As chairman and CEO of GE, Jeff Immelt has led GE to divest itself of its financial services business and recommit to manufacturing innovation. He is a leader in thinking about the relationship of automation and expertise, and has applied that thinking to reinvent GE’s business and to bring manufacturing back to the United States. He is also thinking deeply about how the internet of things and data from devices in what he calls “the Industrial Internet” can improve services and transform business.
— Tim O’Reilly
People talk about the Darwinian nature of markets. They say that America has undergone a natural evolution from farming to manufacturing to services, as have other mature economies. But nothing is predestined or inevitable about the industrial decline of the United States. China is growing fast because it is investing in technology and has zero intention of letting up on manufacturing. We shouldn’t be afraid of that; we should be inspired by the competition.
In the 1980s, U.S. labor was expensive and materials were cheap for probably the first 20 years of my career. This did not generally help good labor-management relations. As a result, most of us saw it our task to outsource manufacturing, to move it to low-cost countries. This continued through the 1990s and into the very early 2000s. Today, materials are expensive and labor is relatively inexpensive. Today, the product is the process, more or less. And labor is a lot more flexible. If you look at an aircraft engine, the content of labor is probably less than 5 percent. We have two hours of labor in a refrigerator. So it really doesn’t matter if you make it in Mexico, the U.S. or China. Today it’s really about globalization, not about outsourcing; it’s how do I capture markets faster than the competition?
If you run an industrial company, analytics are going to be a part of your future. So if you’re thinking that you won’t have to become astute on data, software and analytics, you’re in the wrong place. It will permeate all of our industrial businesses.
We’ve got 10 parts that are going into the next-generation engine—let’s say the G90 or Leap X engine. The most sophisticated case we have right now is a fuel nozzle that’s going from 28 parts down to 1. The scrap and time savings are huge. A decade from now, you might see as much as 25 percent of an engine made through additive manufacturing. It will likely begin with uniquely shaped parts, like a calumniator and a CT scanner. These are very highly welded that normally involve a lot of scrap. In addition, we acquired a company called Morris Engineering in Cincinnati because it is an entrepreneurial manufacturer. We needed some entrepreneurial manufacturing spirit inside GE, so we had to acquire some of that talent. We may have to acquire more.
The second thing we’ll see is a lot of opportunity for 3D printing in repair shops. We do a lot of locomotive repairs and a lot of healthcare engine repairs. The ability to do a one-off part in a continuous flow will offer great advantage over the next decade.
In addition to additive manufacturing, we’ll be spending a lot of R&D on materials, novel processing, welding and braising. Five years ago, we spent $50 million a year on manufacturing technology—pure technology. I bet now we spend close to a half a billion dollars a year on manufacturing technology.
There are four things that drive a country’s competitiveness. It’s true for the U.S. and every country that I ever went to. It starts with education. We need more engineers and we need more welders. Engineers create jobs and engineers create companies. In advanced manufacturing, welders create productivity and we need both of those. In Vietnam, the government provides 5,000 people with welding degrees every year. You can go to Vietnam and build a plant that’s very competitive from day one because of what the government’s done.
The second thing is infrastructure. This is where I disagree with many Republicans; we need to improve infrastructure. [The New York Times’s] Tom Friedman came to one of the GE meetings last week and he said that flying from Beijing to JFK is like going from the Jetsons to the Flintstones. There’s some truth to that.
The third thing is the focus on small and medium business, which is an amazing engine of growth. I’d say they’ve gotten hammered in this downturn. For every job in GE, there are eight in the supply chain. We need to worry about these eight in the supply chain and how they’re doing.
And the last one is regulation. If we want jobs, we have way too much regulation. It’s grown geometrically over the past 20 years. Those are the four things that any government must stay focused on.
The one thing that people don’t get about GE is that, to the people who work here, it’s not a company. It’s not just a job. You feel like you’re part of a 120-year-old ever-growing, ever-improving family.
Jeff Immelt has held several global leadership positions since coming to 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. He has been named one of the “World’s Best CEOs” three times by Barron’s, and since he began serving as chief executive officer, GE has been named “America’s Most Admired Company” in a poll conducted by Fortune magazine and one of “The World’s Most Respected Companies” in polls by Barron’s and the Financial Times.
Jeff was also the chair of President Obama’s Council on Jobs and Competitiveness. He is a member of The American Academy of Arts and Sciences. Jeff earned a B.A. 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.
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