Beyond bulbs: Imagining GE's digital future

General Electric, which got its start from the business interests of American inventor Thomas Edison, is a global behemoth, with 360,000 employees worldwide. Mr Immelt has served as GE chairman and chief executive since 2000.

For many people, 30 years ago, when you thought of GE, you might have pictured washing machines and light bulbs. What is GE today?

High-tech industrial. I think we've really reshaped the portfolio. We have broadly globalised the company. When I joined the company in the early 80s, we were 80% in the US. In 2016, we are 70% outside the US.

So we are broadly more global, broadly more technical. The big kind of initiative that we are driving right now is to really digitise the company. There's a big thrust on industrial analytics, industrial software. It's a pretty massive change inside of the company.

High-tech. Global. Industrial. Digital. That's today's GE.

Do you see yourself now as an IT company?

The way I look at it, there are basically three segments of the internet world. You have a consumer internet, and that's dominated by Facebook, Google and Amazon, what I would call tech companies. Then you have an enterprise internet, and that's really Microsoft, salesforce.com

The industrial internet is going to cut differently. So there are elements of IT, elements of software that will be critical. But in the industrial internet, the assets really matter. The knowledge of a jet engine, the knowledge of a gas turbine, the knowledge of a MRI scanner. The knowledge of the vertical space really matters.

Our strategy is to go from the asset to the enterprise. So we need to be good in software. But we are trying to play in the unique space we have of being both a vertical and a horizontal company. It's our belief that the industrial internet breaks very differently than the consumer internet.

The push towards big data, big analytics. Is this being driven by the need to produce better machinery, or to better enable customers to utilise your machinery?

The way I think about it is three layers. You have to have talent. And then you have to build new technical solutions. Invest in cloud-based systems, cybersecurity, digital twins and so on. And then you have to deliver meaningful customer outcomes as it pertains to better wind turbine uptime and things like that.

I would say the initial thrust is all about delivering better customer outcomes, in terms of how they use the assets -- more efficient fuel use, more uptime, more safety.

And as a result of all that, you also have a cycle back into new product delivery. You are getting insights into how your jet engines, your CT scanners perform. And that's going to allow you to generate better products in the next generation.

Will this drive you more towards a service model?

I think we're open on the business model. But I think there's little doubt in my mind that ultimately, the industrial world will become more of an opex model [operational expenditure] than a capex model [capital expenditure]. And as you go through that, it's going to be more services.

What we've tried to do is to be kind of business model-agnostic. So we haven't put things into any one category. If customers want to buy this as a service, we will sell it that way.

If we think about PC manufacturing, you see how IBM has exited it completely. On the other hand, very few people make jet engines.

You see, that's the seminal point. The assets we're in are essential assets today. And they're also likely to be essential assets 10, 15, 20 years from now. That's another way that the industrial internet is different in that assets matter, in our world. So I think we view that as a strength and not a weakness. It's not a box. It's not a box with chips in it. It's a more sophisticated materials design. And we see that as a barrier to entry, honestly.

I read the other day about how GE was working to wire up sensors inside a volcano in Nicaragua.

What we try to do while we are building this business is also do interesting, neat things that maybe don't matter from a business standpoint. But they are ways of getting the next generation of talent to say, 'here's a way I can think of GE that's different than the social media companies'.

So we do big, complicated, integrated things as a demo, even though they are not necessarily business things per se. What it's resulted in … I think we can recruit some of the best young talent to join the company because they are captivated by the scope of what they can think of when they think of GE.

When you think of GE, you think tremendous engineering. But are your solutions more evolutionary than revolutionary? When will we see the next light bulb?

We've invested in things like additive manufacturing. We treat that as a new business that we are standing up. It's high-tech systems engineering using lasers, hardware and software to actually print parts, in an additive process rather than a subtractive one. Or take cell therapy in health care, where we are basically inventing, say, the pots and pans that doctors are going to use to deliver cell therapy.

I think you always have two or three or four of those [initiatives] in the pipeline. A company of our size needs a portfolio of growth ideas. Some organic. Some inorganic. Some revolutionary. Some evolutionary. It's hard at our size to make invention the only way we can grow. You need the evolutionary given the scope of what we do. But it's also important for us to invent, since it keeps you in the flow of where the new ideas are.

Does the company have the right culture for this change?

