CMO Insights

Marketing in a Technology Company: GE’s Organizational Platform for Innovation

This post was co-authored with Anna Chavis and Jace Moreno, MBA students, Fuqua School of Business, Duke University.
At a recent roundtable discussion at Fortune’s Most Powerful Women Summit, Beth Comstock, the Chief Marketing Officer of GE, described how GE approaches marketing: “You have to create a platform that invites innovative ideas.” Unfortunately, we teach marketing and many companies approach marketing as if the organization does not exist. As a result, marketing often fails because it sits outside, or is layered on top, of the most important activities in companies. Marketing needs to be down in the trenches and marketing leadership needs to foster a culture of innovation that creates new products, new services, and new customers.

GE has written this approach into its DNA. In particular, GE’s culture ensures that technological innovation (the historical backbone of GE) and commercial innovation (managing with deep consideration of the customer’s needs and wants) are inextricably entwined. We interviewed Beth Comstock during her visit for the Distinguished Speaker Series at the Fuqua School of Business, Duke University. From this talk and from other press accounts, we derived four capabilities that constitute GE’s organizational platform for innovation. We discuss these capabilities as part of the CMO Insights series for The CMO Survey and offer examples of the new products, services, and customers that have resulted in a follow-up blog.

Capability 1: Create Marketing Innovation Internally

A big feeder of GE’s marketing innovation is the ECLP—Experienced Commercial Leadership Program—GE’s first externally focused leadership program. ECLP began in 2002 as part of Jeff Immelt’s commitment to grow GE’s commercial pipeline and aims to position GE as the “gold standard in marketing.” The two-year post-MBA program develops a pipeline of future leaders and also teaches the company what good marketing is and how it has the potential to change traditional views of product development. The program is viewed as a mutual learning experience—the graduates bring an external perspective and unique talent to GE and program participants learn from GE’s R&D expertise. As Comstock noted, “Marketing must bring a different viewpoint to tough problems. This involves data analytics that produce customer insights and the ability to address customer needs in a creative manner.” She went on to point out that “The best marketers are the ones who have both the creativity and analytical skills in the right proportion.”

Capability 2: Integrate Collaboratively Within GE

There are two key illustrations of this capability—the Commercial Council and the Imagination Breakthrough Process.

The Commercial Council is composed of top marketing and sales leaders from across GE. This group meets regularly to share best practices and to plan growth programs. In 2012, the Commercial Council monitored a new initiative referred to as “Growth Sprints.” This initiative involves bringing a GE-wide view to 3-5 key verticals/services/solutions to identify bigger opportunities. This approach has created early success. For instance, in the 3^rd quarter, GE completed growth sprints in Germany and Brazil by identifying significant revenue opportunities in the mining vertical and top prospects in the food and beverage vertical. Without this integrated view, GE might have under-invested in or completely missed these opportunities.

In support of these activities, Comstock argues that “Successful marketers need to be good at conveying their ideas to the team and proving their ideas to others through effective prototyping. I can’t emphasize enough how important it is for marketers to be able to translate customer insights to their teams, their organizations, and to markets.” In a different venue, she goes on to say, “When you hear marketing, most people think advertising. While we of course do that, we have made sure that marketing has been redefined as innovation. We expect our marketers to be the champions of ‘what’s next.’” Likewise, Comstock points out that “You don’t get to be a 130 year-old company without developing some kind of resilience and an ability to be nimble. You certainly have to focus on today, but also be prepared for tomorrow. We expect our marketing and innovation teams to be the champions for that.”

Comstock recognized the need to link GE’s technological genius with its emerging commercial capability to serve new markets, new segments, and new customers. To do so, she created the Imagination Breakthrough Process, which fosters cross-company talent and cross-disciplinary engagement on future-oriented projects. Through the Imagination Breakthrough Process, GE integrates its collective talent across functions to forge unique solutions.

Capability 3: Collaborate with the Customer

Following the 2008 financial crisis, senior leadership recognized the importance of improving the “stickiness” of GE’s relationships with customers. The strategy was to make GE’s value to the client so great that customers would not be able to afford not to work with the company. Two approaches lie at the heart of this capability.

The Differential Value Proposition (DVP) System combines software, data, and processes to foster conversations between GE businesses and their clients. These exchanges start with questions such as “If you had $1M of GE’s money, how would you spend it to best impact your business?” These conversations produce an assessment of the monetary value that GE brings clients over GE’s closest competitor. From there, these GE and customer teams create plans to increase the mutual value of the relationship. This involves mapping out “promises” that GE will execute over a given time frame and a monetary value that these promises will deliver to the client. Comstock notes, “I think marketers’ next hurdle is a knowledge management one. One where we have to figure out how to start to harness the data that exists, so that you know your customer better than they know themselves, and that you can understand and intuit and feed them data back that’s going to make them even smarter.”

Comstock noted that a huge part of GE’s marketing innovation is maintaining a strong focus on the customer. Listening keeps GE focused on a “what to make for the markets” approach instead of reverting to a “make and sell” approach. She explained that GE regularly conducts discovery sessions with customers, maps the customer journey (all actions taken by the customer in the product or service area), and conducts observational research. Comstock observes, “Any successful organization will produce a good system of tension and bring these two facets [customer and market] together. They have to be interwoven and work together with an inward focus of vision and outward focus of success.”[1] The key, she added, is marketing’s ability to “…translate the customer vision to the team, your organization, and the markets.”

Access GE, a web-based portal, allows all GE customers to tap into GE’s unique insights, tools, and best practices. The Access GE team is composed of internal experts at GE who help customers tackle their biggest business challenges. Some of GE’s partnership successes in this area include growing sales and exploring new markets, managing costs, building a best-in-class finance function, planning and integrating a merger, developing and retaining talent, managing regulatory, market and competitive dynamics, and increasing operational effectiveness and productivity. Since 2000, more than 6,500 customers have participated in 8,500 Access GE engagements.

