Repeat: Be resilient. Don’t give up. Find more people with whom to share the idea, more ways to bring it to life. Sometimes the timing may be wrong. The company may be wrong. The boss may be wrong. Keep at it.
The next step was to create a formal process and code around this. In 2006, HR hired Vijay Govindarajan, a professor of strategy and innovation at the Tuck School of Business at Dartmouth College (Jeff’s alma mater), to be GE’s first Professor in Residence, based out of our Crotonville education center. Known as VG, he would become a marketing lifeline to me, giving a new voice of authority to the programs I was leading. VG introduced us to a simple tool that was classic “business school.” It turned out to be so crucial that I advise all aspiring innovators to use it. VG taught us to look at our growth investments as a portfolio of three boxes: Core, Adjacent, and New. The Three Box Approach—or what I’ve come to call 3D budgeting—was all about strategic planning, a way to continue to protect the established business lines while at the same time innovating at the edges, in unknown and uncomfortable places.
3D Budgeting
Budgeting for innovation allows organizations to become more nimble and position themselves for entrepreneurial growth. The Three Box Approach has withstood the test of time for me. I still return to it and have found it a useful framework for how I think about budgeting with my teams—always ensuring we have up to 10 percent of budget, and time, for exploring the new.
When I say resources, I don’t mean just project investment dollars or capital expenses but also people. It would take me a while to learn that you require different skills and capabilities for innovating at the core versus the new, and that measurements or benchmarks need to be aligned accordingly—it’s hard to measure profit on an idea that doesn’t even have a viable customer yet! But sadly, well-meaning companies do this.
Time is an overlooked resource as well. I make sure I carve out at least 10 percent of my own time in any given workweek for exploring what’s new. For example, I carve out Friday afternoons for discovery, whether it’s meeting with an expert in a new field or reading about a new topic. I created “Field Trip Fridays” once a month to take my marketing team to visit an emerging company or even an exhibit or art installation.
In my personal life, the percentage of time I spend in discovery is much, much higher. I search out new products, venues, exhibits, and experiences as a way of life. An adaptation that I’ve challenged myself with is to create three segments, along the lines of Things I Love to Do, Things I Have to Do, and Things I Hate to Do. It turns 3D budgeting on its head, with me attempting to have more things I love (Box 1)—like reading and exploring—while finding creative ways to outsource things I hate (Box 3)—like doing laundry!
But even as we were gaining traction, the sharks—both inside and outside the company—began to circle. For one thing, people had huge doubts that a big and slow corporation like GE could make itself agile, swift, and innovative. We needed a clear, unmitigated success, validated by the one traditional metric that will always matter most at GE: huge profits in billion-dollar markets.
CHAPTER 5
ECOMAGINATION
You’re going to make us look like idiots!” John shouted from the back row.
I was standing at the front of the Lyceum meeting room in GE’s Crotonville executive education campus during our quarterly corporate executive council meeting (CEC), which brings together forty-five top business and functional leaders from around GE. I remember thinking that, even for a company that prides itself on a kind of raw clarity in its feedback, those were pretty powerful words for a division head to be directing at the CMO.
I was presenting a radical new company-wide initiative through a just-finished commercial that featured a dancing elephant named Ellie. But it wasn’t just the gyrating elephant that got our execs concerned about their image (though the elephant was an issue). Rather, it was the essence of the initiative: to reinvent ourselves from an environmental Godzilla—to our critics, a lumbering capitalist beast leaving total destruction in its wake—into a tree-hugging corporate Jane Goodall. That’s not how I presented it on that day, but seeing their fuming bewilderment as my talk unfolded, that’s certainly how they heard it. Innovation is not just about generating, analyzing, selecting, and publicizing ideas. It’s about getting an entire community of “customers”—in this case, the company’s executives and employees—to adopt new behaviors and practices. It’s a slow process. And, as was becoming painfully clear, the Imagination Breakthrough program was only the start. Real company-wide adoption would take years. But the bigger and bolder the effort, the faster we could move forward.
* * *
—
Nine months earlier, Jeff came to me with one of his “quarter of an idea” observations. He told me that in client meetings, business reviews, at the coat rack after sales dinners, and in industry conference elevators, customers—especially those in the energy and rail sectors—were cornering him with various versions of one muffled fear: They wanted to do right for the environment, first because it was the right thing to do, and also because of pressure from enhanced regulatory standards in the EU and United States. But they feared they could risk financial ruin in the process of converting to expensive technology.
They wanted help.
“Is there something we should be doing about our technology and the environment?” Jeff asked. “Go check it out.”
Of course, not every energy and rail executive told Jeff the same thing. Far from it. It was that their words, taken together, created a pattern that was identifiable to someone with the orientation to see it. In the executives’ anxiety and fear, Jeff recognized a pattern of environmental tension that couldn’t be found on any spreadsheet—weak signals or repeated anomalies that register as “Hmm, that’s interesting” among the noise of the day-to-day business landscape.
