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Eskom InitiatedOpen InnovationPilot Case Study

“Eskom Holdings SOC Limited (Research,

Testing and Development) embarked on

an Open Innovation pilot project in 2011

to fast-track finding solutions to strategic

challenges by leveraging off an existing

global system of solution providers, while

creating a local ecosystem of stakeholders

and energy solution providers. The pilot

represents a major milestone in Eskom’s

journey to create an energy innovation

ecosystem. This case study highlights key

lessons learnt from the pilot and serves

to inform recommendations for OI

programmes, especially in South Africa.”

AuthorsMaggie Fikkert (RIIS)Kammy Dhaver-Young(Eskom Innovation Circuit)Jonathan Muringani (RIIS)

Innovation CircuitSustainability GroupResearch, Testing and DevelopmentHouer Road, RoshervillTel: +27 11 629 5111Eskom Head OfficeMegawatt Park, Maxwell Drive, SunninghillTel: +27 11 800 4426 2011 – 2012

Acknowledgements

Barry MacColl - Acting GM, Research Testing & Development, Sustainability DivisionKerseri Pather - GM, Sustainable Systems, Sustainability DivisionNanda Govender - GM, Water and Environmental Operations, Sustainability DivisionLawrence Padachi - Customer Services Division, Integrated Demand Management (IDM)Andre Rossouw - Human Resources DivisionSenzo Myeni - Sustainability DivisionPrathaban Moodley - Sustainability DivisionRahsaan Arscott - Sustainability DivisionAmal Khatri - Sustainability DivisionRojane Qacha - Group Technology and Commercial DivisionChris Gross - Sustainability DivisionRichard Candy - Transmission DivisionCecil Ramonotsi - Eskom Development Foundation, Corporate AffairsLiza Van De Merwe - Group Information TechnologyDave Lucas - Sustainability DivisionIan Jameson - Sustainability DivisionDamela Mathetja - Group Technology and Commercial DivisionRego Mavimbela - Customer Services Division, IDMSipho Nxasane - Sustainability DivisionDali Ngutshane - Sustainability DivisionNkateko Siweya - Sustainability DivisionDanielle Sutherland - Customer Services Division, IDMAndreas Beutel - Sustainability DivisionHendri Geldenhuys - Sustainability DivisionTony Britten - Sustainability DivisionStuart Van Zyl - Sustainability DivisionSimon Higgins - Sustainability DivisionRobin Pillay - Sustainability DivisionEvelyn Mpshe - Sustainability DivisionKeneilwe Thejane - Sustainability DivisionDheneshree Lalla - Sustainability DivisionFrancois Du Preez - Group Technology and Commercial DivisionGerhard Gericke - Sustainability DivisionKelley Reynolds-Clausen - Sustainability DivisionMotshewa Matimolane - Sustainability Division Bonginkosi Nyembe - Sustainability DivisionColin Openshaw - Customer Services Division, IDMKennedy Subramoney - Sustainability DivisionRaj Chetty - Sustainability DivisionRobert Henderson - Sustainability DivisionRonel Clarke - Sustainability DivisionPhilip Groenewald - Group Technology and Commercial DivisionFrancois Van Geems - Sustainability DivisionFred De Villiers - Sustainability DivisionHilary Joffe - Group Communications Corporate AffairsNto Rikhotso - Group Communications Corporate AffairsDikatso Mametse - Group Communications Corporate AffairsFehmidah Koor - Regulation and Legal

Note: The above is a list of Eskom employees, these names do not reappear in the list of acknowledgements in Section 9 of this document.

Eskom Initiated Open Innovation Pilot Case Study 2011-2012 1

Contents

1. INTRODUCTION 3

2. PROBLEM STATEMENT 4

3. POSSIBLE SOLUTION 5

3.1OpenInnovationDefined 5

3.2OpenInnovationReadiness 6

3.3 Open Innovation Approach 7

3.3.1 Leverage a global OI network – NineSigma 8

3.3.2Buildingandstimulatingalocaleco-system 8

4. IMPLEMENTATION 9

4.1ProjectMethodologyandStructures 9

4.2Stakeholders 12

4.3OpenInnovationProposals/PossibleSolutions 14

5. CHALLENGES,LESSONSLEARNTANDSUCCESSES 16

5.1DEFINEPHASE 16

5.1.1Challenges/LessonsLearnt 16

5.1.2Successes 17

5.2 CONNECT PHASE 18


5.2.2Successes/Opportunities 19

5.3 EVALUATE PHASE 20


5.4 AQUIRE PHASE 21


6. GENERALOBSERVATIONSANDLESSONSLEARNT 22

7. CONCLUSIONS 23

8. REFERENCES 23

9. ACKNOWLEDGEMENTS 23

Eskom Initiated Open Innovation Pilot Case Study 2011-20122

Case summary

eskom Open Innovation Pilot Project

EskomcontributesenormouslytotheSouthAfrican economy by supplying electricityto millions of customers, spanning manyindustries and residential homes. Being

open to new concepts which can add value toEskom’s innovation cycle, Eskom embarked onan Open Innovation (OI) pilot project with the aim of strategically bringing innovations fromexternal stakeholders into its innovation cycle.Open innovation is a concept coined by HenryChesbrough in 2003, when introducing the OIconcept where organisations bring innovationsand knowledge from outside the organisationalboundariesintotheirinnovationcycletoaugmenttheirinnovationprocess.

Eskom continuously has to balance seriousexternal demands with internal capacity toinnovate, while constantly being challenged byexternal stakeholders poised to help solve someofthesecases.

