Economics, Videos

Jeffrey R. Immelt: The Transformation


Jeffrey R. Immelt: The Transformation

Published on Jan 18, 2016
Jeff Immelt talks about what it was like to take over GE four days before 9/11, the great recession, transforming the company, team building through diversity, and being inspired by what is going on in the world of business today.

General Electric
0:15hi I’m professor Jeff Cunningham of Arizona State University’s Walter
0:20Cronkite School of Journalism
0:22are icon today is jeffrey are Immelt he is the ninth chairman and CEO of General
0:28Electric in its one hundred and twenty three-year history the company whose
0:32roots go back to the inventor Thomas Edison Jeff Immelt was appointed on
0:36September 7th 2001 during his tenure he successfully dealt with extreme
0:41disruption in the world and inspired historic innovations in the company
0:45welcome Jeff Immelt
0:48Jeff my first question was going to be where you take Andrea on vacation but I
0:53was afraid 240 looking back with you became CEO in 2001 would’ve been the
1:01most unexpected hurdles so you know Jesse it’s funny I it’s been almost 14
1:07years to the day and we had the anniversary of 911 last week you know so
1:12it always makes me thoughtful I think the world if I had to pick one you know
1:17we’ve come out of this time period of really geopolitical peacefulness us’ was
1:23the center of the economic world we really hadn’t seen a meeting for
1:27recession since 1990 and things like that so I think the biggest prize just
1:32been the world has just been twisted from one of relative I would say you
1:38know benign growth to one that just high volatility hi geopolitical risks things
1:44like that and so in many ways the environment today is nothing like what
1:48it was like when I thought it would be when I became CEO I know you’ve talked
1:53about 911 and your experience and if I’m not mistaken you on a trip to Seattle
1:56that was exactly but think back to that time what kind of stresses were you in
2:01the company dealing with so I was in Seattle so it was just an incredible
2:06moment and again i I always start by saying you know what the country went
2:10through as far worse than what the company went through what I went through
2:13but you know we were big in the aviation business we were big in the insurance
2:18business we were only network at that time so we really had met you know
2:23several for businesses that got direct hit so I would say first and foremost I
2:29thought about our employees who are they safe second I worried about the country
2:33and where we under attack and then we just started you know unraveling the the
2:38impact on particular are aviation business if you were in the commercial
2:42aviation business on 911 of 2001
2:45on you know you went to a major thrust because products were being used as
2:50weapons we own 1200 aircraft you know what happened airlines was certainly at
2:56risk and so we really you know picking our way through the various businesses
3:00were in to try to determine you know what changes we need to make and how we
3:04would adjust when you got through that very difficult period when did you start
3:10thinking about streamlining the company and the transformation that has taken
3:14place today so I would say as the started to change and you could see I
3:20would say the financial service businesses even pre the Lehman Brothers
3:24crisis was getting more difficult and and I i had a little bit of a sense that
3:31the company was more well constructed for kind of an American centric economy
3:39one that was maybe not quite as volatile you know we really started thinking
3:47through the portfolio had to change and the initial thrust was to make GE
3:53Capital actually smaller so we sort of insurance business and things like that
3:56and I think we’ve we’ve had this philosophy for about 10 years that we
4:01only wanted to be as broad as we were deep so we we looked at those businesses
4:06where we thought we had an essential competitive advantage as ultimately the
4:11businesses that the G should be insight about technology globalization installed
4:17base revenue things like that is being our core competency so we start
4:22eliminating businesses like plastics even before the crisis we thought about
4:27the weather not NBC was it was a good fit for the company and and we wanted to
4:33make financial services at that time no more than a third of the company you
4:37know the the fiscal crisis kind of took her that that’s so but you know we we
4:41had small financial services more dispositions than acquisitions and get
4:46deeper and more businesses like healthcare aviation energy we really
4:50started at a 2010
4:51four and then it got impacted by the financial crisis for sure that’s a very
4:56different philosophy then we want to be number one or number two in every
4:59business again I think time changes you know when you when you replace a famous
5:05person you’re always reminded of things that he said in the past and i think
5:12what really makes leaders greater what really made my predecessor great was
5:18that he really didn’t care too much about history he was always what was
5:24right for the moment and so I think we we think today what’s right for now know
5:28what was right ten or twenty or thirty years ago so today I think we live in
5:34very global business I i became CEO in 2001 we were 70% American I joined she
5:411982 we were 80% in the us- once we complete the Alstom acquisition will be
