Corporate Explorers to Watch: Kenji Tateiwa, CEO Agile Energy X

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Summary

We have long equated groundbreaking innovation with the entrepreneurs and startups of Silicon Valley. But now, more than ever, large corporations are staking a claim in the innovation game. Driving this wave of corporate innovation are Corporate Explorers: the leaders actively pursuing bold, exploratory business ideas beyond their firm’s core.

Sometimes, Corporate Explorers are managers given license to create new businesses, operate outside established corporate rules, and use the assets of the firm to convert the organization’s financial lead over startups into disruptive growth opportunities. At other times, Corporate Explorers are CEOs, personally leading the charge to innovate. Regardless of their position within a firm, Corporate Explorers are typically insiders willing to stand out from the crowd, act with independence, and break the firm’s taboos to commercialize disruptive ideas. They are purpose-driven individuals on a mission to transform the status quo.

This article is the seventh in a series of Corporate Explorers to Watch, featuring Kenji Tateiwa CEO of TEPCO’s Agile Energy X.

Andy Binns:
I’m Andy Binns from Change Logic, author of Corporate Explorer: How Corporations Beat Startups at the Innovation Game. This is the first of our next series of Corporate Explorers to watch. I’m going to be speaking with Kenji Tateiwa from TEPCO, the Tokyo Electric Power Corporation. And Kenji has set up a very interesting new venture around renewable energy and Bitcoin. I will leave that to Kenji to tell you more about that, but the whole idea of this series is to highlight the way in which leaders like Kenji, inside corporations, are leading new ventures, and to open up our understanding of how they do it and what makes them successful.

Hi, Kenji. Thank you very much for spending time with us to talk about Corporate Explorers at TEPCO.

Kenji Tateiwa:
Andy, nice to meet you again.

AB:
So, as you know, I co-authored a book with Charles O’Reilly, your professor from Stanford, as well as with Mike Tushman from Harvard. You know, most people know it in its Red Edition, but you might know it now in the Japanese edition, which I’m very pleased and proud of. We talk about Corporate Explorers as people who lead ventures in existing businesses and fulfill some of the same roles that entrepreneurs do within a startup. And I know that’s a part of your story, which we’re going to talk about. But, before we get to that, you know every Corporate Explorer has an interesting personal story. But I have to say, you have a really interesting personal story.
Can you just tell us a little bit about who you are, who you work for, and some of the key things you’ve done in your career?

KT:
Yes, certainly Andy. So, I did my bachelor’s and master’s in nuclear engineering in Japan at Kyoto University. I joined TEPCO, Tokyo Electric Power Company in 1996. I initially worked at the Fukushima Daiichi Nuclear Power Station, and then at the headquarters in the nuclear engineering department, designing next generation nuclear reactors, collaborating with companies such as General Electric, Toshiba, and Hitachi. But then Enron came along and came into the Japanese power market, and I decided I should learn business. So, my pursuit for my MBA started. Luckily, I got into Stanford Graduate School of Business and got my MBA in 2004. Then I made an internal career switch within TEPCO and started to work in the international division where I started to work on an international thermal power project in Australia. But my big hairy, audacious goal was to someday start TEPCO’s international nuclear business. That opportunity arrived in 2006 when a US energy company called NRG Energy decided to build two nuclear reactors in Texas and asked for TEPCO’s help to build a Japanese-designed nuclear reactor. It took me four years to convince the TEPCO management, but in May 2010, I was able to convince them to sign a deal with NRG for TEPCO to become the first Japanese utility to invest in an international nuclear project.

AB:
So, already at that point in your career, you are sort of an explorer. Essentially you are already setting out to do something new and different than the company had done before.

KT:
That’s correct. And immediately after I graduated from Stanford in 2004 and returned to TEPCO, I proposed a new business plan as an in-house venture of TEPCO to set up a sharing mechanism of Segways, the electric vehicle. I thought that idea made sense because Segways were not selling well because it was expensive, but it was a very convenient and unique means of transportation, a short distance transportation well suited for, in Tokyo, the crowded area where there’s high demand for short distance transportation. And so setting up a sharing mechanism of Segways will provide commuters with affordable and convenient ways of transportation. And it made sense for TEPCO as an electric utility, because Segways run on electricity. I think I was 15 years ahead of time, and TEPCO management couldn’t get the concept. But nowadays, sharing business and electric vehicle is full blown.

AB:
You were out ahead of the market with that idea, but then a big event took place, which really reshaped the opportunity and, at least temporarily, your career, right? Because you faced the Fukushima disaster after the earthquake and tsunami. How did that affect you personally?

