View from the Top: Arcus Innovation Leaders Series. How business leaders use innovative approaches to shape their strategies.
Public Sector Innovation: Hydro One
Hydro One’s view on the Innovation Imperative: An interview with Mr. Tom Goldie, Senior Vice President, Corporate Services, Hydro One. Mr. Goldie argues that there is too much emphasis now on doing things which are tied directly into the short-term to productivity and profit.
Launched in May 2000, Hydro One is a holding company with four operating subsidiaries. It emerged from the restructuring of Ontario Hydro as the owner and operator of the wires operations formerly provided by the provincially owned utility. The company employs approximately 4,000 full-time staff across the province. Hydro One Networks Inc. owns and operates Ontario’s 28,600 km high-voltage transmission system. The system transports electricity to 67 large industrial customers, 55 local distribution companies, and its own low-voltage distribution business.
What does it take to innovate? The majority of executives say it involves achieving technological leadership, global presence and a comprehensive portfolio of patents that will enable the company to help define the major trends regarding products, systems and services, and to offer its customers important added value. They say it helps to cut costs, increase sales and achieve higher earnings. But how does one come up with new solutions, and can innovations really be part of a strategy plan? Arcus’ multi-industry survey of senior executives found that of all the challenges companies face in this area, the biggest challenge is finding ways to create a “climate for innovation”.
As Arcus research indicates that to do so, you need to be surrounded by highly talented people, and you need to find a way to transmit your passion to them, so they will buy into your vision of the future, perform at the highest possible levels, and come up with innovative solutions to the challenges of achieving the vision. No surprise, then, that the topic of innovation has been gaining ground as CEOs seek to incorporate concepts like “a culture of innovation” into their assessments of a company’s long-term value.
What challenges do you think Canada faces with innovation?
There is too much emphasis now on delivering results and doing things that are tied directly into the short-term to productivity and profit. Anything that is going to be a longer-term initiative tends to be frowned on and the money is put elsewhere. As an example, at the “old” Ontario Hydro, when it was an integrated utility, there was a Research Division, set up specifically for more theoretical and applied research but that also looked at innovation and new ways of doing things.
As the companies were broken up and successor companies were created, they started to move away more from actual research into more technology services. So, things that could be sold as opposed to pure research. And as the companies divided up, that organization disappeared and through a number of reintegrations became Kinetrics, which is still in existence. But because there wasn’t a specific short-term tie to any sort of innovation, it got pushed to the back burner and money was not invested in it.
In addition, when I think of innovation, especially in our type of organization, there are different types of innovation but the real benefit comes from technical innovation more so than on the managerial or investment or accounting side. That is where it is really going to take place.
How do you feel about innovation and graduates of postsecondary education?
What we are seeing is a change -a significant change- in the educational system where people are moving away from more technical education in engineering and the hard sciences, more toward finance and business education. I think we are just getting fewer people that either have that strong technical and innovative background and less of a desire to get into those areas. That is going to impede innovation.
We are seeing is a change- in the educational system where people are moving away from more technical education in engineering and the hard sciences, more toward finance and business education.
In North America generally, and Canada specifically, what’s being pronounced as the sexy career is the business side of things and not the technical or engineering side. If you look at our organization historically, to go back to the old Ontario Hydro days, everybody in a senior position in the organization was an engineer. I don’t think that was necessarily correct, either, but if you wanted to get ahead, you had to be an engineer. Now, what we are fighting against is the reaction from people that if you want to get ahead in an organization, you need an MBA.
For example, over the last few years, we’ve hired seventy or eighty new grads, primarily engineering grads, into the organization and once they start, we try to encourage them to go into a Master of Engineering program to get more technical knowledge and depth on what they’re doing. But they want to go into MBA programs and we’ve told them, we will completely fund anyone who wants to take a Master of Engineering program. In fact, we’ve got a specific Master of Power Engineering program developed, which can be done online and was jointly developed by Waterloo and Western. And we’ll pay for that but it’s a much more rigorous process to get approval to through to get an MBA. An MBA is not as beneficial to Ontario Hydro, but the students want the MBA designation.
