Sign me up, says GE’s Jeffrey Immelt to India
GE CEO Jeffrey Immelt on why he thinks the Narendra Modi govt is ‘higher on the say-do ratio’ and how his firm can navigate a world with more protectionism better than others
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New Delhi: General Electric Co. chairman Jeffrey R. Immelt said India is becoming a better place for business—he cited the government’s focus on infrastructure, the potential inherent in the unified goods and services tax that India is moving to, and increasing transparency as reasons for this.
The current government is “higher on the say-do ratio”, Immelt, 60, said in an interview on Friday.
In 2014, GE opened a first-of-its kind multimodal factory in India (located in Pune, it has manufacturing lines that can switch between a variety of complex products across the various businesses in which the conglomerate operates) and the success of that shows that “manufacturing can happen here and be much bigger for us than what it is today”, Immelt said.
Today, “making things in India is as productive as making things in China”, he added.
India’s big opportunity is to get its “micro—a strong entrepreneurial class” meet the “macro—governance” and he is increasingly seeing that, Immelt said.
Describing Prime Minister Narendra Modi as “honest and hardworking”, Immelt said these are qualities that increase his confidence in doing business in India. “I don’t judge policies. It is not up to me to judge policies. But, if you look at somebody that is forceful, hardworking, honest and transparent, I would say sign me up.”
Edited excerpts from the interview:
How do you feel about India right now?
Good. I think business results are strong. There is a sense of confidence in the country. I think economic growth... higher on the say: do ratio—things that have been talked about are actually happening, things like GST (goods and services tax). So, I feel really good about India.
How about the rest of the world—Europe and the US?
I think we are on a slow growth, volatility, populism, uncertainty... I think that’s just the nature of the world today. Things in the US are a little bit better. Things in the Europe are a little bit better. Things in China are a little bit better. There are points of volatility when oil prices are down and they put strain on places like Nigeria and Brazil. I think there is enough growth out there for GE to accomplish what we need to accomplish. It’s not robust, but it is okay. India is good.
With Brexit and the US election, there is clearly an indication that people are not happy with the status quo. The numbers show that their incomes have not gone up since 2008. So, there is a reason for their unhappiness. Do you think this will have a medium-term impact on business in some way?
This is on everybody’s mind. Globalization has changed the way world works. Technology has changed the way world works in terms of productivity. If you think about a company like us, in the US context, we are a huge net exporter. We are the second-biggest exporter after Boeing. From the US standpoint, we are doing exactly what our country wants us to do. But, that does not mean that every factory in GE has been a winner. Some have closed, some have grown and that’s the nature of globalization, and at the same time, there is technology, productivity. Our output per employee has grown. So, even while our manufacturing jobs have expanded, our output has expanded more than that. So, those are things that factor into the way people feel. In certain industries in the US, such as coal, steel, the impact that you felt has been huge. Same way in Europe.
I think my job is to run GE, make it productive and to grow it. We have 330,000 employees around the world. We probably take that number and multiply it with 8, if we think about our suppliers. So, we probably have around 2 million people around the world who depend on GE. I will have to think mainly about them.
I think what every CEO has to understand is that jobs matter. When you are adding jobs, you are a good guy, and when you are taking jobs, you are a bad guy. If you go back 20 years, may be business sometimes lost sight of the fact. It does not mean we don’t have to make tough decisions; we do. But, we have to prepare a sense of context and listen to what people are thinking and saying.
In some ways, GE set the trend in terms of globalization and you have been in charge for 15 years, which coincides with the most turbulent period for globalization because people have started to question whether it works. What is that one learning, one piece of wisdom about globalization that you have to share?
I think resiliency. So, the first thing I would say that I joined GE in 1982. When I first started with GE, in the 1980s, globalization in GE context meant moving factories for the purpose of selling in the US. Seventy-eighty per cent of the revenues were still in the US. Today, at least 70% of the revenues are outside of the US. It is about planning, building local teams and things like that. The first thing is people think about globalization as one moment of time or one idea. I am in my fifth idea for globalization. I still have people talking about outsourcing and that’s the farthest thing in my mind today. Now, resiliency. You have to see countries through cycles. You have to continue to stretch your brain in terms of what the country can be. I first came to India in the 1980s because my predecessor thought that it can be a great consumer market for GE; we used to sell refrigerators in India. That turned out to be a horrible idea. It did not even come close to working. While we were doing it, we discovered that talent here was huge and you could build laboratories here.
In the 1990s, we were trying to build GE Capital in India. It was brutal and horrible. But, we did business process outsourcing as part of GE Capital, which became Genpact. So, it’s amazing. We have made an incredibly successful enterprise in India. Our team here is great and nothing ever worked the way we thought it would work. So, one door would close and another would open. Around 10-15 years ago, we thought China would be the most productive in terms of manufacturing in the world; now, we find making things in India is as productive as making things in China or in other places. We would not have thought about that 10 years ago.