KT:
Yes, it deeply affected me. First as a nuclear engineer, especially a nuclear safety engineer where I specialized, having to go through a real-life severe accident at our nuclear power station was a truly sobering experience for me. And it almost shattered my belief in nuclear energy. But I still believed that we needed nuclear power, but we have to absolutely make it much, much safer. And during that time of contemplation, I came across this book, Black Swan, by Nassim Taleb. And it forced me to think deeply about how to prepare for the next Black Swan. But it’s almost impossible because, by definition, black swans are things that you cannot predict.

AB:
Yeah. Just remind us a little bit about the Taleb concept of the Black Swan. What’s so important about that?

KT:
Yes. So according to the book, Taleb defines black swan as events with the following three attributes: one is rarity, the second is extreme impact, and the third is retrospective predictability. He primarily talks about the financial crisis, but the concept is applicable to natural disasters and other things.

AB:
Yes, and applicable to the Fukushima disaster as well, in many ways.

KT:
So that’s a sensitive topic in which whether the earthquake tsunami and the accident was unpredictable or not. It’s a difficult topic. TEPCO is not saying that it was unpredictable, therefore, it could not have been prevented. That that’s not what TEPCO is saying, and I’m not saying that. The learning is that we as people in the nuclear industry, even if it’s extremely difficult to predict such natural disaster, we have to be well prepared for such unexpected events. But that is very difficult because there’s limits to the resources available to make nuclear power plants robust against various natural disasters. But we have to strive for that. But there’s a tradeoff that we have to consider between safety and economics and other things, which led me to the sequel of Nassim’s book called Anti-Fragile.

And the concept is of anti-fragility Nassim Taleb is a system that gets stronger when confronted by shocks. And there are many systems with the anti-fragile attribute. But his point is that we have to think about making systems anti-fragile. So since the accident, I’ve been always thinking, how could we make nuclear power plants anti-fragile? So that nuclear power plants can not only withstand earthquakes or tsunamis, but if we can make it stronger when such things happen, that’ll be ideal. But obviously, it’s very challenging,

AB:
Very challenging. But, with Fukushima, you were there on the ground within a month of the accident happening. Is that right?

KT:
Yeah, that’s correct. So, I accompanied the International Atomic Energy Agency, or the IAEA delegation, to the Fukushima Daiichi Nuclear Power Station in early April, 2011. So about three weeks into the accident.

AB:
Yeah. Wow. That’s an extraordinary experience to have. It’s such a major event in the world. Tremendous, tremendous. But then you go back to the U.S. to tell the story of the steps that TEPCO were taking to decommission and make the site safe.

KT:
That’s correct.

AB:
But then somewhere along the line, you get the idea of going back to being a Corporate Explorer. What’s the inspiration for the business that you now lead? I should say you’re now CEO of Agile Energy-X, which is a subsidiary of Tokyo Electric Power Company (TEPCO). What was the inspiration for that? Where did the idea come from?

KT:
Yes. So first I was trying to apply the concept of anti-fragile to corporations. First, I was trying to apply to nuclear power plants, but then corporations, and then more in general, like the country, Japan. But, talking about corporations, TEPCO after the accident, was on the brink of bankruptcy. TEPCO going bankrupt is not only an issue for the company and the employees and the shareholders. It’s a huge issue for the country, Japan, because TEPCO is the largest utility in Japan, and electric utility is one of the most important infrastructures for our country. So, I was trying to think how we could rebuild the company TEPCO so that we can continue to supply stable, affordable, reliable, energy to Japan.

And because the power market in Japan was going through deregulation and the population of Japan was starting to shrink, the prospect for the power industry was not bright. So just continuing the status quo of doing power business would not make TEPCO a viable company, especially after the accident and all the compensation liability that TEPCO has. So the executives and I were trying to think about a new business pillar or new sector of business that will be profitable, that will allow TEPCO to become a profitable company again. But obviously, it’s not easy to come up with a huge new way of making money for a company the size of TEPCO. So that’s what I was thinking after the accident, and around 2018 when I joined this in-house training program.

AB:
Yes. And that sort of sparked your thoughts about how you could innovate. Do you remember the moment at which you started to get the idea for the business, and then maybe describe what the business is?