Two approaches to OI were available toEskom,namely(i)developandleveragealocalOIeco-system;and(ii)tapintotheglobalNineSigmaOI network.The decision was to go with bothapproaches depending on the challenge. Eskomfollowed an OI project methodology with thefollowing phases: (i) DEFINE; (ii) CONNECT;(iii) EVALUATE; and (iv) ACQUIRE; and alignedtemporary committees to this OI methodology.Three technical problems (or challenges) weredistributed through thenetworkswhich includedenergy(localonly),safety(localandglobal)andwater(localandglobal).Theoverallresponsesindicatedthat thematurity levelof innovationswasmostlynon-commercialisedsolutions(60%).Atleast74%ofthesenon-commercialisedsolutionsemanatedfromthe localeco-system(local innovators fromSouthAfrica)andmostofthesolutions fromthe

local environment were generated by SMMEs (atleast52%ofthelocalsolutions).

Eachphase in theOImethodologypresentedits own challenges and successes, which arediscussedinthiscasestudy.Someofthepressingchallenges included the following: the definitionof the problem (or challenge) to the external communitycouldhavehadamoredefinedscope,containingnarrowerandmorespecificparametersand criteria; these challenges should have beendefined and evaluated by the same stakeholders;the change management process could havebeenmore in-depth in termsof involvementandcommunication (related to OI and the internalreach of the external media process); and thegovernanceprocess constrained the speedofOIconnectionstotheexternalstakeholders.

Eskom succeeded in developing strongpartnerships and media coverage that placedEskomas a thought leaderofOI in SouthAfricaandhelpedtolayasolidfoundationforstimulatingfuture SMME growth in South Africa. EskomreflectedthatOIwasaboutconnectingsolutionsand pockets of knowledge, often unrelated, toproblemsacrossindustries,andnotmerelyaboutfindinganovelinnovationsomewhereintheworld.OIisalsoaboutprovidingopportunitiestoexternalstakeholderstobecomepartoftheinnovationfoldofEskominaquesttostimulateeconomicgrowthat an SMME level in South Africa.

At the time of publishing, the pilot was stillon-going, hence the successful proposals havenotbeenfinalisedandreportedinthecasestudy. This case study explains the process followedand highlights the lessons learnt during theprocess, which Eskom wants to share withother organisations that are keen on pursuing open innovation.


1. IntrOduCtIOn

Eskomisthelargestproducerofelectricityin South Africa and has an extensivecustomer network which includes thecommercial, agricultural, mining and

industrialsectorsaswellasmillionsofresidentialcustomers.Eskom(2012) isamajorcontributorto the national economy and is responsible forapproximately 95% of South Africa’s electricitygenerationandsupply,andapproximately45%ofAfrica’selectricityusage.Thismeans thatEskomis also the largest buyer of coal in SouthAfrica(R25billionin2011)sincemostofitselectricityisgeneratedfromcoal.

The organisation has embarked on anextensive capital expansion programme for thedevelopment of additional power stations andmajorpower lines tomeet the surgingdemand.Eskom’mission:“ToprovidesustainableelectricitysolutionstogrowtheeconomyandimprovethequalityoflifeofthepeopleinSouthAfricaandinthe region”,means that the organisation has toinnovate continuously (Eskom, 2011, p 10). Forthisreason,Eskomconstantlyinvestsininnovation

through R&D, focusing on the development ofnewtechnologiesandhasinvestedR500millioninR&Din2011toimprovecurrentoperationsand investigatefutureenergyoptions(Eskom,2012b).

Eskom took a strategic step to open up itsinnovation cycle and pursue Open Innovation(OI), where the organisation engaged withexternal stakeholders to help address some ofEskom’s core and non-core challenges throughanOIpilotproject.Thisengagementwentbeyondcontracting or procuring services and/or goodsfrom third-party suppliers, as it entailed sharingEskom’schallenges,needsandfuturerequirementswith external parties, by encouraging them toseeksolutionstosuchchallenges.TheEskomOIplatform,withintheOIglobalandlocalnetwork,wasastrategicsteptowardspositioningEskomasadynamicinnovationthoughtleaderintheregionandintheglobaleconomy.ThesynergiesofthisOIpartnershipgaveEskomopportunitiesandalsohighlightedthebarriersandchallengesthatEskomhas to deal with in order to takeOI to higherlevelsofengagementandenablementinEskom.


2. PrOblem statement

Eskom has to deal with serious externaldemands juxtaposed with challengesto meet these demands. Many solutionproviders approach Eskom to help solve

perceived challenges, but because they do nothave insight intoand informationabout the realchallenges,thesesolutionsarenotalwayshelpfulto Eskom. In addition, the lack of a structuredprocesstohandletheseinnovationengagementswithexternalstakeholdersmightharmtheimageand brand value of Eskom and exemplify lostopportunitiesforinnovationsintheenergysector.

Currently, most innovation ideas andapproaches entail a technology push, i.e. whereideasaboutnewtechnologies,solutions,productsand services are introduced without a clearmarketneedbeingvisibleand/orwherethere isnoexistingandwillingcustomer.Insuchinstances,inventorsand/orentrepreneursapproachEskomwith the aim of trying to penetrate Eskom’sprocurement processes or of gaining Eskom’sendorsementsothattheycangettheirproducton the open market. Previously the EskomInnovationCircuitwasnotgearedtohandlesuchrequests, and as a result therewas a negativelyimpact on public perceptions about Eskom andat the same time new energy innovationswereprevented fromcomingonto themarket. Itwasclear that if a structured eco-system approachwas adopted, this approach would facilitate theinnovation process for Eskom and repositionEskomasanopeninnovationthoughtleaderwitha collaborative innovation approach.

