Lean Energy Management Project Startups

Why Lean Energy Project Management  Startups ? 

- isn't it just a string of buzzwords ?

In this post we will explore some ideas from the business startup field (the word startup seems to have been adopted -  will not resist), which have great merit, and go further to see how they apply in an energy management context. 

This is appropriate because I believe an energy Manager necessarily has a little entrepreneurial spirit -  they have to change the ways that things are done, or in management speak - disrupt. Secondly project pitching & resourcing is lifeblood to any energy conservation initiative and if a project runs out of cash it flounders, and it is better to retire hurt than to drown.

In the entrepreneurial environment in recent months much has been made of  lean startup ideas  as described by Eric Ries, and more recently Seth Godin has made an observation that any project needs to be support declaring victory or risk an ill defined vagueness that does not deserve the title "project".

These ideas are extremely generic and much can be learned from them in other fields, but let's take a look at what we mean by "lean" and how it applies to Energy Management (beyond the obvious).

The idea of a lean business startup is one can get off the ground for minimum overhead, keeping risks (loss of control, direction, cash and credibility) to a minimum "burn rate".  Only once "off the ground", do issues like scaling, marketing, and funding come to bear.

So there we had it -  the obvious  "burn-rate"; but when talking about energy management I am not referring to burning less fuel, but to the process of managing projects that are perceived as "alternative", "non-core" or simply "damn risky." 

Since some readers of this may not be energy managers, let's first characterise the world of the energy manager. If you are doing anything at all you are using energy. the word energy is derived from activity in Ancient Greek.  There is no avoiding it. Here are five points that relate to startup issues and not in a positive way.

1) Non-core business

Most people spend their lives focussing on something other than the energy they use.  Automatic trading systems in banks buy and sell $billions for the cost of a few cents worth of energy. The energy cost of manufacturing most products remains small (though it is rising), so the energy used by a sweetshop, is rather secondary to the objective of stopping children from stealing candy, while relieving them of their pocket money.  This means that energy comes as an always essential overhead, but usually at the end of a list of other concerns. 

2) Who cares ?

The implications is that by throwing a light switch, the lowest of underpaid workers has authority to spend corporate cash on energy.  Typically the same authority as the chairman! 

3) If it ain't broke don't fix it 

Energy management enters a new paradigm (sorry horribly over-used term but accurate here).
What worked adequately but inefficiently prior to An Inconvenient Truth has now been declared broken. And there is the word "declared" - we will come back to that. But while "broken" it still works !

4) No budget line 

Since energy management is new (well new if we ignore that cave men probably practised it diligently).  The process of funding energy management projects is fraught with nonsense.

How many people would invest in a safe as houses stock that guaranteed a 50% return on investment - very few - they just would not believe it.  However, the investment criteria for energy conservation tends to run between one and three years (call it a 50% return). It seems you cannot give it away !

5) No Team 

Most companies do not have a bunch of workers standing by to pick up a new project. This creates a huge "risk" perspective from a corporate perspective.  Usually energy projects involve temporary outsourcing or redeployment of staff (who maybe responsible for keeping the boilers stoked - so to speak).

The worst of all possible worlds !

So to all you investors and VC's out there - how would you pitch an extremely scalable clean-tech project in-house with those responses to your investment criteria  - not a "fit" ?

No Team, No funds, No market, No pain, and No track record - Well you wouldn't would you ?

However, if we look at the market that can exist once barriers come down it is a monster in terms of revenue, but most energy management projects also don't scale.  They are one-building-at-a-time.

The conclusions are obvious.

The energy manager must be  founder of a startup "project"  that has little choice but to "bootstrap" - (to energy management readers "get off the ground with no investment").

As such the theory of lean startups applies strongly.  Moreover, the ability to declare a successful project or "show traction" is utterly critical to the energy manager.

So what are the key lessons for the energy manager ?

1) Proof of concept

Your project must be plausible - and so pilots and case studies will help. But to be useful they need to be very clearly documented successes.  This means metrics - How has performance changed?  In essence a pilot study for energy management should be a low cost proof of a hypothesis - which should be stated up front. To complete a pilot, it will need to be "declarable" and you move on or you drop it.

Your pilot hypothesis does not need to be in-house - you can rely on "social proof" to be sure a technology works.  Read the blogs and make the pros-cons arguments for yourself.

2) Getting over the chasm

Generally, returns on energy management projects are negative or substantial, simply because they are not trialled otherwise.  So "getting to revenue" should be everything.  Once you show payback (if not you need a new job) , ideally you can re-invest it.  This should be negotiated up-front with your "funding environment".  Get the authority to roll out the bigger projects on the basis of a success criteria, it is so much harder to tie down a deal on something that works after the event - because everyone wants a piece.  You could think of this as your intellectual property (ownership of the project) - you don't want to "dilute" your ownership until it is declared a success with you as a founder at the helm.

3) Minimum Viable Product

As an energy manager, you want to keep you investments (time, credibility money if you have some) low until you show returns.  This means you want to show returns as soon as possible.
The easiest way of doing this may be as follows:

  1. Set up some good metering (high resolution off-site weather data - maybe from kWIQly :) 
  2. Disrupt a process that you believe is unnecessary systematically (a good example is to lower hot water flow temperatures in a zone with much harsher compensation or better yet control boilers on return temperature - if you aren't already !)
  3. Record complaints ! - diligently 
  4. Rinse and repeat for a week - or maybe a month
  5. Get weather corrected corroboration that is saved energy (kWIQly again!) - a proof of savings  report takes seconds to generate).
  6. Either you are making savings or not !
  7. Poor long beer - enjoy

Note : If you can back up the savings claim with a well-documented case study (including the "no impact on comfort statistics"), then Bang the drum - ie go to your fundraisers.  They should be expecting your call - because you have set expectations

If not - declare it (at least internally) and move onto another project - if you are an energy manager there are hundreds available - because nobody is seeing the opportunities you do !