KT:
So, in 2018 I joined this internal training program called NLT—Next Leader Training program. And at that time in 2018 two things were happening. One was Japan was trying to introduce a lot of renewable energy which is a good thing–solar and wind, but especially solar power. And with the introduction of much solar power generators in Japan, this issue of curtailment was starting to happen where the demand and supply of electricity was not balancing. For example, in the springtime, during the sunny daytime, there was too much solar power generation, but not enough power demand, so the solar power generators had to be shut down. There was wasted renewable energy which is not efficient, and it’s a waste of opportunity to make use of the availability of a renewable power. I was thinking there should be a way to make use of this wasted, curtailed renewable energy, and batteries was one of the only viable solutions, but still very expensive. The other totally unrelated thing happening in 2018 was the bust of the Bitcoin bubble. 2017 was one of the first bubbles that happened for the Bitcoin price. It went up, and then in 2018 it tanked. I wasn’t interested in Bitcoin at the time, but I saw news articles and TV programs saying negative things about Bitcoin, and Bitcoin mining which was a waste of electricity. Bitcoin mining consumes a lot of electricity in order to validate the Bitcoin blockchain transaction.

AB:
So, everybody else is reading this article about the financial ruin of Bitcoin, and you are seeing electricity wasted. Oh, that’s an opportunity!

KT:
So initially I didn’t have positive views towards Bitcoin or Bitcoin mining. But when I heard that Bitcoin mining consumes a lot of electricity, people said it’s bad for the environment because it uses coal power plants to generate power used for Bitcoin mining. I thought, yeah, maybe that’s a bad thing. But at the same time, if this Bitcoin mining consumes a lot of electricity, Japanese power utilities should be able to capitalize on that opportunity. And whether it’s bad for the environment or not, it depends on what kind of electricity that we use. I was able to connect the two things, Bitcoin mining and the curtailed renewable power. So rather than curtailing renewable power, perhaps there’s a way to use this power guzzler, bitcoin mining, to make use of the wasted renewable energy.

AB:
Yes. We’ll come to how you get support from your executives in a moment, but who is going to benefit from your ability to connect these two things—the electricity-guzzling Bitcoin, and the oversupply of solar power? How does that work as a market?

KT:
Two major players. The first is the renewable power generators which, as you described Andy, were losing opportunities because the sun was shining, but they could not generate power and send it to the grid because there was not enough demand to use the generated power. Bitcoin mining machines will be the ideal off-taker for the renewable power generators because Bitcoin mining could be turned on or turned off in a very flexible manner according to the supply of electricity and solar power. So that’s one potential partner. The other is the power grid operators, like TEPCO power grid, the subsidiary of TEPCO, that’s in charge of transmission and distribution. So the variable renewable energy causes instability to the power grid. And having a flexible demand, like Bitcoin mining machines, can serve a role to stabilize the power grid system. So those are the two major players that would benefit from this Bitcoin mining industry if it were to be introduced in Japan.

AB:
Yeah. Because at the moment, the Bitcoin industry is immature in Japan, which, you know, in terms of the, the opportunities that might lie for digital currency, that’s kind of limiting potentially in the future for economic development in Japan. So, there’s sort of a double win within your idea, essentially.

KT:
Yes, I think so.

AB:
So, then let’s talk some about how you got support for this—because unsurprisingly, the role of the Corporate Explorer is a lot to do with this next part of our conversation. The innovation story, having an important customer problem to solve is a big part of it, but getting support from your organization is obviously pretty significant. How did you go about that? What did you do?

KT:
First from the conclusion point of view, it took me four years to convince the technical management to set up this new company, Agile Energy-X. Initially back in 2018, when I first came up with this idea of using Bitcoin mining machines to solve the power grid system issues in Japan, almost no one understood what I was saying. Gradually some TEPCO executives thought this may be interesting. They still didn’t fully understand what Bitcoin was, what Bitcoin mining was, and why it made sense for TEPCO. But I think my passion and belief in this concept gradually made them think that this may be real, and it may make sense for the executives to give me a chance to explore this concept further.

But in 2018, and then the following two years, I was in the nuclear division of TEPCO. My day-to-day job had nothing to do with Bitcoin or Bitcoin mining. I was doing the heavy lifting work related to nuclear power, and during my pastime, like the weekends or holidays, I was working, brushing up on this business concept of using Bitcoin miners.

AB:
Outstanding. And so the thing that I think is interesting as we talk to many different Corporate Explorers is that those who are successful are those who tend to have a long history with the company. Because you’ve already, at this point, proven yourself to be a very important contributor at key moments, like in Fukushima and before. And so here, when you have this strong advocacy, there’s much more of a willingness to listen to the point of view that you bring and to follow you, essentially, is what I hear.

