12 Tips To An Innovative Culture From ARPA-Energy, Part I

A PwC study of top CEOs found that innovation is one of the top priorities for CEOs and yet they also struggle with it. They could learn a few things from an unconventional government agency incubating transformative clean energy-related technologies – if those CEOs are willing to truly transform their cultures.

“We are both very comfortable in the big picture, crazy moonshot idea space, but we’re also very pragmatic, because all of us have seen instances where somebody thought they knew what should be done and did this crazy tech that was amazing that it worked and nobody made it or bought it or used it. So, it didn’t have an impact. So, we are really fanatic about thinking about impact.” Those are the words of Dr. Jennifer Gerbi, Deputy Director and Acting Director of ARPA-E, the innovation arm of the U.S. Department of Energy, on my podcast Electric Ladies recently.  

From ARPA-E’s structure and culture to the way it manages what they call “performers” – projects and teams accepted into their program – ARPA-E is unlike any corporate model. That’s where the lessons lie.

ARPA-E is the Advanced Projects Research Agency, Energy, focused on solving the country’s energy problems. They fund potentially transformative technologies that address critical logjams in transitioning to a clean energy economy. These range from the grid, to transportation, hydrogen, nuclear, and removing CO2, to fusion, buildings and beyond.

Since its founding in 2008, signed into law by President George W. Bush in 2007 through bipartisan legislation, ARPA-E has invested ~$2.8 billion in 1,190+ innovative energy technologies (as of May 2021), some of which have received $5.4 billion+ in follow-on private capital (and generated tax revenue).

“We’re a very mission driven agency,” Gerbi explained. “We’re supposed to solve energy problems for the country and because it’s so broad that enables us to do all sorts of different things and to figure out what the right thing to do is… And to do that, you have to have a specific kind of culture.”

Having spent many years in top corporations herself, Gerbi recognizes the structural and cultural issues between ARPA-E and corporates that are at cross-purposes when it comes to innovation. “I think that, especially with large companies in the U. S., you really have to appreciate how tightly they have to control their systems and processes to be able to do what they do,” she said. “And that needs and requires…a culture that would be very different than the kind of culture at ARPA-E.”

There are 12 key ways ARPA-E functions that enable it to successfully innovate these “moonshot” energy solutions, based on our conversation – many of which could make a Fortune 500 executive cringe. Here are five and the other 7 are in Part II:

·      No internal competition:  The ARPA-E structure and culture are inherently non-competitive. For example, they have term limits of about three to five years. “So the fact that we’re set up this way means that we don’t, there’s no reason to compete. There are no promotions, “ Gerbi told me. “So, there’s literally no reason for us to compete. And that has really set up a special kind of culture here that really enables us to do what we do.”

·      Go for the “biggest risk”: Many corporate leaders insist they have a culture that tolerates or even encourages failure, some even boasting of failure “awards,” but in reality, you’re still promoted based on your successes. But because there are term limits at ARPA-E, that dynamic is off the table. As she explained it, “If somebody is measuring your success right by how many projects might get shut down or fail, well, then …you’re going to be more risk averse, right? Because you want to choose things that won’t fail because you’re being measured by that. So, we don’t measure by that.”

·      Be comfortable with ambiguity: Three of the things large companies thrive on are efficiency, consensus, and sales. Not ARPA-E.  “Not everything works….and I think that that’s just absolutely crucial. We have comfort with ambiguity.” In big companies, “You don’t want people in there screwing things up and testing things around,” but that’s exactly what she said they do at ARPA-E.

·      Put it out there before it’s ready:  Startup leaders like Steve Blank emphasize talking to customers before you finish developing your product to make sure it’s serving their needs. ARPA-E takes a page from that book, insisting on “field testing for validation,” as Gerbi put it, even for moonshot technologies. “One of the key reasons why we are successful is that we intermesh tech and market right from the beginning,” Gerbi pointed out, adding, “You can’t understand what the solution needs to look like to make an impact if you don’t understand the market.”

·      Encourage challenging each other: Where most corporate cultures want everyone to go along to get along, at ARPA-E they, “challenge each other all the time,” Gerbi said. “You might want to call that conflict, and sometimes depending on personalities, maybe that’s a little more towards the conflict side of things, but I see it as a method of information transfer.” She added that, “I would call that a little bit more pressure testing and learning and help me understand why…It’s not personally aggressive, but if you are not used to that model…(it could) be very uncomfortable.”

Transforming large companies from within is extremely difficult. But we have urgent and huge problems to solve, like climate change, and as Einstein famously said, We cannot solve our problems with the same thinking we used when we created them.”

Maybe the pandemic shook corporates up enough that they are open to ARPA-E’s unconventional ways. Read Part II here.

Listen to Joan’s full interview with Dr. Jennifer Gerbi on the Electric Ladies podcast here.