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Innovation and creativity in organisations

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Innovation and creativity in organisations

 Introduction      

Smart thermostats represent an evolution of this product that started in 1830 when Scottish chemist Andrew Ure filed a patent for the bi-metallic manually set thermostat that solved the need for consistent temperatures in Europe’s textile millThe next significant advancement came in 1885 when Albert Butz patented the automated pulley system thermostat that was called the “damper-flapper”, which automatically regulated furnace heat This thermostat led the way for the formation of the Butz Thermoelectric Regulator Company, and then the Electric Heat Regulator Co., of Minneapolis, MN that became Honeywell International.

The next revolution came in 1968 when Honeywell of the United States introduced the programmable W8 Innovations caused Centrica to foresee as well as respond to customer demands for devices that simplified the programming of thermostats.This led to an agreement with Honeywell in 2009. This was an organisational approach as the company recognised its limitations by forming an association with the more technically established Honeywell. The environmental aspect represented reducing energy consumption.

Modern technologies such as semiconductor chips and wireless features resulted in the smart thermostat. which is the focus of this study. Organisation processes will be explored in the next section (the innovation) that reveals how the company developed the product as a team effort. HIVE smart thermostat serves as the basis for this investigation regarding ‘Innovation and creativity in organisations’. The Hive was introduced in 2013 by Centrica. This represented an implementation process that changed the dynamics of the. British Gas held the gas trading, sales and services as well as operations concerning gas production in the Morecambe gas fields (North and South) that were transferred to Centrica in 1997. This has been brought forth to clarify references in this study that refer to British Gas and Centrica since these company names are interchangeable.

This exploration will delve into varied aspects that include environmental and organisational conditions, along with organisational and implementation processes to explore the development and outcomes of this innovation. This will include sustainability concepts and theories where sustainability consists of economics, ecology, culture, and politics. Stubbs and Cocklin explain that sustainability represents a challenging social area that considers ethical consumerism, international and national sustainability trends, along with individual lifestyles. These represent three sustainability dimensions of environment, society, and economy where environmental limits constrain the other two areas. The Venn diagram provides an illustration of the above:

The above diagram aids in understanding the interconnected links between ‘’ environmental, societal, and economic aspects” that illustrate an economy and society should be “… in equilibrium with basic ecological support systems”. The above three aspects provide an understanding of the concept of sustainability that is also the foundation of the Triple Bottom Line. In terms of theories of sustainability, Stubbs and Cocklin advised these three areas attempt to integrate and prioritise society’s response to cultural and environmental issues. The Brundtland Report of 1987 embodies the above, as does the ‘weak’ model of sustainabiliti. It (weak model) espouses that future generations should not be left any worse off than we presently are (as opposed to strong sustainability that prioritises preserving a species or ecosystem). The economic model of sustainability proposes sustaining opportunities is an investment, whilst the ecological model seeks to sustain diversity in a biological manner and attempt integrity ecologically. The political model is concerned with how global and local environmental issues impact current and future life. In terms of the above, the weak and economic models will apply since this study represents looking at a business issue.

In addition to the above, sustainability will weave the following into this study:

This will aid in understanding the resource-based theory of sustainability that focuses on firm innovations and their use of internal resources . These are used to guide strategic choices and decisions to achieve or develop a competitive advantage. This is further explained by the resource-based-view (RBV) theory that links what a company does (internal capabilities) to the external environment in terms of what the market is demanding and what its competitors are offering. Paiva et al as well as Ambrosini et al, and others advise that RBV can be a source of development in terms of internal competencies that when they are applied can potentially result in a competitive advantage. This is applicable to the development and market introduction of Hive.

The following figure shows the manner that the above concepts and theories are linked

The above exploration of sustainability regarding concept, and theories were included to provide a reference point for when they are brought forth in other sections.