5:47almost 70% outside the United States so just the global footprint so much
5:53different our vision has always been the GE is a technical leader at the core of
5:59our competitive advantage
6:01had to be built around technology I think we used to think that it was only
6:05about leadership and that if you had good leaders you could be in any
6:08business we want to have good leaders but we actually believe that this deep
6:12domain expertise also critically important for the future be just can’t
6:17you know you’re in business hasn’t shelf life so you really can’t be captivated
6:24by anything that’s happened in the past that’s what it’s all about today and
6:28tomorrow and businesses so I’ve never worried so much about what it was like
6:32in the nineteen eighties and nineties but you always have to arbitrage the
6:36difference between what Wall Street’s excited about what the world’s excited
6:40about and what you know you should be excited about how do you use that look a
6:44learned something important
6:47the hard way harken back to
6:51911 so the markets as you remember were closed for that we can then they
6:57reopened and you know the day we we opened our our stock sound like 20
7:03percent after 911 and our largest shareholder owned at that time four
7:07hundred million shares and they sold a big chunk of the holding of push the
7:11stock price down and I called the people running the finance no slowdown what
7:17were you scared people and they said well we didn’t realize the GE was really
7:22that big in the insurance industry and I said what you own for a million shares
7:27and you didn’t know they can teachers it’s your fault not mine and I think
7:32what you want to have in the investor base are people that kind of share your
7:36strategy transparently
7:38know they were in the jet engine business or we’re in the health care of
7:42business and i think increasingly shortly after the financial crisis it
7:49was hard to be both in the financial services industry and and in the
7:52industrial business right so they just were fewer investors that are willing to
7:57go along for that right so I think where we are today people say hey here’s what
8:01I’m investing in we still need to report quarterly earnings in the annual
8:05earnings and things like that but I think we have more people in the stock
8:09today that no why they’ve invested you know aren’t necessarily looking for a
8:14quick turnaround but but only for a couple years CAS execute our strategy
8:19hold us accountable for that and I think that’s ultimately what you when your CEO
8:23you never gonna you’re always going to have to work too short term long term
8:27trade off but you want people in the stock because they know the strategy and
8:33they hold you accountable for your own expectations not somebody else’s that
8:38relates to an announcement that I think you just made today I’ll put it this way
8:43olivia newton-john were writing a song about GE would be let’s get digital
8:47what’s going on with that I think the technology in the world has just changed
8:55radically so I jet engine today is surrounded by the same maybe a hundred
9:00sensors so when you fly back to Arizona that’s light is pulling generate a
9:06terabyte of data and it’s going to be about emissions from the engine fuel
9:10performance where the blades and the customers can now use this data to
9:16determine life of the engine when it needs to be overhauled how much it costs
9:20how to be more fuel-efficient and things like that and we want to participate in
9:24that so our thesis is that every industrial company also has to be a
9:29software company now if you were in Chi in the nineteen nineties probably so we
9:33can he said look we we do hardware and finance somebody else offer and we
9:39should separate those too but that’s not really where the world is today so we
9:43kind of talked about being additional industrial company and we think that’s
9:46really the future of where a company like she has to be in were put in
9:50putting our money where our mouth this on that I I know that you know I don’t
9:54think everyone knows the GE was voted best brand on vine video channel best
10:01fortune 500 brand on social media Twitter and Instagram this has to have
10:07been something that has started a while ago how did he get cool I would say two
10:14things first of all we’ve got the goods and other words the stuff we do is
10:18essential to the economies around the world essential to people and I can go
10:23to any college campus and say hey you want to be involved with the future of
10:28transportation the future of flight the future of healthcare you want you want
10:32to get involved with that at the ground level 22 year olds would say yeah that’s
10:37pretty neat to me and then we also invest in great technology like
10:41analytics and industrial internet and things like that but I think beyond that
10:45we’ve got great creative people that work for GE and we turn them loose on on
10:50social media
10:52and allow them to create their own stories one of things I reviewed this
10:56morning is on National Geographic Channel Ron Howard and Brian glacier
11:01doing a six-episode story of technology and science that has world-class
11:07directors from Hollywood for producing shows on the brain
11:12the future of energy and GE scientists are a part of that so I think we’re into
11:18the the things that interest people and and we’re willing to experiment in new
11:25ways of storytelling with the talent we haven’t said the company I think that
