Business Report

Open Innovation at GE

General Electric and startup companies alike say they benefited from the company’s call for ideas about the smart grid.

General Electric had an innovative way to come up with innovations related to the emerging “smart” electric grid: the company asked for ideas.

A winner: An energy-efficient heating and cooling system from a Swedish company called ClimateWell got GE’s attention.

Last July, GE launched what it called an “ecomagination challenge,” a competition in which startups and inventors were asked to present technologies that could help GE accelerate its development of products and services related to the smart grid. GE got 4,000 submissions. It gave $100,000 cash awards to five young companies and formed strategic partnerships with 12 others; all of them are expected to help GE’s business in one way or another in such areas as energy storage, utility security, energy management software, and electric-vehicle charging services.

The goal was to “bolster the company’s R&D program by opening the company up to innovation from the outside,” says Tore Land, who headed the challenge.

GE set up a website to take submissions; entrants were asked to describe their technology, its value proposition, and its potential to be integrated with GE’s technologies or expertise. GE executives and external advisers, including venture capitalists and the editor of Wired, judged the ideas on the basis of their originality, feasibility, and potential impact. Members of the public could vote as well—GE got comments from some 74,000 people overall—though the company won’t say how much weight the public’s votes had.

Among the $100,000 winners was Capstone Metering, a company in Carrollton, Texas, that sells networked water meters. Scott Williamson, the company’s president, says the company entered the challenge not only to attract new funding but also to gain wider exposure. As for GE, its new relationship with the company will give it better insight about how water supplies can be networked much the way the electric grid is. Capstone expects to undertake a pilot program this year with a GE competitor, Honeywell, Williamson says.

The challenge also led GE to a partnership with ClimateWell, based in Sweden, which has developed energy-efficient solar-thermal systems for heating and cooling. The systems were commercially introduced in 2008, but now GE will sell the technology much more widely through its appliance division and also help develop it further. Per Olofsson, CEO of ClimateWell, acknowledges that the open-innovation process isn’t necessarily easy: it can be tricky to define the intellectual property rights that each company retains, for instance. But it’s worth the effort, he says, for the opportunity it gives his small company to collaborate with a company like GE that possesses “skill sets that we don’t have.”

Smart water: The Intellih20 water meter from Capstone Metering, a company that won $100,000 from General Electric in an open-innovation program.

Stefan Lindegaard, an innovation consultant and the author of The Open Innovation Revolution, says GE’s project is a model for how to open the corporate innovation process. It succeeded as well as it did in part because the company has enormous market reach and a big network of partners. Access to these things is “much more rewarding than cash prizes” for many startups, Lindegaard says.

GE’s next “ecomagination challenge” is focused on home energy-management systems, and winners will be announced this spring.

The company is also trying to improve on this innovation process itself. Land says the first round demonstrated a natural bias on the part of the judges toward business proposals from companies in the Western Hemisphere. To change that, GE will try to develop a more diverse pool of evaluators, he says.

Michael Mascioni is a freelance writer in New York.

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The world’s most innovative companies are using technology to move faster and more decisively than their competitors. They are mining data on their operations and their customers, letting their employees do inexpensive experiments, and using business software to get sprawling organizations working together. We’ll explore the industries that are most in need of fast innovation and examine new ways of doing business, with case studies and interviews from around the world.

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