“The way we started all this was a combination of the desire to innovate and also the opportunity we see in the Internet of Things (IoT). To capture the opportunity in IoT, we knew we had to so something different. A lot of companies want to innovate, but sometimes it’s hard to find the trigger. There is always something else important to do. We understood that the only way to make progress in IoT was to create something to push innovation and it helped us. A lot of companies want to start innovation in principle, but its hard to do it in reality.”

Thus, Idea Labs was born. It was only formally announced in early February 2016 (although in practice it has been active for eighteen months), with the specific goal of “developing new business opportunities in high-growth industries and emerging markets utilizing Itron Riva technology.”

In my wide-ranging conversation with Aiello, what most intrigued me was his proactive nature and fearlessness of approach, informed by the conviction that if Itron doesn’t create its own technological destiny, somebody else surely will.

The former serial entrepreneur and Entrepreneur in Residence for the Walt Disney Company, Aiello brings a broad perspective to his role, sparked by an infectious enthusiasm. This allows him to embrace a significant level of failure. His philosophy is to fail fast and fail often. About 80% of his team’s ideas don’t pan out. And it is, in fact, a good benchmark for the proper amount of risk-taking.

“The principle is that we want to innovate and we want to create new things. Statistically, I am targeting a 20% success rate, because that means to me they were taking risks. If we succeed at 40%, I think we are going for single bases or we are not being innovative. However, every person in every project is convinced that they will succeed. It’s not like they think they are going to fail.”

But embracing a high rate of failure doesn’t mean there are no bumper rails on the bowling lanes. Efforts must be guided. Protocols and methodologies are necessary. The idea is to generate a lot of ideas that may have some promise, but develop a series of stage-gates to quickly test and approve or reject each concept early in the game. That helps keep people from becoming too emotionally attached to an idea or concept that ultimately expires. As Aiello puts it,

“Every single person has this deep conviction that their project is going to be successful. But when we shut down projects, people don’t feel bad about that, because they know they were supposed to take risks.”

In order to succeed, the Idea Labs team must have the right kind of person, somebody rather different from other parts of the company where failure is simply not an option and predictability of processes is critical.

“It takes different kinds of people with different kinds of mindsets. It’s just the ability to do things and try things and risk things and be OK.”

They also have to be highly flexible in what they are trying to solve for. Sometimes, it’s a specific customer problem, or a specific model or customer type they are trying to address. But Aiello indicates that switching gears from one project to the next is never easy. “Every time before we pivot, it’s a struggle.” he says.

By contrast in the main part of Itron, the culture and the problems to be addressed are quite different, and pivots don’t occur. “There we know who the customer is. We know what the problem is. And we know how to solve it for the customer.”

So what is the main predictor of success that gives a fledgling idea wings, or indeed sends it flailing helplessly to the ground? Aiello comments that some things simply aren’t – in retrospect – good ideas. In some cases, he comments,

“It’s not because the technology doesn’t work, but because the customer doesn’t have a business case for it. Therefore, we can’t get customer engagement.”

Aiello notes that every project undertaken by his team of twenty people, working with companies under contract for fast development, leverages existing Itron technologies, an aspect that accelerates the process. And though most of the projects being developed focus on the Riva platform, Idea Labs is also active in exploring ideas related to data science and mobile technologies.

So how does Idea Labs come up with the initial concepts, and how do they know what’s worth considering? Aiello indicates that the bar is relatively low, but must include three critical elements: The first is a hypothesis: a problem to solve and a way of solving it. The second is a specific customer or customer type. And the third is a market large enough to move the needle.

“We review them together and we discuss and we agree…whether we should start it or not. It’s fairly informal. I want to keep it a low bar. By definition, when somebody proposes a project it is a hypothesis.”

About a month ago, the team considered a list of fourteen concepts. Some, Aiello says were self-evident. Others were too small, or not viable. But three were approved for further activity and investigation.

Keeping the bar low is critical in stimulating the ideas and nurturing the process,

“The thing is, if you want to be able to terminate projects, we need to be able to start projects easily. We can’t possibly say it’s a high bar to start a project, because then it’s going to be hard to end a project.”

In the 18 months since the innovation effort began, approximately one-fifth of the projects have developed to the point where they are transitioning to the Itron business unit. One project is about mobile devices, emanating from an idea that started with customers’ response to a survey about the mobile space.

“We determined that there was an opportunity for customers in the field service. We did more surveys, and identified features like mobile meter reading and maintenance from mobile apps, locating specific gas and water meters in the field.”

The team began with ten customers in the field and found that they could address gas, electric, and water meters with the same product.

“After a year we actually transitioned this product to the business unit and now it is part of our product portfolio for our mobile offering.”

Here’s the fascinating aspect of this particular project and product: it disrupted Itron’s existing business. It was uncomfortable, but Aiello convinced the business units that it was also necessary, in a world where technologies and business models are always on the move.

“We disrupted our own business with mobile – we did this before somebody else did. We should continuously look for ways to innovate and disrupt in our own business.”

Another successful outcome relates to the open source approach Itron has developed for its Riva platform, helping to create a developer community tied to Riva.com.

“We offer development kits, both hardware and software, to customers and partners, and they will develop on our network. A lot of people do that. What’s interesting to me is that we do this on open hardware. Anyone can take our design files and copy them and make them their own. Itron and many other smart grid companies have made most of their revenue on proprietary and closed systems in past…Here, what we did instead is we took our basic technology, our crown jewel, and anybody with a credit card can go and buy it. This is a big change for us and nobody else in the industry is doing this.”

This approach came about as the team encountered a lot of partner companies that wanted to design products on the Riva platform but lacked the necessary tools. Idea Labs addressed that situation, and the user community now numbers in the hundreds and is growing quickly.

Aiello notes that these two Idea Labs undertakings illustrate clearly how Itron has embraced the need to evolve with the market, and how fundamentally critical this approach will be to survive in the future.

“One project demonstrates how we disrupt our own business, and the other completely changes the paradigm. It’s not like Itron is changing. Itron has changed. The open platform changes everything. Every company has cold warriors who have lived through specific things that made the company successful in the past. But technology changes exponentially. Shorter development cycles, computing, shorter time to market, all these things change the market exponentially. We need to ride the curve and live exponentially. It is beyond scary. Humans see change linearly but not exponentially. We are doing it, and I think every company needs to do that.”

When asked about the secret sauce for innovation, Aiello was emphatic in his response,

“This isn’t easy. When I started this, I did not start with an organization. I did not ask for an organization, and I did not ask for a budget. I started doing things myself and it grew that way. I am more of a doer than an organizer. You need one person to start, and then two and then three. It’s much easier and it’s like boiling the frog. I’m a fan of ‘you just start doing it.’”