A discussion about Uber, Airbnb, disruption and the Walt Disney principle.
Today we have met in this magnificent building, with all its different windows, in order to take a few peeks at the future as well as a few back at the past, and to adopt differing perspectives.
Mr Werner, the topic of the Internet goes back to the year 1969. It was developed by the US Army and only later did it move in a more business-related or commercial direction. When was the first time you came into contact with the Internet?
During my degree course – business engineering – in Hamburg in 1993. As part of a software internship I was given the task of compiling a so-called “editor” for the Internet. I found it fascinating. Most of it was entirely new territory.
IT is the abbreviation for information technology, the umbrella term for information and data processing. So how big was a data machine in the 1990s?
The enormous machines that existed at the time filled entire datacentres. At that time, everything was bigger, slower and less complex. The development up to now has been breath-taking, albeit not without downs as well as ups – think the dotcom bubble in the 2000s. Nevertheless, the development has been astonishingly fast.
Was the term IT understood rather differently at the time than it is today? Or is it still all about information technology and data processing, with only the types and methods having changed?
I believe that 20 years ago IT was primarily what happened down in the engine room, the datacentre. The important thing was that the servers were running. E-mails were frowned upon in board rooms. The penetration of processes by IT has changed phenomenally over the last few years. We therefore also talk about IT as the enabler, i.e. that IT facilitates and optimises IT business models.
How would you explain to an outsider, in two sentences, what you do at OGE?
I am responsible for IT and try to use IT to improve business processes and facilitate new business models.
And what does it mean to be responsible for IT at OGE?
The simplest explanation is that we ensure that everyone is able to do their job – with IT; from the hardware and software, to mobile end devices, all the way through to the printer. But in all honesty it’s much more than that. Two thirds of our IT team, i.e. approximately 40 out of 60 or 70 internal colleagues, plus a good 30 contractor staff, work on projects relating to the future, things we have to do because they are required by the regulator, and we want to do because they take us further, optimise us and are innovative. That’s really the core of IT. Integrated into these processes are partners like HP, SAP, ATOS, BTC, PSI and others, which we direct accordingly. That’s a large part of our business. So it’s not just IT, but also a lot of direction and management.
You say you are responsible for ensuring that the IT-supported business processes run smoothly. Are you also responsible if something is not running properly?
Yes, absolutely. For example, a short time ago we had a big outage of our VTP platform (ed.: Virtual Trading Point). The error was with the provider, but we as IT bear overall responsibility. That means we have to explain to customers and specialist departments why things aren’t working. Of course the priority is to resolve the issue and get the process up and running again. Afterwards we look at “lessons learned”, so that we can avoid making the error again in future. But errors do occur: the important thing is not to take them too lightly but also not to dramatize, and to manage everything professionally.
What do you like about your job?
I like the fact that, within the context of the projects mentioned, we have the opportunity to shape the future of the OGE. I like the fact that I have a great deal of freedom. OGE offers the freedom to shape things if you want to. With innovative themes in particular, which are often still sometimes derided, I want to be involved in shaping processes, including for OGE. I find this part of the job really enjoyable.
IT and the future: the two belong together somehow don’t they?
One hundred percent. We need only look at the transformation of the energy industry and IT: two areas with extremely high degrees of change. If you can be involved in shaping things here and you do it appropriately, then it can be really fun and you can really have an impact.
IT has developed enormously since the 1990s. Can this development continue at this rate or will the momentum slow down at some point?
I believe it will continue that way for a time. More and more IT and digital developments involve the private sphere as well as the business world. The Hanover Messe in April highlighted this very clearly once again: everything grows together and IT is always part of it. Virtual worlds are playing an ever greater role. In my opinion there is no end in sight for now.
We hear and read that companies like Google are miles ahead of us in terms of software development. Who exactly is Google in Germany?
Google is unique, no question about it. But there are also companies like SAP, Europe’s biggest software manufacturer. Google, originally founded as a search engine, comes from the consumer corner and grew with the Internet. SAP was already casting business processes in software back in the 1970s. Both Google and SAP are continually looking for new business models and have now, for example, developed their own cloud solutions, which relate to the storage and use of data. If you ask me, SAP is more on the ball with innovative themes in the business environment. For example there are many foundations and university-linked institutions set up by SAP where think-tanks develop which, amongst other things, also come up with new ideas and business models for SAP.
