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GE Smart Grid: Ecomagination in Action

Sunday, May 1st, 2011

This is a summary of the report “GE Smart Grid: Ecomagination in Action”. For information on how to obtain the entire report, email the author, Tom Kucharvy, at TomK@Beyond-IT-Inc.com

General Electric (GE) launched its ecomagination initiative five years ago. Although GE certainly intended ecomagination to promote the company’s social consciousness, the initiative’s primary goal was much deeper—to recast GE’s overarching value proposition and establish it as the leader in what CEO Jeff Immelt saw as some of the biggest growth markets of the 21st century, including those around alternative energy generation and energy efficiency. While ecomagination efforts are spread across every division of the company whose products range “from turbines to toasters”, nowhere are the company’s efforts more focused and concentrated than in GE Digital Energy Services, the group that is responsible for General Electric’s Smart Grid program.

Smart grids promise to redefine how electricity is generated, transmitted, used and managed. They will create a new, much more flexible energy infrastructure that:

  • Enables the integration and optimization of more renewable energy (such as wind and solar) and plug-in electric vehicles into the grid;
  • Drives significant increases in the efficiency and reliability of the network; and
  • Empowers consumers to make smarter decisions in managing their energy usage and saving money without compromising their lifestyles.

General Electric pretty much encircles most of the major components of, and a range of devices that will be powered by tomorrow’s smart grids, all the way from the power plants that generate the electricity, through the batteries that store it and the appliances and light bulbs (not to speak of the MRI and wastewater treatment equipment) that consume it. It is also writing software that will be required to manage these grids, and is creating services that will be necessary to design, install, manage and finance these grids.

Although GE certainly has a broad line of smart grid hardware, software and services, it has no intention of providing all the tools required for a comprehensive solution. It does not and will not, for example, provide the ERP, data management or analytics software that utilities will need to manage their businesses, or most of the services that will be required to integrate energy management and distribution systems into their business systems. Rather than build such products and services itself, it is actively building an ecosystem of partners to address these needs.

GE’s ecosystem began with companies that designed software, and sometimes hardware and services, for utilities and other power generators. It is now expanding its smart grid ecosystem to incorporate more commercial and consumer-based software, including ERP, analytics and home electricity management. But while ISVs account for the largest number of GE’s smart grid partners, the companies relationships with systems integrators are rapidly emerging as among its most strategic. These partners, after all, can provide the:

  • Connections to and credibility with the type of C-level and business executives who will drive large-scale transformation projects within their organizations, but with whom GE does not typically engage;
  • Strategic consulting to construct the business cases and provide the change management guidance these customers will require in migrating to smart grids;
  • Integration services to link third-party IT components and other non-GE products into these solutions; and
  • Outsourcing and managed services for grid/back office integration and for the type of complex, multivendor grids that GE cannot itself support.

This, of course, is not to suggest that benefits of such partnerships are uni-directional.

SIs, for example, gain from access to GE’s hardware and software, its deep domain knowledge, its ability to finance huge implementations and from its strong credibility and deep relationships with power generation and distribution executives and managers. Moreover, while GE hopes that SIs will increasingly provide it with access to new customers and to additional decision influencers in current customers, GE claims that as of now, it is more likely to pull its partners into deals, than partners are to pull in GE.

Although all of the parties recognize the potential benefits of working together, effective partnering is never easy. Partners face particular risks in dealing with huge partners, such as GE. The closer the partnership, the greater the risk that smaller partners’ value add and customer relationships may be subsumed by or eventually subjugated to those of the giant., There is also always a potential that big, multi-faceted vendors may decide that software and services for which they initially relied on partners, are too strategic or too profitable for them to cede to partners.

Moreover, GE Energy has far more experience in working with customers and suppliers, than it does with go-to-market partners. It lacks a deep partnering culture and is still in the early stages of building a formal partner organization and program.

Such limitations, however, have the potential of working in General Electric’s favor. Its current lack of a partnering philosophy and structure gives it the flexibility to strategically think through its software and services objectives, to communicate these objectives to its partners and to develop a partnering program, in conjunction with these partners, from scratch. Just as importantly, since the group does not currently have large or comprehensive software or services businesses to protect and feed, it has more flexibility to strategically align its visions with those of its partners.

GE Digital Energy does appear to have a genuine desire to partner and to learn from the experiences of other industries (especially the IT industry) that have already gone through the trials and errors of creating synergistic partnering models. It must, however, decide exactly which forms of value—hardware and especially software and services—it wishes to retain for itself, and which will remain the province of partners.

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GE’s Ecomagination: From Business Commitment to Business Philosophy and Social Contract

Sunday, April 17th, 2011

Five years ago, when General Electric first launched its ecomagination program, many, including some within the company, saw it primarily as a marketing and PR effort. As discussed in my April 3rd post, the company has long since proven that it was much more than a marketing program. It has now become a fundamental part of its business. And, judging from its commitments to extending the program, ecomagination is on the path to being core to GE’s business.

In fact, ecomagination appears to be more than a central part of GE’s business. Ecomagination is expanding the company’s view of and approach to partnering and is  beginning to become integral to the way GE views its business and even to its contract with society.