From a theoretical perspective and afterexposure to other OI case studies whichresonatedwithEskom,theorganisationbelievedOI might be an opportunity to speed up theinnovationcycleandengagewithexternalserviceproviders (local and international) in a morestructuredwaytobringinnovations,alignedwith

realproblems,intotheinnovationprocess.TheseOIpilotprojectswerethereforeadirectresponsefromEskomtotaking theopportunities thatOIpresentedbyembracingsuitableinnovationsfromsources external to theorganisation and in thisway, build an external eco-system of innovativelocal providerswithwhichEskomcould engage.Eskomalso realised that embracingOI in SouthAfrica would put it at the forefront as an OIthought leader in the country and that localexternal challengeswould also stimulate growthat the SMME level in the local energy sector.Eskom could therefore provide themarket pullthat would ensure sustainability, growth andopportunity in theenergymarket.Thiscouldbeachieved by setting clear priorities for energy-related innovation and then co-ordinating thevarious key role-players needed to ensuremarket-drivenenergyinnovation.Furthermore,asEskomalsowishedtoexperimentwithOI,theOIpilotwasinitiated.

In 2006 Eskom established the InnovationCircuit (IC) to support one of Eskom’s corevalues, namely innovation. The IC encouragesand nurtures a culture of innovation insideEskom and this unit spearheaded the OI pilotwith the aim of proving the value of sharingneeds with outside parties to accelerate thediscovery and implementation of innovativesolutions (Eskom, 2011).Through this OI pilotproject,EskomalsowantedtoascertainhowwellEskomwasdoingwithitsownthinkingintermsof innovative ideas compared to the innovationspace outside Eskom’s boundaries, and wasopen to the discovery of truly innovative ideas. The above culminated in the core question tobeaddressed through thisOIpilotproject:How can Eskom co-innovate with local and international institutions in a systematic, consistent, effective, rigorous, transparent and measurable way?


3. POssIble sOlutIOn

3.1 Open Innovation Defined

Open innovation, a termfirst coinedby Chesbrough (2003a), hasbecome a cutting-edge businesspractice. Globally, companies

acrossallindustriesareembracingitinordertomaintain their competitive advantage and meetcustomer needs. Chesbrough (2003b, p XXIV)in his landmark book, Open Innovation: theNew Imperative forCreatingandProfiting fromTechnology(Chesbrough,2003b,pXXIV),definesopeninnovationasfollows:“Theuseofpurposiveinflowsandoutflowsofknowledgetoaccelerate

internal innovation, and expand the marketsfor external use of innovation, respectively. [This paradigm] assumes that firms can andshoulduseexternalideasaswellasinternalideas,andinternalandexternalpathstomarket,astheylooktoadvancetheirtechnology.”

SomecoreprinciplesofOIinclude:“Notallofthesmartpeopleworkforussowemustfindandtap into the knowledge and expertise of brightindividualsoutsideourcompany”and“Wedon’thavetooriginatetheresearchinordertoprofitfromit”(Chesbrough,2003b,p38).


3.2 Open Innovation Readiness

AnorganisationmustbehighlyengagedandenabledtosuccessfullyimplementOI. Figure 1 illustrates the variousquadrants into which organisations

may typically fall in terms of OI readiness. Anorganisation that is fully engaged externally and

isstrategicallyenabledwillbeinthebestpositionto implementOI successfully. In such situations,an organisation derives benefits from externallinkagesandhasenabledthenecessarystructures,processes,competencesandculture toembraceandleverageOI(Quadrant4).

Figure 1: Organisational Readiness (Adapted from NineSigma, 2012. About Open Innovation.)

External

Internal

Tactical Strategic

enable

engage

2.Closed

Innovation

1.Highly

engaged

3.Highly

enabled

4.Optimised

OpenInnovation


3.3 Open Innovation approach

Inordertoestablishthenotionofapermanentand formal platform for OI, Eskom neededto first verify and test aspects and theimplications of OI and highlight challenges

and successes, as well as the key lessons to belearnt from the OI process, which could thenbe integrated intoamore long-termsustainablesolution.The main objective of a pilot projectpersewastoascertainthebestOIapproachforEskom to follow going forward (if at all), takingthese lessons into consideration, so as to solvechallengesandleveragetheopportunitiesthatOIpresentedtoEskomandinadditiontostimulateeconomic growth in South Africa. The OI pilot projectencompassedthetwoapproachestoOIdepictedinFigure2andfurtherlistedbelow:i. leveraging a global OI network.

NineSigma is an OI organisation with anetwork of solution providers. This is the

largestsuchnetworkintheworldandspansall industries, geographies and technicaldisciplines.Thisglobalnetworkoffersaccesstobothpatentedandpre-patentedknowledgeand intelligence capabilities. Through thisapproach, Eskom leveraged the NineSigmaglobalnetworkofsolutionprovidersto linkfeasible solutions to the challenges selectedbyEskom(thesolutionseeker).

ii. Building and stimulating a local eco-systemwhich is a networkof SouthAfricaninnovators,institutions,organisations,SMEs,researchunits,etc.thatwasleveragedto solve Eskom’s selected challenges. Thiseco-system was formalised, structured andscaled up to enable a selection of externalinnovationsthatcouldsolveEskom’sselectedchallengesforthepilotproject.

Figure 2: Two approaches to leveraging OI.

Building & leverage local

eco-system leverage Global network


Creating a local eco-system aroundEskom’s value chain is closelyaligned with OI practices, whichare a set of defined processes and

engagement with virtual and physical networksto discover, isolate and implement innovativeideas, technologies, products and capabilitiesfromexternalorganisationstoaddressidentifiedproblemsorchallenges.

