At GE, a push for innovation through partnerships

February 7, 2014: 2:37 PM ET

The industrial titan is using its investment arm to partner with outside companies to produce and commercialize new products.

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In front, from left to right: GE's Rod Bollins, Greg Gratson, and Peter de Bock; Aavid's Norm Soucy and Julie Hitchcock; GE's Chris Giovanniello.

FORTUNE -- General Electric (GE) has a long history of developing, manufacturing, and selling products across more than a dozen sectors, but the industrial giant is using its investment arm to find untapped resources for innovation.

GE Capital has developed a partnership program for which it will reach into its investment portfolio to collaborate with outside companies on new products. The idea is to make GE more nimble in the marketplace, and is the latest in a string of initiatives intended to foster new ideas from startup companies for GE's benefit.

GE Capital has relationships with hundreds of private equity firms, to which it provides loans for the benefit of portfolio companies that have grown to a certain size and need capital and management expertise. GE Capital's program allows it to collaborate with some of these companies directly to produce and commercialize new products around the world.

The first is a collaboration with thermalloy producer Aavid. The companies are working together to create and sell dual cool jets, or DCJs, which provide improved airflow in electronics and are used in products such as computers, telecommunication equipment, aircraft, and LEDs.

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"GE has been a long-standing customer of Aavid's, and the relationship with GE goes back more than a decade," said Norm Soucy, vice president and general manager at Aavid. "The technology that they have associated with the dual cool jets is relatively unique. It has some potential applications that Aavid feels provides a benefit to our customers across all markets."

Aavid, which is owned by the Audax Group, is one of the 15,000 companies accessible courtesy of GE's relationship with the private equity firms. Of those, around 1,000 receive loans from GE Capital. According to Rod Bollins, senior vice president at GE Antares Capital, GE's sponsor finance business has made about $15 billion in loans to mid-market companies. Bollins is one of five people who were involved in the creation of the partnership program, which Bollins says will give companies access to the "secret sauce" of GE's technical resources.

"The program has been slow and steady so far, but now we're ramping into next gear," Bollins said. "We have dozens of companies that are now becoming involved."

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The partnership program isn't the only way GE intends to foster innovation. GE Global Research, the research and development division of the company, sponsors competitions for participants around the world to solve design and manufacturing problems. For example, one recent contest was a 3-D printing design challenge to make a better bracket for a jet engine. More than 700 participants from 56 countries were involved. In the end, the winning design reduced the bracket weight by 84%, presumably to save on fuel costs.

GE has promised to invest more than $15 billion in innovation through 2015. The company spends billions of dollars on product development in its eight R&D labs around the world, which employ more than 3,000 scientists and engineers.

"We wanted to participate in crowdsourcing, which has taught us to think differently and have more of a startup mentality," said Todd Alhart, a spokesman for GE Global Research. "The innovation landscape has become much more competitive. GE has a lot of good ideas but not all of the good ideas."

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