Jeff Immelt on "Slower-Growth Times"
No new CEO can avoid comparison to his or her predecessor. Yet few have ever taken the top job from a leader as lauded as the charismatic Jack Welch, who retired in September, 2001. During Welch's tenure, General Electric enjoyed double-digit growth as the U.S. economy rode its longest-ever bull market.
Now, almost two years since Jeffrey R. Immelt took over as chairman and CEO, GE (GE ) has endured declining earnings and revenues -- played out against scandal and turmoil on Wall Street, a sagging world economy, terror attacks at home and abroad, and wars in Afghanistan and Iraq. Yet Immelt is putting his own stamp on the company, infusing it with his own style of leadership.
Immelt sees information technology as the key to productivity gains. This means, Immelt says, that today's chief information officer has the productivity role that manufacturing managers had earlier generations. He discussed IT with BusinessWeek Associate EditorDiane Brady. Following are edited excerpts of their conversation: Note: This interview originally appeared in the August 18-25 double issue of BusinessWeek, "The Future of Technology".
Q: How important is technology to GE? A:
Q: How important is technology to GE?
A:It's a business imperative. We're primarily a service-oriented company, and the lifeblood for productivity is more about tech than it is about investing in plants and equipment. We tend to get a 20% return on tech investments, and we tend to invest about $2.5 billion to $3 billion a year.
Q: What kind of technology will be key in the future? A:
Q: What kind of technology will be key in the future?
A:Wireless could have a huge impact. We have an incredible amount of people who work close to the customer -- our salespeople, our service people. Making them more productive is my No.1 priority. Wireless is going to be the key to us. Other exciting areas are going to have to do with more energy-efficient and lower-emission
technology, whether that's in aircraft engines or gas turbines. We think we're on the leading edge there, in things like molecular energy where we can image down to predict disease patterns three or four or five years before the onset of the symptoms of a disease. There's nanotechnology, advancing our material science. We feel good about our pipeline and, in many ways, it has never been stronger.
Q: When you came to the job, you said you were going to make GE a much more tech-focused company. How are you doing that? A:
Q: When you came to the job, you said you were going to make GE a much more tech-focused company. How are you doing that?
A:It starts with the premise that we live in slower-growth times. There's lots of excess capacity, and the companies that are going to get margin-rate growth and revenue growth are the ones that have excellent products and good technical advantages. What we're doing is going business by business, making sure we've got short- and long-term product development and spending that will give us leadership technology.
When I do a business review, I start with: What does it take to fund that technology? And then I make the businesses fit to that model.
Q: You're talking primarily about innovation and new products. Are you also focused on information technology and how that can make GE itself more productive? A:
Q: You're talking primarily about innovation and new products. Are you also focused on information technology and how that can make GE itself more productive?
A:Our IT investment is greater than our investment in P&E [plants and equipment]. That means that your IT people, your CIO, have the role that your manufacturing manager had in the last generation.
Q: Do you think information technology is so pervasive now that it doesn't really offer a competitive advantage to companies like GE? A:
Q: Do you think information technology is so pervasive now that it doesn't really offer a competitive advantage to companies like GE?
A:If you want to get long-term productivity, which is always going to be important, you've got to make IT investments. I look at it as a way to drive continuous improvement and get costs out.