BOSTON--In one respect, green-tech companies are realizing what IT manufacturers did many years ago: just selling a box will only go so far.
To get a high volume of products sold, technology suppliers need to combine hardware with software and with consulting services to solve a problem.
This idea of developing a "solution" around energy-related gear is high on the mind of Mark Vachon, vice president of Ecomagination at General Electric. To do that, there needs to be an "ecosystem," or network, of partners who can pull the various pieces together.
Launched six years ago, the Ecomagination initiative is essentially a business proposition stating that there will be greater and greater competition for natural resources, which will drive demand for renewable energy and goods that improve energy and water efficiency. In five full years, GE has made $70 billion from Ecomagination-tagged products, which can be everything from wind turbines to hybrid locomotives to electric car charging ports.
In the next five years, the company expects Ecomagination sales to grow two times faster than the rest of the company and for GE's efforts to be more international, Vachon said.
While Vachon was in Boston earlier this week, we spoke about how he wants to open up Ecomagination to more people outside GE and outside the U.S. He also said GE sees a place for its water purification technology to address problems around shale natural gas drilling.
You've been at the job for about half a year. What have you found and what are your priorities?
Vachon: From where I sit with Ecomagination now going in its sixth year, Ecomagination for me looks bold six years ago. It's a little more crowded space these days, substance or not. The R&D capacity that the company possesses is a real luxury. I talk about the ability to make lots of bets--that's a huge strategic advantage. And on your point on scale, a lot of these industries require massive resources and we have that ability, both technology- and resource-wise.
I think the U.S. energy policy debate over the last several years sort of tugged on Ecomagination [in] the U.S. maybe more than we would have preferred. [GE was a founding member of USCAP, a consortium of businesses lobbying for a price on carbon emissions but Congress failed to pass a law limiting greenhouse gases.] We really did believe in carbon pricing. While appropriate and useful, I find myself wanting to balance out the rest of the world in terms of Ecomagination. If you asked me where I spent my time the last six months, 75 percent of the time I was outside the United States.
You see a lot of green-technology start-ups partnering with big companies either to get financing or to help them bring their products to market. Is more of that needed?
Vachon: It goes to this idea of ecosystems. In the case of electric vehicles, we own a big chunk of [the necessary products]. But we need to partner to be the tipping point for some of these technologies. So organizing ourselves around that solution mindset is a priority.
The solution mindset being?
Vachon: Don't sell me a charger; sell me the ability to convert San Diego to a leading electric-vehicle city. We have a collaboration to do just that.
What happens to San Diego Gas & Electric when you plug [all the vehicles] in? How should the charging infrastructure develop? What's the driver behavior dynamics we need to be thinking about? The members of that collaboration are the City of San Diego itself, San Diego Gas & Electric, and the University of California at San Diego. They have some real knowledge around how renewables connect to the grid, which is another layer of complication.
I'm encouraged we will see the ecosystem dynamics develop sooner [from collaborations] and as a result develop better and smarter solutions and get to the endgame faster. These are ecosystems that can be replicated and learned in many different places in the world.
What gives you the confidence that these partner networks are forming?
Vachon: If you go back, traditional business success was about the best box. In these new industries, if you're an electric vehicle driver, the car is one thing. But you quickly get to: where do I charge it? How much does it cost?
Our observation is without those [networks of partners] we miss an important part of the solution. In addition we're being pulled into these conversations.
You've said that the consistency of government policy is as important as energy policies themselves. Do you see any major movement from Washington?
Vachon: Not to be overly cynical on U.S. dynamics, but we'd all agree that the forecast for pricing carbon in the U.S. is dark and dim. The point is it's further confirmation that business needs to lead. For example, purchasing our own fleet [of electric vehicles] is an important signal.
It's not so much the [policy] signal because remember we have a broad portfolio. Whatever the answer is, I think I've got the answer, from wind to solar to turbines, biogas, LED, home energy solutions. Just give me that signal and give it to me over a period of time [so] that investment profiles can be worked out.
A few years ago, I had an interview with Lorraine Bolsinger, a former vice president of Ecomagination, about some of the difficulties getting Ecomagination to take hold in GE. And she said there were conflicts. What's your sense for how effective GE is using Ecomagination to further these green-tech products?
There still are areas where we have to ensure that eco is integrated in the business fabric. Today it's all about getting design signals very early on in the new product or solutions process.
Business teams see the value in that. When you see the revenue from the Ecomagination products growing faster than the rest of the fleet, there's real motivation.
GE tried crowdsourcing to get ideas for grid technologies which led to GE and venture capital companies funding outside companies. Can we expect to see more of that?
The opening up part is the next dimension of Ecomagination. Although we're ecstatic about our own five global research centers and 3,000 scientists, this concept that not all good ideas sit inside the company forces us into this Eco-challenge as one dynamic of partnerships. The San Diego partnership is another example of trying to solve these ecosystem dynamics.
When it comes to the Eco-challenge, there's no shortage of ideas. The robustness of the thinking out there is incredible.
GE has businesses in batteries, wind, solar, and water purification. What are some new areas you'd like to get into?
Unconventional gas--I want to face into it, particularly here in the domestic market. It's a supply source of clean energy we have to figure out for lots of reasons and you can pick yours--energy security or greenhouse gases.
But I also think we have to face into the challenges in the exploration of shale gas particularly. This is another place where a company like GE can lead. We have a great water business that can help deal with both the chemicals and the post-drilling water challenges.
I'm excited about energy efficiency in the home--appliances, LEDs, home charging for EVs. That's an interesting place to play. As well as other technologies like nanotechnologies for membranes to do CO2 capture, wind and solar technologies, zero-discharge water capabilities, batteries. There's no shortage at all.
Discuss Building GE's Ecomagination 'ecosystem' (Q & A)