 employees worldwide, teamed with a technology startup to encourage consumers to use less power at moments of peak demand. How? By linking devices like WiFi-connected thermostats, electric car chargers, and pool pumps to a system that allows them to be automatically switched off or to a lower setting when utilities are trying to reduce energy consumption, like the middle of an August heat wave. Consumers get rewarded with cash for cutting their usage, much as they might earn money from renting out a spare bedroom on Airbnb.
InnoLead caught up with Campbell recently to discuss the innovation center’s focus and the progress so far. Campbell, who has been with the Paris-based company for two years, reports to both Prith Banerjee, chief technology officer, and Jean Luc Meyer, SVP of strategy and innovation.
InnoLead: Why did Schneider decide to open an innovation center in Silicon Valley?
Paul Campbell: Schneider Electric had been looking to expand its innovation and technology programs in the Bay Area for a while, and the timing was perfect. We’re at the heart of the IT/OT convergence in areas like smart buildings, smart grid, smart home and smart cities. [IT refers to information technology; OT refers to operational technology — hardware and software that controls physical devices like a generator or light fixture. See the illustration below.]
InnoLead: What’s the center’s focus, and what kind of progress is it making?
Campbell: I had a vision of what was needed right from the start.
1. A common definition of innovation – Horizon 1/2/3, or sustaining/incremental/disruptive, etc.
2. An understanding of how it is done today – allocation of resources across Horizon 1/2/3, open innovation maturity, etc.
3. Defining problems to be solved – is it a lack of ideas or poor execution?
4. Setting up the right environment for success.
We started with number four. We first built an internal accelerator to gain an understanding of how we could turn ideas and technologies into viable businesses faster. We built a small team and located them at RocketSpace in San Francisco. Then we engaged all of Schneider Electric’s business units and began making prototypes, running idea contests, and launching customer discovery projects. All the projects applied the principles of design thinking, lean innovation, and business model innovation. We planned to wait to expand our open innovation program until we had a good handle on the accelerator, but thanks in large part to our sitting at RocketSpace amongst 200 startups, a lot of startups knocked on our door. This led to us turning on our open innovation program sooner than expected, and we got great results immediately.
InnoLead: In what ways has it improved Schneider Electric’s innovation approach? What was innovation like before?
Campbell: Schneider Electric is a leader in innovation; all of our brand studies tell us this. Historically, much of our business has been governed by regulations and electrical codes. However as IoT and renewables become a bigger part of connected energy and automation, our customers now have more choices in how they interact with their electrical and building infrastructure. We have responded by embracing the large number of startups creating fantastic customer-centric solutions for this industry. Recently, we launched a search for startups in one of our core businesses that had identified some gaps in its long-term roadmaps. Over a 3-month period, we evaluated 200 startups and found ten that not only filled the gaps we had identified, but filled gaps we didn’t even know we had. And we’ve made several investments and formed several partnerships with those companies. We’ve launched pilots and programs and are generating revenue already.
InnoLead: Discuss some results from the center’s work: products or projects you’ve launched, or new strategies you’ve implemented.
Campbell: One project that we launched recently was in smart home 2.0. Specifically, we see the electrical infrastructure of the home as an asset that can be accessed and monetized. Think about Airbnb and how it monetizes a spare bedroom or Uber, which monetizes your car. Both monetize assets for you by providing a service layer over it. We want to do the same thing for smart home 2.0. We launched a partnership with a brilliant company, OhmConnect, to pay consumers to save energy. [The partnership is called Wiser Home.] This is not like the old model where you save a few cents off your utility bill. We are actually paying consumers about $100 a year, so consumers can buy the things they really want and save on their utility bill. It creates a double benefit. We think this is a brilliant program. We’re in the early days, but we think this is one of the most disruptive programs announced in the smart home space.
InnoLead: What lessons have you learned?
Campbell: For those of us who work in large companies, we know the challenges of convincing core businesses to free up resources to work on adjacent and new opportunities. So a key to success of an innovation program is creating an accelerator with dedicated resources and budget. Similar to the well-known accelerator model, Schneider Electric’s accelerator works on internal and external projects in short sprints to validate the idea or technology, generate first revenue or pilot, and then scale up and prepare for transfer to the core businesses at the right time. This last point is critical. I’ve learned the hard way that the decision to transfer [projects to] businesses must be made with great care. There is a “Goldilocks moment” to transfer the project, and any other time is likely to lead to the project being stopped. One criteria we have is that the business is not only generating revenue, but is also cash-flow positive.
InnoLead: How many dedicated employees work at the lab, and what’s the budget?
Campbell: We have a small dedicated team here, but a large virtual team located throughout the company. We have a small dedicated budget, but access to the research and development budgets of all the business units.
InnoLead: What advice would you offer others developing such a program?
Campbell: A key to success in Silicon Valley is that decision-making authority must reside here. Startups and investors need quick action. They need to know that decisions will be made quickly and by someone they can meet with and get to know. A core element of our program has been establishing local decision-making responsibility here to meet the fast pace of Silicon Valley. We have won deals because we move faster than other companies.