Eskom faces challenges requiring innovativesolutions.These challenges create opportunitiesfor making deals between Eskom (a solutionseeker)andtheprovidersofenergy innovationsintheeconomy,soenablingthesedealswillassistwithstimulatinggrowthinSouthAfrica.

With the support of the Research Institutefor Innovation and Sustainability (RIIS) as theappointed consultant, the pilot project wasdesigned to develop a database of high-techsolution providers in the energy arena to augment Eskom’s innovation capability and atthe same time to stimulateeconomicgrowth in South Africa.

In addition to a database of solutionproviders (innovators across South Africa),the local ecosystem also focused on building closely knit partnerships with institutions such as the Technology InnovationAgency (TIA), the CSIR and the technologytransferofficesoflocaluniversities.

3.3.2 Building and stimulating a local eco-system

NineSigma’s OI global network wasleveraged as one of theOI optionslisted above, since the organisationisoneofthemostexperiencedand

advanced OI service providers in the world.Founded in 2000, NineSigma has offered OIsolutions long before these solutions werean accepted management practice. NineSigmaengagesorganisationsacrossall industrysectorswith the global innovation community and

enables organisations to leverage resources tosolve immediate challenges. The organisationhas completed over 2 300OI projects and hasmore than 2 million solution providers, makingitthelargesthigh-techOInetworkintheworld.NineSigma solves challenges by connectingsolution seekers (such as Eskom) to solutionproviders (innovators from across the world)andalsoimplementsbusinessmodelstostimulatelocaleconomicdevelopmentthroughOI.

3.3.1 leverage a global OI network – ninesigma


4. ImPlementatIOn4.1 Project Methodology and Structures

The scope of the OI pilot projectwas clearly defined and includedthe definition of the challenges. (Achallengeisa“need”whichhasbeen

posedtotheopeninnovationcommunitythroughanOIplatformintheformofawrittenbrief.Thisis a clear, concise and compelling statement ofa business need to be solved, i.e. a problem oropportunity).Thenthechallengesweredeployedto the local eco-system, supportedbyEskom indefiningandverifyingtheinternationalchallengesthrough the NineSigma network, the buildingof the local eco-system, the actual local launchof the project and the evaluation of possiblesolutions to link a short-list of solutions to thedefined challenges. Therefore the methodologydeployed was challenge-driven rather that idea-

driven,meaningthosesolutionshadtobealigned with the specific challenges that were defined, andwerenotmerelyunsolicitedsolutions.

The overall project methodology isdepicted in Figure 3 below. The methodology encapsulates the identification and definitionof the challenge (the problem to be solved) aswell as the definition of the local eco-system,according to which the eco-system is built(for option ii), the connect phase where the challenges aredeployed to the local eco-systemor global network (NineSigma), the evaluation stage where the solutions are evaluated againstthe defined criteria, followed by the acquisitionof the solution by Eskom (the contractingprocess,throughlicensing,jointventures,productacquisition,etc.).

Figure 3: OI Pilot Project Methodology.

1.Define

2.Connect

3.evaluate

4.acquire


Asitwascriticaltoensurethatthechallengesweredefinedsoastoelicittherightsolutions,arigidprocesswasestablishedthatdealtwiththedefinitionof thechallenges itself.Thisprocess isdepictedinFigure4.

Structures and processes were defined tohandle the evaluation process as illustrated inFigure 4. The local and international responseswere evaluated through the same process.The local responses were submitted to Eskomthrough an Eskom OI online website whereas

the international responses were submitteddirectly to NineSigma’s website.As indicated in Figure5, thereweretwostagegates–technicaland commercial evaluation. The technicalevaluationcommitteewascomprisedofsubject-matter experts who reviewed the responsesaccording to the technical specifications andcriteria defined during the definition phase. Bycontrast,thecommercialevaluationprocesswasunderpinned by Eskom’s procurement policiesandprocedures.

Figure 4: Definition of the Challenge.

EskomOIstakeholdersprovidelistofpossiblechallengestoadvisorycommittee

Challenge workshopto enable finallistofpotential challenges

Presenttentativelisttosponsorandlinemanagers

Identifiedsubjectmatter

expertsperchallenge

Write up challenge andpresentforsign-offbysponsor


Figure 5: Evaluation Process.

The structures for the pilot project weretemporary and the teamsconsistedof technicaland business stakeholders who contributed totheprojectoutsidetheirsetjobmandates.ThereisanintegratedfeedbackprocesstothesolutionprovidersandoncethesolutionhassuccessfullymovedpastGate2,theAcquisitionstagewillbeenteredwherethefinalsolutionisselectedandacontractisplacedwiththesolutionprovider.Thefinalsolutioncouldeitherbefurthercollaborativeresearch (depending on the maturity of thesolution), a pilot project or a demonstration of

afinalproductforfurtheruptakebythebusiness,ifthebusinessagreesthatthefinalproductisfitforpurpose.

The following committees were temporarilyestablished to manage the process of the OIpilotproject:• OI Stakeholder Advisory Committee –

consistedofateamofsubject-matterexpertsandopen innovationchampions inorder topromoteopeninnovationaswellasconducttheEskomOpenInnovationpilotproject.Thecommitteewasmadeupofsomeinfluencers

Feedback to Solution Providers

technical evaluation

Proposals

ProposalsnotfitforEskom(gate1&2)maybereferredtofillotherstakeholderspipelines

SolutionsfitforEskommayneedsupportofotherstakeholders

Gate 1 Gate 2Solutions fit for eskom

Commercial

Go

Go

Stop

Go

StopStop


4.2 Stakeholders

The local eco-system was comprisedof external stakeholders which weredefined during the DEFINE stageof the methodology, following the

challenge definition in the same phase. The eco-systemdefinitionandconsequenteco-systemdevelopmentwere fullyalignedwitheachof thechallenges that were distributed through the eco-system to obtain solutions for selectedchallenges. The main stakeholder groups thatformedpartofthepilotprojectareillustratedinFigure6.