11:30combination I don’t know if it makes us cool my over twenty year old daughter
11:34she might disagree with the notion that a clever mix as well of it which is
11:39probably even more important I have two daughters and we don’t only share the
11:43name but the fact that neither of them think we’re cool let me take off on that
11:48part about the brain you had dinner not long ago with 4 brain scientists have
11:54also started a program with Roger Goodell of the NFL to combat brain
11:59injury
12:00most of us wouldn’t have thought the GE would be in the center of those
12:03conversations because like year earlier example we really don’t know where the
12:07company years of the technology has tell us so we’ve got twenty billion dollar
12:12healthcare business and we’re a big diagnostic company so both imaging in
12:17biomarkers and things like that and what it thinks it’s really great about GE or
12:23running two years that you can look out over these big challenges let’s say in
12:28the 21st century and one of the big challenges is just the study the brain
12:32so it’s the most understudied
12:36you know kind of organ in the body people no affirmative by cancer people
12:40though fuhrman about heart disease but when you think about traumatic brain
12:45injury alzheimer’s things like that we don’t know that much about about how
12:51disease in the brain really happened and how it can be treated so we’ve launched
12:56a variety of different technologies both on our imaging business but also on you
13:01know for instance we do a biomarker that can light up
13:04amyloid plaque which is one of the precursors to Mercy exactly and and ALS
13:10we got research on the ALS and then you know so you’re always so that’s a piece
13:15of our science and when we when we talked to some of the advanced people
13:19that’s what we talked about and then we’re always looking for other conveners
13:23around how to raise more money how to raise more interest in the case of brain
13:29disease it’s really the us-led military in the NFL
13:32so you’ve got all these kids coming home that have had some foreign traumatic
13:37brain injury and the NFL course is grappling with concussions and the after
13:41effects so it allows us to raise more money to raise more awareness in a drive
13:45the science harder but that’s an example of a business that’s really about the
13:50next generation of GE like financial services was the last generation of GE
13:56and when that we feel like we can compete very aggressively and how does
13:59this relate to the institution that you develop your the Global Research Center
14:04would you funded about six billion dollars a year which by the way beyond a
14:08nice profit for any company I think about the G what we call the G store so
14:15we we say ok what is the what is at the core of what allows us to be in a
14:20company that is in the energy space the only guess based the healthcare space
14:25and you know from your experience at Forbes you know that conglomerates gonna
14:29go in and out of style and you better have a thesis on why you have it so we
14:34call it the G store which is really the foundation of yg exist white white can
14:39we be
14:40two very different businesses in one of the core elements of the stores sites
14:45and technology so we have one of the last companies that has industrial lab
14:49we we push those technologies across the company so the fact that we’re in the
14:55aviation business helps our power generation business the fact the word
14:59the health care business we take imaging technology from health care we put a
15:04little gas pipeline inspection and things like that so one of the core
15:08competencies of GE israeli this technology that we drive across the
15:13company to make a successful so I i believe that that is a differentiator
15:19and that’s what creates a big boat for a company like ours you know your CEO but
15:26you’re also a portfolio manager and a capital allocators fellow in Omaha
15:33claims to do the same thing who’s got the tougher job you are warm but look I
15:38mean I think that
15:40but it’s always a guy I study and what I’ve learned from Warren is he never
15:47follows of sad hehe his Decius what he believes and how we invest never changes
15:56and I think again that is something I you know I’ve learned from and try to do
16:02the same thing in my own context there’s a lot of people you know just to the gun
16:07fired thinking they’re Warren Buffett went broke forward stroke what he does
16:15kind of works works for him
16:20classic really as CEO of Berkshire Hathaway all he does is really a leaky
16:27human resources and capital so there’s no global research center at Berkshire
16:32Hathaway there’s no way in building person other than him so we run our
16:37company a little bit differently I mean capitation still important we invested
16:42billion dollars a year and training people we have the six most valuable
16:46brand we globalized as a big company together we do technology together so I
16:52think there’s a lot to be learned I mean again what I would say is the thing I
16:56admire the most about Warren is he never follows the Fed he always he doesn’t pay
17:00more than eight times but he’s very focused on in certain kinds of
17:04industries and I try to follow that visa V GE is to stick to a very disciplined
17:10box of what makes a good cheap business what makes a good investment but we also
17:15do things centrally that in Berkshire Hathaway would never never be viewed as
