What “Beneficial Planned Obsolescence” Can Teach Us About the Energy Transition

In this post, we explore the concept of “Beneficial Planned Obsolescence” of products, companies, and entire industries, and what it means for the energy transition. In particular, we discuss strategies that companies like gas utilities may adopt to remain competitive regardless of what form the future takes.

If you’re like basically anyone I know, you’ve probably owned a smartphone that seemingly all of a sudden stopped functioning properly. Maybe the battery stopped holding a charge. Maybe it encounters a fatal error when trying to switch from a mobile network to a WiFi network (be better, phone!).

Like others, you probably took this as a cue that it was time to get a new phone, perhaps curiously just after your 2-year warranty expired.

This is not necessarily a coincidence; planned obsolescence is a strategy adopted by manufacturers of all kinds to keep consumers buying the latest and greatest versions of whatever they sell. It’s a wasteful economic practice that both perpetuates AND persists because of hyper-consumerism, keeping consumers of all levels of means consistently replacing smartphones, laptops, cars, and other resource-intensive goods because they aren’t built to last. Instead, cynically, they were built to last just long enough until the next version’s release – and perform just well enough to convince customers to stick with their brand.

Planned obsolescence is not a new practice; as early as 1924, the Phoebus Cartel, a consortium of lightbulb manufacturers, collectively decided to limit their bulbs to a 1,000-hour lifespan, which was much shorter than the industry standard at the time. A full century later, we’re still filling our landfills with flimsy single-use items, outdated electronic items, fragile furniture, and other goods discarded because manufacturers (understandably) preferred to avoid permanently saturating their customer base in the first wave of adoption.

But I digress… (and cynicism is fashionable these days). In reality, technology advances quickly, and it’s often in consumers’ best interests to upgrade to the latest and greatest purely for the incremental utility value of more advanced technology such as better hardware, faster software and new features. The point I’m trying to make is not that we live in a wasteful society (though I will continue to lament this to my family and friends). The point is that literally every product faces a finite useful life, and thus the long-term survival of products – and their corporate owners – depends on the anticipation, acceptance, and proactive control of that fate.

We saw one of history’s greatest displays of anticipation and acceptance of impending obsolescence in 2021 when America’s largest coal workers’ union proclaimed support for renewable energy and simultaneously requested support for workforce retraining to participate in the new energy future. Enough coal workers had lost their jobs — despite continued federal support, with mixed success — and they valiantly banded together to ensure beneficial participation in the new energy economy.

At ADL, we are developing another opportunity for the same coal workers to upcycle their collective human capital: The Industrialized Construction Institute. The Appalachian “workhorse workforce” has long been selling their time and skills in a market that may soon no longer need them. Creating the next generation of their “product” (i.e. time and skills) by learning how to operate factory machinery and/or install solar panels is a valiantly productive way to both anticipate and lead industry transformation.

Let’s take the opportunity to coin a new term here:

Beneficial Planned Obsolescence (BPO): The process and/or resulting quality of intentionally becoming obsolete due to the pursuit of maximizing customer and/or societal value.

You can take the product view, the corporate view, or the industry view, but in all cases, the underlying tenet of BPO – and what differentiates it from regular Planned Obsolescence – is the religious prioritization of serving customer needs above selling more product. BPO means focusing less on what you can sell to your customer, and more on what your customer wants to buy from you (recall Christensen’s “jobs to be done” framework).

One pocket of our economy where this is particularly acute today: gas utilities, or at least the fossil gas utilities as we know them currently. Today’s domestic dependence on our fossil gas supply chain and infrastructure is incompatible with a growing number of local, state, federal and international climate goals. Is it time to double-down on the same old system, or is it instead time to consider which assets and aspects are future-proof and which should be redesigned or repurposed?

While ADL supports the “yes-and” strategy of leveraging the gas industry as a strategic decarbonization resource (be it via RNG, hydrogen, methane monitoring, building efficiency, and all other strategies) rather than abandoning it, it is becoming increasingly apparent that at least some of our underground gas distribution pipelines may be supplanted by low-carbon alternatives like networked geothermal or abandoned altogether in favor of electrifying certain residential areas.

In other words, while gas will likely remain a critical part of industrial heating and power generation for the foreseeable future, the “product” gas utilities are selling is not necessarily going to remain the optimal solution for all residential consumers over the long-term.

