Tom Crawford, Business Leader – Consumer Insight and Richard Halsey, Innovation Director at Energy Systems Catapult. 

There is an urgent need to accelerate energy innovation and increase the uptake of a wide range of low carbon energy products and services. However, successfully developing and deploying this innovation at the pace and scale needed requires that we put understanding of consumers, their current behaviours, future needs, and problems to be solved at the centre of the innovation process. The Climate Change Committee directly refers to the need to increase our demand side changes in order to meet 2050 Net Zero targets (October 2021 CCC UK Net Zero Strategy Independent Assessment).

Crucially, we need to design products, services, and policy that solve people’s energy problems and improve their lives whilst also supporting our collective Net Zero ambition. Currently the design approach can lean towards technical solutions that put Net Zero first and only then are tested, validated and refined to make them acceptable, not desirable, to consumers. In every product category it is this focus on meeting consumers in the context of how they are living that determines success in market.

Innovating in any sector is hard

The energy sector is by no means alone in this challenge to innovate with the consumer in mind with 52% of the Fortune 500 having gone bankrupt, been acquired or simply ceasing to exist since the year 2003. This figure rises to 72% of the original FTSE 100 companies from 1984 and increasingly reflects a failure to keep pace with rapid technological advancements and changing consumer expectations.

Innovating in any sector is hard to get right and particularly in the startup space where 92% fold in their first three years (MIT ‘Designing High Impact Solutions’ 2021). Yet it remains emphatically the case that the companies driving growth and landing those products and services most successfully are the ones highly active in developing innovations that respond to people’s behaviour. The most successful companies also manage to connect the resulting innovations and life enhancements to their brand, delivering long term value across multiple launches and routes to market.

In the energy sector there is widespread technical innovation happening that can benefit consumers from smart software solutions to aid retrofit planning, home energy management systems to open up the benefits of the flexible energy system to the solar and battery hardware itself.  However, those same consumers do not yet have sufficient trust in brands and an understanding of the product benefits to enable large scale adoption.

The role for ‘consumer insight’ from end to end in the innovation process

Understanding people and deploying that insight right across the spectrum of product creation is critical to driving adoption of low carbon energy solutions. The innovations that truly land well and disrupt markets draw on the right mix of insight from early opportunity identification through to detailed user experience design and development. A brilliant, disruptive innovation will fail due to delivery of a poor user interface (UI) just as a poorly conceived idea that doesn’t adapt to the behaviours of the user or cut through the competition cannot be saved through outstanding packaging or an intuitive interface.

With so much collaboration needed across government at all levels, industry, and academia it is particularly difficult to apply the right processes to R&D and marketing in energy where many technically promising innovations have failed:

Proving that not even the world’s most successful tech companies are immune from poor consumer understanding impacting market success in energy, was Google’s home energy product PowerMeter. Brand power is nothing when that brand has no equity or credibility in the space you’re seeking to enter. Even in 2011 the home energy management market was overflowing with gadgets, web tools and software designed to save people money. Trouble was, the benefits to the user were far from clear and in a space that people had no idea existed, let alone an appetite to explore. For most consumers it is the utility provider that holds the keys to the relationship, suggesting a branded partnership may have accelerated adoption. Yet those same brands themselves fail to occupy a position of trust in the minds of consumers.

Arguably the UK’s ‘Renewable Heat Incentive scheme’ (RHI) (Ofgem domestic RHI Audit report 2021) fell far short of its forecasted take up (total accreditations of around 90,000 compared with installation of approximately six million gas boilers over the same period), not for want of the right idea but for the way it was delivered to consumers. Gas boilers are typically replaced under situations of some distress to the householder or when carrying out renovations. Whilst the different technology solutions might effectively contribute to emissions reductions, the benefit to the consumer versus the high upfront cost was not well presented or understood.