17:22value-added you mentioned brand unless someone is an analyst for his look
17:28recently they may not realize that the top 10 fortune 500 includes Google
17:35Facebook Amazon Microsoft and won one hundred and twenty-three year old
17:42industrial
17:43do you see that is validation of your strategy that you are in the top 10 with
17:49those companies I first of all I think it’s what we want to aspire to be you
17:54know what other words we want to stay relevant today
17:57the second thing I’d say is I’m I’m blown away by companies like Google you
18:03know Google’s I think twelve years old I am completely impressed with what
18:08they’ve done in 12 years but the thing they say is look we matter we’re not
18:14going away we’re paranoid we’re investing with changing where relevant
18:19to our customers and the industries that we serve and so I I always think these
18:24you know we don’t want to be Microsoft we don’t want to be Google but we’re
18:28inspired by them were we we we we we we want to be better because of them so i i
18:35was just one of the great things about business you know fifty percent of the
18:40S&P 500 market cap today for companies that didn’t exist ten years ago the
18:45Facebook so the world so I think it makes our our our team inspired
18:49hard-working wanting to stay relevant and that’s you know that’s how I look at
18:55it but i i wanna be in the top ten most valuable brands you know it’s not ok for
19:00me to say oh gosh were to hold over 52 number twenty that’s not acceptable as a
19:08thought for our company one day we’ll look back we call this the MLT room will
19:13say he made it look easy was it what were the hurdles in performing the
19:18streamlining the changing the portfolio switches that you i i would say look
19:23i’ve done this now fourteen years it’s a hard job in other words anybody that
19:29sits there and says they think these jobs are you see these are hard jobs you
19:33have to learn every day I think I think what’s what I love about our company and
19:40what I try to match myself is just resiliency that this this sense that
19:45were never as good as we want to be were never as good
19:49as we can be and that no matter what happens we can keep getting better so I
19:54i think i think what I would say we’ve accomplished is we’ve done all these
20:00changes in a very unforgiving with almost no talent right so we’ve been
20:05able to change the portfolio grow earnings do things like that and it has
20:09three recessions you know political unrest and and and things like that you
20:17know i i was i was having lunch today with political candidates running for
20:24president and you know we don’t really don’t think today as a company about
20:30government doing tax reform immigration reform are great things we we are more
20:37worried about the government shutting down in two weeks that’s something that
20:41my predecessors didn’t have to grapple with great in terms of where the world
20:47is so in a very volatile world we’ve stayed focused on you know kind of what
20:52we thought we could be accountable to you know our customers are investors in
20:57each other and and I think that’s made us a better company one thing that
21:01surprised me delighted me you recently announced your else done deal which is
21:07greed and power transmission operations France but the fact that you got doj
21:14approval and European Commission approval so my question is how difficult
21:18was it and is dealing with regulators actually a core skill for a major global
21:23company so the answer to the second question is yes you know we are at a
21:27moment in time win this is our suspect large institutions are suspect it’s the
21:35most part of it I business government actions new US but everywhere that i’ve
21:40seen in 33 years and business and so I think it you know it’s we thought we
21:46were right all the time we thought this was a good deal for europe a good deal
21:50for the USS pro customer but the fact that we were just more nuanced I I think
21:55we’re more flexible we were more looking for ways to maybe get 80%
22:01it right versus a hundred percent right and you’re fourteen years ago I could
22:06never have done that I was too arrogant I think have to do with more homeboy you
22:14become a little bit more flexible and you recognize that winning eighty
22:19percent of the time is still a win vs this need that you think you have to if
22:25I don’t get it completely my way I’m going to walk that’s just not relevant
22:30in the world today in dealing with governments goes back to your comment
22:35about capitalism in the ability the requirement to be flexible so contrast
22:40that with what happened in with Honeywell you know it’s such a different
22:43it was just such a different day you know is just so I would look back and
22:48say you know me well you know jack was right we were right it wasn’t an
22:55antitrust case but nonetheless we didn’t have the right outcome so nothing you
23:03know he was great but really matter in the end
23:09winning getting things over the goal line that’s important
23:13you know the fact that you had to compromise here and there that’s ok you
23:17know there’s there’s nothing there’s nothing wrong with that and I think
23:21that’s what you learn in terms of the world today and I think it’s something
23:26that I’ve learned having done this job for more than 10 years one of your
23:30signature achievements is what you’ve done in terms of networking in the
23:35manufacturing space we’re looking at it