I think this notion of resiliency, creativity, don’t get too set in terms of way of working and that’s what makes us a great company.
You have built a multi-modal facility in Pune. Do you think it is a model that can be replicated widely in the country?
I do. This is a country that thinks productivity every day. It had to because infrastructure has not been good. Other things have failed. So, you have this inherent DNA for productivity, access to materials and workforce. The challenges remain in infrastructure. How do you export until you get better ports, better roads, etc? But, this can happen here. It can be much bigger than what it is today, for us.
Has it become easier to do business here?
We opened this facility in Pune in 2014. That has been two years and it is amazing how quickly it is gone. I think the focus on infrastructure, GST, more transparency... step by step, India is becoming a better place for business and more straightforward place for business. It has still got some unique challenges, but the progress has been substantial. This is the country where if the micro ever meets macro or, in other words, strong entrepreneurial class and governance... If the government ever matches the entrepreneurial class in India, there is no stopping this country. I have seen more general progress on macro today than I can remember seeing in days gone by.
That’s also the function of leadership. Right?
I think PM (Narendra) Modi has been a good leader. I think you guys decide on your politics, we have got our own challenges in the US. I think as a world traveller, you admire leaders who are hardworking and honest. I don’t judge policies. It is not up to me to judge policies. But, if you look at somebody that is forceful, hardworking, honest and transparent, I would say sign me up. So, I see that in India today. I see a different pace of governance today. For a business person, that’s all you can ask for. Governments are not put in place to do favours for GE. Their job is to serve the country.
The period between 2012 and 2015 was one of rapid technological change. Solar, which was hugely expensive, has now become very inexpensive. Artificial intelligence has become a reality. 3D manufacturing is real. Desktop CNC machines are not being ruled out. Our kids could probably live until 100. How are you taking advantage of that?
First thing that I will say, which I say inside my company, is that the change will find you. In other words, no one is safe; no country is safe; no company is safe. So, you have to find your way in the world. When it comes to future technologies, the place where GE wants to play and win is this intersection between the physical world and analytical world and so there are two places where we are placing huge bets today. One is what we call industrial Internet or Internet of Things (IoT) right—a massive bet because we believe that our foundational asset is a huge strength and that we can recruit talent to do the analytics on the software side.
And the other place is manufacturing, because we have a kind of a generational strength in material science and we can add to that the laser technology, the systems integration, the part design to do manufacturing. So, when I say what’s the GE technical spot of ownership in the future? It’s at this intersection of the physical and the analytical. We want to be the company that the other people are looking at, not the other way around.
How has your whole Silicon Valley experiment worked out?
That is what we call industrial Internet; you know we have kind of been focused there for 5-6 years. We have got a business that is about $6-7 billion in revenue. Our aspiration is to be a top 10 software company by 2020. That would basically mean $15 billion of revenue by 2020, so we are halfway there. It wasn’t really about GE trying to think we were Microsoft or something like that. Our vision was that a good industrial company had to own analytical layer around their products and the only way to get there was through software. We went to Silicon Valley because that is where the talent is; not because we want to hang out with VCs or because I wanted to wear a blue jeans, a sweatshirt and a hoodie. You gotta go where the talent is. And you know if you want to build a space, the place to start was California, Silicon Valley and then go to Bangalore and then go to Munich and there are probably 15 cities around the world that you have to be based in if you want to win there.
So, when we first planned that in 2010, we couldn’t get A-level talent come to work for GE. They would think you are a lightbulb company, you are something else. Now, we get people from Google, Facebook or Amazon come to work for GE because they like the technology, they are attracted by, in some ways, we are the platform on which they can work on their next-generational skills.
And even while you do this, clearly you have not taken your eyes off traditional; this whole Baker Hughes (GE’s deal with Baker Hughes to create the world’s No. 2 oilfield services business)... What’s the logic? Why would you do something like that?
You know, we kind of define our business set around high-tech system engineering products in essential industries. So, when you think about essential industries, oil, gas, healthcare, transportation, that’s our set. We had our core oil & gas business and like every business we are in, it has been through cycles. Our aviation business has been through cycles, our healthcare business has been through cycles. Our power business, our renewable business. So, in businesses you like, the downcycle is the moment...
I always tell people when oil’s at $100/barrel, that’s a bad time to be buying oil & gas companies. When oil’s $40/barrel, that’s a great time. And so, in many ways, Baker Hughes was a great fit for our portfolio. The one piece we didn’t have was oilfield services. We really thought that the combination of oilfield services and analytics was critical; so, for us to drive our industrial platform in oil & gas, we needed what Baker Hughes brought to be successful. We did it in a unique structure mainly because we wanted to do it, we thought it is a good time in the cycle, Baker Hughes wanted to do it and I didn’t want to… we have so many investment opportunities right now, we didn’t want to put all of our capital in just one industry. So, we tried to create a unique structure that would allow for their investors to benefit, for us to get the synergies of an acquisition, but did it in a way that created a public float because we did not want to take all our capital in just oil & gas.
