2004 IEEE International Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004) April 2004 Hong
Kong
Technological Risk and Opportunity in CLP
C . C. Ngan, Gail Kendall, Rebecca Tse, CLP Research Znstifute
Abstract-Technological Innovation, a given nowadays
with unavoidable, unpredictable and evolving underlying
risk and opportunity, could be described by the Chinese
thinking cf&tBa, on risk and opportunity. For a business,
technological innovation is critical to its long-term
sustainahility. Knowledge enabling informed decisions could
help a business to manage its technulogical innovation issues.
CLP, an electric utility with over 100-year history, relies on
a portfolio of technologies to operate its business.
Traditionally, competent technical stafls and special task
forces help CLP to manage technological innovation in their
respective functional areas. Yet, emerging issues such as
climate change and competition have escalated many
technological innovation issues beyond the scope of
individual functions and operational planning horizon. In
2001. CLP established an independent research unit to
enhance the building and sharing of strategic knowledge in
CLP, The parallel functional and knowledge-based
approach is observed to deliver positive contributions in
CLP.
I. INTRODUCTION
T . .
HIS paper presents the risk and opportunity
associated with technological innovation from a
Chinese risk-opportunity (e&) perspective.
Technological innovation can present the opportunity to
introduce improved or even new functionality. Pursuit of
new technology can bring risks of unforeseen expenses
and difficulties, and even the failure of the technology to
perform as intended. On the other hand, failure to pursue
technology innovation can leave a company entirely
dependent on unexpectedly obsolete technologies.
Management of technology in the context of ongoing
innovation is both a science and an art. This must be a
continuous process to cope with the dynamic risk and
opportunity profile.
CLP is an electric utility with over 100 years of history,
and a reputation for introducing new energy technology.
The more recent progress ranges from nuclear power,
combined cycle gas turbines, trenchless cable laying
technology, and remote meter-reading applications in the
1990s lo information technology (IT) based customer care
management systems, environmentally friendly substation
buildings, and remote telecommunications facilities
powered by off-grid hybrid renewable energy systems in
the first years of the new millennium. Appropriate means
Chi Cheung Ngan is with CLP Research Institute, Hong Kong (e-
mail: ccngm@clp.com.hk).
Gail Kendall is thc Managing Director of CLP Research Instihlte,
Hong Kong (e-mail: kendall@clp.com.hk).
Rebecca Tsc is with CLP Research Instihltc, Hang Kong (e-mail:
rebeccat@cIp.com.&).
0-7803-82374/04/%17.00020041EEE
468
to build and share relevant knowledge that enables CLP
employees making informed decisions contribute
positively to this success.
A . The Risk and Opportuniiy Concept
Risk is the ‘possibility or chance of meeting danger,
suffering loss, injury, etc.”[l]. For most of us, risk is
usually something to be avoided or mitigated to the extent
practical and economical. Responsible corporations have
to mitigate or cover their business risks to protect the
interests of their shareholders, employees, partners and
other stakeholders. For example, businesses depending
heavily on raw materials could limit their exposure to
price volatility through long-term purchasing agreement.
Companies investing and earning profit overseas could
hedge their currency risk with financial instruments such
as swap and forward contracts. Operational and
production based organizations could manage their safety
and health hazards in work place by good house keeping,
implementation of clear practices, nurturing cautious and
responsible work culture, and covering the residual risk
with insurance. Listed companies have to disclose major
risks affecting their business. Financial analysts and
investment bankers would discount the value of a
company because of its business risks. Clearly, risk has a
negative meaning in common sense.
And yet for some, and even at times for many, risk can
also have an attraction of exhilaration, or the potential for
high retum or reward. At the same time, companies may
have to take risk to improve, or even just to maintain their
positions or performance. Business may need to develop
new products, offer new services, or enter new markets, in
order to meet the objectives of their shareholders and
other stakeholders. To these individuals and companies,
the risks they have taken or managed might lead to the
capturing of rewarding opportunities.
The Chinese have visualized this co-incidence of risk
(E)and opportunity (@) with a popular word “E@”.
The Chinese believe that, depending on evolvement and
interactions of the involved parties, a set of circumstances
could pose both risk and opportunity. Moreover, a risk, if
properly managed, could become an opportunity, and on
the other hand, a poorly managed opportunity might
eventually become a risk. Technological innovation
offers the promise of market success, and yet the risk of
major failure can be best described by this Chinese risk-
opportunity thinking.
2004 IEEE International Conference on Electric Utility Deregulation, Reshucturing and Power Technologies (DRPT2004) April 2004 Hong Kong
B. Risks and 0pporfunityfi.om Technological Innovation
Technological innovation is a given nowadays, and the
