From RWE to Innogy

1. November 2020 by Arndt Brandenberg

If we can achieve sustainable change with 70,000 employees, anyone can.

A strong urgency for a new business model. A change-resistant culture. An organisation in crisis. That’s what energy giant RWE was up against. A seven-year transformation with a small team of change makers led not only to the birth of Innogy, but also to a complete shift in mindset and culture. How, you might ask?

It was red and orange all over, RWE’s 2012 Organizational Health Index by McKinsey. What to do? The top leaders got together, but their solutions lacked a breakthrough. And didn’t sufficiently address the cause of those reds and oranges. ‘We discovered a couple of blocking mental models. A real eye-opener, because it was the first time we understood the core of the problem’, says change maker Arndt Brandenberg.

The company did very well for decades, but to take the next step, they were lacking capabilities, RWE realised. That created a huge demand for change. The company needed to be more customer-focused, innovative and financially profitable while also creating a great place to work. This ignited an intense discussion: is it possible to turn around this company?

Broken business model

For decades, the organisation had been stable and respected. The Germany-based energy giant focused on nuclear power and fossil fuels like lignite and hard coal. After the 2011 nuclear disaster in Fukushima, renewable energy and CO2 reductions made it to the top of the (political) agenda. This broke RWE’s business model.

Arndt Brandenberg, who started leading the transformation seven years ago: ‘Part of the employees wanted to go for a decarbonised energy world which is decentral and leveraging digitisation; in other words, for something that would potentially further destroy RWE’s old business model.’ This led to the foundation of Innogy in 2016, which redirected 2/3 of RWE’s employees into creating the future renewable energy landscape. ‘The opposing forces were directed into separate channels, which released so much energy. There could now be two missions and visions’, says Arndt

Blocking mental models

Splitting Innogy from RWE was never an objective but emerged during the transformation. ‘The new mindset that developed during the transformation created space to think outside the box’, says Peter Stoppelenburg, who co-lead the change group. But what made the old mindset obstructive? There were four blocking mental models:

  • ‘I do not like to give critical upward feedback.’ Arndt: ‘It’s impossible to steer a business if the top doesn’t know reality.’
  • ‘I’m a leader of my area, not of the whole.’ Arndt: ‘Silo thinking is counterproductive for a fast-delivering company, especially in the VUCA (volatile, uncertain, complex, ambiguous) world in which we find ourselves.’
  • ‘I’ll stay below the radar and wait until it’s over.’ Arndt: ‘To achieve results, you need to be clear about purpose, desired outcome and KPI’s.’
  • ‘I need direction.’ Arndt: ‘Leaders want to have all the answers, but you need to accept that this is just not the case and connect to the outside world for answers.’

So how did RWE approach these blocking mental models?

No more excuses

The change team introduced new ways of working. ‘We adopted an emergent approach with a small core group of six to seven people designing small interventions with big impact’, explains Peter. All interventions were based around a powerful belief that you can only change yourself. But how is it possible to take 70,000 people on a journey without being able to change them?

‘If I say “change starts with you”, I take away all excuses’, explains Arndt. ‘I always believed in the power of the people and the collective wisdom.’ This is why the change makers didn’t want the board to cascade down the purpose and strategy. They did it differently: by involving everyone

Everything is possible

Peter: ‘People don’t mind change, but they don’t want to be changed. People support what they create. Hence, we made a strategy prototype with 1,500 leaders. Within three or four months, we had dialogues with nearly all 70,000 employees in small groups of five. Everybody was able to enrich the prototype.’

Connecting emotionally with the change was pivotal and inspired people to share and open up. This wasn’t part of the culture before. ‘As soon as we show emotions, we connect with others and create alignment. We started thinking about possibilities rather than risks and problems. With that energy, we actually got something done which was impossible before’, smiles Arndt.

Comfortable with discomfort

Based on the purpose and strategy, four programmes were designed, focused around creating a new mindset and culture. Three of those programmes focused on leadership, and not without cause. Peter: ‘The leaders were some of the toughest to align. They came from 30 years of stability. And now the company was shaken up. Can you be comfortable with discomfort? That was a big ask. But if you want to be agile, you have to lead in an uncomfortable, uncertain, disruptive environment.’

Arndt vividly remembers the moment top management broke down to break through. While working on the future management agenda, someone asked: ‘Is everyone aware of the consequences? If we do this, one-third of our leaders will be redundant in the future. The same logic applies to us.’ That’s when the penny dropped. ‘This moment changed everything’, says Arndt. ‘Top management realised that they’re not talking about others, but about themselves and that change starts with I. It led to honest discussions like never before.’

It’s possible everywhere

So, was the transformation successful? Since the change group measures everything continually, Arndt has no difficulty sharing results:

Sustainability of transformations improved from approximately 40% to 80%.
Customer satisfaction went up to 80/100.
Employee engagement rose from 66 to 77/100*.
Leadership quality went up from 61 to 73/100*.
*A benchmarked safe and sustainable workforce should aim for 75/100.

The change makers consistently held to their philosophy for seven years. ‘I think that is one of the key success factors’, says Peter. ‘People have different conversations now and understand each other much better. There’s far more trust and alignment because of this human to human contact.’ Arndt smiles. ‘Our new culture is in the hearts and minds of the people. Practices will develop further from here. If it is possible to do this with a 120-year-old company in Germany, it’s possible everywhere!’

Ten lessons learned during RWE’s transformation:

  1. Only what gets measured can be improved. Arndt: ‘Measuring helps making sense of the culture and system in the organisation.’
  2. Understand the root causes and determine the blocking mental models. Peter: ‘Don’t only focus your efforts on strategy. Culture and leadership make the real difference.’
  3. Create and co-design small, high impact interventions based on the desired future.
  4. Approach change in an emergent, iterative way. Experiment, innovate, fail and learn.
  5. People support what they create. Peter: ‘involve, involve, involve.’
  6. Start where the energy is and with leaders who really want it. Arndt: ‘We wasted resources when leaders weren’t capable or didn’t really embrace change.’
  7. Assemble a team of enthusiastic people who can catalyse change. Then build up knowledge and wisdom in the company. Empower people.
  8. Set a high enough ambition. Arndt: ‘Without that, you stay in your comfort zone and continue to do as you always did.’
  9. Forget the burning platform. Arndt: ‘A burning platform helps you to create movement, but only for a while, because it inspires the wish to flee. Come with a burning desire instead.’
  10. Embrace that change never stops, because the company needs to adapt continually.

‘It’s impossible to steer a business if the top doesn’t know reality.’

‘If I say “change starts with you”, I take away all excuses.’

‘People don’t mind change, but they don’t want to be changed.’

‘Can you be comfortable with discomfort?’

‘You need to break down to break through.’