Gen­eral Elec­tric’s Moon­shot

Rotman Management Magazine - - FROM THE EDITOR - - from The Moon­shot Ef­fect: Dis­rupt­ing Busi­ness as Usual by Kate Pur­mal, Lisa Gold­man and Anne Janzer

In 2005, for­mer GE CEO Jeff Im­melt an­nounced that he was shift­ing the com­pany to pro­duc­ing en­ergy-ef­fi­cient, eco­log­i­cally-friendly prod­ucts, start­ing with a ma­jor in­vest­ment in a pro­gram called ‘Eco­mag­i­na­tion.’ At the time, GE was not a likely can­di­date to fo­cus on en­vi­ron­men­tally-ef­fi­cient prod­ucts: The com­pany was widely be­lieved to be one of the big­gest cor­po­rate pol­luters in the U.S. Skep­ti­cal ob­servers dis­missed Im­melt’s an­nounce­ment as a PR ploy de­signed to green­wash the com­pany’s poor en­vi­ron­men­tal record.

A true com­mit­ment to the Eco­mag­i­na­tion moon­shot re­quired GE to reengi­neer its en­tire prod­uct line for en­ergy ef­fi­ciency, in­clud­ing clothes dry­ers, light­bulbs and jet en­gines. Tar­gets were set to dou­ble its $700 mil­lion re­search and devel­op­ment in­vest­ment in clean tech­nol­ogy; to turn a pro­jected 40 per cent in­crease in green­house gas emis­sions to a one per cent re­duc­tion by 2012; and to cut its use of water by 20 per cent by 2012.

Eco­mag­i­na­tion suc­ceeded well be­yond its ini­tial tar­gets. By 2010, GE had in­vested $5 bil­lion in clean tech R&D, and by 2015, the pro­gram had gen­er­ated more than $200 bil­lion in sales. GE beat its en­vi­ron­men­tal tar­gets by a wide mar­gin: By 2015, it had re­duced green­house gas emis­sions by 31 per cent and water us­age by 42 per cent. Moon­shot achieved.

Mo­ti­vat­ing change is a com­plex and har­ried busi­ness that tends to be most suc­cess­ful when the lead­er­ship team op­er­ates with both in­tegrity of pur­pose and com­pas­sion about the dis­com­fort that change in­evitably causes.

THE TRAN­SI­TION PATH SHOULD BE SEEN AS AN ECOSYS­TEM AND

This idea is a kind of am­pli­fi­ca­tion of the PLAT­FORM PLAY. in­sight at the heart of The In­no­va­tor’s Dilemma, which em­pha­sized the role of pre­vi­ously-dis­en­fran­chised cus­tomers in the in­no­va­tion process. The key here is to rec­og­nize that your best cus­tomers, sup­pli­ers, em­ploy­ees and man­agers are likely to be dis­rupted if the busi­ness-model in­no­va­tion is suc­cess­ful. Some part­ner­ships sim­ply may not be sus­tain­able on the terms of the past, and as a re­sult, new re­la­tion­ships, com­mit­ments and con­nec­tions are crit­i­cal to the process. Es­tab­lish­ing a path to­ward the achieve­ment of a moon­shot re­quires iden­ti­fy­ing these stake­hold­ers and seek­ing their sup­port and en­gage­ment, even if this step up­sets and con­cerns key con­stituents from the past.

For SUC­CESS RE­QUIRES SHREWD CON­TRACT­ING AND IN­VEST­MENT. the ap­proach to be sus­tain­able, cre­at­ing new value must be ac­com­pa­nied by a care­fully-crafted strat­egy for cap­tur­ing value in the or­ga­ni­za­tion. I am not sug­gest­ing that in­vest­ment can be avoided; quite the con­trary. Com­pa­nies seek­ing busi­ness-model in­no­va­tion must be pre­pared for a pe­riod of in­vest­ment of re­sources to build the ca­pa­bil­i­ties nec­es­sary to ac­com­plish the tran­si­tion. But if this in­vest­ment is not ac­com­pa­nied by a thought­ful, well-de­signed and strate­gi­cally in­sight­ful ap­proach to con­trac­tual ar­range­ments, it will not be sus­tain­able, be­cause an or­ga­ni­za­tion can­not per­sist in in­vest­ing with­out even­tu­ally achiev­ing a fair re­turn on the in­vest­ment it­self. Great trans­for­ma­tional com­pa­nies such as Netflix, Ap­ple and JP Mor­gan Chase all struck deals over time that re­flected the risk and ef­fort that went into the process it­self.

In clos­ing

In the end, the es­sen­tial el­e­ments of the Kennedy Moon­shot are the same el­e­ments that are needed to ac­com­plish large-scale change in an es­tab­lished com­pany: First, the case must be made that the cur­rent sys­tem is bro­ken in fun­da­men­tal ways; the fea­si­bil­ity of a new sys­tem must be as­sured, but held in the back­ground, given that its pre­cise facets will de­pend on the res­o­lu­tion of un­cer­tain­ties in the fu­ture; the po­ten­tial im­prove­ment to value cre­ation must be sig­nif­i­cant and vis­i­ble; and the case must be made that re­sources on a large scale should be de­ployed to as­sure its achieve­ment.

A goal is only a moon­shot goal if it is lofty enough to mo­ti­vate sci­en­tific and or­ga­ni­za­tional achieve­ment through dif­fi­cult tech­ni­cal and ad­min­is­tra­tive bar­ri­ers, and widely em­braced by ev­ery­one in the or­ga­ni­za­tion. Above all else, the down­side risk of not chang­ing must be made crys­tal clear.

The good news is, you don’t have to travel to the moon to ex­pe­ri­ence the moon­shot ef­fect: A moon­shot is not de­fined by its dis­tance from Earth, but by its dis­tance from busi­ness as usual.

Anita M. Mc­ga­han is the Rot­man Chair in Man­age­ment and Pro­fes­sor of Strate­gic Man­age­ment at the Rot­man School of Man­age­ment, with cross-ap­point­ments to the Univer­sity of Toronto’s Munk School of Global Af­fairs and the Fac­ulty of Medicine’s Depart­ment...

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