Sinclair’s C5 from the ‘80s benefitted from the genius and convictions of its maker and was certainly at the vanguard of the electric vehicle (EV) transport revolution in a low cost, urban format. Yet it manifestly failed to take consumer insight into the product so failing to position correctly with consumers. The vehicle’s inability to reverse would also surely have come to light as a barrier in even the most rudimentary usability testing amongst the addressable market. In many ways the current slowdown in adoption of EV’s is another example of where failure to adapt to the current behaviour and needs of the user is slowing adoption. On the consumer side, people need their EV to slide neatly into the use cases and position previously held by their combustion engine vehicle and then discover that the embryonic infrastructure and high cost of accident repairs prevent this. The early adopters have, by and large, adopted and now we must work with government and industry to design a whole system capable of meeting everybody’s transport needs.

A particular challenge in energy is the sheer scale and range of stakeholders to engage in the formulation of any new product and service. The Green Homes Grant was the right idea yet failed to impact more than 10% of its intended audience. In this example, consumer demand and appetite for information was also not in doubt. It was arguably the user experience of the website and poor process for allocating vouchers to consumers that felled a £1.5bn scheme. Early consideration as to the role of the trade with joined up thinking on training and financial incentives to move into the new space would have helped to inform realistic targets for this scheme.

Even with the highly incentivised or subsidised programmes in energy there are many cases where carefully planned consumer and customer input could have reduced downstream risk and lead to more positive consumer adoption. Companies and governments that invest in understanding consumer perspective from end-to-end stand to benefit enormously in driving change.

Putting people at the centre of innovation

Innovation is changing in all sectors, not just energy. Long cycles of testing and reworking concepts at the front end within the parameters of a particular opportunity space, or even brand, are necessarily giving way to more agile test and learn approaches that place carefully structured consumer insight at the heart of defining new ideas. The emphasis must be on starting with understanding of current practices and behaviours distilled for design and doing this in a repeatable way, using a variety of data sources. Search and social listening allows us to get to the heart of what consumers are expressing around our category and their needs so we can build propositions for later testing and development. (Digital) ethnographic approaches help us to really understand the lives of the people we’re designing energy solutions for at the exact point that their needs are greatest, as that boiler breaks down and needs replacing for example.

At the same time, it is more important than ever in the energy sector to bring in perspective from analogous and adjacent products and services where the consumer and user experience is exemplary and there is more of a history of user focused design. The market, policy and regulatory landscape will need to give energy retailers more freedom in what they offer so we can move innovation beyond the constraints of the current market.

It is critical in energy to test and optimise the user experience once the idea has been translated into working prototypes and to model and predict real world usage scenarios in a controlled, lab-based environment at scale.

There are several crucial areas where consumer insight can help to enable energy innovation:

• Strategic insight management

For any given innovation program or policy development, start with what you know already to define the scope of the program and build hypotheses for subsequent testing. Create, and maintain through Analytics and synthesis in every project, a dynamic core of consumer and user insights mapped to priority strategic areas within energy. Placing this ‘portfolio’ knowledge at the heart of every major program drives consumer-centred thinking and acts as a tremendous gelling agent across innovator teams and clients.

• Understanding current behaviours, priorities and values

Through a variety of research methods and either in advance of the generation of a new idea, or to adapt an existing product or technology. Using unstructured search data, quantitative surveys, usage and behavioural data and a range of qualitative techniques to start the innovation process with the behaviour change we need to support front and centre.

What do ordinary energy consumers most care about and value? Where are they willing to make trade-offs? Gaining these fundamental insights allows innovators to design solutions suited for success rather than making assumptions. For example, convenience and costs may take priority over maximizing energy efficiency. Do this in a variety of ways from ethnographic research to search and social analytics and surveys to observe and uncover the real consumer, or community stakeholder, conversation to build into proposition creation.

• Mapping consumer journeys, co-creating and testing propositions

Understanding the path people take in adopting and using an energy product is essential. Research must uncover points of friction and gaps between intent and behaviour so innovations can solve these problems. Where a solution exists in market, how are people using it currently and how do people respond to new journeys in concept?

Unless they are among the very leading edge of a fast-accelerating new market, consumers should never be relied upon to design solutions or products. However, they most certainly can express joy and frustration and be a vital partner in rapid prototyping and testing solutions.  Ideas that seem promising in specialist areas can often miss the mark for typical consumers. Frequent concept testing, within the context of a real problem to solve, exposes flawed assumptions early so products and services can respond to human needs.

