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Wednesday, April 10, 2013

G.E. Turns to the Crowd for Help in Creating Consumer Products

General Electric has been making a serious push in recent years into the so-called Internet of Things, where all kinds of devices connect to the Internet, creating a constant stream of data about how they’re working. Now it is hoping to crowd-source consumer uses for technologies it has developed for things like power plant turbines and medical imaging equipment.

On Wednesday, G.E. announced a partnership with Quirky, a New York-based start-up that is a kind of social network for inventors, helping turn vague ideas into marketable items, manufacturing them, and distributing them through stores like Best Buy and Target. G.E. is licensing hundreds of its patents to the company’s community and working directly to help identify particularly promising consumer uses of these patents. The number of patents that G.E. is making available is expected to grow into the thousands in the coming months.

The deal provides for G.E. to share in the revenue from resulting products. The company will thus have a chance to profit further from its intellectual property â€" say, for special coatings to protect industrial equipment from water damage, or cooling techniques for LED lighting systems â€" without having to figure out itself how such things might appeal to consumers.

“There are a host of consumer applications that we haven’t had they ability to focus on,” said Beth Comstock, G.E. chief marketing officer. “That just isn’t our core business.”

The inventors who work with Quirky, meanwhile, will have access to a deep library of technologies developed by G.E. for other uses. Ben Kaufman, Quirky’s founder, sees the partnership as a way to leverage patents in a positive way.

“We’re making it really easy for owners of intellectual property, like G.E., to explore new uses,” he said. “For them, it’s extra revenue with little risk, and for us it’s a whole new avenue of different types of invention.”

Mr. Kaufman started Quirky in 2009 after selling his previous company, Mophie, known for a smartphone case that serves as an extra battery. Quirky’s founding premise was to make it easier to be an inventor by providing a novel twist on product development. Anyone can pitch an idea for a product to Quirky. The company’s other users then weigh in on which ideas they like best and help design the physical makeup and branding of the product. Quirky’s staff has the final say.

The company gets over a thousand ideas a week, about two or three of which actually end up with manufactured products, mostly produced in factories in Asia. Once a week Quirky live-streams product development sessions, so that people watching online can offer feedback.

When a product hits the shelves, Quirky splits the profits with the people who helped create them. Previous offerings have included a new kind of power strip and a rubber band with a hook attached to it. The person who comes up with an idea gets a share of the revenue it brings in, while someone who developed the tagline for a product or proposed changes to its design gets a smaller cut.

The company, with a staff of 130, has raised over $90 million in venture capital and expects to bring in at least $50 million in revenue this year. It is not yet profitable.

By providing its patents, G.E. will essentially become a member of Quirky’s community, receiving a portion of the revenue from products that make it to store shelves. The companies declined to discuss how big that cut would be.

“This is not an academic exercise,” said Mark M. Little, G.E.’s senior vice president for global research. “We’re looking to make money out of this, Quirky will make money out of this, and hopefully the inventors will, too.”

The two companies will also work together to select three Internet-connected household devices that they will sell this holiday season. (Quirky and G.E. have already cooperated to create a jug with a sensor that will tell people when the milk inside has soured.)

Mr. Kaufman said the idea to pursue Internet-connected devices came from an afternoon at the Consumer Electronics Show in January, when he became convinced that none of the most established technology companies had been able to dominate this area in the way that, say, Apple and Samsung have overtaken the smartphone market. But while he says he believes that typical garage-based inventors have a chance in this market, he also knows that they will benefit greatly by creating such products with G.E.’s vote of confidence behind them.

“You don’t want to buy a smoke detector from a little start-up that is great at Internet hardware,” he said. “You want to buy it from G.E.”