I have often also heard the expression “agile working” in relation to agile software development. What does that mean? Do several people work on and programme the same product at the same time, one day one, one day another? Is that what is meant by agile working or is there more to it? And is it purely an IT topic?
You’ve got the right approach, but now there are ever more experts who take it to a higher, corporate-cultural level. An agile company has other ways of working. It is very communicative as, for example, an agile process starts with a brief determination of the following each morning: What do I want to do today? What did I do yesterday? What do I need to do tomorrow? Staff meet up every day to discuss this, certain things are discarded again, new approaches are defined – so it’s basically an agile process. We have discussed this at OGE too and want to try it out in specific areas. Regulatory requirements generally come far too late, i.e. in the spring or summer, and then have to be implemented in the autumn: there, an agile approach would be ideal under certain circumstances, because it would mean quick results. Before we get that far though, we need to do a little bit of “mind-changing” in the heads of those responsible at OGE.
So that means you’re going to do a pilot experiment in your IT division?
When will that launch?
We’re working on it now. The recently implemented organisational changes, which mean we now want to address the topics of innovation and the future together in the team and work precisely according to such methodology, support this.
What is the reaction of OGE’s senior management to the topic of “agile working”? Do they welcome it?
There are varying levels of approval and support. Part of the senior management is very much anchored in the here and now and places a great deal of value on the fact that we are in a good position today, so their focus is elsewhere. Another part also places value on the fact that we are in a good position, but at the same time looks very far ahead into the future. This part is more keen on this approach.
Who will lead the “Innovations” team?
My impression is that we will set up a sort of matrix structure so that each of the heads of department will have a certain responsibility with regard to specific themes. The team will organise itself independently. That’s feasible thanks to the differing areas of focus: one takes care of data, another mobility, another collaboration, etc. In my opinion it doesn’t really require a lot of leadership; my idea is to lead through results, and it is precisely here that we want to try out this agility.
Results: an important keyword. At what point does one become innovative? How is innovation manifested? How can it be measured? And what does a company like OGE then do with this result?
These are questions we are always asking ourselves when we discuss this issue. At an innovation workshop we held this spring, we identified that there is innovation in three areas: a) orientated inwards in the area of process optimisation, b) in the area of expansion and/or renewal of the existing business model, and c) with entirely new business models.
With process optimisation, for example, processes in dispatching are optimised by means of innovative and digitalised tools, which is measurable. That would be a project in which one could measure whether processes have become faster or more stable.
On the topic of expansion of business models I look, for example, at “transport-related services”, which has become a huge initiative at OGE. These themes can also be measured pretty well.
Or new business models that have nothing to do with gas transport: a good example is the smart meter roll-out. If we as OGE become engaged and open up a new branch of consultancy for energy, that would be a new business model. Of course we must consider very carefully whether that’s something we want, because it doesn’t actually have anything to do with what we do originally, and whether it really pays off. But I believe we cannot get around the fact that our business model also essentially harbours a risk.
In all frankness, do we as OGE actually have any alternative to exploring new paths?
I believe not, and this is something that is a must for younger colleagues too. We are what we are: a gas transmission company. If at any point there is no more natural gas, then we will have to transport something different. But that will also need to be defined first, it will need to be explored, and for that you need a market and in that market there will no doubt also be rules, i.e. some sort of regulation. These are precisely the points we are giving thought to and indeed must give thought to.
Innovation and the capacity for innovation: do you believe anybody can be innovative?
Most definitely, yes. I believe the capacity for innovative thought and action is a basic attitude, coupled with a touch of risk tolerance. Have you ever heard of the Walt Disney principle? It concerns the topic of “innovation” and has three levels. The first level is the dreamer: at first you’re just crazy, meaning you’re limitlessly innovative. The second level involves the realist: he or she tries to plan the whole thing. And at the third level comes the critic: he or she attempts to break the whole thing apart.
