George S. Day and Christine Moorman

How GE Wind Power Innovated the Business Model

Friday Oct 8, 2010

In B2B markets, customers win by getting better solutions and by absorbing less risk. A good company will offer solutions that help the customer make money. GE Wind Power is an example. GE entered this industry in 2003 after buying the residual Enron wind power business. It was a small operation but it gave GE the chance to learn about, and gain insight into, wind power. The biggest market at the time was Germany, mainly because the German government provided very substantial subsidies. The market back then was very fragmented, and the belief was that you had to have different sizes of wind power turbines to meet different property specifications. At one point, Siemens offered eight or nine different sizes tailored to a specific location.

The industry had essentially lost sight of the market. Companies never looked at the world through the customer lens and figured out that reliability — the percentage of time the machinery is working — and efficiency — the ability to convert the wind into energy — were key. So GE Wind Power invested in understanding customer requirements, and based on that, decided to challenge the whole industry model. They built only one really big turbine per location, but they made it extremely reliable. Plus the company used its existing expertise in jet engine turbines to make the most efficient rotors anybody has.

The key story here is that GE’s insights into their customers gave them a strong sense of where to put their R&D dollars. Subsequent to that, they offered a service guarantee that their turbines would be working 98% of the time.

An outside in strategy means looking at the world as a positive sum game. A lot of the strategy literature, especially the competitive forces approach, is all about intensity of competition. The world is seen as a zero sum game, i.e., “If the customer has more power, we lose.” That’s not a good mindset. It doesn’t help. You need to go into a collaborative conversation with the customer.

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