Design Thinking is Changing the Practice of Energy Efficiency

Mar 6, 2017

At the recent Association of Energy Services Professional (AESP) National Conference in Orlando, I moderated a well-attended session on how demand side management (DSM) can provide the springboard for brand and design thinking - design thinking being a creative approach to product development whereby products are designed based on an empathetic customer’s perspective.

My panelists included E-Source’s Bill LeBlanc, who has written provocative articles like “Becoming the AirBnB of the Energy Services Industry,” and GoodCents’ Danielle Marquis, who has some of the best customer-listening skills of any marketer I know (her Prezi on the topic of "utility branding" has some great ideas here). During the AESP session, the three of us and attendees explored how utilities and implementers can use design thinking to better structure DSM offerings for the needs of customers. We discussed concrete examples of ways to employ rapid prototyping techniques to continually improve service offerings and brand them in a way that resonates with customers.

One concept that lit up the audience was Bill’s suggestion to listen to “extreme users” – instead of shooting to satisfy the middle of the bell curve, talk to the customers at both ends: the ones who don’t use your product at all, and the ones who are pro uber-users. Their insights will be the ones to drive improvement and innovation in your design, inspiring new features that anticipate and delight the entire customer base.

The irrepressible Bill LeBlanc soliciting input from Extreme Users

Disruption – a manageable opportunity for utilities

Innovation through disruption is a given for Silicon Valley, but can be challenging for utilities. IDEO, the mother of design thinking, puts successful innovation in the context of balancing desirability, feasibility and viability. 

Many smart entrepreneurs maintain this balance by applying a “lean startup” methodology. A key element of both design thinking and lean startup is to use a test and learn approach as an agile way to keep up with customers while staying within your business constraints. “Test and learn” requires a scientific approach to data collection and analysis, using randomized controlled trials (RCTs), which measure a treatment group against a control group. At Nexant, we use RCTs to evaluate different outreach tactics, measure mixes and a combination of other program elements (e.g. incentive levels or segmentation strategies), that are designed for specific customer requirements. RCTs start with a controlled launch and simultaneously and systematically test various techniques on random samples of the population.

Having worked at a large regulated utility in California prior to joining Nexant, one question that I kept asking as we developed the panel’s content was, “how do regulated utilities implement design thinking into DSM programs without disrupting programs, increasing program costs, and detracting from regulatory requirements?” One way to do this is to work like a lean startup, complementing design thinking with test and learn practices (which we at Nexant call Adaptive Design). Test and learn practices allow utilities to optimize program performance and reach high levels of customer satisfaction by constantly monitoring customer behaviors, likes and dislikes and then making rapid decisions about what’s working, what’s not working, and what’s missing.

Surprisingly, this kind of rigor and agility doesn’t have to be disruptive or costly for utilities. The results actually help utilities satisfy customers, meet regulatory requirements, and optimize program performance. How? Imagine designing a low income weatherization program for 100,000 customers spread over a very large area. Perhaps the program includes incentives, outreach, and direct install. The program is launched, but within the first 6 months enrollment falls behind target.  What methods do you use to investigate why program goals aren’t being met and why enrollment is behind schedule? In typical program design and implementation, you probably wouldn’t have robust tools, other than anecdotal evidence, to assess program performance. Furthermore, it probably wouldn’t be until the program was evaluated (ex-ante) that you’d get to conduct surveys or other means to really understand the barriers to participation.

What if you didn’t have to wait until it was too late to understand program obstacles and intervention methods? Timely, useful insight is exactly what Adaptive Design delivers. In the case of the low income program example, the use of RCTs and a test and learn method can provide rapid feedback and measured evidence of the impact and effectiveness of various recruitment tactics. This in turn allows utilities to make effective adjustments based on empirical evidence and customer insights, rather than launching a fully baked product which increases risk and costs if the program fails. Experimenting with alternative marketing techniques in particular, such as different messages, channels and strategies, is relatively easy to do and can lead to significant advances in effectiveness. This iterative and highly adaptive implementation strategy is well-suited to help utilities maximize cost-effectiveness by designing programs that are optimally geared to the needs of each customer and sector.

RCTs also help utilities, policy makers, and legislatures answer the question “What would have happened in the absence of program intervention?” This ability to measure the previously unmeasurable (such as savings associated with outreach campaigns and educational reports) equips stakeholders with a strong tool to advocate for and support DSM program funding.

To think about how to use entrepreneurial approaches specifically for the design of energy programs, please download Nexant’s ebook on Adaptive Design, where we explain how utilities are already successfully implementing design thinking, lean start-up  and test and learn approaches to improve their customer programs.

More resources…

Because there’s nothing like looking outside our industry to give us inspiration for innovation: