Imagine It Forward

by Beth Comstock

  I had to call Ben to tell him about the sale. There was an eerie silence from him, the guy who always had something to say. It was only when he called me back ten minutes later that he said, “I’m pissed. What does this mean? It’s all gone? Everything we were building together?”

  The announcement of the Appliances sale felt like the beginning of the end. The original investors, including GE, had long questioned Quirky’s financial rigor, which was sloppy but not unusual for a company of that stage. To calm them, Ben brought in a new CFO in advance of the SoftBank investment, but the news was worse than we could have expected. Quirky had to restate its financials because they had recorded some of the Wink development funding they got from GE Licensing as revenue, and it turned out that they only had a few months of funding left. Worse, the summer hadn’t been as strong as expected and Ben’s stealth tripling of the Aros order was now a burden.

  SoftBank went away. To stop bleeding money, Ben decided that Quirky had to pivot, which meant closing down the manufacturing bit and concentrating on open-innovation design and consulting.

  That’s when the board decided to sell the Wink business and use that money to execute the pivot. The existing investors, including GE, were not up for putting in more cash. There was no way I was going to be able to convince anyone to put more in, but I was going to try my damnedest to find enough money to keep Quirky alive.

  The good news was that a company called Smart Things, which was one-fifth the size of Wink, had just been sold to Samsung for $200 million. We could trade on the valuation of Wink to capitalize Quirky. Lucky for us, the Wink connected platform had really taken off publicly, and Amazon, Google, and Samsung all began to sniff around. It felt like we had a way out.

  Then, suddenly, on a Saturday morning in April 2015, in the midst of the sale negotiations, the Wink software broke. A programmer had typed a 1 instead of a 10 into the security certificate, meaning it would only last for one year instead of ten, and Wink Hubs crashed fifty thousand connected homes. We eventually got most of them back online by creating a self-service fix for customers, but it was a mess. When they heard what happened, the brands that were thinking about buying Wink backed away.

  I called our “good buddies” at Home Depot to ask if we could codevelop Wink with them. “We never invest in our suppliers,” they said.

  I got Jeff to call Jeff Bezos—Ben had been summoned there recently to make a presentation—but Bezos told Immelt that while he liked Ben, he had gotten Quirky too far in debt. His excess optimism had left him deeply in the hole. Most of the venture capitalists were soon to follow. In VC investing, if something is not a sure huge winner, it’s a loser.

  While Ben kept saying that they were close to a new round of funding and he probably believed it, he was pretty honest in public: at the Fortune Brainstorm conference in June he admitted onstage that Quirky, which had raised some $185 million, was basically out of money. A few weeks later Ben was pushed out, and the company declared bankruptcy.

  Most of the VCs never looked back. But for us it was always about more than money. We wanted to do something unique in the world. And we had come close. That’s why the pain of failing was so intense, the sadness for people who were losing their jobs so visceral. In the good days, I’d occasionally see a young Quirky designer in my kickboxing class. She’d regularly tell me how much she loved being part of the Quirky brigade. And then she was gone.

  The Quirky experience hurt even more than iVillage, because this time I had put the partnership together, I convinced GE to join, I led the initiative. And now it had turned into a fireball. My fireball.

  The GE finance guys were tough on me. Jeff Bornstein, our CFO, said, “This is a tough hit. We hadn’t planned for this this quarter.” Neither had I, for any quarter. “This is the problem with these risky ventures, we can’t plan on them. We can’t have you losing money,” Bornstein added. When you’ve had to tussle with these guys your whole career, that’s the last thing you want to hear. It was, in GE terms, a small stumble. But I still felt terrible.

  Jeff Immelt was fantastic, though: “We need to try things. And if it fails, we keep moving. Forward.” Jeff was beginning to focus more on GE’s culture and how to get people to try more things.

  Still, I was heartbroken.