If you go through these levels iteratively, then you have a good chance of coming up with robust new ideas and thus innovations. Hopefully there is a little bit of all three types in all of us: simply dreaming does no good, and equally useless is merely thinking about how to break an idea apart. Unfortunately that is a popular attitude at OGE; I am often told why things will not work. Why not use this energy to think about how things could work (differently)? There something needs to happen in our thinking in order for us to create something sustainable. The ideas are there – I can see that from so many of the discussions I’ve had. But they come to nought if we do not take the time, space and money to invest in these topics.
A very popular word at the moment, particularly in connection with digitalisation, is “disruption”. What exactly is that?
I have always presented disruption as a form of cannibalisation, for example the cannibalisation of business models: With a new business model I attempt to trump my own business model or parts thereof, or perhaps even to destroy it. I’ll give you two examples: the iPhone trumped the iPod. These days I don’t need an iPod anymore because I can listen to my music equally well on the iPhone. Second example: With the Kindle, Amazon virtually cannibalised its own books segment and made sure that sales of “real” books would fall significantly. That’s conceivable at OGE too: a hydrogen pipeline instead of a natural gas pipeline or a power supply line through the pipeline instead of natural gas transportation. This would take away sales on the one hand and bring in sales on the other, because it is believed to be more future-compatible.
The core element with disruption, therefore, is that a company virtually cannibalises itself or parts of the business model in order to become more future-compatible with the changes connected to it.
Exactly, that’s one side of it. Disruption can of course come from outside too. For example Uber, the private version of taxis or Airbnb as a form of disruption in the accommodation sector. Uber’s business model permits private individuals to transport other private individuals in their cars from A to B, so it represents disruption in the taxi business. In Germany, however, it remains outlawed. Digitalisation plays an important role in all the examples given because these business models function primarily via IT. You need a smart idea, then an app – and then you can implement it relatively quickly without having to make huge investments.
So disruption is actually nothing to be afraid of? It’s a quite normal aspect of further development with, depending on the circumstances, either more or less dramatic consequences when the new replaces the old.
Exactly, it’s like a purifying storm or a fire. Plants are able to flourish afterwards.
You want to shape things, and you are even restructuring your own division and repositioning the theme of innovation. I would assume that you have an IT strategy. Can you tell us what this consists of in just a few sentences?
For our IT strategy we ask ourselves three core questions: What do we do? How do we do it? With whom do we do it? As a consequence, the fourth question then arises: What can the whole thing cost?
The question of “What do we do?” is primarily about the topics of standardisation, digitalisation and automation of business processes. The question “How do we do it?” concerns a sort of structural planning, a kind of architecture. We don’t want things to be all higgledy-piggledy, but rather in suitable order. “With whom do we do it?” refers to the sourcing issue, i.e. what we do ourselves and what we do with partners. These questions from our IT strategy are enriched with a digitalisation strategy, whereby we examine the topics of innovation, new business models and how we as IT can engage with them.
So there’s an IT strategy and a company strategy. Do you drive the company strategy or are you part of the implementation of the company strategy? Who drives who at OGE?
Generally speaking the company strategy should drive everything else. Thus an IT and digitalisation strategy would be sub-strategies derived from a company strategy. As part of the company strategy, we have the themes of service and regulation, from which areas for action emerge. With the IT strategy, however, we have been at it for longer. What this means is that both are mutually dependent. It is not the case that one strategy merely creates the blueprint for the other strategy, rather it goes in both directions.
This can be easily explained using the example of “cost efficiency”: the theme of cost efficiency comes from the company strategy. We, the IT division, can apply our approaches to standardisation and automation to achieve clear cost effects and thus support this strategy. On the topic of innovation things are a little different. There we, along with a few other specialist divisions, are the drivers and thus create impulses in the direction of the company strategy.
Would you still push your topics forward if the company’s development still needs some time?
Most definitely, I can’t waste time here. IT is an extremely fast-paced business. If, for example, an SAP system needs renewing, then it is just as essential for me to do that at OGE as it is in retail. Specific fundamental strategic pillars are in place here, I cannot and need not wait for the company strategy. The important thing is that the mutual exchange functions well.