Capability 4: Collaborate with Entrepreneurs

GE CEO Jeff Immelt recently made the point at an ECLP Conference that “I am not most afraid of our biggest competitors. I am afraid of the guy in his garage coming up with an idea that could potentially wipe out one of our businesses.”[2] It follows, therefore, that the final pillar of engagement in GE’s marketing innovation takes place with the entrepreneur. GE collaborates with outside entrepreneurs to stay ahead of the curve and maintain a forward-looking stance. One way that GE fosters this collaboration is through contests, such as its ecomagination Challenge. GE casts a wide net for new business ideas by offering large cash prizes and new business opportunities for entrepreneurs. GE melds an open call for ideas in this business challenge with a large commitment to invest in winning companies and commercialize their ideas quickly. The ecomagination Challenge is part of the larger initiative ecomagination Platform, which Comstock describes as “A platform for business development [that is] basically a shadow P&L across the company.”

Ireland-based FMC-Tech, a smart grid technology company, won GE’s 2010 ecomagination Challenge. As a result, GE and its venture capital partners invested $55M in FMC-Tech to quickly commercialize its unique technology—real-time power line monitoring that improves utility distribution automation systems. FMC-Tech’s solutions provide utilities with a new level of grid intelligence through real-time information on power outages, dynamic power line capacity ratings, and assistance for maintenance and repair crews. FMC-Tech’s impressive on-the-ground success after the ecomagination win prompted GE’s acquisition of the company in late 2011. FMC-Tech’s expertise in online power management seamlessly complements GE’s expertise; its integration into GE’s portfolio will allow GE to drive faster technology developments and to offer broader-based utility solutions.

The Payoffs From GE’s Innovation Platform

The four capabilities have paid off for GE. Here are just a few examples of the new products, new services, new markets, and new business models that have resulted.

New Products: GE’s new GeoSpring™ hybrid electric water heater was developed to address consumers’ growing desires to save money and be environmentally conscious. GeoSpring, which uses a novel integrated compressor and evaporator mechanism, is 62% more efficient than traditional electric water heaters and saves consumers an average $325/year on utility bills. GeoSpring is an output of GE’s ability to integrate big-picture economic dynamics, customer trends, and cutting-edge innovation to capture market share and new customers. It was recently named to BuildingGreen’s Top-10 list of green building products for 2013 and, not incidentally, its manufacturing facility will create more than 1,300 new U.S. jobs by 2014.

New Services: GE’s Trip Optimizer automatically controls a locomotive’s throttle, helping keep trains on schedule while minimizing fuel use. This software-based service calculates an optimal trip profile that considers such factors as train length, weight, grade, track conditions, weather, and locomotive performance. During the trip, a sophisticated network of on-board computers and GPS systems updates the profile continuously, adjusting for changes to ensure the train arrives on time and with minimum fuel use. For each locomotive, Trip Optimizer can reduce fuel consumption an incremental 32,000 gallons, cut greenhouse gas emissions by 365 tons, cut NOx emissions by 5 tons, and decrease particulate matter emissions by 0.2 tons.

New Markets: One of GE’s Imagination Breakthrough successes leveraged its products and technology from established markets to grow in new markets. Through cross-business collaboration, GE made the connection between MRI machines and wind turbines. For decades GE has used superconducting magnets in MRI machines to lower costs and produce higher image quality. GE then applied the superconducting magnet technology to develop an innovative wind turbine generator that delivers more wind power at a lower cost. This technology also eliminates the need for rare earth materials formerly used in wind turbine generators. The superconducting magnet project is one of many in GE’s wind research portfolio focused on scaling up wind power in the most economically feasible way.

New Business Models: GE’s entry into the global wind turbine market illustrates its willingness to challenge current assumptions among competitors to innovate a new business model. Through deep immersion into the needs of current and prospective customers, GE uncovered and subsequently address two main drivers of customers’ perceptions of economic value in wind power: gearbox reliability and efficiency in capturing wind energy. Existing competitor wind turbines were unreliable, inefficient, and costly because of short production runs.

GE’s first step was to acquire Enron Wind Corporation’s assets in 2002 to learn about the wind market. It then leveraged its capabilities in making gas turbines and jet engines to develop a better wind turbine that generated 20 percent more wind energy than competitors’ turbines. At the time, the global market was heavily dependent on government subsidies and the large European market was characterized by a scarcity of open land. German competitors, such as Siemens, responded to market conditions by offering 20 different models that could fit on different-sized plots of land. GE, on the other hand, decided to focus on one turbine size that met the needs of markets where tight spaces were not a constraint and devoted resources to optimizing the efficiency of that turbine model. With the design changes and the cost advantages of high-volume production, GE improved reliability (uptime) from 85 percent to 97 percent at a price advantage to customers.

Summary

Reflecting on GE’s capabilities and these outputs, Comstock points out, “We as marketers helped GE move from pursuing a ‘make and sell’ approach to a ‘what to make for our markets’ approach.” In a follow-up observation, she notes, “Marketing should be a constant incubator of ideas in finding new markets to sell our products and should be a big driver of organic growth for our company.”

In her comments at Fuqua’s Distinguished Speaker Series, Comstock brought the importance of marketing and its marriage with technology success back to GE’s beginning. She remarked, “I believe that Thomas Alva Edison, the founder of GE and inventor of the light bulb, was the world’s greatest marketer. He announced that ‘In six weeks, I will make gas lights obsolete through electricity’ and proved it by organizing a march of men who walked through Manhattan with electric torches on their forehead. That’s guts, a key characteristic of marketing.”