  Such is the path of the emergent leader. This all can’t be done without unrelenting passion and humility. You need the passion to try new things and take great risks, enabling others to do the same. But you also need the humility to realize failure is part of your job and you will be unable to know the answer or predict the outcome. You need, most of all, a kind of faith that amidst all this uncertainty and ambiguity, the next new thing will emerge, eventually.

  There were so many lessons in Quirky’s demise that it took a long time for me to come to terms with them. I had to face up to the perils of overoptimism for an idea or a person. You can’t let your heart get ahead of your brain.

  I learned what happens in companies—small or big—when you throw too much money at something before it has the capacity and capability to use it well. It’s something we now call premature scaling, something we determined to fix. My colleagues hate when I say this, but companies often throw too much money at ideas too early. And teams ask for everything for fear they won’t get funding later.

  I also learned to think hard about timing. With innovation, we race to be first, but being early is not always a good thing, especially if you’re not ready or if you oversell the future. Timing is the difference between being successful and being close.

  A final lesson is that good comes out of the bad. There is a return on “failure.” First Build has become a much-admired and studied model for new methods of manufacturing, with open-source and small-batch at the core. Kevin Nolan went on to become the president and CEO of GE Appliances (succeeding Chip Blankenship). As for Quirky, while there was less value than we expected in the open community in terms of ideas that could scale, there was good reason to have a community to build early feedback and support. Ben’s emergent, fast approach had changed us.

  Ben himself regrouped. He and his wife, Nikki, gave birth to a baby, Rocco, and he joined BuzzFeed, creating new products with founder Jonah Peretti. Knowing them both, I think that’s a mighty mash-up of brainpower. I know I would work with Ben again. He’s good.

  Mostly, I learned what it means to be a partner in good times and bad. Partnerships are a necessary part of business and will become even more so. Partners share reward and risk. But partnerships are hard.

  One thought gave me real solace: I had set a process in motion to open up to collaboration—and change.

  CHAPTER 12

  ILLUMINATING THE DARKNESS: A FAINT AND FLICKERING LIGHT

  GE’s Nela Park campus in East Cleveland, Ohio, was the country’s first industrial park. And it must have been a beautiful place in its heyday. Walking through the campus today, you’d think you were visiting a small liberal arts college, with its green lawns and strings of brick-faced buildings that seem like metaphors for higher education. A beautiful fountain sits in the center of the campus, offering the 1,200 engineers and product managers that worked here in its glory days a moment to appreciate the broad, pastoral views.

  Inside, the original Norman Rockwell paintings from the 1930s that adorn the walls of the Lighting & Electrical Institute spin stories of the majesty of light and the central role it has played in our culture and the economy. Those paintings always remind me of the lightbulb’s powerful symbolism, of the notion of the incandescent bulb as the universal symbol of a bright idea—the “lightbulb moment,” the aha of discovery. On the industrial park’s 125th anniversary, GE dug up one of many time capsules that were planted around the campus, and when one of the hundred-year-old tungsten filament bulbs they retrieved was screwed into a socket, it flickered to life!

  Nela Park is the symbolic heart of GE’s industrial past; this was the pl
ace that made the foundational technology of the era, performing gargantuan-scale feats of engineering on which the conveniences of twentieth-century life depended. Standing in the Lighting Institute and closing my eyes, I can almost hear the building whisper, “Progress.”

  Today, though, Nela Park is a faded artifact of the glory that was. That it abuts one of the most destitute parts of Ohio, East Cleveland, only adds to the somberness of visiting there. East Cleveland is now rampant with neglect, poverty, and crime. It’s not unusual for employees to run through red stoplights on their way home, because they fear stopping long enough to get caught in the crossfire. At least one dead body has been found outside our security gate.

  GE’s tagline in the mid-twentieth century had been “Progress is our most important product,” but somewhere along the line, when maximizing shareholder value became the scorecard for success, the game became almost exclusively about how we could make more of what we have today for less. Progress became synonymous with the perpetuation of what we’ve always done, just a little bit better, cheaper, faster. These mighty industrial parks, once symbols of infinite American inventiveness, became houses of worship to optimization. Call it the Optimize Today Operating System, or what David Kidder calls Big-to-Bigger O/S—an entire machine built to grow earnings per share.