Figure 7 depicts the overall eco-system.The light-blue outer band illustrates the localsolution providers and partners inside SouthAfricawhereasthewhiteareaoutsidethecirclesrepresentstheglobalspaceofsolutionproviders,whichNineSigmaownsastheirproprietynetwork.The innermost circle represents Eskom’s owninnovators and contributors within its ownorganisational boundaries. The IC’s mandate istostimulateaninnovationcultureinsideitsownorganisationalboundariesinthissphere.

Figure 6: Stakeholder Groups.

aswell as decisionmakers from across thebusinessanditsrolewastoadvisetheprojectteamonmattersrelatedtothechallengesfortheOIproject,ontheevaluationofsolutions,as well as to connect the OI team withother relevant expertsor stakeholders thatcouldaddvaluetotheOIprocessfromtime to time.

• TechnicalEvaluationCommittees–atechnicalevaluation committee was established foreachofthechallengesbecauseeachchallengehad its own technical domain that differedfromtheothers.Eachcommitteehadadual

function,namelydefiningthechallengeswithinput from various stakeholders, as well asevaluating potential solutions from externalsolutionproviders(localandinternational).

• Commercial Evaluation Committee – thecommercial evaluations have to commenceonce the technical evaluations have beenfinalised, i.e. if a possible solution has beenfound. This committee is responsible forcompliance with Eskom’s policies andprocedures for procurement (at the timeof writing this case study, the commercialprocesshadnotyetbeentriggered).

Media

Internal to Eskom(Staff

& Management

eskom OI Pilot

(driven by IC)

Local eco-system(Solution

providersandpartners)

Global network (Through

NineSigma)


Figure 7: Eskom Innovation Eco-system.

an Innovation ecosystem

Global Innovation Community

Large companies

Universities

MediaSmall entrepreneurial companies

Private Laboratories

National Labs

UniversityTechnology TransferOffices

NineSigma Affiliates

Individuals

Media

UniversityTechnologyTransferOffices

Retirees

Suppliers

Customers

Consultants

ResearchCentreUniversities

Government Departments

Contractors

esKOm

Innovation Circuit

local ecosystem or Trusted Networks

OtherBU’s

Other-Public,CivicBodies,Investorsetc.

BusinessDevelopment

Other


Figure 8: Challenge Deployment and Number of Solutions.

1Local only

4.3 Open Innovation Proposals/Possible solutions

One challenge for Energy1, Safetyand Water respectively wasdisseminated through the localeco-system and global network as

depicted in Figure 8 (the number of responsesis indicated in parenthesis). Eskom received atotal of 173 possible solutions through the OIprocess of which 85 potential solutions werefromthe local SouthAfricaneco-systemand88from the global network through NineSigma. The maturityleveloftheresponsesislistedinTable1,

indicatingthatthemajorityofsolutionshaveyettobecommercialised(40%commercialisedvs.theremainderthathavenotyetbeencommercialisedat 60%: 74% local and 26% global notcommercialised).Atthetimeofwritingthiscasestudy, the final technical short-lists indicatedfive solutions per category per platform (localand global) with a potential for 25 short-listedsolutions.Thefinalcommercialevaluationprocessstillhastobecompleted.

* The Energy Challenge was not run through the global (NineSigma) network

table 1: maturity level of responses/Possible solutions.

Challenge theoretical model

Conceptual model

Prototype Ready to commer-cialise

Commer-cialised

Energylocal 12 10 8 4 6

Water local 0 1 12 11 9

Water global 0 4 4 4 37

Safetylocal 1 17 1 1 3

Safetyglobal 2 8 12 3 14

sum 15 40 26 23 69

1XWaterChallenge

•Local(22)•Global(49)

1XEnergyChallenge*

•Local(40) •Local(23)•Global(39)

1XSafetyChallenge


Figure 9 illustrates the percentage split ofresponses from different types of originatorsfor the local SouthAfrican challenge, indicatingthat at least 52% came from SMEs, 13% fromacademia, 10% from individuals/inventors and9% frommultinationals, and the rest were split

acrosstheothercategories.TheNineSigmasplitfor global responses was categorised differently(notindicatingaseparateSMEsplit)butshowedthatatleast35%oftheresponsescamefromtheindustryfollowedby28%fromacademia.

Figure 9: Local Originator Categories

local Originator split

SME

6%

9%

10%

13%

52%

3%

5%

1% 1%

Academic

Consultant

Individual/Inventor

Multinational

Researcher

JV/Partnership

NGO

Employee


5. CHallenGes, lessOns learnt and suCCesses

5.1 Define Phase

The definition of the challenges isone of the critical steps to ensurethat proposals are elicited withinthe parameters set in the technical

challenge. If the parameters or criteria forinnovations are too wide, the responses wouldnot be specifically aligned to the challenges tobe solved. Hence these challenges should bevalid, real and relevant, with a clearly definedscope that resonates with the business as wellaswith inventorsoutside theboundariesof theorganisation. Therefore the framing of thesechallengesiscriticaltoelicitingtherightsolutionsto specific problems in the business.The topicschosenbyEskomwererelevantandfullyalignedtostrategicobjectivesbut thescopecouldhavebeen definedmore strictly with more specifiedparameters for responses, as this would havepreventedanumberofthemisalignedproposalsreceivedbytheorganisationandmightalsohavepreventedunsolicitedresponses.