Having designed your product or service and made sure that the ideal consumer journey is reflected in the user experience, it’s essential to build and test in real world environments at high-fidelity prototype level at a minimum. Here we transition from consumer to user perspective feeding further iteration of the experience and developing insights to inform the design of the whole energy system. Ideally assess the user experience and consumer perceptions whilst gathering real world behavioural data. Fusing these elements provides unrivalled understanding and prediction of the innovation’s impact in the future market.

• Tailoring messaging

How an energy innovation is described, framed and marketed has huge influence over whether consumers dismiss or embrace it. Run a thread through every innovation program considering the benefits your product unlocks and how those could form the basis for eventual communication from the very start of product concepting. Targeted message testing allows outreach to be optimised.

Without really understanding what consumers value and want from the energy they use at home it’s likely that companies and governments waste time and money on solutions that are doomed to fail in the market.

Consumer insight should drive energy innovation

There are many examples from adjacent sectors where consumer insight drives innovation and the take up of new products and services.

In the technology sector, particularly in software solutions, the most successful and transformative innovations have not only disrupted existing markets but created entirely new ones while accelerating huge shifts in consumer behaviour. Blackberry, Motorola, and Nokia had been excelling in the smartphone multimedia space long before Apple’s iPhone changed the market forever. The iPhone didn’t technically offer anything that wasn’t already available in Blackberry’s product including email, file management, internet access, calls and texts, and gaming. What it did was deploy understanding of user behaviours and needs to position email within the ever-widening context of use for a mobile device and optimise the (touch) UI while opening up the developer ecosystem to produce apps and content that people actually wanted.

Google have come to define search and location services enabled by a truly mixed method approach to innovation from trends and futures identification at a societal level through to ethnographic studies to understand people’s behaviours, hacks and workarounds. Once live or at Beta testing stage the user experience is benchmarked and refined using minute by minute analysis of the large data sets generated.

Fast moving consumer goods have long led the charge to new and innovative practices and applications of consumer insight and data analytics. Increasingly, rather than using online retail only as a channel to bring to market offline designed innovation, they are flipping the conventional innovation pipeline to put it at the heart of new product development.

This is achieved through a combination of utilising their own direct to consumer and third-party retail data, comprehensive and continuous analysis of panel sourced sales data and an increasing focus on driving incremental innovation at local level. Such is the level of consumer conversation taking place in social media and the level of need expressed through online search that it is now possible to formulate entirely new product line extensions, flavour combinations in snacks for example, through advanced analytics in the ‘search and social’ space.

When combined with the near endless possibilities digital channels provide in segmenting and targeting their shopper base, this also allows them to innovate in much more specific ways. This can include creating rapid modifications to product lines based on shifting consumer sentiment, or even creating entirely new sub brands to respond to a geographic or time-based event.

Key roles for policymakers

While businesses often apply consumer centric practices organically to build competitive advantage, policymakers must also foster participatory frameworks so public interests are served.

We should view the development of policy in much the same way as the development of product or service. As when developing product, the key is to start the process of energy policy creation with an understanding of how people behave, the barriers to using energy today and towards which goals. Only then develop policy propositions and enter into testing and trials.

For example, price sensitivity testing of subsidy amounts within the context of features and benefits generated based on consumer need would highlight early on likely challenges to adoption.

As in any good innovation process the first step is to consolidate what is known about the needs and barriers of a particular consumer target group before heading into detailed co-creation and development. The Department for Energy Security and Net Zero and Energy Systems Catapult ‘Inclusive Smart Solution’ program offers an ideal example of a truly end to end innovation process that aims to help in accelerating smart innovations to market and build principles for future research and innovation with vulnerable and low income consumers. It does this by providing for the full range of consumer targeting, needs understanding, concepting and innovator support required to turn ideas into solutions.

Energy networks regulated to pursue innovation should incorporate community-based participatory research to identify local user needs and understand barriers before evaluating solutions. They could incorporate ‘search and social’, census and existing survey data to understand communities and capture underlying sentiment around energy topics. This, coupled with the use of representative customer advisory panels to work collaboratively with network companies’ planners, can push the consumer view right to the head of the workstream.