The Innovation

A key aspect is the company’s foresight in forging a relationship with Honeywell to develop sustainable approaches to the marketplace. This represented the beginning phase of the resource-based view that showed the company was expanding its capabilities (what it does) by developing internal competencies. This would aid in positioning Centrica in terms of competitors regarding customer needs for a more convenient thermostat.

In terms of organisational conditions, a brief background on the company aids in understanding the innovation. The first Hive model (introduced in 2013) had three key developmental aspects. The underlying objective represented designing and creating a unit that provided customers with a means to remotely control heating and hot water temperatures. The company stated its second step in the process represented providing a way for customers to have an improved method for heating and hot water aspects that included upgrades to the product using ongoing customer feedback. This was an important consideration in the organisational process as it helped to guide development, and that the initial design needed to have a base for subsequent additions and improvements. The third step was to completely redesign the manner the company approached thermostats since it was creating a new approach (smart) . In terms of the latter (third step), this represented the resource-based view that utilised a strategy of building on the initial design for further upgrades that centered on applying its competencies (see Figure 3, Integrated Conceptual and Theoretical Framework). It also represents the shareholder view that was also referred to in Figure 2.

The specific characteristics of the innovation start with recognisable functionality that was a feature of the first units in 2013. The traditional dial format was retained to make it recognisable to customers, and it incorporates a push access on the dial to bring up the programming menu. Hive’s main rivals (the Ecobee, Honeywell, and Sensi) use a digital output display, only the NEST uses the same dial format as the Hive. The Hive can control a home’s water heater using the dial, or by the wireless app. These are characteristics that refer to utility theory regarding customer decision making. Utility theory (regarding customer decision making) proposes that they make decisions based on the expected outcomes (in this case remote control use, saving money and ease of use).

The most interesting characteristic is the remote control wireless app (iOS and Android) that looks and operates like a physical thermostat dial:

This design feature helps to make the transition to wireless remote use seamless, user-friendly and eliminates frustrations for customers that are not savvy in using applications. This is another example of utility theory in customer decision making.

Whilst the above list of characteristics seems brief, this actually represents the major feature of the Hive as converting to its use is similar to a regular thermostat dial.

Innovation Development

The evolutionary path to smart thermostats was a result of two trends in technology. The first was advancements in microprocessors that became less expensive and smaller. The second was the development of wireless technology connection for the Internet. The key foundation was to expand the utility aspect using a remote temperature adjustment approach. This remote-connectivity allows setting temperatures when customers are out of the house that lowers usage and the adjustment of setting prior to arriving home. This represented institutional theory as described in figure 3 that represents the role institutional stakeholders have in driving environmentalism. Centrica’s institutional stakeholders consist of varied government and regional authorities, along with organisations and businesses that have an important influence and interest in the UK energy sector. The following provides an understanding of the interests the company took into consideration regarding the product’s developmental path. It represents the company’s approach to figure 3 that revealed the significance of an ‘Integrated Conceptual and Theoretical Framework’:

The above is an important part of sustainability as gas produced in the UK has been in a long-term period of decline as North Sea supplies become depleted.The UK has a heavy gas dependency that accounts for 45 percent of all energy consumption.

The fact that 80 percent of all UK homes are powered by gas, and is increasingly coming from Russia is an important institutional stakeholder problem in terms of national gas stability.

The first step in the implementation process by British Gas toward smart thermostats began in 2009 when it entered into an agreement with Honeywell. The key aspect of this agreement was to explore approaches to make heating systems more efficient, reduce the use of energy and thus make a contribution to climate change. Sustainability was a critical element that resulted in the formation of this agreement as the Director of Environmental Controls for Honeywell, Richard Edwards, stated:

“Domestic heating consumes as much energy as the useful output from all UK power stations put together and produces 25% of all carbon emissions in the UK ... Moreover, heating and hot water account for over 80 percent of the energy consumption within homes, compared with only 3% for lighting. Installing the latest energy-saving heating controls can have a big effect on energy use and the environment.” (p. 1)

