American Electric Power (AEP) Instills and Rewards Exponential Innovation as Employees Deliver Solutions for Customers

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1 CUSTOMER STORY ENTERPRISE American Electric Power (AEP) Instills and Rewards Exponential Innovation as Employees Deliver Solutions for Customers THE CHALLENGE COMPANY: American Electric Power (NYSE:AEP) Transform a traditional utility into an agile, exponential organization focused on quickly delivering innovative new products and services for customers. Incent and empower employees to drive the development and delivery of these innovations into new business for the company. FOUNDED: 1906 INDUSTRY: Energy (coal, wind, solar) RESULTS, OUTCOMES, AND ACHIEVEMENTS A new entrepreneurial culture. THE GOAL The company has an engaged workforce empowered to respond to customers with products and services developed in months rather than years, a new entrepreneurial culture, and a leading role in defining and delivering the infrastructure to support smart cities of the future. A strong network with city, state, federal, private industry, startups, and universities to grow AEP business and influence through new mutually identified opportunities. A growing reputation for thought leadership in Smart Cities of the future. A highly engaged workforce that is turning its ideas for new customer solutions into market reality.

2 Remarkable changes are happening at one of the largest electric utilities in the U.S., thanks to a new focus among executives to encourage employees to use exponential thinking and technologies to deliver new services and products for customers. With SU s assistance, AEP is developing expertise in seeing the potential of exponential technologies and how to rapidly execute and iterate new ideas to benefit customers. SU is helping lead change at AEP by providing a mechanism for moving from idea to new offering in weeks and months instead of years. AEP is implementing that mechanism and anticipates positive results. It is building an innovative culture and displaying thought leadership to spur innovations in thinking and technologies among employees. The utility is Columbus, Ohio-based American Electric Power (AEP). It was founded in 1906 and today delivers electricity and custom energy solutions to nearly 5.4 million customers across 11 states: Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia, and West Virginia. AEP had $16.4B in annual revenues in 2016 and more than 17,000 employees. It owns the nation s largest electricity transmission system and delivers power to customers from a balanced mix of resources, including coal, natural gas, nuclear, hydro, wind, and solar. In 2016, Mark McCullough, executive vice president of Generation, participated in an SU Executive Program, which inspired him to take a sharper look at the potential to accelerate innovation at AEP. Innovation was not new to AEP. McCullough, who is responsible for all aspects of power generation at AEP, had already formed an Enterprise Technology Council. This Council s role is to work across business units and create opportunities beyond the traditional electric utility business. But what was new was a sense of urgency he brought back to the Council and AEP. The Playbook That Set A New Course for Innovation at AEP Additional AEP leaders participated in the SU Innovation Framework, a custom program that results in developing a playbook for implementing exponential methodologies and thinking across the enterprise. The playbook helped frame the next steps for an innovation program at AEP. The playbook builds on processes already in place and the work of the Enterprise Technology Council to focus on how to educate employees to turn exponential ideas into exponential solutions. After completing a corporate assessment for AEP, SU recommended an Open Innovation Challenge.

3 Tapping into AEP s Most Important Asset Its Employees in the Open Innovation Challenge In the Spring of 2017, AEP rolled out an Open Innovation Challenge. Its 17,000 employees were invited to propose new, cutting-edge products and services for customers. The company expected 250 applications. It received more than 400 submissions from more than 600 employees. Many proposals came from long-time customer service representatives who d heard first-hand about the problems their customers were facing and who had ideas about how to fix the common pain points. Other Enterprise Technology Council members attended SU programs and were energized by the possibilities of harnessing technologies to the company s advantage. This group served as the judges for the 400 applications, culling them down to 160, and then 30, and then to the final eight. The eight finalist teams were invited to make a case for their ideas in 3-4 minute presentations in front of a panel of executive judges (internal and external). SU helped the finalist teams hone their presentations and complete a business model canvas describing their ideas. All presentations and the critiques by the judges were videotaped and shared with all employees. The stakes were high. Some employees who won temporarily left their current day jobs to be placed on special assignment to incubate their ideas as a startup, bring them to minimum viable product status, iterate them through field testing, scale them, and bring them to market. The company expected 250 applications. It received more than 400 submissions from more than 600 employees.

