How British Gas wrote a digital disruption playbook
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How British Gas wrote a digital disruption playbook

Clare Simmons — September 2014

With their established business models under threat from lean, digital start-ups, many industry-leading corporations are seeding ‘creative disruption’ initiatives within their own ranks, hoping to beat the newcomers at their own game. Kassir Hussain, head of British Gas’s Connected Homes business unit, outlines how the UK energy company managed to inject start-up DNA into its 200-year old structure.

With a history stretching back two centuries, British Gas succeeds by applying ultra-stable business models to the delivery of proven utility services to customers throughout the UK. So how come its products have started to show up in Apple Stores alongside cool accessories like Beats headphones and quadrocopter drones, as well as on iTunes and Google Play?

Kassir Hussain-Hive

The answer can be traced back to the creation of its Connected Homes business unit, which over the past two years has built a playbook for disruptive innovation, showing an organization can use start-up approaches to move beyond its established business structures and embrace new tech-driven business models.

Initially appointed as CTO for Connected Homes, Kassir Hussain now also directs its sales, marketing, customer service and product development teams. He is also responsible for the unit’s two initial commercial offerings: the UK Apple Store-marketed Hive Active Heating, which enables central heating and hot water temperature control via smartphone, PC or tablet; and the British Gas Smart Energy Report, the analytics software tool that helps customers understand their energy use and supports the 1.4 million smart meters the company has already rolled out (British Gas supplies both gas and electricity).

Barriers to innovation

But carving out a new innovation space within such a venerable company was not without its challenges. As Hussain points out, efforts to encourage innovation in companies often fail because the ‘mindset’ of the traditional enterprise is allowed to progressively leak into the new venture.

“Applying the same old business rules to a new venture is the most destructive action you can take,” he says. Innovation projects will frequently come under attack from the core business because expectations are based on their enterprise KPIs, which aren’t appropriate for a new endeavor. In order to achieve something different, he argues, an innovation hub must be nurtured and given the scope to work towards its own milestones. “Such little ventures [can be] the future of the business, so you must prevent those corporate antibodies from killing off the idea,” advises Hussain.

Challenges can also come from within the new group, if its leaders try to create a business case around assumptions and hypotheses that draw on historical data — especially when assessing risk. “Most large organizations don't have an experimental culture,” explains Hussain, so they fail to re-evaluate assumptions and adapt as a new project evolves. Venturing outside a business's comfort zone necessarily creates a higher level of risk, which demands a more agile, reactive approach – the team at Connected Homes “went into this knowing we weren’t going to get it right first time,” he says.
Route to success

Hussain is a strong advocate of ‘lean start-up’ principles (as first proposed by Eric Ries in his book of the same name), which Connected Homes adopted in order to encourage an entrepreneurial working style and shorten product development cycles.

For such a venture to succeed, he argues, it is also critical to have a visionary sponsor within the existing corporation who recognizes the need to explore new avenues and provide scope for experimentation. “Having CIO/CTO support is imperative for innovation,” says Hussain, and from the start, Connected Homes has had the full backing of British Gas CIO David Cooper — someone who Hussain describes as “not only a very commercial individual but also a remarkable CIO, who understands the importance of maintaining Connected Homes’ agility.

“David has actively encouraged the unit to stay as independent as possible. He has also supported us by enabling the use of different IT solutions rather than the business-as-usual enterprise ones — essentially he’s provided one set of rules for the core IT team and another for Connected Homes.”

But the approach goes beyond new rules; other umbilical chords have had to be cut. As well as shying away from sharing British Gas’s existing back office functions, the Connected Homes leadership hired its own dedicated teams to give each function equal voice and operate as a unified group.

Hussain, who was previously director of technology innovation at Sky in the UK and head of futures and innovation at Telefonica O2, also convinced British Gas management that 70% of Connected Homes’ staff should come from outside of British Gas and be set up in a new satellite office in central London, away from its core HQ in Surrey and just a few hundred meters from Google’s UK HQ. An urban location was vital for attracting the best tech talent, notes Hussain, and for preventing the core business’ culture from seeping into the new operation.

Although Hussain views the Connected Homes team as an extension of the existing IT function he believes it would have been a mistake to simply poach the executives leading the enterprise operations and hand them a role in the new venture as ‘career development.’ Taking new products and services to market requires a certain type of individual and those that excel in the core business aren’t necessarily equipped with those skills, he argues. A new business unit therefore requires an influx of people with entrepreneurial technology experience, who lack the fear of failure or the corporate politics that can be so inhibiting to innovation within established organizations.
Next step

Now with around 100 staff — across product management, marketing, sales, customer services and technology — and the close to 100,000 Hive Active Heating customers, Connected Homes sees its next big goal as IP-enabling the millions of boilers in the UK and their connection to the Internet of Things. With that in mind, it has recruited an ex-NASA data scientist to help move this project towards commercialization.

Hussain advises other CTOs and CIOs to put a lot of thought into the environments for innovation they are creating — it's a bit more than setting up “ivory-tower outposts for R&D,” he says. CIOs need to recognize that great innovation can also originate within the existing IT function and engender the culture, behavior and mentality to encourage its development: “You have to recognize and reward innovation.”

First published September 2014
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