My friend Joi Ito, director of MIT’s Media Lab, uses mushroom-hunting as a metaphor to explain how pattern recognition—what he also calls peripheral vision—works. It requires immersion without absorption—a broad awareness of the environment, while resisting the pull to fixate on any one thing. When you go mushroom-hunting, if you focus too deliberately, you won’t find any mushrooms. With your task-oriented mind switched on, you’ll filter out the weak signals, the visual hints of delectable fungi that are nearly, but not quite, hidden in the nooks and crannies of the forest underbrush; however, when you stop looking so intently, suddenly your pattern recognition kicks in and you’ll see mushrooms everywhere.
Futurist (and spark) Faith Popcorn calls her version of the method “Brailling the Culture,” which I love because it makes you think about using your senses in different ways to recognize patterns that you don’t yet see. After Jeff asked me to look into the signals he picked up, my job was that of a sense-making machine—examining early signals picked up in discovery, going deeper and collecting more information, and seeing if patterns emerged of something bigger. And if they did, what could GE do with that knowledge?
To build our case for (or against) an environmental initiative, I convened a small working group to survey the effects of environmental regulation on business and make suggestions on what, if anything, we could do. My first questions were, “Is this bigger than these few industries? Are there more dots to connect? When you connect them, what image and opportunities do they create?”
At that moment, we already had a trend of three. British Petroleum had left its maiden name behind and rechristened itself BP (or “Beyond Petroleum”), Toyota also was messaging about a cleaner environment, and now there was the expression of unease among our own customers.
We spent all of 2004 figuring out how we could connect technology to environmental and economic outcomes, from retail to railroads, and do it credibly. David Slump, the CMO of GE Power, and I formed a sort of ying-and-yang team. “You dive off the board and go deep, and we’ll survey the pool fro
m the lifeguard’s tower,” I told him. David’s Power team delved into details—they knew the technical realities of our products, what our customers were buying and not, what our energy-generating competitors were doing—and put together a granular report on issues like how Europeans were using renewable energy, such as wind turbines, differently. My marketing team went wide, looking at trends on the horizon, comparing issues not related to the power-generation space, like how Toyota’s success with the Prius could be applied to products in the power-generation space.
Our marketing team also set about to research macro trends on the environment: What did consumers say versus what they did? Were other industries leading in green technology? What efforts, if any, were taking place in GE’s industries? What was the science about carbon emissions and the environment? Is global warming real? What did our scientists believe about it? What could we really do about it?
One of my GE Water business-unit colleagues told me, “Yes, but you don’t have enough subject expertise to understand my industry or what my customers need.” Exactly! Looking at the world horizontally means considering ideas outside of our direct expertise. And because of that, we could see opportunities that deep domain experts cannot. Never underestimate the value of viewing things through a different, wider lens. You need to have both: ideas born in deep expertise and then a challenge by someone asking, Where else can this apply?
When we finished our first wave of research, it was clear we had discovered a theme emerging across our different businesses—energy, rail, water, aircraft engines—that was bigger than any of these businesses alone. The opportunity was real, but vague, broadly focused on emissions reduction, energy efficiency, water usage, and what I would call generally the economics of scarcity. What wasn’t clear was what GE could do.
I worried that a pure messaging campaign wouldn’t be different enough from what BP was doing with its rebranding. Moreover, I feared that if we engaged in that, people would accuse us of greenwashing. After all, we had a difficult environmental legacy. Our position on PCBs in the Hudson had sparked the wrath and fueled successful fundraising efforts of NGOs like Greenpeace and Bobby Kennedy’s Riverkeeper. I also knew there was a lot at stake in pivoting our position on the environment—a move that had the potential to baffle and enrage our internal constituency and maybe make us an even bigger target for environmentalists.
“Why are you messing with this?” one sales lead asked David. “You are going to piss off our customers!”
To veer away from an intramural debate, I created something we called Discovery 2015, a future “Dreaming Session” with our thirty biggest utility customers. Some of the top players in the industry—CEOs like Jim Rogers of Duke Energy and scientists like David Rutledge of Caltech—came to Crotonville and listened to Jeff Sachs from Columbia University talk about global warming. In addition to the thirty customers, we had our top GE management, sales, and R&D leaders in attendance. We debated and dreamed aloud about technologies, especially the timing for renewable energy such as wind. Most of the utilities are subject to local regulatory bodies that must approve price increases, so cost issues were critically important. Jeff also floated the idea of doing something on public policy on greenhouse gases. Debates were robust. But we also made room for dreaming.
This environmental Dreaming Session was a critical hinge event for GE, because it helped to show that we could go beyond improving management practice and indulge in business innovation. It was one way to show the organization that it was okay to stick your neck out and even to make customers a little bit uncomfortable from time to time.