The Growing Ecomagination Partner Ecosystem

This, however, is not to suggest that GE believes that it can field all the technology required for its ecomagination solutions. As I discuss in greater depth in a recent report I wrote on GE’s work in building an ecosystem around its Smart Grid program, GE’s divisions are working more closely with each other to facilitate the development of and to support standards that facilitate interoperability across multiple industries (energy, aircraft, healthcare, etc.) as well as to leverage technologies and processes developed in one, to support others.

This being said, each division is also building partner ecosystems around their own ecomagination offerings—ecosystems that consist of combinations of customers, governments, academia and all types of large and small businesses. The company is also forging relationships with other global innovation leaders, exemplified by partnerships with:

  • Honda, to bring the smart grid to aerospace;
  • Better Place, with which it shares a vision to accelerate the global deployment of electric vehicles;
  • Masco, to help builders design and build more energy-efficient homes that use ecomagination home technologies,
  • Cities, including Portland, Oregon and Orlando, Florida to help them meet sustainability goals while simultaneously creating jobs; and with
  • Leading research universities, like Columbia, to realize the next generation of clean energy innovation.

And, where the partners do not yet exist, GE is helping to create them. The company’s ecomagination Challenge is an open call for breakthrough ideas to create a cleaner, more efficient and economically viable grid and to accelerate the adoption of smart grid technologies that leverage GE infrastructure. Like IBM’s Global Entrepreneur Initiative, it provides entrepreneurs with access to GE technical and commercial experts, introductions to VCs and other partners, and opportunities for ongoing technical and go-to-market relationships. The Challenge came with a pledge of $200 million (of which GE funded about half, with the other half coming from its VC partners), to be invested in promising start-ups. The winners, who were announced in December 2010, include:

  • ElectricRoute, which created a communications gateway point for electric transmission and distribution systems;
  • WinFlex, which produces rotors for wind turbines from light, flexible and inexpensive composite materials; and
  • Capstone Metering, which applies remote communications technology to water meters.

GE recently extended the ecomagination Challenge with call for solutions for home energy creation, management and use.

Ecomagination as Integrating Umbrella

Ecomagination serves as both an inspiration to and obligation of GE’s businesses. Led by Jeff Immelt’s conviction that investment in ecomagination will be good for all of GE’s stakeholders, the ecomagination goals for R&D spend, revenue growth and environmental responsibility (energy efficiency and greenhouse gas reduction) ensure that all the company’s businesses contribute. Ecomagination provides corporate leadership, not only by providing the structure for the product approval process, but also by providing continuous feedback on best practices, environmental trends, and the continual monitoring of claims to ensure GE leadership.

Ecomagination also serves as a central coordinating group for key stakeholder outreach, with executive-level, strategic customer engagements; employee engagement; and collaboration with NGOs, governments and other corporations. Furthermore, ecomagination.com raises topical and sometimes controversial issues, and invites the public to participate in the conversation.

This year, ecomagination is expanding its role in driving cross-business initiatives. GE’s heritage with electric vehicles dates back nearly 100 years to Charles Steinmetz and is entrenched in many GE businesses. GE Capital’s Fleet Services is a world leading leasing company. GE’s Licensing & Trading works with automotive manufacturers to improve fuel efficiency. And of course, GE Energy designs and manufacturers electrical equipment from the WattStation EV charger, through all of its local distribution equipment, to the generating technology itself. The company is aggressively endorsing electric vehicles (EVs) through its normal channels, and especially through its commitment to put 25,000 EVs on the road by 2015, both in its own fleet and in those of key customers. The ecomagination team is leading the company’s coordination of these activities.

Given all this, there can be little doubt that ecomagination is far more than an advertising program. It has become a fundamental precept of General Electric’s business philosophy and its social contract. Nowhere is this more evident than in the company’s Digital Energy group’s Smart Grid program (which I discuss in more depth in my aforementioned report).

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GE’s Ecomagination: From Marketing Campaign to Business Commitment

Sunday, April 3rd, 2011

Most of us have seen General Electric’s ecomagination advertisements. But while ecomagination may make for a catchy slogan and an interesting, and even compelling advertising campaign, it is much more than a marketing program. It is a totally new way of viewing General Electric’s value proposition, of defining markets and conceiving products and of allowing GE to “Create Shared Value”—a set of business policies and practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates.

GE CEO Jeff Immelt has spoken directly and often of the private sector’s responsibility to the country. He believes that the private sector must embrace the realities of environmental, national security, and other societal concerns; and that it must assume responsibility for addressing these challenges.

The company’s ecomagination initiative is a central component of his willingness to stake General Electric’s future on this proposition. His recent acceptance of President Obama’s invitation to chair the newly created Council on Jobs and Competitiveness is indicative of his believe that business must partner with the government to jointly address such needs.

The Genesis of Ecomagination

One may be forgiven for assuming that GE’s five-year old ecomagination initiative, which has been at least partially promoted around GE’s concerns for the environment and a desire to “leave the earth as they found it”, has its roots planted firmly in the clouds.