underlying risk and opportunity are not avoidable,
unpredictable and evolving.
Because of human desire and market need for
improvement and problem solving, there will always be
technological innovations to challenge, improve and
replace existing technologies. No single player can rely
on existing technologies on its hand to monopolize all
opportunities and eliminate the underlying risks forever,
although it might be possible for a dominant market
player to slow down the pace of development, if only for
a time.
One has to adopt or neglect a given technological
innovation from time to time. In either case, there are risk
and opportunity involved. For a business, the risk of
failing to pursue technological innovation could be that of
being forced out of the marketplace by competitors with
better products. For example, NCR, which once
dominated the cash register market with its
electromechanical machine, could not hold its position in
the face of innovations in electronics. Friden captured the
opportunity of these electronic innovations and produced
the first electronic cash register in 1969. The electronic
cash register eventually drove NCR out of the cash
register market in US [2]. Yet the pursuit of opportunity
associated with technological innovation could be a risky
course. Of all the start-up companies launched in the
euphoria of some technological development, only a few
find success in the marketplace. Ofien times it is the early
adopters, or even the market-followers, who win the
biggest market share, edging out the innovators.
Technological innovation alone is not sufficient for
success in the marketplace, even when it is brilliant. For
example, Xerox built the first personal computer in its
Palo Alto Research Centre in 1973, well before Apple and
IBM. It also developed the first hand-held mouse and
graphics-oriented monitor [2]. But Xerox did not fully
capture the opportunity underlying these technological
innovations. It was other companies like Apple and
Microsoft that made huge success in the business of
personal computing. Xerox is fortunate, however, in that
it was able to sustain its main business with other office
machines such as photocopiers.
Mathematicians like to predict or quantify common
risks with statistical models. Insurance companies can
then offer coverage based on these statistical models. As
different players contribute to the development ' of a
technological innovation and take positions in adopting or
not adopting this technological innovation, the risk and
opportunity profiles of all players are altered interactively
at the same time. It is practically impossible to predict or
quantify this risk and opportunity profile for individual
players in view of the uncertainties associated with
technological innovation itself. For example, although
computer equipment might be depreciated at a standard
469
rate in 5 years, the risk of early obsolescence is difficult to
predict. A top model computer today might have to be
scrapped in 2 to 3 years time due to lack of support on
obsolete components and incur a windfall loss to a
business. The opportunity and competitive advantages
from using this top model computer could not last forever
or for a specific period with certainty.
C. Management of Technological Innovation
In view of their unavoidable, unpredictable,
continuously evolving, and interactive attributes, risks
associated with technological innovation cannot he fully
mitigated, and opportunities associated with technological
innovation cannot be firmly materialized and sustained
with one-off measures. Management of technological
innovation and related emerging issues under a business
context, whether done internally or out-sourced, is a
knowledge-intensive and on-going function. This is
based on the belief that technological innovation - both
opportunities and risk - is best managed by informed
people. It is a task requiring expertise, continuous
learning, knowledge of the sector, perspective on the
business environment, and judgment.
To fulfill these intensive knowledge requirements, the
corporate knowledge base has to be continuously built
and maintained. Knowledge building is much more than
information gathering or subscriptions to various
information services. As technology develops rapidly
around the world and information spreads quickly through
modem communications systems such as Internet, it
becomes crucial to develop a proper screening and
adaptation process for effective use of information. It is
also important to build a dynamic knowledge network for
acquiring state-of-the-art technology and being in the
communication loop at early stages. Whilst much
knowledge on technological innovation can be obtained
through Internet and other credible information sources
throughout the world, further research and study may be
necessary to apply that knowledge locally. Updating
could be an issue as the knowledge base grows in volume
and scope.
Knowledge, once built, has to be shared to those who
are involved in the technological innovation management
process. Knowledge sharing is beyond managing a
circulation list to distribute news, articles and documents.
In an organization, knowledge has to be shared with
preferred structure, format and language that align to the
corporate culture and practice. Scope, timing and way of
sharing might have to be tailored to the needs of different
audience groups. While modem telecommunications and
communication technologies help knowledge delivery in
occasions with large audience groups, workshops in small
groups might create more supportive atmosphere and