The Managing Director of New Energy at British Gas, Gearoid Lane, added:

Honeywell has significant experience in manufacturing state-of-the-art heating controls and is, therefore, an ideal partner to develop this innovative product range.”Lane added “We are constantly working on new solutions to make it easier for our customers to adopt low carbon technologies.  Private households are responsible for a significant percentage of emissions everywhere in the UK.  Making our homes and businesses more energy efficient is vital to combat climate change.” (p. 1)

Whilst the above quotes and agreement are from 2009, they represent the relevant theories that led to Centrica’s smart thermostat in 2013. The formation of the Connected Home Business segment of its operations provided a dedicated division that was based on a reduction of energy use under the resource-based view theory as well as sustainability and more concentrated product development. In terms of the sustainability, it refers to what drives companies to be socially and environmentally responsible. It also includes economic aspects since it aids customers to reduce gas usage and lower their bills. This represents value theory that Amit and Zott describe as the why, how and the degree individuals value something. Saving on gas bills also refers to practicality under Maslow’s hierarchy of needs where the product has practical value for customers as well as contributing to reliability and safety due to remote control.

Historical aspects reveal the factors that influenced the development of HIVE that looked into concepts, theories, and frameworks used to describe varied factors that influenced the development of this product.

Outcomes of the Innovation

The Hive vision and developmental approach have been aided by the long-term service ethos of Centrica that represents its millions of non-smart thermostats that have been installed over decades. That foundation includes customer feedback that has helped to provide the basis for understanding the need for a more modern multi-function system. It was Centrica’s user feedback from its non-smart thermostat installations that provided the basis for retaining the traditional dial approach. In commenting on this, Centrica’s managing director of the Connected Home division, Nina Bhatia said: "We did a lot of research on functionality to arrive at both (functionality and utility), as people really wanted a traditional feel as a tool of enablement for more efficient, smarter energy usage". The Connected Home division is an example of how Centrica understood the need to create a dedicated unit to oversee the Hive and explore other product possibilities.

In terms of success, the 360,000 units that have been installed is a key measurement. A search for the sales of the company’s competitors in the UK did not reveal a comparative regarding who is selling the most units between Hive, Nest, Ecobee, Tado, Honeywell Lyric, and Netatmo. Centrica has recently committed £500 million to expand into the highly competitive and large United States market. This seems to indicate that it has and is achieving tremendous success. The above factors point to the company’s foresight in forging an agreement with Honeywell that has been worth the resources used.

The acceptance of the Hive has seen a number of changes. The dial format that was used for the first Hive has since been upgraded to utilise an invisible LCD screen that hides the settings until they are accessed.

The dial still controls the functions, as the hidden screen permitted a design approach to minimise the thermostat intruding on home decor.

This home décor design aspect represents the new thermostat being available in 13 colours to enable customers to match it with their walls or home design scheme.

The same innovative thinking that resulted in British Gas forging a new product development agreement with Honeywell reveals what it is doing after the Hive was first introduced. This refers to the company seeing the need for a suite of connected products it calls the Honeycomb IoT platform. The Honeycomb suite represent the Hive Active Light that is a smart LED bulb that can be controlled from a mobile, laptop or tablet device to automatically turn it on or dim at just £19. A key feature is that because the lights can be individually controlled, a person can time them to turn off and on in different rooms to give the impression that someone is home. The Hive smart thermostat has also provided a platform for the development and release of the colour changing 9.5W light (£44), and the Hive Active Plug that allows remotely controlling appliances (iron, TV, etc. for £39 per unit) . There is also the Hive Sensor that sends an alert to a tablet, computer or phone if there is movement in the house, or if windows or doors are opened (£29), and the Hive Hub that connects all Hive devices to a central control (£80) . These devices indicate the success of the company as it seeks to expand its range of products beyond smart thermostats.