* * *
—
On a very basic level, change is a conversation. The more vibrant, the more diverse, the more animated and sometimes agitated the conversations an organization is having, the more likely you’ll find an adaptive organization that’s gotten good at learning, creation, innovation, and change.
In that sense, our Dreaming Sessions showed us that management can discourage innovation by an overdependence on the scientific method, by demanding innovators “prove it” before “it” is really understood. To be innovative, you have to learn to be comfortable with some level of “maybe.”
To this end, we asked our energy customers at our environmental Dreaming Session to peer into the future to the year 2015. We picked a time frame—and we were very deliberate in choosing ten years out—that was near enough to be actionable, but still far away enough that CEOs could “dream” and not feel competitively threatened by sharing insights with one another. “What technologies would you like GE to invest in?” we asked. “If you had a billion of GE’s dollars to invest, where would you place it?” We laid out options for new technologies, such as cleaner coal, wind, solar, and geothermal energy.
We facilitated the discussion, posting notes around the room. Jeff in his usual fashion jumped in whenever the debate heated up and needed moving along. There were a few utility CEOs who just didn’t believe GE would be able to deliver benefits like emissions reductions; others feared what it would cost. “What happens if we get ahead of regulations that never end up existing? Who pays for that?” said one CEO. It was the kind of feedback we needed to intelligently invest more money and resources into solutions such as solar energy or “clean coal.”
While GE executives listened carefully to the input, ultimately we would make our own investment choices. “I love customers. I get great insight from them, but I would never let them set our strategy for us,” Jeff said. But by talking to more customers, we saw patterns emerge, where they were alike, and where we could develop offerings that scale.
Deep investigation into customers’ lives and needs was vital when GE’s Achilles’ heel was that it often engineered the product first and then had to figure out how to convince customers to pay for it. The new plan was to ask, “Let’s first figure out what they want to pay for.”
As we developed our ecological business initiative, my team and I worked on a parallel track talking to NGOs, government leaders, academics—the very people we had been fighting for years. We asked them what they thought GE could do to make a difference. It was the first time some of them had heard us asking questions instead of going in and telling them how right we were with our point of view.
Their first reaction was suspicion. Eileen Claussen, the head of the Pew Foundation on Global Climate Change, said, “Let’s just say that I’ve been waiting a long time to have this conversation with you guys. And I never expected the day to arrive.”
“How will this be perceived?” I asked her. “How do we make it credible? What do you expect GE to do, Eileen?” But it was slow going to make even a tiny crack in her suspicion. I found her lack of trust understandable, but ultimately irritating. Finally, at a meeting in her office in Washington, I blurted out, “How can we make it so you and your colleagues can accept that we’re telling the truth?”
Eileen had been around—at the EPA, the Department of Defense, Booz Allen Hamilton—and she was known for her frankness. “Let’s think of this another way, from another industry: Arms control treaties are based on trust, right? They have to be, but every one, I promise you, is verified by an arms control observer group. Trust, but verify.” (Eileen would become the longest-standing member of our Ecomagination advisory board.)
I nodded. “Verify,” I said.
“Yep.”
It was at this point that it became clear that to convince skeptical customers and third-party observers, whatever we did would need to be measured by a trusted outsider, a referee whose judgments would not be doubted. That would be absolutely crucial to our success. We needed an outside force to say, “GE has cut greenhouse gases by Y and saved its customer $X in the last twelve months,” and have people believe it. We needed a scorecard.
I talked to green activists, government leaders, and other forward-thinking industrial firms, and one name came up repeatedly: GreenOrder. We commiss
ioned the New York strategy firm to evaluate the environmental performance of our innovations and grade them on detailed economic and environmental scorecards. To qualify as part of this new program, a product had to show considerable and demonstrable benefits both for the planet and for GE’s bottom line.
Because GreenOrder was well respected and connected, they also helped us sort through the many NGOs and green activists who had concerns about us. Accompanied by GreenOrder, we spent months talking to over two dozen groups to hear their concerns and test our ideas. We developed an advisory board composed of NGOs, customers, and venture capitalists, whose role was to verify our actions and advise us on R&D investments.
We started to believe this new initiative could change GE. So we took the scorecard that GreenOrder’s Andrew Shapiro helped us build and began auditing our products. We were pleasantly surprised to discover that we already had $5 billion in product sales in the pipeline that met our standards—for products like a hybrid diesel-electric locomotive that beat EPA standards and energy-saving water desalination programs. We were already on our way to becoming a green economy leader without knowing it.
But Jeff was blazingly clear: this could not be just a feel-good project; for this to work, we had to have a positive economic outcome. Jeff kept saying, “Not just ecological; it has to be economical.”
We debated our actions around Jeff’s big conference table. I was on what seemed to be the greenwashing, lunatic fringe, with GE chief legal counsel Ben Heineman on the other extreme. In between sat Jeff, GE’s chief communications officer Gary Sheffer, and Steve Ramsey, former chief of the environmental enforcement section at the Department of Justice.
Imagine It Forward Page 11