KT:
Yes. That, that’s right. So fortunately, I had the ears of the top executives of TEPCO. Whenever I wanted to have a meeting with them they would take time to listen to me. And many of them showed interest, but the difficulty was because I was a fairly qualified nuclear engineer, I was somewhat valuable for the nuclear division as well. So that’s where the difficulty and challenges happen within large corporations.

AB:
It’s the constraint of your expertise. It’s that there’s a rarity to your skill, and therefore losing you from the team is not an insignificant event from their point of view.

KT:
That’s correct.

AB:
Yeah, I think this is a fair point, which again, is one of the things that an entrepreneur has an easier time with. Even though there are four years to go from idea to getting your angel investor is actually not a long time for your first venture, right? This is a reasonable length of time, but you deal with different kinds of stresses. So, we talk about new ventures as having ideation, incubation, and scaling. Sounds like you are in the middle of incubation right now. Is that fair?

KT:
Yes. It’s a fair statement.

AB:
So, what’s next for Agile Energy-X Inc? Where are you going to go? How do you think this is going to play out over the next year or two?

KT:
Great question. So, in terms of incubation, I was transferred from the nuclear division to TEPCO Power Grid in 2020. So for two years, I was within the typical power grid organization, serving as project manager for this project called “Megawatt to Megahash”, which I coined–transforming electricity megawatt into Bitcoin mega hash. I was leading this project and setting up small Bitcoin mining facilities within TEPCO Power Grid and demonstrating that the concept makes sense to stabilize the power grid system and also make use of wasted renewable energy. And then in parallel, I asked the TEPCO management if we should set up a company so that I could go out to the market and talk to potential partners and move on from incubation to scaling.

At this moment, we’re still in incubation because, in order to make the Bitcoin mining business profitable, there needs to be much more wasted renewable energy that we could capitalize on, and currently there’s not enough curtailed renewable energy. And, other than the curtailment, the average price of electricity in Japan is very expensive. It doesn’t make sense for our company to run Bitcoin miners using electricity from the grid. It takes time before more variable renewable energy is introduced into the grid where we could use the wasted, renewable energy.

AB:
Do you know how long it will take for that to be the case with the project coming online?

KT:
So, that could be from several years to maybe up to a decade, depending on the situation. And that again, is very difficult to predict, but the Japanese government has set up a goal to achieve carbon neutrality by the year 2050. In order to achieve that, there needs to be much more renewable energy that needs to be introduced. And by that time, there’ll be a huge amount of wasted renewable energy. And we cannot wait until the year 2050 when we find out that there’s too much wasted renewable energy that the plan is unachievable. So, we have to start now and then be ready for that massive, wasted energy time to come.

AB:
And presumably, you are open to finding other uses for that energy? Bitcoin is just one use case—if you can find some others, you’re very open to that?

KT:
Absolutely. So that is actually a very important point. The TEPCO executives were concerned that my setting up a company solely for the purpose of mining Bitcoin could cause reputational risks for TEPCO. TEPCO, obviously, is not in the business of making money from Bitcoin, and that is not my intention for Agile Energy X. The objective of Agile Energy X is to find novel solutions for energy usage for the entire power system and other ways of utilizing wasted renewable energy. One we have thought about is using molten salt electrochemistry, which uses molten salt and electricity to form various materials in the molten salt. Actually, there’s commonality between molten salt electrochemistry and Bitcoin mining in the sense that both technologies can use electricity in a very flexible manner. If there’s excess energy from solar power, we could either use Bitcoin mining machines or use it to electrolyze the molten salt system.

AB:
Fantastic. So it’s an idea with multiple potential applications. So as you think of where you are now, Kenji, as a Corporate Explorer, what would you say to aspiring Corporate Explorers out there? What’s your advice and your thoughts for them?

KT:
My advice would be to find a career goal where you strongly believe in that goal and you’re passionate about. In my case, it’s creating a perfect energy world, which I wrote in my essay for Stanford. And by that, I mean providing clean, safe, affordable, and reliable energy initially in Japan, but now hopefully expanding that business all around the world. And that goal, first working on the U.S. nuclear project was part of achieving that goal. And now setting up Agile Energy X is also aligned with my career goal. I would advise aspiring Corporate Explorers to think about what career goal do you truly believe in and can feel passionate about.

AB:
Your passion and your relentless commitment to your goal is very impressive. And it’s what definitely told me from the first time we met, that you are a Corporate Explorer at heart. Well, thank you very much for your time, Kenji, it’s fabulous to speak to you again and we look forward to catching up with you as the business unfolds in the future.

KT:
Thank you. Looking forward to keeping in touch with you too, Andy.

 

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