What does planned obsolescence mean in this context? For starters, perhaps this means more attention towards “Non-Pipeline Alternatives” such demand-side measures to provide the same service (e.g. space conditioning) without new investments in pipelines. Maybe it also means investing more in networked geothermal (link above) – not just in its deployment, but in optimizing the technology itself.

And, maybe it also means teaming up with electric utilities to file combined Integrated Resource Plans to find the lowest-cost solutions for serving customers. PG&E’s Remote Grid Program – which constructs remote microgrids to serve customers without the need for maintaining long, expensive, and wildfire-prone electric lines – is a shining example of an innovative utility solution to fulfill their customers’ “job to be done” (electricity in the home) at lowest cost and lowest risk. Rhetorical: what can the gas utility learn from this example?

At ADL, we spend the vast majority of our time thinking about the future. Here we propose a few strategies for the wider energy industry, based on the aforementioned coal workers’ union 2021 announcement.

1. Own the technology that disrupts your status quo.

R&D is the heart pumping blood through any tech company’s body. Don’t stick to incremental improvements; pursue Horizon 3 ideas. Invent the future before your competitors do. (And the second you think you don’t have competitors, even as a regulated utility, you’re on your death march.)

EXAMPLE: Amazon’s sustained success through multiple transformations can largely be attributed to this line of thinking. Why just sell books when you can sell Kindles and tear apart the book industry? Why just sell books when you can use the same technology to sell literally anything? And if you’ve already built advanced internal server capabilities, while you’re at it, why not just triple your profits with Amazon Web Services? These business transformations seem natural in retrospect, but they weren’t straightforward at the time (just ask anyone who didn’t buy Amazon stock in 2006).

2. Place bets on your possible successor(s).

Map the possible 20-to-30 year future states of your industry, and make a list of the technologies or conditions that could catalyze each one. Find entrepreneurs and innovators developing versions of those technologies. Invest in them. Benefit from their victories.

EXAMPLE: Remember when Ford bought Tesla? Neither do I. Tesla’s first Roadster hit the road just 15 years ago, and at the time of this writing, Tesla’s market cap is seven times that of Ford (even after its post-$1T-club collapse). Ford is 100 years older as a company (to the year), but it failed to anticipate – or even insulate itself from – the EV transformation, and now Tesla is eating its lunch. (Or will the F150 Lightning steal it back?)

3. Turn your competitors into allies.

Though you may be used to decades of competition, your competitors face the same challenges you do. Put your heads – and your assets – together and see what opportunities you can create together. Remember the African proverb: If you want to go fast, go alone; if you want to go far, go together. (Author’s note: African proverbs are the best proverbs.)

EXAMPLE: The Open Invention Network (OIN) was founded by IBM, Red Hat, and NEC in 2005 and now boasts support from Google, Toyota, Philips and others. This community of companies have agreed to share their patented technology with each other in order to help promote innovation and defend against patent lawsuits. By creating a more open and collaborative environment for innovation in the name of customer value, the OIN allows the member companies to focus on rapidly developing new products and services rather than worrying about patent disputes.

4. Pilot, pilot, and then pilot some more.

It’s true: “pilot fatigue” is real. It’s hard to effectively manage an array of projects with an array of vendors while maintaining sufficient attention on safety, accountability, measuring success, and the like. But – and believe us – if you’re a major energy, buildings or transportation player, there are queues of startups out there that would bend over backwards for the chance to work with you. You just need to find them – and ADL’s ProblemSpace platform can help you short-circuit that process. Heck, maybe even band together with your brand new allies (see #3 above) and co-sponsor a pilot series. ProblemSpace can facilitate that too.

5. Continuously upskill your workforce.

Let’s face it: hiring is time-consuming and layoffs suck. Minimizing both requires maintaining a skilled and versatile workforce capable of adopting the next generation of technologies, processes and procedures. Don’t let your workforce hold you back – but don’t hold back your workforce, either. Invest in internal training programs and make continued education part of your firm’s culture. After all, culture eats strategy for breakfast (or more accurately dinner, because if your culture is eating your strategy, your sun has already set!).

If you think about any of these things in your job, please reach out to us. We would love to hear how others around the energy, transportation and construction industries apply similar principles to their own strategic growth initiatives. Perhaps our ProblemSpace model can help you fill that gap in your technology portfolio, or ADL can help you build new revenue sources with our Monetizing Innovation framework.

How can ADL help you stay ahead of your industry’s curve? Reach out to us below to find out!