The Greening of Innovation… And Profit

General Electric is recognized as one of the most efficiently run companies in the world. It calculates risk meticulously. It manages resources with omniscient control. While Wall Street sycophants myopically focus on quarterly earnings, GE strengthens its position by focusing on longer-term objectives.
Whether it’s a hunger for new sources of profit or genuine altruism, sustainability has found a home on GE’s green website where they showcase their “Ecomagination” initiatives. The site outlines GE’s leadership role for a more ecologically sound future through environmentally sustainable innovation.
“As the world’s biggest companies give sustainable business a look, there will be challenges at every turn. Immelt has the ideas, the technology, the cash and the commitment to turn green ideas into big profits.”
A case in point: GE’s new jet engine
One of GE’s current projects is a new GEnx jet engine for the Boeing 787 and Airbus A350 jetliners. It uses 20% less fuel than the engines it will replace. An average commercial domestic U.S. flight releases more than 1,700 pounds of harmful greenhouse gases per passenger into the atmosphere. Multiply that by the hundreds of passengers on thousands of flights per day, and you begin to comprehend the magnitude of the problems contributing to global warming.
It will take years before there are enough efficient jet engines in service to make a difference. GE isn’t banking on jet engines alone. They are also exploring biogas engines for ground based transport and numerous other alternative power sources.
Understandably, GE sees energy as a huge area for innovation.
GE’s “greenspin” website has probably been influenced by GreenOrder, a New York-based PR firm whose staff touts deep ecological roots. GreenOrder’s tagline is “making progress profitable.” So, which came first, the spin or the values? GE’s site, which defines their commitment to solar, wind and other green energy initiatives, shares the same deep environmentally sustainable messaging as a separate site dedicated to nuclear power. My opinion: The real sustainable power solution has yet to be discovered. But, nuclear isn’t it.
Sustainability is the message, but profit is the primary motive driving many “green” initiatives. Although GE is managed better than most, it shares a common base with all publicly-held companies — stockholders who make decisions based on ROI. The good news is that sustainability is becoming economically feasible and finally receiving serious consideration.
Innovation and sustainability – how?
How do you innovate, grow profitability, and support genuine sustainability? In their thought-provoking book, Blue Ocean Strategy, W. Chan Kim and Renée Mauborgne challenge us to see things differently. By their definition, red oceans are where most companies compete (red for bloody, shark-infested, dog-eat-dog fighting over diminishing margins). But a blue ocean strategy creates and captures new demand in an uncontested space, generating higher margins and rendering competition irrelevant. Rather than compete against an existing standard for limited differentiation, create a new standard and own it.
Blue ocean strategy – in the locomotive market?
Consider the diesel-electric locomotive, originally developed in 1920. Not a subject most people would associate with innovation today. But, there’s a blue ocean developing here. The red ocean of locomotive manufacturers is focused on incremental improvements in engine performance to comply with stringent Tier II emissions requirements from the U.S. Environmental Protection Agency. GE is looking beyond the engine to boost efficiency by capturing, storing and reusing a tremendous amount of dissipated energy from the locomotive’s braking system.
In GE’s new locomotive design which will be operational next year, this surplus energy is collected and stored in non-lead batteries, then repurposed dynamically to deliver on demand horsepower. It will reduce fuel consumption by as much as 15% and cut greenhouse gas emissions by up to 50%. The new design also outperforms traditional locomotives at higher elevations and climbs steep inclines more efficiently. GE estimates a potential annual fuel savings of $425 million a year if all North American engines operated as efficiently as their new system.
Eventually, competitors (if they survive this paradigm shift) will imitate GE’s hybrid locomotive, driving costs and margins down. But, the quest for new profit will provide the return investors demand and the sustainability consumers want.
Blue oceans can be created wherever necessity intersects creativity.
People are ready for change. Toyota’s only error in the past few years was underestimating demand for their wildly successful Prius hybrid. It was voted Car of the Year in Europe, where the price of gas rivals gold. The market responded with orders far exceeding supply. Toyota’s leadership into the blue ocean of hybrid fuel efficiency was quickly copied. Now, even some SUVs boast hybrid status (green paint job optional).
Ecomagination appears to be synonymous with ecoprofit. As more companies begin to recognize sustainability as an opportunity to create new, lucrative blue oceans, we may reverse disturbing trends like global warming by creating a more balanced future.
When leaders like GE and Toyota capitalize on opportunity, they are rewarded through increased revenues and higher stock prices. But multinational corporations have no patents on sustainable innovation. Blue oceans can be created wherever necessity intersects creativity. Alternative fuels, jet engines, locomotives and other high profile innovations are highly publicized. But change that improves livability can happen anywhere, anytime. Analyze your daily routines. Most of your actions are the result of habit, not reason. Profit and sustainability do coexist, but someone has to consciously make the leap from red to blue. The solutions may be new products, new services, or new processes. Innovation comes in a variety of forms. Habit isn’t one of them.