provide interactive environment for sharing experience.
2004 IEEE International Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004) April 2004 Hong Kong
D. Technologyand CLP
Being an electric utility group, CLP’s business is built
on a portfolio of technologies. In its power stations, CLP
uses coal-fired boilers, nuclear reactors, steam, gas and
water turbines, and a host of other technologies to
generate adequate, reliable and affordable electricity. In
Hong Kong, CLP is also responsible for transmission and
distribution of power to its customers. A network of
overhead lines, power cables, transformers and
switchgears from 380V to 400kV is constantly being
expanded to meet the growing demand. Embedded in
these power stations and networks are technologies
supporting the operation, monitoring and control of these
facilities in the complicated power system. For example,
computers, telecommunications and measurement
technologies are bundled together in a Supervisory
Control and Data Acquisition (SCADA) system to
facilitate centralized monitoring and real time control of
CLP’s power system in Hong Kong. Many of these same
types of technologies are used in other systems to serve
customers through electricity meters, call centres,
customer services centres and other customer interfaces.
Many of the technologies used in CLP’s power
business are capital-intensive, and have life spans of
decades. Major power plants and network developments
can take years of planning, approval and construction
before the commissioning date. Replacement of a
particular technology before its planned life span can be
both costly and difficult. Therefore it is a business
imperative to make good technological choices.
Fortunately, the pace of innovation in energy technology
is rather slow in comparison with, for example, the
computer industry. Still, the emergence of competitive
power markets and issues like climate change, mean that
there is growing importance in the choice of technology.
Therefore, in CLP, like most of the electric utilities,
technological innovation is both a business risk and
means of managing business risk.
E. Munugement of TechnologiculInnovation in CLP
There is always the risk for CLP to pursue
technologies that do not go mainstream or not to pursue
technologies that eventually become the mainstream. Any
technology that is in the mainstream at any particular time
and place can be inappropriate in other places, and can
become outdated everywhere as time passes and
technology evolves. For example, centralized coal fired
power plant was the default generation technology in
1980’s. Because of environmental and investment
consideration in recent years, fast track combined cycle
gas turbine technology is the favour of most power plant
developers today.
As the opportunity driver, technological innovation
can help CLP to improve its operational, economic,
environmental, and safety performance. For example,
CLP Power, the subsidiary taking care of CLP’s Hong
470
Kong power business, recently commissioned a
Distribution Automation system to enhance its
management and control of distribution networks and
improve the supply reliability to the customers. Some of
the facilities in this Distribution Automation system are
powered by renewable energy. This allows CLP to
explore the use of renewable energy in Hong Kong at the
same time. To minimize the environmental impacts from
its operations, CLP Power uses low NO, burners in its
coal tired power station, and trenchless tunneling
technology to lay new cables. CLP Power also works
with the Government and the customers to promote
energy efficiency.
These examples illustrate that technological innovation
and related knowledge are part of CLP’s strategy for
managing its business risks, and positioning itself with
respect to emerging issues like environment, climate
change, and competitive pressure. Throughout its history,
CLP has managed the technological innovation and
emerging issues through its strong and competent
engineering professionals and technical experts working
in different functional units. This approach works well in
CLP and bas successfully introduced many important
technological innovations, such as combined cycle gas
turbine technology, 400kV power system technologies,
and sophisticated IT infrastructure supporting the CLP
power system and business operations.
CLP’s management of technology innovation by
relevant functional units relies on technical staff to
maintain their skills, leam new concepts, and
continuously update their knowledge of technological
developments. CLP technical staffs achieve this through
continuing education, innovative projects, and active
participation in the professional community. This work is
supplemented by teams who focus and report on
innovation in faster moving areas such as metering
technology. The approach gives CLP the advantage of
assessing technological innovation with a practical view
covering aspects on installation, maintenance,
decommissioning, as well as normal operations.
In recent years, issues such as climate change and
disparity in energy access have begun to direct the energy
industry’s efforts beyond environmental performance
management in specific areas of their business processes
to the implementation of the comprehensive sustainable
development concept throughout all aspects of their
businesses. At the same time, competitive pressure
continues to escalate the expectations of customers for
more reliable and affordable electricity. Technological