I think we can manage and navigate the complexity, but the strategic opportunity was too good to pass up. It was the only moment we could do this deal, so the door opened and we went through.
If you look at the entire portfolio of things that you do—and you do a lot of things—what are the three things that excite you the most?
It’s always hard to answer such questions because they are all like your children, so I love each business for its context. So, let me just take one that I have already talked about—increasing the stack from analytics to add to manufacturing. It’s as big as anything I have ever worked on and I find it to be massively, massively exciting.
And it is a horizontal trend...
It is, it is a horizontal trend inside the company. Then, you know, there’s always a human element in business and in some ways, the human element of GE always gets brought out more in the healthcare business than in any other. I could go through a variety of different technologies we are working with on our healthcare businesses—from cell therapy to finding ways to serve markets like India or Africa—which are hugely important. If I had to pick a third one, I would have to say it’s taking a big, well-known company and navigating it around the world at a time when everybody hates globalization. I find things like that interesting, challenging, fascinating. And if you were to put yourself in my shoes, we don’t have to be perfect; we only have to be better than everybody else.
The world is not perfect today, people don’t like globablization today. So I don’t have to convince everyone that globalization is great. All I have to do is navigate the world better than our competitors and we are confident we can do that.
US president-elect Donald Trump has spoken about protectionism, and the majority of your business comes outside of the US. So, in the current scenario, is there going to be a change in strategy when you think about doing your business, especially in the context of India?
We have a big footprint in the US and we are a big exporter from the US. In some ways, I think his initial, at least in the speeches and things like that, targets are more people who manufacture things in other places and ship them into the US, car companies and things like that. But we need to see; he’s been president-elect for a week. Long before president-elect Trump, protectionism has been on the rise, in Europe, China, everywhere. We probably very judiciously over the last decade have localized the company, so we have a very local face everywhere. So, we can navigate a world with no trade deals, with more protectionism, we can navigate that better than anyone else because we can make almost anything almost anyplace we want to and I think that’s a big competitive advantage.
I think we are a good American company. We are exporters, we create a lot of jobs in the US, but we have also earned the right to do business in India and China or other places in the world, and I think to a certain extent, we can do that on our own.
See, I believe in trade deals, in NAFTA (North American Free Trade Agreement), in TPP (Trans-Pacific Partnership), but if they all went away, we would be okay, we would be just fine. Our job is to make our strategy fit where the people and governments are going to go.
We believe in globalization, we have teams across the world and I’m not going to turn my back on my team in India, or in Mexico, so we are not going to change what we believe in necessarily because elections change. So, we remain committed to India and our Indian team; I’m not going to turn my back on my team in India, I’m not going to run away from everything we have built here in India. I’m not going to treat this team any differently because we have a new president in the US.
And you know why I feel that way? Because it’s un-American! (laughs) In other words, this is what I was taught—Sunday school and things like that. I think he’s a shrewd businessman, what he’s done is amazing and it’s up to us to fit our strategy into the context that he creates for the US.
How has your move to Boston been—how do you feel about it? I’m told you have a really nice...
Crappy little office? (laughs) I have gone backwards in my career, I can tell you that much! (laughs)
We had kind of a classic conglomerate compound in the county in Connecticut and it was a nice community and things like that. But I thought it was important for the company to be in a city, to be around ideas, entrepreneurs. So, we moved into what’s called the Seaport—the entrepreneurial part of Boston. We are going to build a new building, but we are in a temporary office and the office is very open. My office was substantially bigger... but now I have this office with glass windows—and people can watch me work, first time in 15 years. It’s horrible because I can’t sleep at my desk or anything like that! (laughs)
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But the advantage is that everything is visual, I can meet with my CFO (chief financial officer) and we can meet openly and we just become faster. It’s given us a chance to reinvent what corporate should. How do we eliminate bureaucracy? How do we become faster and more purposeful as a company? So, I think it’s accomplishing all those things.
In India, to set the context, I am sure you have noticed this messy battle that has been going on in a large conglomerate. It is largely the case of succession planning gone wrong, and one of the finest case studies of succession planning is how you got the top job. Can you tell us how it works in your company?
I think we spend a lot of time around people thinking about people at different jobs. I spend a lot of time on developing talent, succession planning and things like that. I was a product of the system and in some ways, we always try to prepare ourselves for the change of leadership and how it works... Look, I know the Indian context. I have immense admiration for the company that you mentioned and the leaders involved. I think, the most important thing about how we do business is that the company always comes first and nobody is above the company. This is the place where I am a steward. That’s it. I am in a relay race. Somebody handed me the baton. I hand it to somebody else. So, GE is above everything else you do.
Have you thought about your successor?
We will do it in a different way. There is always a right time to do it. We want to make sure we have a great list of people.