There is not enough emphasis on the technical side anymore in the public perception. It is seen as more of a hum-drum, non-exciting line of work, which I think is unfortunate because our view is that there is lots of great stuff going on in the technical side and that’s where all the real breakthroughs are going to take place, from both economic and social points of view. But so many people these days want to be deal makers and movers and shakers that other people get pushed to the background a little bit.
How have you seen innovation translated into tangible results in Canada?
RIM is a company that I think of as a great example. I think it’s wonderful to see that Canadians have come up with something that’s so innovative. But even there, it’s kind of respected more from almost a marketing perspective rather than a technical perspective, but it is a huge technical breakthrough.
Another example is the whole advent of nuclear power that was embraced by Canadians. It was highly developed and was at the forefront with the ‘can do’ technology. We went from getting electricity from water turning a wheel, to burning coal, to splitting up an atom to be able to do it, which is a huge technological breakthrough. Now, the whole concept of distributed generation and solar technology and renewables, I see all of those as big innovative changes. You hear a lot about them but I don’t think people realize what a totally different approach it is to be doing that now from what we did previously.
How do you see innovation helping to preserve the environment?
I was once involved in what was called the Energy Management Branch of Ontario Hydro, which was really energy conservation. It was all based on the fact that we wanted to keep from having to build another Darlington Nuclear Station and the best way to do that was to get people to use less energy; it was sort of viewed as a phantom Darlington.
Reducing the demand by the amount of supply that would be needed from another nuclear station saved all that cost. If you’re energy efficient, you’re going to save a lot of money. That didn’t really resonate with people then, but now that you have the whole environmental, green, climate change triangle, I think people are buying into it much more and they’re in fact willing to pay more for the product, if it’s going to preserve the environment.
I think people look at nuclear and are concerned about the whole issue of radiation, but they also realize that it’s a safe technology and a cleaner technology than burning coal or oil and eliminate some of the problems with hydro electric stations and their impact on the environment. The whole move to nuclear and to renewable is driving things and, of course, the more time you invest in the technology, the cheaper it’s going to become so the prices drop over time fairly substantially.
What would you say are the two top things that need to be done to promote innovation and change?
Well, I think we’ve got to deal with the education system. We’ve got to say that innovation is as important as the business side of the equation so we want people who are going to go into areas, who are going to understand what breakthroughs are all about. I think that’s one.
And I think in the work environment, that organizations and institutions have to respect innovation as much as they do bottom lines and realize that one leads to the other and short-term, you could probably turn a bigger profit by not investing in innovation but longer-term that’s just not going to work. You’ve got to put the investment in it to keep yourself sustainable.
Do you see a difference worldwide in terms of the pace of innovation?
It’s interesting, if you looked at India, for example, the number of technical people that are being educated and developed over there far and away exceeds anything that we’re doing here. Our experience is that students in India are going back and getting technical degrees and following that up and are not to the same extent emphasizing the business side of things the same way that students in North America are. I think it’s cultural and social and so on, but I think they understand the value of technical knowledge and innovation. Another country to look at is Japan. Technology is very important to them and what’s made them successful today. Now that being said, there are also a lot of good business people being developed in Japan so there may be more hybrid of it. Part of this is that globally there is more of a service-type economy and if we keep moving that way, we may hit a point where we’re not going to have the technology and innovation necessary to support those services.
What should drive innovation in the public sector? Both in Ontario and at the federal level?
I think what they have to do in the public sector is rationalize their operations a bit and collapse and number of the programs that they have and be able to rationalize them a little bit. Then there would be fewer programs but there would be more money to fund them and they would be more core to what’s needed to govern.
I think part of it is a federal-provincial issue. With streamlining, there may come better clarification or at least communication around the programs and it can reduce overlap and gaps, which may or may not exist, but seem to exist to somebody on the user side. I think anything that they can do to sort out accountabilities between those two levels would be helpful.Streamlining may also lead to better measurement of program outcomes, which would then let the government to better evaluate the programs to decide what to keep and fund and what to roll back or eliminate.
Please contact Merril Mascarenhas, Managing Partner at Arcus Consulting Group at (416) 710-2727 or by email for more information and to provide your feedback to Arcus.