Research and development (R&D) portfolio management in the electric utility sector

Abstract

PurposeThe electric utility industry, unlike most other technology‐intensive industries, does not spend much money or effort on research and development. Many utilities do not possess an in‐house R&D facility, nor is there an R&D line item in their budgets. Over the last several decades the rate of change in the electric utility industry has been very slow and in‐house R&D efforts have not been required. As the rate of change in the industry is beginning to change, the need to pursue R&D is increasing. The electric utility industry is responding to this increasing requirement by increasing R&D budgets, and in some cases re‐initiating the R&D process within individual utilities. The purpose of this paper is to focus on R&D portfolio management efforts of various actors from different industrial sectors, to find out the best practices by using benchmarking method.Design/methodology/approachThe paper used case study approach and on‐site interviews as research methods.FindingsThe authors found that R&D management is in its infancy in the electric utility sector, while the methods established in the manufacturing sector are applicable there.Originality/valueThis study is exploring R&D management in the electric utility sector and contributes to the service innovation research stream.

Productisation: A review and research agenda

“…To address various challenges, including inefficient production of services and difficulties by customers and company employees perceiving the service offering Valminen and Toivonen (2012), Jaakkola (2011), Ardley and Quinn (2014) To make services more product-like, repeatable and tangible Salmi et al (2008) Daim et al (2013) In addition, there is literature that may overlap with the focus of this article but where the main context is different. Productisation is also presented as the evolution of the services component to include a product, or a new service component marketed as a product, whilst discussing product-service systems (Baines et al, 2007).…”

Innovation strategies of energy firms

“…One of the main challenges that firms face is in deciding which innovation strategy to develop and how to acquire the necessary technology to accomplish their innovation goals. In turn, firms are now having to work bottom up, rather than top down, as they have been to date (Daim, Oliver, & Iskin, 2013). Recently, the penetration of renewable energies as well as the empowerment of consumers-which the digitalisation allowswithin the new electrical system has created the need to develop an In short, energy firms seek to increase their portfolio both in the upstream and downstream markets.…”

Innovation Strategies of Energy Firms

“…The new trend also reflects the innovation strategies being adopted by companies in the sector, a trend that is dominated by externally performed R&D, in contrast to the situation in other sectors. This could account for the low values presented in terms of R&D effort (Daim et al, 2013; Weisenthal et al, 2012) when considering energy companies only.…”

“…These processes of constant innovation mean the sector's industrial processes are yielding to a disruptive technological transfromation. In turn, firms are now having to work bottom up, rather than top down, as they have been to date (Daim et al, 2013). …”

“…The business strategies employed in promoting these innovation processes seem, according to the sector's own reports (Eurelectric, 2013) and the literature (Daim et al, 2013), to involve close cooperation with other companies, given the high costs and the diversity of activities and knowledge (both hard and soft) needed. The existence of high uncertainty in the sector (Sanyal and Cohen, 2008), combined with such aspects as capital-intensive innovation requirements, the long life of existing installations, the amount of time required for new technologies to mature and become competitive in the market, may have caused a slowdown in the internal R&D ratios of energy firms (Gallagher et al, 2012).…”