Conclusion                   

This look into the development path that lead to the introduction of the Hive smart thermostat has revealed the company’s approach to the resource-based view, sustainability in business, along with stakeholder and institutional theories that provided insights that revealed Centrica has gone beyond a market and competitive approach for this product. By exploring aspects such as environmental and organisational conditions, along with the company’s organisational process in the approach to the development of the product that used cultural ethos and leadership revealed a depth of commitment and thinking regarding society, environmentalism, and sustainability. This also includes Centrica’s path to implementation that represented it forming a specialised unit to focus on new developments (Connected Home). The results the company achieved by delving into outcomes that provided the study with a what, where who and why context also provided important background context.

Whilst this study seemingly provides only a positive view of the organisation and product, it did attempt to uncover negatives. This was simply not the case as Centrica saw a market need in advance of its potential competitors, and then added new features and product lines to broaden the base of appeal beyond just smart thermostats. Centrica did not wait for the product to approach a market saturation point. Rather, it decided to capitalise on its position by offering allied products to customers who might not be in the market for a smart thermostat. This diversification is a cardinal rule of business to spread their revenue base and products for a broader consumer appeal in order to build a competitive edge as well as more lines of potential product sales to a widen the base of potential customers. The foresight of Centrica in using a dial set device as the settings foundation represented an easily transferrable point of customer reference that provided user-friendly utility. This meant that non-tech savvy customers would not be intimidated by potential product complexity and thus could potentially be lured to try the device. This is a key approach to the consumer market that has been demonstrated by Apple’s intuitive software and applications.

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[2] Prothermostats. 100 Years of Programmable Thermostats. 2017. http://www.prothermostats.com/history.php. (Accessed 2017-11-11).

[3] Ibid

[4] Ibid

[5] Ibid

[6] Honeywell. British Gas and Honeywell working together. 2009. https://www.carbonbrief.org/gas-from-norway-coal-from-russia-eight-graphs-on-the-uk-energy-systemhttp://www.honeywelluk.com/news/British-Gas-and-Honeywell-working-together/. (Accessed 2017-11-11).

[7] Prothermostats. 100 Years of Programmable Thermostats. 2017. http://www.prothermostats.com/history.php. (Accessed 2017-11-11).

[8] Centrica. British Gas product launch makes the connected home a reality. 2017. https://www.centrica.com/news/british-gas-product-launch-makes-connected-home-reality. (Accessed 2017-11-11).

[9] Steve Thomas. A perspective on the rise and fall of the energy regulator in Britain. Utilities Policy 39, no.4, 2016, pp. 421-49

[10] Marina Linnenluecke and Andrew Griffiths. Corporate sustainability and organizational culture. Journal of World Business 45, no.4, 2010, pp. 357-366.

[11] Wendy Stubbs and Chris Cocklin. Conceptualizing a “sustainability business model”. Organization & Environment 21, no. 2, 2008, pp. 103 – 127.

[12] Ibid

[13] ConceptDraw. Path to sustainable development. 2016. https://conceptdraw.com/a99c3/preview--Venn%20diagram%20-%20Path%20to%20sustainable%20development. (Accessed 2017-11-11).

[14] ConceptDraw. Path to sustainable development. 2016. https://conceptdraw.com/a99c3/preview--Venn%20diagram%20-%20Path%20to%20sustainable%20development. (Accessed 2017-11-11).

[15] Bob Willard. The new sustainability advantage: seven business case benefits of a triple bottom line. British Columbia: New Society Publishers, 2012.

[16] Wendy Stubbs and Chris Cocklin. Conceptualizing a “sustainability business model”. Organization & Environment 21, no. 2, 2008, pp. 103 – 127.

[17] Renee Kemp and Pim Martens. Sustainable development: how to manage something that is subjective and never can be achieved? Sustainability: Science, Practice, & Policy 3, no. 2, 2007, pp. 32-39.

[18] FionaTileyand  William Young. Sustainability Entrepreneurs. Greener Management Journal 55, no. 7, 2009, pp. 79-92.

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