innovation is an important element of possible strategies
to manage a variety of sustainable development and
competitive issues. As such, technological innovation is
of both strategic and cross-functional significance in CLP.
The implications of emerging issues like sustainable
development and competition typically span the
2004 EEE lntemational Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004)April 2004 Hong Kong
traditional functions of generation, transmission,
distribution and customer services, making it more
challenging to achieve a strategic response through
individual functional units. Greenhouse gas emissions
emanate mainly from the electricity generation, yet their
mitigation mobilizes CLP’s entire business, including
CLP’s efforts to help its customers use electricity more
efficiently. Likewise technological innovations can
challenge the nature of the divisions among CLP’s
functional units, and may touch on multiple business
issues. For example, distributed energy technologies,
such as micro-turbine, fuel cell, and energy storage, could
span fuel supply, power generation, transmission and
distribution, and, customer services in a single
installation. Innovations in renewable energy
technologies, whether distributed or central plant, may
address a number of strategic business issues, such as
emission and pollution control, community acceptance
and support, economic feasibility, and regulatory
viability.
To strengthen its management of the strategic issues of
technological innovation and the underlying risk and
opportunity across individual functional units and to
extend the outlook beyond operational planning horizon,
CLP formed a small independent research unit, CLP
Research Institute (CLP-RI), in mid 2000.
CLP-RI compliments CLP’s functional management
of technological innovation, and brings additional
advantages, such as cross-functional charter,
independence from commitments to existing systems, an
international perspective, and a full-time focus on
emerging issues and technological innovation. This
combination of functional and independent approaches to
technology innovation lends robustness to the
management of one of CLP’s greatest risks: being
unprepared to technologies that are necessary to maintain
its competitiveness, and to manage its safety and
environmental performance to the satisfaction of its
stakeholders.
F. CLP ’s Research and Knowledge Sharing Functions
CLP-RI is a wholly owned subsidiary under CLP
Holdings. Unlike its peer research and development units
with the mandate of generating and turning innovation
into new products and services for their parent companies,
CLP-RI’s major task in CLP is to build up and share
knowledge of strategic value to CLP, and assist
Management with emerging issues related to
technological innovation.
In the knowledge building process, CLP-RI consults
multiple sources, including information vendors, local
researchers and academics, recognised international
experts and scholars and industrial organizations, to
acquire the knowledge. CLP-RI conducts research
projects, sponsor research at local and international
47 1
organizations, and participate in projects with both local
and international partners. Whilst the information
vendors and renowned visitors would cover the
international aspects of many knowledge areas, CLP-RI
considers that local and internal research project and
study are essential to complement the knowledge base
with local contents.
A critical aspect in CLP’s knowledge building task is
to define and prioritize the significant knowledge areas.
These steps are essential to balance the immediate needs
of CLP and its employees, and development of interests
on knowledge areas that could have strategic impacts in
future. CLP-RI has undertaken many internal initiatives,
such as consultation and brainstorming, and external
initiatives, such as outreaching to research teams in local
universities and collaborating with other research
institutions, to generate and continuously update the
knowledge base.
Collecting and updating of information are intensive
tasks in knowledge building. All CLP-RI team members
contribute to new and updated information. Each team
member is responsible for identifying and collecting
important information from designated sources and
activities. CLP-RI is staffed to provide business-relevant
technological expertise across a range of disciplines. This
approach facilitates the building of CLP-relevant
knowledge from a diverse set of information sources on
topics of strategic importance. Depending on the topic,
knowledge and research projects may be conducted by
interns, regular staff, or external parties to close the
knowledge gap.
Knowledge sharing is another major function of CLP-
RI. In knowledge sharing, CLP-RI uses different media,
including face-to face discussions, workshops, open days,
group presentations, pubic forums, internal reports,
electronic newsletter, and an intemal Knowledge Sharing
Portal, to reach audience groups ranging from Board of
Directors, to all CLP employees, to the larger professional
community. For sponsored research in areas such as
renewable energy, the ability to share knowledge openly
with the community is one of the key criteria for project
sponsorship. By these knowledge sharing processes,
CLP-RI helps enable stakeholders with relevant
perspectives to participate effectively in important
decisions about technological innovation.
The Knowledge Sharing Portal is one of CLP-RI’s
primary means of communicating with CLP colleagues.
This Portal is set up in the CLP Intra.net to facilitate a
