William Taylor's recent Xconomy post on GE's and Wal-Mart's lack of disruptive potential is flawed by the same lack of imagination and innovation Taylor accuses these corporate behemoths of harboring. The post, a response to an article by Intel's Andy Grove on Jeff Immelt and Lee Scott, argues GE and Wal-Mart lack the potential to disrupt critical sectors “because that’s just not the way innovation in established companies works. I have a lot of respect for Taylor and his work at Fast Company and Xconomy, and even more skepticism about the innovative potential of corporate giants, but believe Grove's argument requires another look. In terms of greentech, the game-changing impact of an electric vehicle produced by General Electric at the scale and quality of which they would be capable has significant ramifications for startups, VCs, and policy makers – not to mention the big automakers who would end their day with a soup bowl full of tears. GE is the original disruptor. The light bulb. The electric locomotive. The jet engine.
Commercial radar. The company’s array of businesses would allow them to leverage a number of technologies across an electric vehicle supply chain. Combining, for instance, divisions building engine drive trains, battery technologies, electric generation and transmission, and consumer electronics, into a single business unit – let's call it Ecomagination. This would give the company the ability to shift labor, capital, and technology into a preexisting infrastructure instead of undergoing a massive realignment or outlaying the expense of inventing and developing new technology on the level of gas-friendly to gas-free Detroit. All this leads to what I consider the holy grail for green transport – vertical integration. Consider Tesla, which Grove points out spent around $105 million developing an EV sports car, that will run on fossil fuel powered electricity for the lucky few able to afford it. Consider the ethanol bust or Imperium’s recent troubles. These companies tackled one segment of a multi-faceted industry for which development cannot be uneven. Rule #1 of the green transport supply chain ought to be: just because you build it, doesn’t mean they will come. Rule #2 ought to be: you need to build it all yourself. Shai Agassi and Project Better Place have already provided us with a good example of Rule #2. GE has the capacity to build EVs and the green power systems to charge them. Leveraging its wind turbine, solar panel, and energy storage businesses, the company could build an extended network of roadside green charging stations using a business model similar to Project Better Place. This would provide the company with a secondary revenue stream for its EV business that could become a primary revenue stream (see, e.g., ink jet printers and printer cartridges), while also giving GE’s financial business a new property to manage. But, according to Taylor, just because GE could build an EV doesn’t mean they should. “Why would GE, with so much opportunity in its businesses around the world, and so many headaches from Wall Street (GE shares are barely unchanged from when Immelt took over six years ago), take on a high-profile gamble such as electric cars? he writes. My response – They should, for just those reasons. Since a 3-1 split in May 2000, the company’s stock has had one big peak (September 2000), a bottoming out (December 2002), remaining relatively flat since then. It’s revenues and profits have achieved similar levels of mediocrity, and the company has begun shedding lagging business units, such as its $11 billion sale of GE Plastics to a Saudi Arabian company in May 2007. GE Commercial Finance took a big hit over the summer for its involvement in the subprime mess. While not approaching a near-death experience of IBM’s magnitude, GE is not without its fare share of financial problems. An EV program could stimulate interest in the company’s stock, generate significant revenue through car sales and electricity financing, and boost profits as it boosts margins through streamlining its global businesses units. Finally, as Project Better Place proves, there is an international market for this technology. No other company has an on-the-ground global reach and access to global markets approaching that of GE. Taylor insists big companies “have a hard enough time fixing themselves, let alone fixing society – especially when what ails society is not remotely core their existing businesses. Developing an EV would go along way towards putting GE back on track, not least because an EV is in line with its core business. No one would be surprised if GE developed an electric locomotive (already did it) or built a fuel-efficient jet engine (already working on it). One of the best things about the greentech revolution is that it has given entrepreneurs and innovators an opportunity to think in imaginative ways about producing world-changing technologies. Where is it written that that level of imagination is limited to startups? GE has as much to gain, if not more, from greentech as any company. A GE EV would re-establish the company as an innovation leader and would send a signal to corporate America for it to get its green ass in gear. Everyone in greentech is here because we like to think big. But sometimes big ideas need big capital, and the sooner GE realizes this, the better off we’ll all be.
