Remarks – Mary C. Doswell
Senior Vice President – Dominion
Making Business Work Keynote Address
The University of Virginia
September 22, 2011
"Making Business Work: Winning Through Innovation"
Professor Kemp, members of the faculty and administration, students and special guests … I have been looking forward to this and am grateful for the opportunity to join you this afternoon.
I have given numerous talks and presentations during my career, but few can rival Old Cabell Hall for history and sheer beauty. But why would I expect anything less. This is the University of Virginia, isn’t it?
And in truth, I am no stranger to these grounds, having attended the Executive Development Program at the Darden School about 15 years ago – not to mention any number of sporting events and other functions, including my daughter’s graduation in 2008. She is currently here working on her Ph.D in educational psychology. My husband is also a proud UVA alum.
So, I am very comfortable in this environment and look forward to talking with you about our topic today: Innovation, especially as it relates to the business of energy. I especially look forward to sharing with you some of the exciting research and testing that Dominion is doing in the field of alternative energy, which is the area that I oversee from our headquarters in Richmond.
I have it on good authority that this is the most popular class on grounds. It certainly must be one of the largest. One of my goals today is to ensure that COMM 1800 – Making Business Work – remains as popular as it was before I got here.
I know this class is designed for non-business majors, or at least for those who have not had much exposure to business as a field of study. I plan to change that in the time I have – even if it’s just by a little bit.
I will begin with a pitch – a little cheerleading, if you will. Business loves diversity. Business needs diversity to be sustainable, well-rounded – and yes, innovative – our topic today.
Take my company as an example. In the group I oversee at Dominion – the Alternative Energy Solutions group, or AES for short – there are 23 of us, including myself. I dare say, we have given new meaning to diversity at Dominion.
My background is in physics and engineering. Others in my group are mechanical and electrical engineers; MBAs; lawyers; accountants; environmental scientists and sustainability majors; statisticians and mathematicians.
We also have folks who majored in English and English literature; economics; hotel management; history and last but not least, linguistics.
So if you were thinking that you might not qualify for a job in the business world, think again. The range of skills, educational backgrounds and opportunities in my group alone should dispel any concerns you might have along those lines.
My co-workers are a very diverse and well-rounded bunch in terms of their interests outside of work, too. And Dominion is very committed to supporting them.
For example, one of my employees currently serves in the Navy Reserve. He was deployed to Afghanistan several months ago. He is in charge of the prison for insurgents. Prior to that, his unit was mobilized and sent to Iraq and Kuwait. He and his family continue to receive a paycheck and full medical benefits from Dominion while he is on active duty.
Another employee of mine volunteers with Engineers without Borders. For the past two summers, he has travelled to Uganda with engineering students from a certain university in Blacksburg that will remain nameless. The group raised $40,000 to install 15 solar panels and a battery support system at a school there. It is their only source of electricity.
So my point is, don’t overlook business as a potential career path even if you choose not to major in finance or marketing or management. There will be a wide range of opportunities for bright, educated and motivated young people like you.
The word “innovation” means different things to different people. It derives from the Latin verb meaning “to renew or change.” When we say something is “innovative,” we typically associate it with creativity and imagination, originality and novelty.
I have often used this description: Innovation is not invention; it is fresh thinking that creates value.
We think of individuals, such as Steve Jobs at Apple, Mark Zuckerberg at Facebook, and Sergey Brin and Larry Page, co-founders of Google, to name a few.
Other names from history come to mind – names we associate with “success” and “genius.” Thomas Edison, Henry Ford, Orville and Wilbur Wright. Light bulbs, automobiles and airplanes. All game-changing innovations that fundamentally altered society and the course of history.
And not to be overlooked is the man who lived near here on top of a mountain – Thomas Jefferson – a man with amazing mental agility. Jefferson invented a sundial, a gravity-powered clock, various pieces of farm machinery, beds, chairs and book stands, among many other things.
As Jefferson said, “Nature intended me for the tranquil pursuits of science, by rendering them my supreme delight.”
Innovation is, in fact, a remarkably broad and rich aspect of human existence. It includes a mix of scientific experimentation and discovery, mechanical tinkering, accidental insights, sheer genius – and failure.
If you thought I said “failure,” you heard right. The annals of history are chock full of innovators who failed – until they succeeded.
Thomas Edison is a case in point. Edison opened his laboratory in Menlo Park, New Jersey in 1876. From 1878 to 1880, he and his associates worked on at least 3,000 different theories to develop an efficient incandescent lamp. Do you know how he finally got it done? The filament was the key thing.
