by Andreas Fransius, Peace Is Profitable Contributor
My previous two entries have tried to make the case for making peace a profitable corporate strategy, rather than a charitable side-activity. To achieve this goal it is instrumental to build effective partnerships with different stakeholders. While these are undoubtedly attractive ideas, how can they be put into practice? One of the most exciting projects that embody these elements is General Electric’s venture to become a leader in green energy by building a community of thousands of innovators from across the globe, through the Ecomagination initiative.
Creative new ideas that cause fundamental paradigm shifts in business frequently come from micro enterprises or individuals, who often suffer from a lack of financing. Such problems are particularly relevant in developing countries. In a recent study of Micro, Small and Medium Sized Enterprises (MSMEs) in Peru, I showed that even though micro and small firms make up 99.3% of firms in the country, few of them manage to grow and join the ranks of medium firms. They are frequently hampered by a lack of financial literacy and the formal banking system often struggles to evaluate their growth potential in an adequate manner. These firms therefore get stuck using outdated technologies and fail to employ full-time employees, holding back their growth potential.
What makes GE’s Ecomagination initiative particularly interesting is that it managed to provision financing to buddying entrepreneurs, while creating tangible value for a multinational firm. With the goal of becoming a leader in green energy, GE realized that it would struggle to come-up with groundbreaking ideas in-house. Instead, it launched an open innovation initiative in 2010 and allowed firms, entrepreneurs and students to compete for funds worth over $200 million.
This project was made possible as GE built effective partnerships with Venture Capital (VC) firms, which agreed to invest money in new start-ups. In total, this initiative received ideas from 75,000 people in 150 countries, and 23 start-up ventures have received $140 million from GE and its VC partners.
The broader lesson of this project is that it shows how firms can generate new ideas by engaging a whole community of creative people who are committed to innovation. While the Research and Development (R&D) departments of multinational firms are well-equipped to develop incremental innovations in existing products, they are often less effective at coming up with entirely new business models, particularly when they threaten the firm’s current cash-cows. By harnessing the creative potential of a diverse community, Ecomagination also provides a vivid model for how to make peace profitable.
Watch March Vachon, Vice President of Ecomagination, make an eloquent case for why Peace is Profitable, while elaborating on the role of GE: