AGL Energy
This case study details the outcomes from a three-year journey of scaling a dedicated experimentation program at AGL Energy, Australia’s oldest and largest energy provider. First Principles partnered with AGL Energy to implement and scale a dedicated customer experimentation program to accelerate innovation in the 187 year old Utilities company.
Date
1999 - 2021
Client
AGL Energy
Services Delivered
- Developed experimentation program operating model - Managed experimentation program & portfolio - Implemented processes, systems & toolset - Designed program governance model
- Program resourcing
- Communications & reporting
The business opportunity
AGL Energy is an Australian listed public company (S&P/ASX 200) involved in both the generation and retailing of electricity and gas for residential and commercial use. It operates Australia’s largest electricity generation portfolio from power stations that use thermal power, natural gas, wind power, hydroelectricity, solar, gas and coal seam gas.
AGL Energy provides electricity, gas and telecommunications services (mobile and internet) to more than 4.4 million Residential, SME, large corporates and wholesale customers.
Developing new products and services at AGL Energy took a long time (12+ months), required significant financial investment ($1M+) and is heavily governed.
AGL Energy traditionally launched new products and services to the mass-market through a big-bang implementation. This model of product development carries greater risk as product and market assumptions are only validated once the new product is actually launched in the market.
For many new product launches, the assumed level of customer demand for products did not meet KPI’s set in business cases. Investments were made on ‘what felt right’. Occasionally the investment paid off, however, this approach led to many costly failures.
“First Principles work in elevating the role that customer data plays in business decision-making has significantly reduced market risk for new product development at AGL Energy. This has saved large investments in development costs due to stopping scaled execution of low-value opportunities”
Nichola Miles
Innovation Manager
The solution
The path to scaled innovation at AGL Energy commenced with two experimentation workshops to upskill a targeted group of 47 stakeholders (Product, Digital, Technology, Developers, Innovation, Marketing, Legal) to build capability in the methods, tools and mindsets of experimentation.
Four resources were recruited to standup the foundational experimentation team. Initially, the experimentation function was established as a Centralised Team, operating as a shared services provider to the Retail, Emerging Products, Future Business, Marketing and Loyalty teams.
Dedicated processes, systems and tools were developed and implemented to support the experimentation team. Experimentation team operating processes were de-coupled from existing AGL Energy BAU business processes, workflow prioritisation and governance procedures to fast-track experiment cycle time.
Formal experimentation guardrails and governance procedures were developed in partnership with Legal, Risk, Regulatory, Marketing and Brand teams to manage and mitigate business risk.
A fortnightly governance forum was established to oversee management and operations of the experimentation program. This quorum of key stakeholders oversaw (1). opportunity prioritisation (2). backlog management (3). experimentation insights and results review and (4). product investment decisions
A formal communications strategy was devised for the experimentation program (Who, What, When, Where, How, Why) to support growth and scaling of the program, in addition to nurturing broader organisational cultural transformation.
“Through the experimentation program, we not only pushed the boundaries of what’s possible, but placed the customer at the heart of every innovation and proposition. The experimentation program was instrumental in transforming our approach to product development, enabling us to deliver solutions that truly resonated with customer needs. ”
Helen Tsaganos
Senior Product Manager
The results
When operating at peak velocity the AGL Energy experimentation program conducted more than 1,100+ experiments per annum, testing 85+ new initiatives over a three year period
More than $14.5M+ was saved in avoided development costs by stopping initiatives that provided low-value for customers
The average NPS score for initiatives launched using an experimentation-led product development process increased from -21 to +55
The average Customer Satisfaction (CSAT) score for initiatives launched using an experimentation-led product development process increased from 58% to 81%
2020 Canstar Blue Innovation Excellence Awards (AGL Electric Vehicle Plan & AGL BYO Battery Plan) and 2021 Canstar Blue Innovation Excellence Award (AGL Electric Vehicle Subscription)
The AGL Energy experimentation team were awarded the 2020 and 2021 Finder Innovation Team of the Year
Key takeaways
Experimentationcommunications
To develop and nurture a culture of experimentation in a large organisation it’s important to conduct regular and targeted communications. Devise a formal communications plan for the experimentation program. The success of any experimentation program is 40% performing experiments and 60% cultural transformation and organisational change.
Experimentation guardrails
Work collaboratively with key stakeholders and cross functional teams to define the broad-based guardrails for the experimentation program. The experimentation team need to demonstrate a high degree of trust, ensuring that any business risks are identified and appropriately mitigated.
Operating model
Be prepared for your experimentation program operating model to evolve over time to accommodate changing business needs and market conditions. As blockers to experimentation throughput emerge, they need to be removed. Your work on optimising experimentation program processes, systems, tools etc. is never done!
Value creation
The success of any experimentation program is contingent on the value it delivers for the business and customers. If the perception of value declines, funding for the experimentation program may be cut or withdrawn altogether. The experimentation team need to provide steady and consistent value creation to continue to obtain investments to scale the program.