Mis à jour : avr. 23
The publication of this post was triggered by the recent news that Jeff Immelt was stepping down as the CEO of GE. It reminded me of a very interesting conference he gave a few years back at The American Chamber of Commerce in France that I was lucky enough to participate in. I thought the insights from Jeff Immelt are still very relevant and worth sharing. Enjoy and don’t hestitate to post your comments.
About Jeff Immelt:
Jeff Immelt has held several global leadership positions since joining GE in 1982, including roles in GE’s Plastics, Appliances, and Healthcare businesses. In 1989 he became an officer of GE and joined the GE Capital Board in 1997. In 2000, he was appointed President and CEO, succeeding Jack Welsh.
He has been named one of the “World’s Best CEOs” three times by Barron’s, and since he began serving as CEO, GE has been named “America’s Most Admired Company” in a poll conducted by Fortune magazine and one of the “Worlds Most Respected Companies” in polls by Barron’s and the FT.
Jeff Immelt was the chair of President Obama’s Council on Jobs and Competitiveness. He is a member of The American Academy of Arts & Sciences. He earned a B.A. degree in applied mathematics from Dartmouth College in 1978 and an M.B.A. from Harvard University in 1982. He and his wife have one daughter.
What’s your feeling and understanding of the world today from your experience travelling the world as the CEO of one of the most powerful global companies?
I regularly make my board members and executives expose their views on the economic and political situation of their regions; GE leaders have to think for themselves, when they run their companies they have to have a clear view of what’s actually going on.
Generally, emerging markets are continuing to be the global growth engine, but not in a homogenous and undifferentiated way:
China, which has for a long time been a kind of “macro” story, i.e. the entire economy is booming, has now become more of a “micro” story, i.e. it’s not any longer universally good the way it has been over the last 20-25 years, but if you are in the right sectors (health care, electronics, aviation, …) business is booming, while if you are in the wrong industries (mining, textile, …) business is quite tough; for a company like GE (infrastructure and financial services) China remains very appealing, probably more attractive than ever before; the new political leaders are on the right topics, they know that reforms are needed and that they need more quality growth and transform their industries.
Latin America, Russia, Middle East, India are carried by China.
Europe seems to be kind of stabilized, at a lower level but it’s no longer a threat for the global economy; however, in the long run there is no alternative for a single market in Europe as the long term competitiveness of the region depends on the integration of the European market; while today Europe is treated as individual countries, it should be more like ONE region, that would be much easier and efficient for business.
Russia: GE is a 100 bn € infrastructure business and a 400 bn € financial assets and services firm; GE has to be in Russia, there is no other way; you have to follow a big theme, be big enough to go there directly without middlemen, than Russia is a quite safe bet.
The US gets a little bit better every day, but the US economy is strongly driven by only two major industries: housing and automotive industry.
The focus on low interest rates has made housing very robust;
The Automotive industry is back to a production of more than 15 million vehicles, which is way above what is was before the financial crisis, but on the long run it is only the number the US automotive industry was producing in 1982.
What are your major principles as a top executive business leader?
Companies do have to be good at playing the Risk/award game; too many companies get in trouble because they take big risks for little awards and that’s very dangerous; but there is nothing wrong with taking reasonable risk for big awards.
Nigeria is a good example: the country is n°6 in oil, n°7 in gas, but they have a 40 GW deficit of power, so they need what GE sells; even if the conditions for doing business there are horrible, with a lot of corruption, conflicts, etc. GE has to be there and business can be run under reasonable risk conditions;
India is different, the conditions there are very complex and risky, there is a lot of liabilities to be taken into account and if you do some minor things wrong in a contract, this can cost you an almost infinite amount of money (example: building of a nuclear power plant); so you have to know to walk away from those businesses!
When running a big company, there is no single business that is so important that you can’t walk away from it, but you have to figure out when to say yes and when no! Top executives have to get better in taking those decisions based on the risk/reward analysis!
You have to be aware that standing still is losing competitiveness; if you are in a system that is focused on keeping the status-quo, you have to know that the world around you is moving on and that you will get behind (“you have to be aware that it’s less about you and your company, but more about everybody else competing against you and trying to substitute you”)!
What are to you the main pillars to boost competitiveness in a country, region or country?
Education And training
Small and Medium sized Enterprises
If every country would work on those 4 issues, competitiveness would follow; and this is kind of universally true, in the US, Europe, Asia …
Globally, but especially for businesses in Europe, GE is currently pulling different levers to be more competitive and stay profitable, those are:
No redundancies/simplification in organizations, processes, staffing, …
Extreme customer focus: become better at understanding the customers
Innovation: get in new markets faster
What did you learn from your role as an advisor for the Obama Administration?
How to give advice: bad advice is « here is what you should do », good advice is « look, if I were you, I would go about it like this… »
Business people have to put themselves in the context of Governments and politicians when giving advice, otherwise that relationship won’t work
Example simplification of the Administration for Obama: as a Republican businessman, there is not any Government Agencies that they like, but if you go to Obama and tell him to wipe out 60 agencies, he will say no…on the other hand, if you tell him “look, there is so many procedures and processes that take up to 2 or 3 years, why don’t you cut it down to 6 months?”, he will be interested and start thinking about it.