The first high-resistance, incandescent electric light worked by passing electricity through a thin platinum filament in a glass vacuum bulb. That delayed the filament from melting. But it still only worked for a few hours.
One day, Edison started playing with a piece of compressed carbon. He rolled it between his fingers. Then, in a manner of speaking, a light went off – in his head. That was the key, although it took tons of trial and error. His people went through every sort of carbonized filament you can imagine: hickory, cedar, flax, bamboo.
All told, Edison’s team tested no less than 6,000 different vegetable growths. And each one they tried that didn’t work constituted a small failure, and another reason to be frustrated. But they stuck with it and in the end, they found that a cotton thread worked best.
Afterwards, Edison continued to improve the technology of the incandescent light bulb – and in the process, brought about a revolution in lighting.
Electricity, it is safe to say, radically changed the structure of our industrial processes, our economy and our quality of life. And it continues to be the lifeblood of our economy and a leading source of the comfort and convenience we enjoy in our everyday lives.
Throughout the latter half of the 19th century and into the 20th, innovation was the American way. Our nation was built around it. A better idea. A better technique. A better answer.
And a fascinating aspect of innovation is the way in which it builds on what came before. The Chinese have an old proverb that captures the idea perfectly. It says, One generation plants the trees; another gets the shade.
In other words, today’s innovation rests squarely on a foundation of yesterday’s innovation. Examples from everyday life abound:
In short, for every innovation you can think of, there is an ancestor who paved the way.
Allow me one more example before I turn my attention to the energy business – the industry I know best.
This particular story dates to the 1950s and is about eight unhappy employees of Shockley Semiconductor in California, the company founded by Nobel laureate and co-inventor of the transistor, William Shockley. The disgruntled employees left Shockley’s company and went off to form Fairchild Semiconductor. After several years, Fairchild became a formidable competitor in its own right – a pioneer in transistors and integrated circuitry. The original eight founders eventually split up and started their own companies.
Over the next two decades, this snowball effect helped launch an explosion of start-up companies – 65 to be exact – in the information technology sector. The result was nothing less than … Silicon Valley.
And to think it all originated with the desire of eight dissatisfied employees to do something different. Something risky. Something revolutionary.
It is no wonder that companies are constantly trying to stimulate innovation in their organizations; why they are always searching for ways to provide gifted employees with the tools they need to be creative and ingenious.
Why? Because a future without innovation – and this goes for any industry – will be a future without any technological breakthroughs – the evolutionary and sometimes revolutionary steps – that lead to growth and progress…. and continued success.
One of the greatest challenges we face in the business world is generating bright new ideas and introducing them into the marketplace. The process otherwise known as research, development and deployment.
Science, engineering and technology make up one critical piece of this challenge. The other is public policy – the laws and regulations created by Congress and state legislatures that establish the rules of the game.
A healthy, growing economy rests on a solid foundation of investment in research, education, and information, communications and energy infrastructures. If our nation fails to keep pace with the rest of the world in these critical investments, then our prospects for sustainable, long-term economic growth and world leadership will fade.
That is not an outcome that any of us should wish for. And it is ample reason for our country to invest more public and private dollars into researching, developing and deploying new technologies – the things that are critical to innovation and social and economic progress.
Let’s focus now on the energy sector. Energy is inherently dynamic. We are constantly using it; we are constantly seeking new sources. Without energy, we would not have experienced the Industrial Revolution, and we certainly would not have the Internet.
The Internet, by the way, loves electricity.
At Dominion, for example, some of our largest customers are the data centers that form the heart and soul of companies such as Google, Microsoft and Yahoo. They are basically giant warehouses for mainframe servers powering the Internet. Their electricity demand is comparable to a big manufacturing plant, the only difference being the constancy of their demand.
Data centers run 24/7, 365 days a year at full capacity. In Northern Virginia alone, which handles about half of all the Internet traffic in the U.S., there are 40 data centers in operation, with 20 more planned. Each one consumes about the same amount of power as 9,000 residential households. They basically inhale electricity, around the clock.
The strong growth rate we expect in Virginia over the coming decade can be attributed in large part to these data centers and other high-tech businesses located in the Northern Virginia suburbs of Washington, D.C. – home of, you guessed it, the federal government.
As vital to our nation’s growth and prosperity as electricity was in the 20th century, we believe it will play an even greater transformative role in the 21st century.