One cannot turn a blind eye to technical upheavals and further developments in IT. However, there are potentially also issues that depend directly on the further development of the company strategy and on the further development of the business model. How do you make your decisions when it might not be entirely clear to you at any point in time precisely where the journey is headed?
With regard to technological development, we are clearly in the driving seat. When we decide to roll out Windows 10, Citrix etc., when we announce that we are setting new technological standards, then that is accepted. When commercial or strategic guidelines from OGE are not entirely clear, then we simply need to take specific assumptions as a basis.
What are the current strategic issues you are dealing with?
For us, a great deal revolves around digitalisation and around the initiatives that we have launched with the new structure. We develop so-called “use cases” with employees from specialist divisions and with students. On the one hand, this relates to the topic of the “data environment” or indeed “predictive maintenance”, meaning analyses for the optimisation of maintenance processes. Another topic is the quantity prognoses and customer behaviour. We are attempting to ease the pressure on our grid control by predicting customer behaviour. The third topic is “social analytics”: Using evaluations of social networks, we are attempting to support our construction projects and to come up with arguments. This is particularly relevant for technology and corporate communications. In relation to all the topics, we’re talking about prototypes. We build on these and then discuss with the specialist divisions whether they will bring long-term added value. If that is the case, then we continue; if not, then we call a halt to it.
Back to digitalisation: at this year’s Handelsblatt conference, one of the things RWE CEO Peter Terium said was: “In future electricity will be digital, green and regenewable.” Is “digital”, in your opinion, a buzzword or is it an emerging trend?
It represents an opportunity, an opportunity for the duo of energy and IT. These two areas have seen the biggest changes in recent months and years. Through digitalisation of business processes or even through new digital business models, we are able to create lasting added value for OGE, and that’s something we should most definitely look into.
Let me come back to costs and cost efficiency once again. All those who work in this regulated environment know that we are subject to cost regulation, that we have to allow ourselves to be measured by how efficient we are. In cost terms, IT is a pretty big item on the balance sheet. How does that match up?
Basically it is essential to always make a distinction between project and operating costs. Shareholders in particular keep an eye on operating costs and ensure they remain stable over the long term. We’ve managed that so far. However it is becoming clear that new, innovative topics are leading to increasing operating costs. I am already holding discussions with the senior management about how we can manage that. Our aim is to shut down one old system for every new one we launch, and thus in principle to save costs. Similarly to a gas-fired boiler: if you want to integrate a new boiler then you need to invest, but on the other side, the operational side, you save money. The same applies to IT systems. Our aim is to achieve an optimum. That means if the business process runs better in the specialist divisions and brings savings, then I can thus also justify rising operational IT costs.
I have just ordered a new mobile phone internally at OGE, as my old mobile was no longer working reliably due to battery problems. Now I’ve got a smart new mobile phone from Microsoft. What was the decision-making process that led to OGE offering its employees this product?
From a company perspective decisions on smartphones have a factual basis, whilst privately they are more a matter of psychology and emotions. We proposed specific devices to our senior management, partly with a view to standardisation. By selecting these smartphones we are in line with our strategy of using Microsoft products. The mobile phone you have now can be attached to a docking station. It has a level of performance which, in purely theoretical terms, would allow you to do without a PC, since you can connect a keyboard and screen to your smartphone using a docking station. To me that represents complete integration. The downside is the area of apps, as Microsoft is still some way behind here. Unfortunately there is little to be said with regard to app diversity. There we also need to consider how we can compensate for that. From a purely company perspective, however, it was a good decision. However, that doesn’t mean that we don’t review it regularly. We are currently looking at whether or not it actually matters which end device somebody has. If you can nevertheless access the company via Citrix, then it really doesn’t matter whether you have an IOS, an Android or a Microsoft phone. So then it’s more a question of cost.
Mr Werner, are you a digital native?
According to the definition by age I’m not.
So what age group does the term cover?
I think it covers people born from the 1980s onwards.
How does someone like you, who is responsible for IT development at OGE, remain up to date? How do you learn about new developments?