Further downstream, Energy System Catapult’s ‘Living Lab’ offers the ideal environment to soft launch policy driven services amongst a carefully managed sample of over 2,500 homes. Through a combination of consumer research and behavioural data capture we are refining delivery of policy through improvements to the ultimate user experience.

In research and technology programmes, including a user centered design requirement could help governments fund demonstration projects grounded in real adoption barriers. Incentivising iteration after undertaking initial pilots based on consumer testing helps innovations succeed. It is essential that we also continue to drive to optimise the user experience that results from improvements to the ‘whole system and network’ and not only the many smaller (homes level) considerations that currently occupy most consumer and user thinking. The case for considering hydrogen as part of our whole system solution to varying levels of consumer demand for electricity in an increasingly flexible world consumer demand side is a great illustration of this.

Better outcomes through inclusion

Equity is both a moral and strategic imperative for energy innovation. Underserved groups often face the biggest cost burdens from systems that ignore their circumstances. Unless solutions directly account for unique constraints around income, housing, transportation, health and more, they will likely exacerbate rather than relieve energy-related hardships.

Too often new technologies, products or indeed policy can fail due to lack of inclusion. As we strive to transform our energy system there is a need to understand how this will work for vulnerable and low-income households. For example, time-of-use electricity rates penalise peak periods assuming flexible household routines – but low-income families juggling multiple jobs will likely face real barriers in adjusting their daily schedules. Likewise, EVs hardly serve the needs of residents lacking home charging access.

Targeted recruiting in consumer research can ensure diverse representation matching community demographics. This input makes adoption barriers visible so they can be designed out of programs meant to help vulnerable groups.

Not only does this help to ensure a more inclusive design approach to improve the lives of the most vulnerable, but it also helps to improve the design and user experience of solutions for all consumers. If we design simple to use interfaces to complex solutions for the hardest to serve, then everyone can benefit.

The Catapult’s work developing Warm Home Prescriptions and more Inclusive Smart Solutions exemplify this philosophy and how important we believe it is to combine leading edge ‘walled garden’ research with practical application of solutions in market, linking to the pioneering work of UK innovators of all shapes and sizes.

The way forward

We cannot afford missteps that delay or derail progress. Incorporating deep consumer insight provides the missing link between the technical potential and real-world viability and scalability of the low carbon energy products and services we need in our homes and buildings to achieve Net Zero. Crucially this can also help substantially de-risk deploying the significant investments needed to get the job done.

Consumers have varied and complex needs in purchasing and using energy to get the outcomes they are trying to achieve, and those outcomes go far beyond merely obtaining the lowest price for home energy. The true drivers and benefits go to the very heart of how people maintain health, comfort, freedom, entertainment, friends and family and we must reflect this in how we build and test propositions in green energy.  The difficulties they are expected to face will only multiply as we transition to Net Zero technologies.

It is essential to both develop a deep and broad understanding of how all energy consumers buy and use energy currently, what they actually want and value now and in the future and to harness the power of what we have learned already. Energy System Catapult is working to define and prioritise clearly the problems people need to have solved and then develop low carbon solutions to those problems.

Working with industry, government and public bodies at all levels we must:

With all stakeholders

1. Package, manage and iterate development of those insights to drive focussed investment in the solutions that really matter to consumers.
2. Be prepared to develop, build and test ideas and concepts that may currently be constrained or even impossible to deliver rather than only testing solutions that fit within current regulatory and technical feasibility constraints. It may never be possible to activate some of these solutions but it will allow us to test and learn to better influence innovators and policymakers.

With industry

1. Apply best practices and learning from other sectors where delivering the consumer experience is paramount and directly linked to business performance.
2. Prioritise placing investment in insight and user research where the impact on innovation is greatest and the likely impact of regulatory constraint most limited.

With government and public bodies

1. Consolidate learning from consumer focussed development and testing mid and downstream to feed back into national and central level, upstream decision making and communication to drive behavioural change.
2. Build and test policy as if it were the product itself, utilising a sand box approach to assess the real-world impact of government decision making upstream in a carefully managed and widely consumer representative lab environment.