Innovation that is electricity based is supporting the increasingly sophisticated global, real-time networks for communication, finance, international trade and technology development. Electricity is also driving new technologies – from lasers to microprocessors – that will make possible continued improvements in industrial productivity and efficiency and household convenience – in your lifetime and in your kids’ lifetimes, too.
We know in my business how to make, move and market energy to support economic growth. The question is, can we continue to do it successfully, responding to and meeting customer demand – and do so in a way that is environmentally sustainable?
Society’s changing expectations about environmental quality – driven in part by concerns about global warming and climate change – have altered the energy landscape in a fundamental way.
Allow me to step back now for a few minutes and give you some background about Dominion – our mission, our corporate values and how we see the world of energy unfolding – the world that you will inhabit in the years to come.
I think my comments will help you gain some basic understanding and insight – not only into Dominion – but into the business of energy and the challenges we face in balancing our business goals with environmental concerns.
Dominion provides energy in the form of electricity and natural gas. Our company is part of a $5-trillion-a-year industry. As such, the energy business dwarfs all other sectors of the global economy in terms of size – and, I would argue, importance.
Just think of what electricity does in your own life. Most of the comforts you enjoy – the plasma TVs, the laptop computers, coffee machines, refrigerators, air conditioning, video recorders, iPods, iPads and iPhones – all depend on electricity to keep running.
At Dominion, there are three yardsticks we use to measure our overall success. They are safety, reliability and affordability. The key question for us is, “Are we meeting our customers’ expectations by providing their energy safely, whenever and wherever they need it, at a price they can afford to pay for it?”
In other words, are we fulfilling our business mission in a way that satisfies our customers and meets all of our legal and regulatory obligations?
Our mission expresses what we do as a company. Our core values address how we do it. They are the guiding principles that serve as the bedrock of all that we do. We have four core values at Dominion:
Dominion has three operating businesses and a services company that supports them.
If you pay a monthly electric bill, you are most likely familiar with our electric utility, Dominion Virginia Power. DVP operates as a regulated monopoly, with extensive oversight by both state and federal regulatory agencies. It distributes power to our 2.4 million customers in Virginia and North Carolina.
That is a little less than half of the company. We are organized as an investor-owned corporation, and there are other parts of our business.
We own and operate a fleet of regulated and unregulated power stations – nuclear, fossil and renewable –in the Midwest, mid-Atlantic and Northeast. In fact, we are the single largest power producer in New England.
Most of the power we produce – about 98 percent, in fact, comes from conventional fuel sources – coal, natural gas and a small amount of oil – the three major fossil fuels – and uranium, the fuel source for our nuclear stations. We rely heavily on these fuels – especially coal, which is our most abundant domestic fuel source – because they are efficient, affordable and available in the large quantities that society demands.
The main drawback of the fossil fuels is the pollutants that result from burning them – the main ones being sulfur dioxide, nitrogen oxides, mercury and carbon dioxide, which of course, is the leading greenhouse gas.
We also own and operate a small but growing portfolio of renewable energy assets, including wind, water and wood biomass. These green energy sources have definite environmental advantages, but they are expensive relative to the conventional sources I just mentioned. The challenge is to improve their operating efficiencies and bring their costs down to make them more competitive with the fossil fuels.
Dominion currently gets about 2 percent of its total electricity production from these green energy sources.
Dominion also has plans for the state’s largest solar power and advanced energy storage project, to be located in Halifax County. UVA’s center for Electrochemical Science and Engineering will be participating in this project. I will discuss that project in more detail a little later.
Power generation is a major part of our enterprise, but there is more – a lot more. We are also in the natural gas transmission, gathering and storage business, with about 12,000 miles of pipelines in six Midwestern and mid-Atlantic states.
We operate the nation’s largest underground natural gas storage system and one of the largest liquefied natural gas import terminals, located on the Chesapeake Bay in Maryland.
There, we import liquefied natural gas from producers around the globe and convert it back to its gaseous form before sending it to markets along the East Coast.
We also distribute natural gas to 1.3 million retail customers in West Virginia and Ohio.
All told, Dominion does business in a potential market of close to 60 million homes and businesses, where about 40 percent of the nation’s energy is consumed.
The group that I oversee – Alternative Energy Solutions – was created in 2009. We are the innovation hub for all things related to emerging energy technologies and renewable generation, or green power.
There are three main aspects to our business mission:
In the area of renewable energy, Dominion’s assets include wind, hydro, wood biomass and the small solar demonstration project that I mentioned earlier. When fully operational, the combined output of these facilities will exceed 1,600 megawatts of clean energy – enough to supply the power needs of more than 400,000 typical households.