I think we have what I would call skill-based entrepreneurship. So we are quicker than our direct competitors, we are risk takers. But we try to do things that play to our strengths and our size.

So if you can do something just in this room, develop something just with say the 20 of us in this room, it's probably not a good GE business. But if it takes some element of globalisation, a combination of materials and computational science, multi-disciplinary, multi-region, multi-functional -- that's what I mean when I say skill-based entrepreneurs. And that's how I would define the kind of culture we need to be.

Now what we learn from startups is purpose. When I go to Silicon Valley, what I love about startups is their single-minded focus and purpose. We try to copy that from them. But the advantage I have that they don't have is we have 50,000 salespeople. So we can do things that they can't do.

Your tenure as chief executive has been mostly concentrated on refocusing GE.

I think there's been a tonne of reshaping of the portfolio. The way I would say it, there have been five things that I have tried to do as chief executive: reshape the portfolio; reinvest in technology; reposition the company globally; become more digital; and simplify the culture.

We've gone from the highly centralised, controls-based company that I grew up in to a more decentralised, risk-based company that I think will be important for the 21st century. Drive change. Take a chance; be more empowering of the team in the Asean region.

You know, it used to be that every commercial transaction that took place in Thailand would have to go to headquarters for some kind of approval. That's not really how we run the company today. The local teams have a great deal of empowerment to do their own product design, to do new and different things. That's a big change in the last 10 years.

Basically everything we try to do has some multiplication effect somewhere in the company. Even if it's innovated at a local level.

Let's talk about China. You've pushed hard to grow there. What have been the lessons learned?

The nature of the government is different than anywhere else you go. The consumer side -- it's on fire, it's entrepreneurial, it's fast-paced. While the industrial space is really dominated by the state enterprises. What's our advantage in China? Our breadth and our size.

I think it's so important for companies like GE to be in China. Because it teaches you a lot about yourself. You have ways to test how competitive you are. It makes you be strong. It makes you be better. I'm happy to be in China. But it's challenging.

GE is such an established company, with such a rich history. How has that history helped you navigate the expansion into emerging markets?

Some yes, some no. It's a great question. There are some markets that mimic the US, and some markets that are very different.

I think what I've learned is the importance of localisation, the importance of a local view. You don't try to make one size fit all. But you can understand nuance. You can have a little bit of a different strategy in China than you have in India, you can have a little bit of a different strategy in Germany than you have in France.

I think companies that understand nuance are the great global companies of the age. Some of that I've learned in the US. But some of that I've learned just by looking at the world differently as you travel.

In Thailand, at one time, GE was known primarily by GE Capital. You got out of it. Big lesson learned?

I think the macro-environment of finance was one that at the end of the day, no matter how big or small you were, you were captive to the broader currents of the economy. I don't think anybody, including us, did a good enough job of modelling tail risk as it pertains to such a broad, interconnected service market.

So in our case, we had to go through write-offs and things like that. And ultimately, as new regulations came in, we just couldn't generate an acceptable return. So exiting it, I think we picked the right idea at the right place at the right time.

If you look at it over the course of 30 years, we had mainly good years. But there's no doubt, if you were in financial services the day Lehman Brothers went bankrupt [in 2008], you were in for a tough couple of years. We lived through that as well.

But on the other hand, one might argue that banking is like that. It's boom and bust.

I would agree with that. If you look at it in retrospect, it was easy to predict a lot of what happened. I think what is different this time, certainly in the developed world, there's a real desire by governments to turn financial services into a utility. To basically try to smooth out some of this volatility.

Is there anything that keeps you up at night?

The truthful answer is government and the way governments interplay with each other. I would say we are in a broadly populist, protectionist mode right now. And if you are a big global company like GE, you very much have to fit into that psyche.

This is not just in the US or Europe. This is everywhere. I think we're in a very bad vibe right now between business and government. We deserve our share. We have responsibilities to make that work, and government has responsibilities. But I've been at this for more than 30 years, and this is the hardest moment, just in terms of what the context for corporations is vis a vis broader society. And that is true whatever country I go to.

Clearly companies have their share of the blame. Companies haven't engaged enough. They have just expressed only their point of view, and not a broader point of view. They haven't been sensitive enough about jobs and job creation. And some of it is the fact that governments are still operating in systems that were developed in the 1700s, and we're living in the digital age.