group-wide knowledge sharing process. Developed
knowledge subjects and updated information are uploaded
to this Portal from time to time. Compact disk version of
the Portal are produced and distributed to employees who
2004 IEEE International Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004)April 2004 Hong Kong
have no lntranet access, such as those in overseas office.
Dedicated staffs are recruited to manage the content
editing and updating process. Knowledge contents are
prioritized and customized to meet the intemal needs of
CLP and to align with worldwide trends in energy
technological innovation. Since its launch in September
2002, there are over 13,000 visits to this Portal in a
corporate Intranet with around 3,600 accounts. In a user
survey conducted in June 2003, 80% of the respondents
replied that information from the Portal were helpful and
very helpful.
In the process of accomplishing its tasks, CLP-RI
benefits i?om the organizational and cultural flexibility of
being an independent unit. Keeping the lights on around
the clock is an activity demanding a consistent and
prudent approach for which CLP is well recognized
among its customers and stakeholders. Envisioning new
ways to do business benefits from a different
philosophical approach, CLP-RI has been given the
freedom to develop its own culture to better fit its unique
business nature. As an independent business unit under
the ultimate holding company, CLP-RI is well positioned
in CLP to share its perspectives with senior executives
and Board members. Likewise CLP-RI has the flexibility
to reach CLP colleagues across organizational lines both
electronically and face to face, and the mandate to
participate actively in knowledge exchange in the larger
community of academics, researchers and professionals in
the energy sector. This organizational structure
strengthens the speed, integrity and impact of its
communications to the decision makers.
G. Achievements
Management of technological innovation by respective
functional units continues to fill its function, while CLP-
RI starts to deliver results in its early years of operation.
Examples of contributions from CLP-RI include: -
Helping to build the Sustainable Development
concept as a long-term management philosophy of
CLP to address emerging environmental, social and
economic issues; and to extend this concept to
various operational areas, including policy and public
reporting.
Building group knowledge and global perspective on
topics such as wind power, sustainable development,
emissions trading, and fuel cell through the
Knowledge Sharing Portal.
Building knowledge on the applications of renewable
energy through intemal research and collaboration
with local and intemational researchers, on solar,
wind, biomass, fuel cell and hydrogen technologies
In coming years, CLP-RI would continue its efforts in
472
knowledge areas related to renewable energy, energy
efficiency and customer interface.
CLP-RI is still at the start-up stage of enhancing CLP,
a utility Group with over 100 years of history, with the
capabilities to manage its' exposures to technological
innovation and related emerging issues through a
knowledge building and sharing process. There is much
to leam and improve as CLP-RI climbs up the leaming
curve. Yet, the achievements so far are encouraging and
CLP-RI is confident that its approach can make positive
contribution to the management of both the risk and the
opportunity of technological innovation at CLP.
H. Conclusions
The acceleration of the pace of technological
innovation, the emergence of issues like climate change,
and the rapid movement in sector reform and restructuring
has raised the strategic value and risk of technology and
innovation. As a prudent management measure, CLP is
supplementing its functional management of
technological innovation with the work of an independent
research unit assigned with the task of identifying issues,
building knowledge, and sharing it throughout the
company. The parallel approach helps reduce the risk that
the company would he unprepared to adopt new
technologies it might need to he competitive, or to
manage its safety and environmental performance to the
satisfaction of its stakeholders.
II. ACKNOWLEDGMEN~
The authors thank CLP Group allowing us to share our
experience and practices in relation to management of
technological risk and opportunity at CLP.
111. REFERENCES
Books:
[I] A.S. Homby, Oxford Advanced Learner's English-Chinese
DicrionoT, revised Third Edition, 1991, p. 998.
[2] Allan Afuah, lnnovorion Manogemenr, New York Oxford
University Press, 1998. pp. 92 & 109.
IV. BIOGRAPHIES
Chi Cheung Ngan is currently the Innovation Architect of CLP
Research Institute (CLP-RI), the wholly owned subsidiary of the Hong
Kong listed CLP Holdings Limited. His major task in CLP-RI is to Nm
technological innovations in thc energy sector into rescarch projccts that
could benefit CLP Group. Before joining CLP-RI, he had worked in
different functional areas in CLP Group, including technical scwiccs,
system planning, business planning, and strategy and dcvelopmcnt. He
is a member of IEEE and IEE, arid obtains his Mater of Business
Administration degree from the Chinese University of Hong Kong and
Bachelor of Science degree from the University of Hong Kong.
Gail Kendall is Managing Director of the CLP Research InstiNtc (CLP-
RI), headquartered in Hong Kong, China. CLP-RI brings innovative and
2004 EEE International Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DWT2004) April 2004 Hong Kong

