Enel was one of the largest power utilities companies in the world, with €80 billion in revenues for 2019. Its gross operating margin of €17.7 billion was generated from renewables (43 per cent), thermal

(45 per cent) and nuclear (12 per cent). Enel worked in thirty-two countries across five continents, with 67,000 employees. It generated energy with a managed capacity of more than 89.8 GW, selling gas and distributing electricity across a network spanning 2.2 million km for 74 million end users, making it the largest private electric distribution network globally.

The Enel Group was the first private renewable player worldwide, with a renewable footprint of over forty-six GW managed capacity in 2019.

Half the energy generated was with zero CO₂

emissions. The company was the first to replace traditional electromechanical meters with smart electronic meters, enabling real-time readings and remote-control management for greater energy efficiency. This was critical for the development of intelligent grids, smart cities and electric transportation.

Francesco Starace had been responsible for the success of Enel Green Power, before he was appointed Enel’s CEO in 2014. He introduced a new strategy to capture value in the energy transition.

Sustainability was the key to growth in this new environment. He made sustainability a pillar of growth and aligned the strategic plans of Enel with the UN SDGs aiming to be carbon-free by 2050.

Enel’s goal was to create long-term sustainable value for all its stakeholders by adhering to UN Sustainable Development Goals (SDGs) in its investment decisions. Its plan was to reduce specific CO2 emissions by 2030 (SDG13: 0.23 g/

kWheq) and to promote the economic and social growth of the local communities where it operated.

Other goals by 2030 were: SDG4 quality education for 2.5 m beneficiaries, SDG7 affordable and clean energy for 10 million people, SDG8 decent work conditions for 8 million beneficiaries.

They moved from a CSR approach to one that aimed to change the way a utility could stay in the market in the long run, running a sustainable business through innovation. Enel translated the academic Creating Shared Value approach into a methodology applied to its value chain, so that sustainability was integrated into daily activities not by a central function, but by the people managing the business, from Business Development to Engineering, Construction, and Procurement up to Operation.

To capture value from the four macro trends, innovation had a key role in a world that was changing faster than its ability to adapt. Starace then hired Ernesto Ciorra, an entrepreneur and former consultant, to lead Enel’s innovation and sustainabilitiy efforts. The result was ‘innovability’ – innovation and sustainability combined.

Enel built an Open Power platform that allowed electricity access to more people and opened the world of energy to new technologies, uses, ways of managing and partnerships. An international network of ‘Innovation Hubs’ were set up in Israel, USA, Spain, Italy, Russia, Brazil and Chile, and

‘Open Innovability’ (the first energy crowdsourcing platform) launched – connecting outside innovations with the company’s internal needs.

Corporate culture was transformed with a matrix structure implemented based on lines of business and geographical regions. The business lines (Thermal Generation, Trading, Infrastructure

& Networks, and Enel Green Power) were responsible for managing and developing assets, with the goal of optimizing performance and increasing return on capital for all the regions where Enel was present.

The geographic units were responsible for the sale of electricity and natural gas, and managing relationships with external stakeholders (P&L was reflected in the matrix structure: revenues were the responsibility of the country manager, costs (CAPEX and OPEX) were the responsibility of the business lines, while EBITDA was a shared objective). Prior to this restructuring the organizational structure had been vertical with decisions made from the top down with each division operating separately. When Starace become CEO in 2014, Enel was a portfolio of companies operating almost independently.

Each country manager was in charge of P&L along the entire value chain (generation, distribution, marketing and sales) but there was little communication among countries or divisions, and no sharing of ideas.

Under the new matrix structure innovability teams were set up in every business line, managed by innovation managers. The innovability teams looked for challenges at every level of their respective business lines, scouted and tested solutions, and supported their colleagues in implementing these solutions into the real business. Having the innovability teams working within the business lines and in a matrix structure allowed the company to test projects more efficiently and avoid duplication across countries and business lines, reducing the cost of innovation. Innovation and sustainability were embedded in the lines, hence they became more direct, faster and efficient.

Another major change was the creation of the Digital Solutions staff function in 2018, formed from the merger of the ICT department with business people. The aim was to work towards the digitalization of the Group’s assets, its client relationships and the way employees worked. Over 2,000 people in the Group adopted ‘agile’ methodology to support the quest for innovation and digitalization. Digital Solutions had its own dedicated Innovation Manager.

A complete change of mindset was also required.

Several programmes were launched including ‘My Best Failure’, launched in 2015. The idea was to encourage employees to share their ‘failure stories’

online within the Group, reward entrepreneurial spirit and replace fear of mistakes with an ‘open, no blame culture’ that thrived on lessons learned.

A corporate entrepreneurship programme was launched called ‘Make it Happen!’, where employees were encouraged to form teams and develop ideas for new start-ups or ways to improve Enel’s business. To ensure the success of the open innovation approach, Enel needed fast access to new ideas, technologies and business models from start-ups, SMEs, universities and researchers around the world.

Innovation hubs: The company set up ten innovation hubs worldwide connecting the Group to the best innovation ecosystems in the world. These hubs continuously scouted new opportunities for Enel’s traditional businesses and created new valuable businesses that were sustainable long term for Enel and its customers. Enel deployed local innovation hubs in countries where it had a strong industrial presence – Chile (Santiago), Brazil (Rio de Janeiro together with Sao Paulo) and Russia

(Moscow) – to be close to the people who implemented the technology. By 2019, four years after the opening of the first innovation hub in Tel Aviv, Enel had scouted more than 6,000 start-ups around the world and had done a preliminary assessment on over 1,000 of them.

In 2020, six years after Starace took control, Enel’s stock had increased from €4.06 to €7.84 for a total market capitalization of €99 billion.124 In November the same year Enel announced it would invest €160 billion over ten years to become a green

‘super major’ and carbon free by 2050. It planned to expand its green hydrogen capacity to more than 2 GW by 2030 and phase out coal by 2027. In 2018, Enel ranked number 28 on Fortune’s list of companies that can ‘change the world’.

Questions:

1 Does it make sense to put innovation and sustainability together? Why or why not?

2 What are the main benefits of having innovation hubs in different parts of the world, including emerging markets?