This, however, is not the case. The initiative, which is intended to promote the development and sale of energy-efficient products is, in fact, a hard-headed business decision. It is based primarily on Jeff Immelt’s conviction that energy efficiency and alternate energy are becoming big growth markets and that most resources, and especially energy resources, will become increasingly scarce, costly and subject to government regulation. And since GE is already so ensconced in so many related markets (from water purification to jet engines and all stages of the electricity chain, from huge nuclear plants through home appliances and light bulbs (or as one exec poetically puts it, “from turbines to toasters), it was ideally situated to stake out a leadership position.

This vision of proactive business opportunity is bolstered by another, much more defensive calculation—that Americans’ perception of big business is in a “dark cycle” where the people who can make our economy better (including corporate executives) are considered its worst enemies. With citizens’ trust in big business at an all-time low, Immelt is concerned that “populism will turn to protectionism”, harming not only economy as a whole, but GE in particular.

To some, ecomagination was initially perceived primarily as a marketing campaign. The program, however, is a corporate business strategy built upon the belief that one doesn’t have to choose between economic viability and environmental responsibility; you can have both. The program has steadily gained momentum as public awareness and commitment grew around sustainability, as GE doubled down on its investments, and as the market has come to accept—and indeed demand—a growing number of energy-efficient products. Over the program’s first five years, GE:

  • More than doubled its investment in cleaner technologies, from $700 million in 2004 to $1.5 billion in 2009;
  • Earned more than $70 billion in revenue from ecomagination; and
  • Introduced more than 90 ecomagination products. (Note: Ecomagination products must be both significantly and measurably better in operating performance and in environmental performance. GE business applications are audited by GreenOrder, a sustainability strategy consulting firm. Compliance is measured by a GE corporate approval council.)

GE surpassed a number of its initially, publically-stated ecomagination goals and has now committed to going further—re-doubling its ecomagination investments over the next five years to $10 billion and growing ecomagination revenues at twice the rate of the company’s top line. Employees and investors have long since come to recognize that what’s good for the environment can be good for business—and vice versa.

Ecomagination Initiatives

Ecomagination initiatives now pervade the company. General Electric has and will be dedicating $15 billion over 10 years to work on new ecomagination-related projects and virtually every division of the company is involved, with many introducing new product categories, in addition to fielding more energy-efficient versions of traditional offerings.

The company’s power and energy groups, in particular, are commercializing smart grid solutions, sodium and lithium battery technology, offshore wind, multi-fuel gas turbines and new generations of nuclear reactors and clean coal technology. Examples across GE groups, as shown at www.ecomagination.com/technologies, include:

  • GE Appliance’s ENERGY STAR qualified washers, refrigerators, dishwashers and GeoSpring water heaters;
  • GE Aviation’s GEnx Aircraft Engines and Fuel and Carbon Services consulting solutions and ecomagination-certified TrueCourse™ flight management system to help airlines optimize jet fuel use;
  • GE Energy’s 7FA and LMS 100 gas turbines, wind turbines, nuclear generators, and Integrated Gasification Combined Cycle coal gasification process;
  • GE Lighting’s compact fluorescent and LED lights;
  • GE Rail’s Trip Optimizer throttle control systems and especially its Evolution series of locomotive;
  • GE Software + Services, which pulls together offerings from multiple groups, including GE Digital Energy, with its Digital Energy UPS system, and GE Intelligent Platforms, with its Proficy software platform, that helps industrial and commercial companies improve energy efficiency;
  • GE Water’s line of advanced water and wastewater treatment systems, which cut water consumption, energy usage and its associated greenhouse gas emissions); and
  • GE Healthcare, which is generally focused on the company’s parallel (to ecomagination) vision of “Healthymagination,” is also improving the energy efficiency and reducing emissions and paper usage attributable to products by going digital, including through its use of Digital X-Ray, Digital Mammography, High Efficiency MR (Magnetic Resonance) Systems and Voluson ultrasound technology.

Then there is the rapidly growing number of specialized ecomagination products, including a growing portfolio of solar- and wind-powered alternative energy systems, smart meters and recently announced Nucleus home energy management hub and Wattstation electric car charging station.

Even the company’s Finance units get in on the ecomagination action. Its Business Finance group, for example, finances purchases of the company’s locomotives and jet engines and the building of solar and wind farms. It also earns money from eco-friendly assets by investing in third-party verified carbon offset projects that would not have been viable without the offsets. GE Energy Financial Services now counts on renewable energy investments for 30% of its $26 billion portfolio.

In fact, GE Broadcasting is one of the few divisions that is not in the ecomagination act (unless, that is, you count the ecomagination commercials that are run on NBC and other GE networks). But now that 51% of NBC Universal is being sold to, and will be operated by Comcast, it no longer counts. Smile

Whatever one believes may have been the original motivation for ecomagination, there can be little doubt that it is now fundamental to the General Electric’s business. But, as discussed in my next post, it is now becoming more than a core part of the company’s business. It is becoming part of the company’s Business Philosophy and its Social Contract.

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