  Layoffs, spin-offs, outsourcing, off-shoring, reengineering, TQM, Six Sigma—all these manifestations of the optimize-today approach delivered incredible gains to shareholders, but without always changing a company’s long-term earning potential. But, wow, for a time, did GE and its stockholders make money! Until we didn’t. Until yesterday’s success mattered less and less and tomorrow became more and more uncertain.

  This is American enterprise at a crossroads. Having for too long replaced innovation with optimization, tighter financial targets, and efficiencies, this is what it looks like when business dangerously loses touch with the process—and joy—of imagination and discovery. GE had long been the lighting innovator, a market leader. As more companies entered the lightbulb industry, GE lost pricing power and margins shrunk. In optimization, GE got comfortable with a fast-follow strategy, which turned out to be costly in terms of share and long-term profitability. Once it became harder to make a profit at GE Lighting, less money was put into innovation.

  GE managers put their efforts into what I call “kicking the can”—squeezing every penny they could out of it, putting all their efforts into cutting costs including by moving factories to China. Let the next guy take on the tough investment challenges. And investors and Wall Street were fine with milking the cash cow until it dried up.

  By the time Jeff tried to bundle Appliances and Lighting and sell them together in 2008, no one would touch the pair because Lighting was toxic, the ugly underbelly of an industrial company, with old factories filled with legacy issues, including old equipment and chemicals no longer used today. Whoever bought it would have to pay huge bills for cleaning up mercury used to make the filaments and for closing an international web of factories, some of which were operating at 30 percent capacity. Lighting had, ironically, become a dark place.

  Clearly, the all-consuming mastery achieved at optimization came at a substantial cost: a diminishing ability to create and grow new assets. That was clear when David Kidder asked GE’s leadership, “How many $50 million companies did you launch last year?” and the audience went silent. We needed to reacquire that capacity we would come to call New-to-Big, and quickly.

  I knew where I’d find our teachers. Another framework of mind-sets for identifying, validating, and growing ideas had emerged out of that primordial soup of entrepreneurs and venture capitalists in the start-up world. I had experienced firsthand the iterative speed and validated learning that was possible, even when neither the product nor customers were known, with New-to-Big master practitioners like Jason Kilar of Hulu. But did I really feel, in my heart of hearts, that there was a chance the organizational beast could be reborn?

  In fact, I very much did.

  As elusive as innovation was, I knew it permeated every corner of GE. Every day I was inspired by someone at GE who was working—often against the longest of odds—to create something new. There was a parallel reality inside GE—Edison’s reality. And no matter how much we had turned away from our messy laboratory beginnings, there were thousands of people inside GE committing defiant acts of imagination. That was the true flickering light, like that hundred-year-old bulb, and if you looked hard enough, you were destined to find it.

  Maybe that’s why I felt such a passionate attachment to Lighting. That attachment was made even stronger by the 2012 closing of the GE factory in my hometown of Winchester, Virginia, which was once considered one of the most advanced factories in the company. As I began to poke through the many onion layers of Lighting, looking for these areas of imaginative defiance, I discovered a way forward, a flickering ray of light that could guide us to the future.

  In 1962, GE scientist Dr. Nick Holonyak Jr. invented the first practical visible-spectrum LED, a device that GE colleagues at the time called “the magic one,” because its light, unlike infrared lasers, was visible to the human eye. In the thirty years that followed, a lot of people tried to crack the code on a white-light LED, without success. Then in the 1990s, having seen progress elsewhere, some clear-minded GE soul realized that LED was the future, offering dramatic energy savings and new opportunities to connect and communicate. So he grabbed permission to make the future happen.

