General Electric (GE) is an industrial giant but does not hold sway in the manner it did even a decade ago. Much that had gone right has now gone wrong. But there are lessons to learn, even in fast changing environments.
The fourth industrial revolution is one reason for GE's troubles. How is that affecting businesses, industrial automation, industrial enterprises, particularly the older generation manufacturing enterprises like GE ? How are they coping and what really lies ahead, at the end of the road or the pot of gold, so to speak. Who better to put these questions then to Jeff Immelt, who led GE as CEO for 16 years till 2017 and is now Chairman of Athenahealth. More appropriately, what is possible today ?
Mr Immelt, from your vantage point, having been in an industrial to digital conglomerate and looking at that whole world then and looking at the opportunities ahead, what do you see ?
Jeff Immelt: Look, I think there is a wave of technology that is coming through that’s gonna impact every business. From automation to artificial intelligence, there’s a wave of technology unlike any I’ve ever seen. The challenge for industrial companies is always productivity. The productivity of industrial companies has really flat-lined over the last five or ten years.
We use fancy words like fourth industrial revolution and things like that but what it really is, is using technology to really advance productivity, customer service. Those things are important inside a company. And, in order to do that its both a combination of talent, business model and technology and that’s where some of the changes have to take place.
I remember interviewing GE's chief digital officer two years ago and he spoke of the big challenges as well as the landscape and the opportunities. So if you were to look at how digital GE went for instance, how do you see the effort, was there a lag were you fast enough ?
I would say the benefits were really always about the installed base. And how would we protect, how do we make the installed base more productive for our customers. I think in that context, digital investment really pays off. Its paid off for our customers and paid off for the company.
I think the challenges are more of how fast can you move the legacy company ? How much do you need to invest in new talent ? And there I think we struggled. We never got the right balance of old and new. And I think that’s where a lot of legacy companies kind of have a challenge. Which is how fast you take your old installed base, how fast you take your old culture and how quickly can you bring in people that can add to both technical context and also business model change.
The way you say it, seems to boil down to people completely..?
I think people always make a huge difference. The fact is that there are people that are talented in the digital world, digital natives and they want to hang out with other people that are talented in the digital world. So, in order to attract those people you need to have enough scale that gives or enough interesting work that makes it worth their while.
I would say in some ways we were able to create that in GE, given the size and breadth and things like that. But it's equally challenging to decide should it be a profit centre, should it be a cost centre, should they only deal with internal clients, or external clients. And those are the kind of decisions that legacy companies have to make. In startups its much easier, if you will, for startups to make those decisions.
Let me ask the question from the other side. Consumers are still buying big engines, whether its for aircrafts, ships or locomotives. Apart from the many other things that GE makes. What’s then going wrong ?
I think it’s the desire to do more for your customers. In other words, people may buy an engine but what they really want is `time on wing', they want velocity of the locomotive, they want a better scan mix for their MR scanner. So people want outcomes not products today.
And whoever delivers that is ultimately going to be successful. And I think that in the end was the opportunity that GE is realizing and other people will realize. And if they don’t do it, other people are going to stand in the way and make it happen.
So I think it's just like consumers have new opportunities to buy things or to buy things directly and not go to a store. If you think about all the models of direct to consumer today that did not exist before. Industrial people don’t really buy locomotives anymore. They buy velocity. They don’t buy engines anymore, they buy time on wing. And that’s where you have to become better to stay ahead of your customers. We’re also going to get it from somebody else.
I’m going to come to the technology and health in a moment, but tell us about GE again. What’s your sense today when you look back on the conglomerate structure, given the rise and evolution of so many different types of companies. Particularly those who are, lets say, artificial intelligence natives and so on.
Well look they are kind of unrelated points. I think to a certain extent having a multi business structure allows you to take technology horizontally through the company in ways that single purpose companies cannot. And that remains, I think, the opportunity for companies as they look forward in the future in terms of where these technologies go.