environmentally beneficial technology to CLP’s damcstic and

intemational businesses. She was also named Group Director for
Environment in CLP Holdings Limited, in May 2003. She leads the
Group Environmental Affairs team, which helps CLP position its
business with respect to environmental issues though analysis,
benchmarking, policy implementation, continuous improvement,
reponing and stakcholder engagement.

Before joining CLP, Gail Kcndall was Professor of the Practice of

Mechanical Enginccring at the MaSsachusetts lnstihllc of Technology
(MIT). Earlier, she served as Director of Strategic Science and
Technolo&y at EPRI in Pala Alto Califomia; Chair of the Hearing Board
of the Bay Area Air Quality Managcment District in San Francisco, and
a member of the Mechanical Engineering Faculty a t the UC Bcrkclcy.
She also maintained an independcm consulting practice for many years.

Gail Kcndall holds a doctorate in mechanical cngineaing from MIT. and

bachelor’s and master’s degrees from the University of Califomia at
Berkelcy. She is a registered prafcssianal enginccr in the State of
Califomia.

Rebecca Tse is currently an information specialist of CLP Rcsearch

Institute (CLP-RI). Bcforc joining CLP-RI in Nov 2001, she had
held professional information and knowledge management positions
with multinational managcmcnt consulting, manufacrunng and e-
business services companies. Her cmploymcnt cxpcriencc
included McKinscy & Company Inc. Raychem Asia Pacific, Icon Media
Lab and other e-business venhlres.

Rcbecca Tsc holds a master’s degree of science in Global Busincss and

bachclots degree in Business Adminismation from the Chinese
University of Hong Kong.

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