Eventhoughthechangemanagementprocessfacilitated the engagement of the relevantmembers of management directly affected bythe OI pilot project, the process could haveentailedmorein-depthcommunicationandmoreengagement with the business itself, as thesememberswouldbetherecipientsofinnovationsforimplementationlaterintheprocess.Thislackof a more engaged and encompassing change

managementprocessdelayedthesmoothbuy-inbylinebusinesslaterintheproject.

Although the technical evaluation team consistedofrelevantexpertsandspecialists, theprojectteamfeltthatexternaltechnicalspecialistswould have added value to the definition andevaluationprocess,andshouldbeconsideredforinclusion in futureOI projects to enable value-added external input at the outset of the OIprocess.Furthermore,intermsofthecompositionofteams(inparticulartheevaluationteams),toplevelmanagementwasnotalwaysinvolvedintheprocessasthefunction isoftendelegated lowerdown in the hierarchy,which creates challengesduringthebuy-inprocess later.Topmanagementwasinvolvedintheprocessbutcouldhavebeeninvolvedmoreduringtheearlystagesaswellasintheevaluationphaseoftheprojectasthiswouldfacilitatebuy-inofsolutionslateron.

After the conclusion of the challengedefinition, a proper market study, aligned withthe identification of potential communicationchannels, would have added value to thedevelopmentandconstructionoftheeco-systemof external suppliers of innovation. Hencethis study would have been beneficial for thedevelopment of the engagement strategy, seeingthatitcouldhaveidentifiedawiderspectrumofpotentialinnovatorsacrossSouthAfrica.

5.1.1 Challenges/lessons learnt


Even when considering the view thatcompositionchanges(asdiscussedabove)wouldhaveaddedvaluetothecommittees,theOI project teammanaged to set up

thesecommitteesandstructuressuccessfullywithengagedandmotivatedmembers. This gave thecommitteememberstheopportunitytoexpresstheirinnovativeideasandexpertiseinotherpartsofthebusiness.

Aninternalmarketingcampaignwasalsorunthroughout Eskom to sensitise all stakeholdersacross the business.An interesting observationwas that one Eskom staff member submitted aproposalthroughtheOIchallengeontheexternalplatform.Thismighthavebeena resultofmorerobust external marketing or because Eskomemployees are listed as solution providers onexternaldatabases.

5.1.2 successes


5.2 Connect phase

EngagingwiththemediaandreachingSouthAfrican people (not only inventors) isa communication risk in the sense thatthe general population might perceive

that Eskom cannot solve its own problemsand is therefore“forced” to look for solutionselsewhere. This risk did materialise during themediabriefing,althoughitdidnotleadtonegativemediacoveragebecausetherealcontextoftheOIexercisehadbeenproperlyexplained.Ingeneral,SouthAfricans seemed tobepositive about theopenchallengesrunbyEskom.

Anotherrisktoconsideriswhether,inaskingthemasses to assistwith solving problems, thiscould“opena canofworms” if Eskomwasnotgeared to handle large volumes of responses.The OI campaign led to a larger number ofunsolicitedresponsesthanEskomanticipatedandtheorganisationhadtodealwiththeseresponsesindividually,whichresultedinunforeseenincreasesin work load increases and challenges, whichEskomhadtodealwithinasensitivemanner.

Amediabriefingshouldbepreparedingreaterdetailinfuture,toensurethatallpossibleinternalstakeholders are in attendance – especiallytechnicalexperts–asitcouldbeanticipatedthatthemediawouldposetechnicalquestionswhichmightnotfalldirectlywithinthescopeoftheOIlaunch but should still be handled expertly.Thepresenceoftechnicalexpertswouldalsobuildthe

credibility of the process and show that EskomdoeshavetheinternalcapacitytoworkintheOIarena.

Internal executives and management shouldbe briefed on the media content and specificdetailsofthelaunchpriortotheactuallaunch,sothattheywouldbebetterpreparedtodealwithconsequenceswhichareoften inevitable,even iftheyareofapositivenature.

After the launch of the OI pilot project, much ofthefocuswascontainedinternallyinEskominmanaging and operationalising OI inside Eskom,andtherewasinsufficientcommunicationwiththeexternalmedia tokeepthe levelsofexcitementandinterestathigh levels. Inaddition,themediacoveragecouldhavebeenwider toengagewithmorepossibleinventorsacrossSouthAfrica.

Itwasaproblemduringtheprocessofbuildingthe local eco-system (database) to motivatepotential inventors and other stakeholders toregister on theOI platformwhen they did nothavespecificsolutionstosubmitfortheselectedtechnicalchallenges.EskomhadhopedtobuildawiderdatabaseofSouthAfricaninventorsintheenergyarenawhichcouldbeleveragedatalaterstage,andnotmerelyfortheparticularchallengesposed at present. It was also felt that the OIeco-system should have been managed betterin order to “keep it alive” during and beyondthe OI campaign.



5.2.2 successes/Opportunities

The media engagement and launch ofthe OI pilot project (for the local launch) adopted a big bang approachand the response from SouthAfrican

innovators was far above expectations. Thebrand name of Eskom was certainly positivelyaffected by embarking onOI, although this wasnotoneofEskom’s initialobjectives.Eskomwasobviously seen as an organisation wanting topartnerwithexternalstakeholdersandinventorsto find solutions for problems, and as wantingto contribute to economic growth in SA andnotafraidtoadmitthattherewereproblemstobe solved that SouthAfricans could assist withopenly.Atotalof333stakeholdersattendedthenational workshops held in all the major citiesof SouthAfrica, including Johannesburg,Pretoria,CapeTown,PortElizabethandDurban.ThiswasapositivesideeffectwhichwouldbuildEskom’sreputationasadriverofinnovation.