I think it can happen in a single purpose company, it can happen in a conglomerate. But what’s really important is that it happens. I always viewed one of the advantages we had was with scale. You could take AI technology from the healthcare business to the aviation business, to the power business and you did not have to reinvent everything as you were doing it. And you can match domain with technology. I view that as an advantage not a disadvantage.
Right. So lets talk about technology in healthcare. Your current portfolio. So were do you see the new horizons there, what are you thinking about or focusing on.
There’s always a multitude of technology going on in healthcare. So machine learning, big data and it can be very helpful in drug discovery. It can be very helpful to kind of, stratify patients in terms of response to drugs. I think more importantly, is on health care delivery, the healthcare service side, where you have the opportunity to match artificial intelligence or analytical tools with how a primary physician works or radiology works or cardiology works.
And I think we’re in the early days of that and again I don’t see technology being sold a la carte, in that fashion. I think AI has to be embedded in a radiology scan or a heart examination. And that I think is where some of the most exciting new business models are forming.
Let me ask you a slightly broader question. There was a lot of concern about which way businesses would have to invest or reinvest in the post Trump world. How are you seeing and projecting ahead in the next year or two ?
I think globalization is going to be much more about localization than ever before. I would say, you know, while President Trump has put a finer point on it in the US. Protectionism existed long before him in China, Europe, India other places. So we just are going to live in a more protectionist world and I think but it doesn’t mean that global markets aren’t important.
Global markets are vastly important. I think businesses just have to be more flexible, they have to be more adaptable, they have to be more local, than they were before. We have to know that people are counting jobs whether you’re in India or the US or China or Europe, people care about where work gets done and we need to be facile around that.
We need to understand it. So, we went from an era where business people didn’t have to worry about where work got done to an era where business people have to care about where work gets done. Its not a bad thing or a good thing, it just is what it is. And so I think business people spend too much time worrying about government, cajoling government. And our job is to be the reactor to whatever is happening and be good at that. And that’s what we have to do.
GE was one of the first to set up business process outsourcing (BPO) operation in India, perhaps the second but in scale definitely the first. Now that reflected a certain thinking and philosophy from a different era of course. When you look back at that thinking and philosophy and try and apply it today, do you think that things are going to fundamentally change?
I do, you know, again, what we invested into 20-25 ago was kind of wage arbitrage process. Where India had this vast array of highly educated people and it didn’t cost as much elsewhere in the world. It was a great strategy, it worked extremely well. Great companies were formed in India around that. But you know those days are over now and the tasks for the companies today are either to become more technically astute, invest in new skills and become more partnering with their clients.
So what are the kind of ideas that are on your mind today..?
Things like that. But the old kind of way is done. But that’s not a bad thing. That’s the way the world works. You know, ideas get old and this idea can't hold. And it wasn’t so much just politics but its just, its time for the next act. Twenty years is a pretty good run for one idea. Now its time for the second idea.
Its hard for me to put myself in the shoes of TCS or Wipro, people like that (In India). But they have to embed, they have to take these new tools robotics, AI, things like that. They have to embed those technologies in their services. They have to be even more research and development for the clients that they work with and they have to really deliver outcomes.
It cant just be..a seat of IT is $100,000 in the US and its $50,000 in India. Its got to be more than that. Its got to be different than that. And that’s what I think the leaders have to work on.
And what about the industrial world...?
Oh gosh. I think the industrial world has to grab the next wave of tools and make them indigenous to the way they work. One of the things that I’ve even fought with myself as I didn’t know what was possible. If you’re a manufacturing leader today and lets say you’re in your 40s and you’re excellent at what you do, you don’t know where automation can really go. You don’t know where analytics can really go.
And it's bridging the gap between what do I do in my job today and what’s really the art of the possible. How do you bridge that gap, (finger snap) like that. That is the challenge.
That’s a good note to end on. Thank you so much Mr. Immelt.