The solar project may be of particular interest to you. In June of last year, we announced plans to partner with Halifax County, the Center for Electrochemical Science and Engineering here at UVA, and a battery manufacturer to construct a 4-megawatt, 50-acre solar photovoltaic facility. Coupled with a new and advanced battery storage technology, this demonstration project – the largest of its kind in Virginia – should begin operating in 2014.
My group is also evaluating the costs and benefits of a solar distributed generation program for our electric customers. Distributed generation refers to power that is generated and used at a customer site, as opposed to power produced at a large, centrally-located power station and transmitted long distances via the power grid to homes and businesses.
This program would consist of utility-owned solar installations on leased roof space, as well as special pricing incentives to encourage customer-owned solar installations. This is a great example of how Dominion has responded to changes in the marketplace and has embraced innovation.
You see, the fact is that our customers are installing solar panels – the economics are, in many cases, favorable. Solar is green, and our customers like being independent. So Dominion could have fought this off, possibly with policy barriers, or ignored it and watched consumption or revenue, decline. Or, we could embrace it – make it part of our business model.
Another promising renewable energy source we are studying is offshore wind.
Offshore wind is potentially one of the largest sources of carbon-free, renewable energy in Virginia and the U.S. In 2010, the Virginia Offshore Wind Development Authority was created by Governor McDonnell to promote the commercial development of this green resource. I was one of the individuals appointed by the governor to serve on the Authority and help with policy development.
Virginia has some unique characteristics that would benefit the development of offshore wind: shallow depths, class 5 & 6 winds, a solid port facility, and a high voltage interconnect near the coast. So if efforts continue, Dominion plans to participate as a developer.
Biomass is another renewable resource with commercial promise. Biomass refers to an assortment of renewable organic materials, such as wood, manure and agricultural crops that are readily available and can be burned directly as an energy source.
Last April Dominion announced plans to convert three small coal-burning power stations to biomass, which would add 153 megawatts of renewable energy to our regulated Virginia generating fleet when they begin operations next year.
The fuel conversion would result in reduced pollution, and all of the stations would meet stringent new emissions standards set by the U.S. Environmental Protection Agency.
In addition to these initiatives, we are evaluating a range of opportunities to expand our green portfolio in Virginia and other areas in the mid-Atlantic region.
These efforts are consistent with our commitment to help Virginia and North Carolina meet their established renewable energy targets – 15 percent by 2025 in Virginia and 12.5 percent by 2021 in North Carolina.
The Alternative Energy Solutions group at Dominion is also very active in helping Dominion’s customers use energy more efficiently.
A cornerstone of the future gains we hope to realize in energy efficiency is the smart grid – a modernized and digitized power grid that will enhance the way we deliver electricity to our customers. We like to describe the smart grid as the convergence of information technology and energy technology, a powerful combination.
Smart meters are a key building block of the larger smart grid. In 2009, we launched two pilot projects in Richmond and here in Charlottesville. The goal was to test smart meters and their associated equipment. By the end of 2009, we had more than 53,000 smart meters operating successfully. At the end of 2010, more than 100,000 were in operation here, in Richmond and in Northern Virginia.
The smart meters give us meter readings without meter readers. And they allow us to detect when the lights are out, to remotely turn power on and off, and to reduce energy consumption.
In addition to our work in the areas of renewable energy and energy conservation, we are active in efforts to support the adoption of electric vehicles. The move to electric vehicles is an effort to lower our greenhouse gas emissions and help reduce our nation’s dependence on foreign oil.
Passenger vehicles account for about 40 percent of all U.S. oil consumption and almost 20 percent of total greenhouse gas emissions. Fuel economy improvements are widely seen as the biggest single step that our nation can take – short of a mandatory emissions cap – to lower greenhouse gas levels.
The state of Virginia is a very active emerging market for electric vehicles and is ahead of many other states in laying the groundwork for their development and use. We believe the EV market has the potential to grow to 86,000, or five percent of all vehicle sales in Dominion’s service territory by 2020.
Dominion is partnering in several public/private research initiatives designed to test electric vehicles and hybrid EVs, and develop plans for the required infrastructure. We have teamed up with General Motors and eight other utilities to test the Chevrolet Volt Extended Range Electric Vehicle and supporting charging infrastructure. Dominion installed four charging stations in late 2010 in Northern Virginia and has received three Chevy Volts in 2011. Company employees are driving the Volts as frequently as possible to facilitate data collection and analysis by GM and the U.S. Department of Energy.
