Innovating with Purpose in Canada’s Energy Sector
Guest Blogger: Dale Austin, Principal, Tessellate Inc
It’s no secret that there are a number of challenges facing Canada’s energy sector. We are all aware of the issues around market access and pipelines – namely that it is difficult if not impossible to build one, particularly one associated with the oil sands. There are also a number of other factors driving energy companies to take another look at how they do business. These include:
- Changing consumer demand.
- The need for performance improvements in order to lower production costs and meet shareholder demands for higher returns.
- Increased regulatory uncertainty and costs of compliance.
- Access to financial, equity and risk management markets.
- Long-term waste handling risks.
- Competition for talented employees.
- Ability to earn and maintain public support in response to growing local, regional and global concerns.
For the energy sector to overcome these challenges, companies must strengthen their innovation efforts as part of an integrated process for solving complex problems. Innovation is often viewed, incorrectly, as a unique process. It is seen as a line item, such as research and development, or a single transaction in a chain leading to some new technology or product. In fact, innovation has many faces:
- Innovations that are technological and social.
- Innovations that are either incremental or breakthrough.
- Innovations in strategy, products and services and support systems.
- Process innovations (changing the way work is undertaken).
- Innovations in culture (changing the organizational structure and operating principles, including changing attitudes and behaviours).
Energy companies are well aware of the challenges they are facing and, for the most part, their initial approach to innovation is to look internally to their own dedicated R&D arms for solutions. Alternatively, they turn to a few large service providers where long-standing business relationships are in place.
This inward looking, old-school approach to innovation is insulating energy companies from different types of innovations and from a significant number of smaller solution providers in both the energy sector and other economic sectors where successful innovations could be adapted for use in the energy sector. The innovation challenge in the energy sector is exacerbated by the disconnect between the development of innovative solutions and the readiness of markets to receive those innovations at the appropriate time. Market intelligence related to supply chain needs (demand-pull initiated by the energy sector) is not systematized or supported by sustained sources of intelligence.
This leaves entrepreneurs to hope that there is a market for their product and/or service rather than knowing exactly when the market will be ready for their innovation to be deployed. This lack of market understanding, combined with structural and capacity challenges for energy companies to accept different kinds of innovation means that potential innovations are left without markets and do not get beyond the prototype or start-up stage. A systematic, strategic sourcing approach to innovation for Canada’s energy sector would embed innovation all along the supply chain by:
- Clearly defining the challenges facing the sector to help set the initial market for potential innovations. Challenges could range from the technical and specific (real-time, in-pipe environmental monitoring) to blue sky (zero emission oil sands production).
- Improving the industry’s capacity to interact with the universe of solutions-providers and with each other.
- Accelerating access to insight and intelligence to ensure that there are markets ready to accept innovations as they move through the innovation continuum from basic and applied research to prototyping and testing and finally to commercialization.
- Positioning companies and organizations in Canada’s energy sector to rapidly innovate and drive new performance expectations.
Innovation is more than a creative idea or a new technology. Innovation is the application of creativity to solve a complex challenge — creativity that supports the generation and acceptance of new ideas, processes, products or services or the refinement of old ones to improve performance. Canada’s energy sector needs a more systematic approach to innovating with purpose.