I really enjoy my job, which means I like to learn about new developments in my free time too, but in a more consumer-oriented way. I’m not the sort of person that delves into the latest database technologies and computing centre infrastructures. I have colleagues in my team who are much better at that than I am. But I do have one advantage, namely two children aged 18 and 14, who are therefore at the best age. If I have questions on new trends, new apps or similar, then my boys are the people to ask.
Can you often be found at conferences or trade fairs? Or do you like to go into your favourite shops that sell end devices to get an idea of these things?
Yes and no. I have just recently rediscovered active exchange for myself. In the past this area was neglected a little bit because other issues arose. What’s important for me is active exchange with other IT managers, and I also like giving a presentation every now and again. Only two weeks ago I met up with the CIO of ThyssenKrupp Steel, and we discussed digitalisation and similar topics. This helped me recognise that we’re on the right path. Not because everyone is doing it, but rather because discussions and meetings show that other industries are dealing with these topics too.
At trade shows in particular I can generally take a lot away with me, for example information about how other industries do things. I recently saw a graphic on the topic of digitalisation, showing different industries on a type of development maturity scale. Right at the top came consumer and retail – and which was at the bottom? The energy industry. So it’s very clear we’ve got a lot of catching up to do. That’s also why it’s so important to talk to other people and to get ideas for oneself. This doesn’t have to be the main focus of your activities, but now and again it’s important to get out there and to take a look at what other people are doing.
Where the Internet is concerned, there are leaps in development that are identified in figures or levels, 1.0, 2.0 etc. How does that break down?
At the beginning of the interview we talked about the Internet in the 1990s: That was 1.0, when the Internet was simply a reference book. Wikipedia was developing. I remember that back then my father gave me a large Brockhaus encyclopaedia. My reaction was “I don’t need this, I’ve got the Internet now.” It made him really sad. With the Internet 2.0 came the theme of social media, Facebook, i.e. use of the Internet as a social network. When 3.0 came along it was about real-time web, livestreaming. And today, with 4.0, it’s about networking objects, the Internet of Things. The Internet can be used for communication between items in the home, technology, vehicles, etc. One thing I found particularly impressive was an article on the emissions scandal at VW. It explained how, at Tesla, a simple software update fed into the vehicles “over the air” would have been able to rectify the damage within a few hours, with no product recall required.
Can we already foresee what form 5.0 will take?
Yes, there are already the first trends: It’s all about “emotions”. The Internet will be used for perception, and people will be able to dive into virtual worlds. As quickly as the other things have developed, I am convinced that the emotional web will also gain broad acceptance.
Most recently, the Zuse Institute in Berlin celebrated the 75th birthday of the first computer. You’re no doubt familiar with Konrad Zuse?
Yes, of course.
A great story that is rooted in Germany.
For me it always represents the German art of engineering, the mindset of our country, but unfortunately also the Germans’ incapacity to market it correctly. Because where did the invention end up? In America. The mp3 format followed a similar course. It was also developed by the Fraunhofer Institute and the Americans marketed it. It’s a real shame that’s the case, but it also shows that we are able to create things here in Germany. We just need to learn to then think them through to the end. Things are no different at OGE: we have plenty of good employees who are well placed to carry out research, e.g. the grid planners or even employees in other areas of technology, power-to-gas, etc. We need to reach a point where we carry things through to a successful conclusion. At the moment it’s too often the case that we identify: “OK, that was a great idea, but now other people are doing it.” That’s a little bit the dilemma we – in Germany in general and perhaps also at OGE in particular – find ourselves in.
You mentioned mindset, and earlier we talked about attitudes in relation to “allowing innovation” and even “allowing a culture of failure”. How do we at OGE acquire a mindset? I think I have gathered that it’s something we need.
It doesn’t just come from the management, from above. You need people who take action, who take on responsibility. They have to dedicate themselves to the issue and take time over it. What’s more, you also need to give things room and the right people need to be working on them.
Many thanks for these insights!
The interview was hosted by Alexander Land, Head of Communications and Energy Policy at Open Grid Europe, in the early summer of 2016.