  Under his oversight, the LED incubations team moved into a tiny office thirty minutes outside of Nela Park and created a hidden skunk works away from Lighting headquarters. As successive GE executives squeezed as much as possible out of Lighting, they either looked the other way or never knew about the stealth team. This little group kept going—protected by a small core of rebel managers who found a way to stealthily seed the business, hiding it from the hungry GE earnings machine. It was as if these leaders had taken a secret oath to defy “the man” and make the future. They not only developed innovative products but carved out new markets along the way—traffic, signage, display—and put LEDs in places where customers saw (and paid for) value. This team was scrappy, operated with small budgets, and failed fast. Along with their successes, they experienced failures in places they thought they’d win—an LED dock light, an LED jewelry case. But they continued to apply what they learned to new products. By 2009, the GELcore team (as it was now called) was successful enough that it moved back to Nela Park.

  I saw the seeds of GE’s regeneration in this imaginatively disobedient group, in these rebel engineers who saw the future in LED and wouldn’t give up on it.

  FastWorks

  During my discovery pilgrimages to Silicon Valley and various “maker” spaces, I started hearing a growing buzz about lean innovation methods almost six months before Eric Ries published his book The Lean Startup. Eric was a software entrepreneur who, along with Steve Blank of Stanford, his former teacher, had begun to proselytize that start-ups could be much more successful by taking a lesson from lean manufacturing methods. They created simplified offerings called minimum viable products, or MVPs, that would elicit customer responses quickly, thus offering truly useful information to iterate the offering in what he called a “build-measure-learn” loop.

  When I found myself at a party for Eric’s book launch in New York, I discovered firsthand what lean start-up meant, and I was intrigued. Perhaps this could help us launch more internal start-ups—a quest I had not given up on since launching Imagination Breakthroughs.

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  In the years since we had begun the Imagination Breakthroughs process, we had continued to coach and help GE teams develop “breakthroughs” by bringing in outside innovators as advisors. I thought Eric’s code might be just the thing to evolve our GE DNA forward. And so, after Eric’s talk wound down, I introduced myself and asked if he’d be interested in ser
ving as one of those “innovation accelerators.” His ideas might just work at GE, I said.

  Eric blanched a little when I uttered the letters “GE” and took a thoughtful pause before he replied.

  “I’m superskeptical,” Eric said. “Does GE have the patience for start-ups? You’re hardly what I’d call lean.”

  “We’re trying to make GE more entrepreneurial and adaptable—especially as digital starts to come into industry,” I said. “And you’re going to bring that infection in.”

  Eric smiled. “Will I have to wear a suit?” he asked.

  I knew I had found my spark. I sensed that despite Eric’s Silicon Valley roots, GE would eventually take to him because he is, at heart, an engineer. Pre–Silicon Valley he would have gravitated to large firms like GE or Xerox Park, because his response to innovation was that of an engineer. Entrepreneurialism involves imagination and creativity, and his process was putting a framework around imagination in a way that engineers could grasp. To me, lean is about iterating imagination—you can start small and scale from a place of strength.

  We asked him to take a look at some of our imagination breakthroughs, and then in August 2012, I invited Eric to speak at our corporate officers meeting—this is GE’s annual “partners meeting,” where about 175 of us gather to look at the strategic blueprint for the year. My job was to expose these leaders to new people and thoughts. So I asked Eric to lay out the lean start-up principles to this group, a much different audience from that at the Soho book launch.

  Eric is an engaging, approachable speaker who can break down complex theory into bite-sized nuggets, but I could tell he was nervous (he even wore a suit!). He had reason to be, as I could practically see the skeptical thought bubbles over the heads of the GE crowd as Eric talked about lean methods in the context of rewriting fifty lines of software code in a day. The face of the Aviation group’s engineering leader was practically shouting, “Okay, Mr. Start-up Smarty Pants, you can do that with software, but you can’t do that with complex hardware like a jet engine. We’re lucky to get one change order in a year!”