Aconsiderationforamedialaunchthatmightaddvalueinbuildinganticipationcouldbearun-uptothe launch insteadofabigbangapproach.This should be deliberated after the launch sothat themedia could be engaged to keep theminterestedandexcited.

Therewere various positive spin-offs duringthe Connect phase, in that Eskom forged closepartnerships with stakeholders such as the

TIA (Technology Innovation Agency), the CSIR(CentreforScientificandIndustrialResearch)andother innovation players in SouthAfrica.ThesepartnershipswilladdincrementalvaluetoEskominthecourseoftime.

There may also be prospects in future ofprovidingadditionalopportunitiestoinnovatorstoexposethemselvesmoreontheOIplatformsoastoenabletheirowngrowth.Accordingly,providingopen opportunities to these stakeholders, notmerely from an Eskom perspective but also bytaking a two-pronged approach would create awin-winsituationforallparties,goingbeyondthepresentissueofEskom’sproblemsolving.

Using existing global platforms such asNineSigma (for the global challenge) allows anorganisation such as Eskom to leverage globalknowledgeresourceswithoutthecostofbuildingsuchaplatform,asittakestimetogrowaglobalnetwork of about twomillion potential solvers.This shortens the turnaround time and speedto market, accelerating the innovation cycle.However, since most of the local responsesemanatedfromSMEs(atleast52%),thisindicatesthatOIintheSouthAfricanenvironmentprovidesopportunitiesforeconomicgrowthbystimulatingSME growth, which could be explored furtherduringfutureOIprojects.


5.3 evaluate phase

There were incidents where top-levelmanagement signed off a challengedefinitionduringtheDEFINEphaseofthe methodology, but when solutions

were evaluated by the technical experts duringtheevaluationphase,theseexpertsdidnotalwaysbelievethatthesesolutionswerealignedtotheirtechnical problems. This could mean that thedefinitionof achallengedidnotcontainenoughdetailtoelicittherightresponsesorsolutions.

Itwasalsohighlightedthattheevaluationteamshouldalsohavehadsomeexternalstakeholders,for example from the customer base, in theevaluation sessions, as they would have addedvaluetothereviewofsolutionsinmatchingthesetorealproblems.Itwasalsostatedthathigh-level

management should formpartof theevaluationprocess since the definition is signed off at thislevel,asitwouldfacilitatebuy-inatalaterstage.Delegating theOI-related functions lowerdownin the hierarchy also posed problems as thisinhibited top levelmanagement’sbuy-in lateronintheprocess.

Furthermore,sincetheOIprojectfellbeyondthe job mandate of most members, the co-ordination of time for the evaluation processposedchallengesas theevaluationmeetingshadtofitintobusyindividualschedules.

ForfutureIOprojects,theEskomemployeesinvolvedshouldbemandatedandcompacted totake part as thiswould encourage commitmentto the project.



5.4 acquire phase

Governanceprocessesandproceduresalways pose challenges, in particularfor public organisations. In SouthAfrica, public organisations have to

complywiththePublicFinanceManagementAct(PFMA),whichhasstrictprocessesandproceduresfor contracting with external providers in thesupplier chain management process (SCM)(National Treasury, 2012). The procurementprocess has to be completely transparent andall purchases (services and products) shouldgo through a tender process which is a time-consuming process.Therefore, finding new ideasexternal to Eskom through an OI process stillhas to complywith governance procedures andpoliciesandcannotsidesteptheprocess.

With reference to Figure 1 which depictstheOI readinessof anorganisation, it is criticalfor an organisation to be enabled internally todealwithOI. If it isnotgearedforOI internally(procurement and legal, for example) this could

certainly pose challenges and delays later on intheOIprocessduring theAcquirephase.Oftensmaller inventors cannot afford lengthy tenderand evaluation processes and have expectationsthattheywillconnectwithanorganisationsuchasEskomthrough theOIprocess, andnothavetofollowanextensiveandtime-consumingtenderprocesswheretheyhavetocompeteonceagainagainst other innovators through yet anotherprocess. It is therefore critical to engage theprocurementand legal functions in thebusiness,beforeinitiatinganOIproject,ascomplyingwiththedefinedgovernanceprinciplesandprocedureswillcauseabottle-necklateronintheprocess.

Consideration should also be given toadvancingthetenderprocessatafarearlierstageintheOIprocessinsteadofatthecurrentlaterstage.Furthermore,inventorsshouldbesensitisedbeforehandtothesepoliciesandprocedures,evenasearlyasduringtheConnectphase.



6. General ObserVatIOns and lessOns learnt

The main objective of the IC Unit in Eskomistobeacatalystforinnovationandtonurtureacultureof innovationat Eskom across at least 40 000

staff members in the organisation.As IC is notmandatedtocomeupwithideasand“sell”theseto the business, implementingOI at EskomwasnotwithinEskom’susualoperatingstructures.Forthisreason, temporarystructureswere initiated.Considering that innovations either comefromwithin theR&DDivision at Eskomor areinstigatedbythebusinessitselfwhichmayresultinanR&Dprojectifthesolutionistechnical,OIwas (and may still be somewhat so) a foreignconcepttoEskomandisyettobefullyentrenchedinthebusinesstoensurecompletebuy-inacrossthe various divisions. Uplifting Eskom to higherlevelsofenablement(asperFigure1)mayrequirea deeper level of internal sensitising, cross-functional engagement and change management,aligned with more permanent OI strategies,structuresandresourcestoenableasustainableOIsolutionatEskom.