What is the business environment for SMEs like today and how can it be improved?
Statistics show that fast growing companies have created almost all incremental jobs over the last 3 to 4 decades (Amazon, Microsoft, Fedex, Google, Facebook, …); so nurturing innovation and startups is going to create opportunities and jobs;
It’s less about the small businesses that stay small businesses, but about creating the opportunities for small businesses to scale up fast and become big businesses
Overregulation is very bad for SMEs: Governments won’t complicate the lives of big business with hard regulations as much as they do impact SMEs; Big businesses will always work their way around, but regulation will break small business (e.g. high standards are becoming a competitive advantage for big companies)
What’s your view about resources and energy issues?
Gas resources in the US are massive, bigger than it is even been talked about at the moment.
The two big environmental issues are less the availability of energy resources, but water and emissions; both can be solved, but in these cases stronger regulation for once is probably necessary.
Cheap energy is a real long time change maker and major competitive advantage for the US (with 50% energy prices compared to Europe, for example); if you count in Mexico and Canada, the North American Region could become self-sufficient in terms of energy supply and demand very quickly (if this was the right thing to do politically, which is not so sure).
How difficult was it to succeed the famous Jack Welsh?
It’s always hard to succeed someone, but it’s probably easier to take over from a successful executive than from someone who has left the company in ruins.
The times have changed a lot, and you cannot compare the different periods, but in general the strengths of big companies like GE are institutional, not about any one individual.
What would be 2 or 3 pieces of advice for young professionals?
Understand globalization, and in some ways that means Go East!
In former times, management was divided into the “general” and the “specific”, but the world today has changed, it has become much more complex, intertwined and volatile, and so executives have to be able to go deep and broad (T-shaped people).
You have to understand the notion of speed (“big companies never die because of lack of money, they die because of boredom and self-sufficiency”); so you can learn a lot from the spirit and speed of startups for big companies:
Start-ups only work on what’s really important, they go to the essence of business;
If big companies woke up every day and looked at their companies to sort out the essential from the superflux, you could massively improve the competitiveness of your business.
The lean startup approach has become a Manifesto for the way GE works on projects nowadays (“fast works”); every process needs to lead to speed!
GE follows 2 major approaches or methods:
Lean six sigma is one of them, but only on 30 key processes throughout the company;
The second process is “fast work”s, which GE learned from Eric Ries, the author of Lean startup (getting to market and doing everything in the company faster); for example, GE does every IT implementation in 90 days; this implies that sometimes you do less, you test the limited version, get better at test & learn and carry out a follow-up project, which again does not take longer than 90 days!
What keeps you awake at night?
It’s not competition, but governments and how quickly they can evolve or change views.
A lot of disruption is caused by governments and how they impact business environments.
Things change so quickly in the public sphere nowadays (Turkey, China, Russia, Middle East…) that it’s difficult to keep up.
Questions & Answers:
What’s your view about shared resources?
On the long run, GE plans to massively increase the part of shared services from around 30 % to 70 %.
How can you foster people that are capable of going broad and deep?
It’s more difficult today than 20 years ago, but you still have to find ways to do it; back in the 80s things were easier: the US economy grew by 4 % per year (the biggest economy in the world), so you could be more general about your assumptions; everybody knew the GE brand and where things were headed.
Today executives have to have a much more developed depth of domain knowledge taking into account numerous external factors such as technology, society, economics, etc. that are sometimes contradictory and always volatile and complex to understand.
One of the ways to do that is to stay in jobs longer, which gives you a better understanding of the issues over a longer time period; you have to see cycles and understand how they work.
When you don’t have enough challenging questions to ask or ideas for changes and improvements, then you might start thinking of leaving the business to somebody else.
View on UK and its position towards Europe: it’s a complicated question, but he still thinks of UK as part of Europe. « You have to be in it when things are really bad to be in it when times are good ». It’s a dangerous move to break out now.
What made you a good top executive? The shocks. You need to have a good sense and understanding of tale risks.
Salary discussion: people have the right to feel uncomfortable with high executive salaries; we have to understand their being cynical; the only way out is competitiveness, growth, innovation and the job creation that comes with it; you need to get through that anger.
Energy transition: they put a bad name tag on IT (“green”). By this, IT became the business of some elites; if you speak more about energy efficiency, reduced costs, etc. it would be more largely accepted.
Robustness to disruptive innovation: it’s a very formal process; you need a lot of cash, which helps against black swan risks; the Chief Marketing Officer at GE is also the Chief Disrupter. GE has to play offense and defense at the same time. (Example: Industrial internet).
One of the most serious battles is the war for talent.
Healthcare and housing are amazing businesses where a lot of disruption is going on; but the business models will change; e-health is a big pusher; for GE that means that it has to become more agile!