Also in late 2010, Ford announced Richmond as a target city for the new Ford Focus EV and Dominion and Ford Motor Company announced plans to coordinate efforts to help prepare Virginia for the operation of EVs. Our two companies are working together to develop consumer outreach and EV educational programs, as well as share information on charging needs and requirements to ensure the power grid can support the necessary electrical demand.
The collaboration between Ford and Dominion also involves working with state and local governments on the most efficient ways to bring EVs to Virginia. Government support for infrastructure and a simple charging station permitting process are thought to be two key prerequisites for EV acceptance in Virginia and across the country.
Those are a few of the ways that the Alternative Energy Solutions group is working to find innovative ways to integrate sustainable development practices into Dominion’s existing operations.
It’s a big job – made even more challenging at a time when the business environment is weighed down by significant uncertainty. Uncertainty associated with shifting government regulations, market restructuring, changing customer expectations and uneven technological investment.
There is no doubt that America’s remarkable record of innovation and economic growth is grounded in entrepreneurial spirit, individual ingenuity and initiative and free markets. But from the very beginning, American government has made significant investments in promising technologies that have helped define our history. The interstate highway system, cancer research, and the Internet are three prime examples.
What we need now is a national energy policy that is built around innovation in energy technology – a workable strategy that is capable of driving the clean energy transformation that society is calling for.
This calls for a broad range of technology investments – in everything from solar power to capturing and storing carbon dioxide from coal stations. Some new technologies are bound to fail. But as history shows, multiple failures are often needed in order to reap a single success.
History also teaches that you can’t win in the innovation game if you don’t play. So we need public and private partnerships that will stimulate innovation and investment if we are going to drive down costs and improve the performance of clean energy alternatives.
As I’ve tried to show today, American history has numerous examples of innovation delivering some remarkable technologies – from radar to GPS, from the Internet to iPhones.
We need to reach for similar successes in the energy sector.
Speaking on behalf of the American Energy Innovation Council, Microsoft chairman Bill Gates said: “We are in critical need of a government commitment to research into new energy technologies that can free us from our dependence on foreign oil and create affordable clean-energy alternatives."
Few people come to the subject of innovation with more credibility than Bill Gates. And the massive scale of energy innovation needed to achieve a clean, secure and prosperous future is not well understood.
I hope that I have been able to provide you with some insight into the world of energy and the important role that innovation plays in moving our society forward.
I have thrown a lot of information at you today in a short amount of time. But if you leave this hall remembering only one thing, remember this: Companies that want to stay ahead of the curve and be sustainable performers must innovate – not once or twice but continuously.
They must renew themselves and change with the times. Otherwise they will not survive. Or, if they do survive, they will be poorly positioned to grow and prosper – especially in this era of rapid and constant technological change.
Examples abound of businesses that were once the most innovative in their industries, but for one reason or another, lost their edge – and their greatness. I will mention three of them in closing.
One is Blockbuster, the video rental chain. Blockbuster survived the transition from VHS to DVD just fine – but then failed to adapt to the next big change: videos through the mail, video-on-demand and video streaming. Blockbuster failed where Netflix and Redbox succeeded.
Eastman Kodak, one of America’s great corporate brands, has largely missed out on the digital photography revolution and all the file sharing and third-party apps that we now see in the marketplace. Kodak’s stock price reflects its failure to innovate. It is down more than 90 percent since peaking in 1997.
My final example is Motorola – a powerful and dominant brand in the television industry when I was growing up. Motorola actually built and sold the world’s first mobile phone. But they failed to develop a smart phone capable of handling e-mail and other data. They lost significant market share to companies like Apple, LG and Samsung. In August, the mobile devices division of Motorola was acquired by none other than … Google.
Those are just three of the many top companies that have fallen on hard times, shrunk, grown obsolete or been acquired by rivals. And all because they failed to adapt, innovate or anticipate the future.
A similar fate awaits any company that fails to embrace change and innovation.
I am confident that the time will come when you are the ones who will be innovating and pushing new ideas and perspectives to the forefront of America’s public agenda – whether in the business community, academia or the public sector.
So if the call of leadership ever presents itself – and maybe it already has for some of you – I encourage you to accept the challenge. It can be an awesome experience – and our nation needs the very best and brightest, in all walks of life.
Thanks again for having me today, and good luck to all of you. If there is time, I would love to take your questions or hear your comments about anything I have said.