An Eskom leader involved in the OI pilotproject indicated that existing, but completelyunknownandnovelinnovationsareinaminorityacrosstheworldandthatbusinessstakeholdersshouldlooknotonlyforthe“WOW”factorbutalsoforthe“HOW”whensearchingforinnovativeideas, because what makes OI so compellingis that it is anovel connectorof innovations toexisting problems across disciplines.What wasindicateswasthat:“Itisnotjustthedotsthatareimportant,butratherthejoiningofthedots.OIisaboutthearrowjoiningtheblocksofknowledge.”It is also a belief among the Eskom leadershipthataninnovationidentifiedisnotaninnovationuntil it has been implemented successfully.The

acceptance and diffusion of innovations areoften a time-consuming process and in EskomthequestionwhetherthisOIpilotprojectwasasuccessstillhastostandthetestoftimebeforeitcanbeanswered,especiallyinviewofthewayinwhichsuccessismeasuredatEskom:“Appliedinnovationisacriticalmeasureofsuccess.”

Apart from the fact that the OI pilot project generatedmultiple solutions to problems, manyother spill-over benefits have already beenrealised, including the branding of Eskom asan OI leader in SouthAfrica, the many strongpartnershipsforged,alignmenttoEskomstrategicobjectives,theinternalmotivationandexcitementthathavebeenalignedwithamorecollaborativewayofenablinginnovatingandthepotentiallyhugeopportunities associated with SME stimulation,whichcouldultimatelyhaveaverypositiveeffectontheSouthAfricaneconomy.

IntermsoflocalversusglobalOI,stimulatinginnovation in the local South African environment would mean enormous opportunities for localeconomic development. Associated with thespecificparametersinthedefinitionoftheactualproblem/challengewhichcouldbealignedwithjobcreation,thebenefitsoftheseopportunitiescouldbegainedthroughanOIprocess.EvidentlyglobalOI could connect South African organisationsto previously untapped networks, innovatorsand potentially novel innovations aligned withunsolvedproblems,especiallyconsideringthatthematuritylevelofinnovationsemanatingfromtheglobal environment was marginally higher thanthematurity level of local solutions.The Eskomleadership also believes that directly involvingthe inventor with the implementation of the innovationcouldalsobebeneficialtospeedingupthebuy-inanddiffusionprocessofideasatEskom.


7. COnClusIOns

9. aCKnOWledGements

8. reFerenCes

The IC Unit’s mandate since 2005has been and still is to stimulate acultureof innovation at Eskomacrossapproximately 43 000 employees.This

culturehascontributedtoenablingEskomtotakeastepclosertothe“OptimisedOpenInnovation”status that is defined in Figure 1. However,for Eskom to embraceOI fully and become anoptimisedOI-enabledorganisation,Eskomwouldhave to enable internal divisions, policies andprocedures such as governance and compliance,

whichwouldbe a challenge in itself consideringthe stringent public policies with which theorganisationhastocomply.Findingamiddlewaywouldbeanopportunity forEskomsinceOI, inparticularthroughlocaleco-systemdevelopment,wouldstimulateeconomicgrowthinSouthAfricaandprovideopportunitiesforsmallandmediumplayers in the energy arena to become part ofEskom’s innovationprocessthatwould“connectthedots”andenableabetterfutureforall.

Eskomwishes to extend its appreciation to external stake-holders; IDC, DBSA, CSIR,TIA, SANEA,SAAEA, DST, DTI, DoE,WISA, SAIEE, SAEE, SEDA, NCPC-SA, Innovation Hub, SA universities, RIIS,NineSigmaandex-Eskomemployee,WilliedeBeer.

Chesbrough,H.W.,2003a.TheEraofOpenInnovation.MIT Sloan Management Review,44,pp.35-41.

Chesbrough,H.W.,2003b.OpenInnovation:The New Imperative for Creating and Profiting from Technology.Boston:HarvardBusinessSchoolPress.

Eskom,2011.Eskom Integrated Report.Johannesburg:Eskom.

Eskom,2012.EskomCompanyInformation.[online]Availableat:<http://www.eskom.co.za/c/40/company-information/>[Accessed25March2012].

Eskom,2012b.EskomFactorReport.[online]Availableat:<http://www.eskomfactor.co.za/eskom-factor-catalyst.php>[Accessed26March2012].

NationalTreasury,2012.Legislation,PublicFinanceManagementAct–PFMA.[online]Availableat:<http://www.treasury.gov.za/legislation/pfma/Default.aspx,[Accessed26March2012].

NineSigma,2012.AboutOpenInnovation.[online]Availableat: http://www.ninesigma.com/WhatWeDo/AboutOpenInnovation.aspx[Accessed26March2012].


Eskom InitiatedOpen InnovationPilot Case Study

“Eskom Holdings SOC Limited (Research,

Testing and Development) embarked on

an Open Innovation pilot project in 2011

to fast-track finding solutions to strategic

challenges by leveraging off an existing

global system of solution providers, while

creating a local ecosystem of stakeholders

and energy solution providers. The pilot

represents a major milestone in Eskom’s

journey to create an energy innovation

ecosystem. This case study highlights key

lessons learnt from the pilot and serves

to inform recommendations for OI

programmes, especially in South Africa.”

AuthorsMaggie Fikkert (RIIS)Kammy Dhaver-Young(Eskom Innovation Circuit)Jonathan Muringani (RIIS)

Innovation CircuitSustainability GroupResearch, Testing and DevelopmentHouer Road, RoshervillTel: +27 11 629 5111Eskom Head OfficeMegawatt Park, Maxwell Drive, SunninghillTel: +27 11 800 4426 2011 – 2012

eskom initiated - solexinnovation.com case study aug 2… · 4 eskom initiated open innovation...

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