The energy market is changing fast – and even the most well-established firms in the world face pressure to adapt and digitize or fall behind. For German energy giant RWE AG, the need for change has fueled venture-driven growth.

In business since 1898, RWE has seen its fair share of transitions. Once a leader in coal mining, it’s now the world’s second-largest wind energy producer and Europe’s third-largest renewables producer, and on track for climate neutrality by 2040.

Recognizing that energy leadership would require fresh ideas, RWE sent a team to work with Mach49 in Silicon Valley to launch pear.ai, an AI-driven analytics platform designed for small and medium businesses in the United States. Pear’s flagship product was 'Sam', a virtual energy assistant providing energy managers with instant access to energy information in response to their natural-language questions. Just 18 months after its incubation, RWE sold pear.ai to Constellation.

The integration of pear.ai enabled Constellation, a leading retail supplier of power, natural gas and energy, to employ leading-edge artificial intelligence technology to greatly enhance an energy manager’s capabilities, such as forecasting load and determining the value of energy efficiency and distributed energy resources.

The creation and sale of pear.ai was a success and it also offered valuable lessons about how internal venture operations can succeed within a highly regulated legacy environment.

Setting the Foundation

When RWE first approached Mach49, the team had no existing footprint in North America. Patrick Lammers, then SVP of RWE, brought in colleague and serial entrepreneur Sukhjinder Singh to lead an initiative to build a product that would help small and midsized U.S. businesses manage their energy usage.  “I came here with one other colleague from the company,” explained Sukhjinder. “You want local speed and local people. The last thing you want is to have people [from the corporation] running it like it’s another project.”

Key to the team’s success, said Sukhjinder, was its willingness to follow Mach49 even when their processes felt new and unfamiliar. “Innovation is a discipline of its own,” said Sukhjinder, comparing the Mach49 process to his previous experience as a consultant. “Consulting is just a project. Innovating is creating something from the bottom up.”

Asking the Right Questions

Instead of making assumptions based on existing data, Mach49 helped Sukhjinder’s team to challenge and deepen their ideas through an extensive customer survey process that honed in on and synthesized pain points. Those real-world findings formed the basis for the team’s incubation efforts.

Starting with more than twenty ideas, the team narrowed their options as they gained insights from in-depth customer conversations. “We had some signals from the market, but they were lukewarm signals for a long time,” explained David Charpie, Co-CEO of Mach49. “We had to really dig to find what would truly be meaningful to people.”

Ultimately, the venture team found that the most significant source of customer pain was the complexity of managing utilities across multiple states and utility providers. With disparate information sources, small and medium-sized enterprises lacked a simple way to track energy usage and increase efficiencies. In response, the team proposed building an AI tool that could standardize and parse utility data to streamline payment and identify cost savings. Sam, the virtual energy assistant at the center of pear.ai, was born.

Detaching from Corporate Governance

Moving rapidly from a broad challenge to a specific solution was only possible, Sukhjinder said, because of Mach49’s help “managing the Mothership.” While large enterprises bring many advantages to venture creation, successful incubation requires detachment from the day-to-day oversight inherent to major corporations.

One of Mach49’s preconditions for success is that companies must lift typical corporate governance for the project team. For example, Dave explained, venture teams must be able to hire at Silicon Valley speed, without the often onerous processes typical of large companies—or they risk losing essential talent to other startups.