General Electric’s Moonshot
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 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...