4 The Final Eight As it turns out, all eight finalist teams were declared winners. These teams developed compelling ideas that address valid pain points and growing expectations for new services among customers. All eight teams were invited to participate in an internal Innovation Workshop to help them further develop their startup plans and business models, while the top three will build capacity in the short-term through participation in internal or external accelerators. The following six Open Innovation Challenge teams are working internally to deliver the following new products and services: AEP Smart Building Service, from the winning team, provides energy consulting services enabled by analytics that will help AEP lower customers energy bills. Consumer Resiliency helps customers with resiliency during times of disaster and outages. The team built backup batteries for the home and delivered them at a lower cost than generator technology. Customer Connectivity built out AEP services using a fiber network infrastructure and expanded the AEP portfolio to become an Internet Services Provider. Combined Heat and Power captures energy from waste heat and turns it back into an energy resource. Smart Home takes smart home controls and provides monitoring through a smartphone. Unlike other solutions, though, this application will learn from a consumer s usage patterns and make recommendations for greater efficiencies through the use of artificial intelligence. Trash to Treasure repurposes old electric vehicle batteries to support the distribution power grid. Batteries no longer able to power electric cars still retain percent of their power. The remaining two startups are participating externally in the Singularity University Smart City Accelerator in Columbus, OH (see next page). Forging a New Exponential Mindset at AEP With SU s assistance, AEP is developing expertise in seeing the potential of exponential technologies and how to rapidly execute and iterate new ideas to benefit customers. SU is helping lead change at AEP by providing a mechanism for moving from idea to new offering in weeks and months instead of years. AEP is implementing that mechanism and anticipates positive results. It is building an innovative culture and displaying thought leadership to spur innovations in thinking and technologies among employees.

5 AEP Builds Its Reputation and Business with the SU Smart City Accelerator Bringing the Singularity University (SU) Smart City Accelerator to Columbus is a catalyst for innovation and technology in Columbus, and AEP is proud to be a part of it. In fact we so believe in the benefits of SU s Smart City Accelerator that we are sending two AEP teams through it. The vision of Smart Columbus is for this community to be a center of innovation and entrepreneurship, and the SU Smart City Accelerator represents a significant step toward the realization of that vision. Nick Akins, CEO at AEP As the sole winner of the U.S. Department of Transportation s (USDOT) Smart Cities Challenge in 2016, Columbus was awarded funding and designated America s Smart City. More importantly, Columbus earned the coveted role as global teacher for cities around the world on how to become smart by embracing the reinvention of transportation, infrastructure, energy, and other key city systems to accelerate human progress. SU, AEP, and NCT Ventures co-sponsored the 2017 SU Smart City Accelerator, a 10-week program to foster and rapidly grow promising technology startups with a vision to build innovative solutions to help cities function better. At the same time, they strive to transform how residents and communities will work and live in the future. Eleven startups, including two AEP teams, participated in the 2017 Accelerator. The two remaining AEP Open Innovation Challenge teams participating in the SU Smart City Accelerator were: Power the Road focuses on bringing an electric vehicle subscription plan for charging vehicles to residences, public charging infrastructures, and fleets. Smart Street Light integrates lighting, sensors, security, video, and data analytics into intelligent city infrastructures to improve quality of life, enhance economic growth, and address city challenges. Participating teams were assigned business and technology mentors, given access to the SU faculty and global community of experts, and benefited from the SU startup accelerator programming and toolsets. The teams were guided in developing their solutions over the course of the program and received valuable help from sponsors in the areas of uncommon partnering, web services, legal support, financial services, and tax planning for their emerging businesses and solutions.

6 SU and AEP At-a-Glance SU PROGRAMS Executive Program Corporate Assessment Innovation Framework Open Innovation Challenge SU Smart City Accelerator EXPONENTIAL TECHNOLOGIES Renewable Energy Artificial Intelligence Data Analytics Quantum Computing GLOBAL GRAND CHALLENGE Disaster Resilience Energy Environment About Singularity University Singularity University (SU) is a global learning and innovation community using exponential technologies to tackle the world s biggest challenges and build an abundant future for all. SU s collaborative platform empowers individuals and organizations across the globe to learn, connect, and innovate breakthrough solutions using accelerating technologies like artificial intelligence, robotics, and digital biology. A certified benefit corporation headquartered at NASA Research Park in Silicon Valley, SU was founded in 2008 by renowned innovators Ray Kurzweil and Peter H. Diamandis with program funding from leading organizations including Google, Deloitte, and UNICEF. To learn more, visit SU.org, join us on Facebook, follow us on and download the SingularityU Hub mobile app.

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