23:37trillions sensor world I’m worried about what we do with all the data storage but
23:44also Jim clapper of the Director of National Intelligence said our problem
23:48is gonna be data theft but data manipulation are those opportunities for
23:53GE and are they also concern so I I think so let me take the good part the
23:58good part is dat azz can unlock
24:02whole new areas of productivity its gonna make people more efficient it’s
24:07going to be machines more efficient
24:09you know if we could say just the GE install base jet engines 1 percent on
24:15fuel that’s where three or four billion dollars storyline customers every year
24:19so that’s a massive windfall the data can bring now on the other side if you
24:25said name water one of three or four enterprise risk for the company
24:31cyber as at the top of that list i personally run the cyber working group
24:36and say the company we look at both in terms of our enterprise but also in
24:41terms of our products and so we are really paranoid about an emerging world
24:46where products need to be hardened products need to be safer sodas
24:50enterprise so I would hate to say that the fear kept us from going after the
24:57massive upside that exists I think what it really means is that people have to
25:02be expert on boats and we take cyber terror very you know because it’s not
25:07just that but its relation right you had a car’s brakes to save old remotely what
25:16a month ago or something like that look we worry freakishly about things like
25:21that as I think you have to be in this in this world I just like you to comment
25:26if you will you announce recently vice chairman was appointed and I think the
25:31first female Vice Chair General Electric that follows in the kind of thinking
25:35that’s been happening at places like IBM and Pepsi and so forth were women
25:39arising up into the most senior management positions quick outlook for
25:44GE as well as corporate America for the subject of diversity and people moving
25:48so my first diversity training in G was in the mid-eighties so I’m an almost my
25:5530th year of being trained how to run a meritocracy how to be open how to
26:01encourage an open workplace there’s no excuse of four people of my generation
26:05not to be open to no matter where you came from
26:10no matter what you’ve done if you can bring it if you’re if you’ve got married
26:14if you’re winning you’re gonna get promoted and so we have a great pipeline
26:17women are so people my you know my dad is 88 years old it’s ok if sometimes he
26:24he’s not quite into diverse away I am if you’re my age you excuse you have no
26:30excuse you’ve been taught the right way to run the workplace so that the best
26:34people can get the right jobs and things like that and and look at this is that
26:39that conseco is our our first moon vice-chairman she’s been incredible
26:44value to the company through multitude of different roles and this is this is
26:48one where every putting the company just says a fantastic that’s great
26:53today we had two promotions to people running big G businesses Russell stocks
26:59as an african-american jeanne miller’s woman there’s nobody I i hope i don’t
27:04think it’s solely we’re not there yet but I don’t think people in GE looked
27:08around and said oh gosh this was a diversity and they look and said these
27:12are two awesome people that are gonna be great GU years and what a great thing
27:18for the company and for them in 2008 the Washington Post said that you were one
27:23of the world’s best CEOs seven years later are you even better you never
27:29really led and to you been through like really really terrible risk flying close
27:38to the Sun right so now they don’t love you when that’s happening when you’re in
27:45the middle of crisis you don’t understand you getting better with the
27:48people that are are a little bit had to offer but there’s no doubt in my mind
27:54when I talk to other leaders no matter where they’re from the fact that you
27:58been to a crisis and if you’re if you’re learner which I hope I am sure which i
28:02think our company is you get better and so I’m a hundred times you know I would
28:10say this about looking at people you never tell me anything about anybody
28:13when things are good you can only tell about people when it’s like 15 minutes
28:18to midnight and it’s crappy outside and there’s a horrible things happening then
28:23you can tell who’s good and who’s bad and who can make it and who can’t and I
28:27i think in in my own case I i’ve learned from all the things that have happened
28:33over time and just because hopefully become better try to become better for
28:38my last question if you’re truly global as you say when a rocket two Mars will
28:45there be a GE representative on board so it’s a quick question you know so I’m
28:49always very very like mindful of what guys like you are doing why I just think
28:55that one of the incredible aspects of the United States is this great venture
29:03creativity so I don’t know if they’ll be a GE person on board but I can tell you
29:08we have teams of people that are studying what he’s doing to say okay
29:12should there be a G control system should be G proportion to the Vig person
29:18and whether it’s be so sore or Elizabeth home so I can go down the list of people
29:24were were quite I would say
29:29intrigued by everything that’s going on in the world around us and how can we
29:34get better and be more participants in that world Jeff thank you very much chef