Case study: GE’s innovator community

The story

In 2005 Jeff Immelt, chief executive of US conglomerate General Electric, announced a stratety called “ecomagination” to double its revenues from environmentally friendly products. GE saw it as a big growth area but its interest was also spurred by the environmental and natural-resources challenges facing the world.

The challenge

GE’s energy business was dispersed and complex, ranging from aircraft engines to water treatment systems, and serving a wide variety of customers. Although GE had impressive in-house research and development capabilities, fresh ideas tended to develop from smaller, external organisations and individuals who were the most innovative in the sector. The venture capital industry alone was investing $2bn a year in green and “cleantech” start-ups.

GE had to figure out a way to be a leader in the green energy sector – making the most of its vast internal R&D expertise while integrating its existing energy efforts with those outside the company.

The strategy

In 2010, to tap into the start-up activity in cleantech, GE and a group of VC partners started an open innovation initiative called the Ecomagination Challenge, in which businesses, entrepreneurs, innovators and students competed for funding totalling $200m with ideas on improving the world’s energy future.

The company got VC firms RockPort Capital, Foundation Capital, Kleiner Perkins Caufield & Byers and Emerald Technology Ventures involved by giving them full discretion on investment decisions. They also made sure that start-ups that received funding would not be locked into an exclusive arrangement with GE. The advantages for VCs were that GE drove the development of its markets and had the clout to take new technologies to market at scale. Entrants were invited to submit ideas to a panel of GE executives, academics, technologists and VCs. The best would receive funding from GE and its VC partners to start new ventures.

What happened

GE hoped for a few hundred entries. The Ecomagination Challenge received 4,000 responses in its first round and another 1,000 for a second round that focused on ideas for connecting the “smart grid” – a network to improve the efficiency and sustainability of electricity – to the home. Moreover, 75,000 people from more than 150 countries submitted ideas or commented online.

The company selected 40 finalists and the panel picked 23 winners. To date, GE and its VC partners have invested $140m in 23 start-up ventures.

The Ecomagination Challenge has also led to at least one GE acquisition that would not otherwise have been made.

GE created the new position of community manager to support the thousands of contributors who volunteered time and expertise to the challenge.

The lessons

Despite GE’s size and capabilities in the energy sector, it chose to boost innovation by looking outside, using a novel open innovation strategy to invite ideas from all over the world.

GE also chose to augment its own extensive knowledge in the energy sector by teaming up with VCs who had years of investment expertise in this area. The company and the VCs learnt a lot from each other – having established clear boundary conditions at the start.

Overall, GE’s experiment shows open innovation is not simply something practised between two companies. Instead, it can lead to the creation of new communities of engaged experts, customers, users and citizens who care about innovation in a shared area of interest.

There will be other companies that create these kinds of communities to harness participation from a broad range of people to advance their innovation agendas.
- Financial Times, 14 May 2012