Electric Eels and the Smart Grid: Case Study Explores GE’s Open Innovation Challenge

When General Electric launched its “ecomagination” strategy to double its renewable energy business, CEO Jeffrey Immelt pledged $10 billion over five years for clean-tech R&D. The company also took a more unusual step for a traditional Fortune 500: It looked outside, soliciting renewable energy ideas from entrepreneurs and startups.

GE’s $140 million foray into open innovation is examined in a new case study by Adjunct Professor Henry Chesbrough published in the Spring 2012 edition of California Management Review, the school’s quarterly peer-reviewed journal. The case, “GE’s ecomagination Challenge: An Experiment in Open Innovation,” is part of a new case series written by Haas faculty to promote faculty research and the school’s teaching mission. Abbreviated versions of the cases are also published in the Financial Times.

GE’s ecomagination Challenge grew from the company’s awareness that even with a $37 billion energy business and impressive in-house expertise, it didn’t have a corner on the market for good ideas in the rapidly changing renewable energy sector. Venture capitalists were pouring $2 billion a year into energy startups, including many in GE’s core business area.

Partnering with Kleiner Perkins, RockPort Capital, KPCB, Foundation Capital, Emerald Technology Ventures, and Carbon Trust, GE launched the challenge in July 2010. The company expected just a few hundred entries. Instead, nearly 4,000 entries poured in from 160 countries in the first round, followed by 1,000 more in a second round focused on improvements to the smart grid.

There were a few wacky ones—such as stocking a lake with electric eels and tossing in a power cord—but many held promise. By 2011, GE and its VC partners had invested $140 million in 23 startups, and made one acquisition.

Chesbrough uses the case to show how open innovation is not something that only takes place between companies, but can enable companies to tap into a larger community of innovators. Chesbrough pioneered the concept of open innovation, which holds that companies benefit by using external as well as internal ideas and technologies.

Read CMR and the Open Innovation Case