GE’s Ecomagination project has been in place since 2005. The initiative has the noble goal of not only developing innovative solutions to energy and environmental issues but following through and driving the actual production of this technology. Often great ideas are disconnected from real world application but the Ecomagination projects generated $25 billion in revenue in 2012 on a R&D investment of only $2 billion. Astounding figures and validation that investing in world-changing innovative technology is an incredibly efficient way to make money.
GE’s Challenges in China and Australia
In China, GE set out to address the rapidly growing energy and environmental needs in one of the world’s fastest growing economies: The solutions are all related to energy and benefitting from the energy productions process itself. Solutions included:
- Converting pressure from natural gas pipelines to heating and cooling systems
- Development of a chemical that cut the cost of natural gas refueling
- Development of a membrane to improve wastewater purification
A similar Challenge was initiated in Australia addressing the nation’s carbon footprints. Solutions included:
- A engine powered by compressed air
- A membrane to recycle and reuse energy
- A smart water meter
- A wave energy conversion device
- A electricity network planning tool
Solutions can become more than their original intended use
Just from looking at the above we see an incredible amount of diversity within the solutions for each challenge. Between the 2 challenges and over 10 winning solutions GE, has for relatively little money spurred diverse and game-changing R&D. In return these ideas can now be put into production. Not only are there new products available here but there are solutions that can help quickly move slow progress. Cutting the cost of natural gas refueling could hasten new natural gas engine technology. Development of a membrane to improve wastewater purification may have uses in far more areas then the original intention of energy production.
The future of a Challenge driven innovation economy?
GE handles challenges differently than some. Traditionally the challenge owner will win a prize and Intellectual Property will be handed over to the company to use as they please. GE expanded beyond the $50 and $100k prizes by actually seeding the start-ups that came up with the best solutions. They essentially found a way to engage the crowd in order to develop new externally sourced start-ups that would still be under their wing. While the Ecomagination project and its challenges have been around for a while, it will be interesting to see how several aspects of these initiatives develop in the future:
- The Crowd Funded Start-up: Will a new way of beginning your start-up be to develop a product and business by joining a corporate, private or even government funded challenge? If GE’s success is an indication of the future of challenge driven indication, we may see a growing number of start-ups coming out of challenges. The benefits are mutual. Companies solve immediate problems or broader public good initiatives and receive endless potential for solutions. Companies also have the choice to pursue the best solutions further, becoming venture capitalists to well thought out solutions that are ready for production. All R&D and the business development portion of the start-up cost was the challenge amount. Challenge winners win money for their effort. In best case scenarios they also get funded and can act as a start-up, skipping the need to slowly build out until you’re ready for your series A.
- Crowdsourcing by Challenge Driven Innovation Meets Crowdfunding: It’s no secret crowdfunding has taken off. Sites like Kickstarter and Indiegogo are prevalent around the globe and the diversity of funding these sites facilitate has grown over the years. In the GE example we see the crowdsourcing of solutions in the form of startups. GE seeds the start-ups with initial prizes then further investment occurred to top companies. There is already a movement towards companies crowdsourcing their product development. I can see an increasing integration of crowdsourcing and crowdfunding as individuals develop products using the crowd then put them into practice using the crowd to fund development and manufacturing. As Mark Shuttleworth, CEO of Ubuntu claimed, a great deal of technology sits idle without the proper means for mass production. Crowdfunding more consumer oriented niche products means faster acceleration of technology that in the past may not have made it into production as quickly.
- Increased Corporate investment in start-ups and external sources of new technology: Corporations spend a great deal of money on acquisitions each year. It is not new for firms to target technology they want and buy it. However the timing of their interest may shift earlier if we look to the GE example. Instead of buying mature companies, larger firms will look to invest earlier on. Whether it’s in the form of Challenges like GE or Start-up funds, companies will crowdsource start-ups that complement their needs and nurture them in the way GE did. This will prove more cost effective than buying small but well established companies. Beyond this I can see corporations spending more money on start-up competitions defined by their most pressing needs. Talent or early stage start-up crowdsourced through competitions would compete for funding in a similar way to the Ecomagination Challenge.
Authored by Joe Artese, Business Analyst