CEO Jeffrey Immelt and the reinvention of GE
CEO Jeffrey Immelt and the reinvention of GE
8 July, 2014
It has been 13 years since Jeffrey Immelt took the reins of American colossus General Electric from the legendary Jack Welch. Having weathered the early years, besieged by a storm of economic and business challenges, Immelt is at last taking steps to realise his own vision for GE – which includes moving away from finance, and becoming a more agile and globalised company, focused on its core identity as a maker of industrial equipment.
A recent high point was the acquisition of the energy businesses of French engineering group Alstom. GE will get all of Alstom’s gas turbines and most of its steam turbines business but, as The Economist notes, end up in three joint ventures with Alstom, making wind and hydropower generators, power grid equipment and steam turbines. While the deal surprised many, it represents a decisive move towards Immelt’s strategy of focusing onindustrial equipment.
Achieving this goal will entail shrinking GE’s finance business, GE Capital, which continued to swell early in Immelt’s career as CEO. With the impending IPO of its credit card business, Synchrony Financial, GE should be on track to earn less than 25% of its profits from finance in 2016, down from 45% in 2013.
Realising Immelt’s vision also calls for GE, a company founded by Thomas Edison in 1892, getting back to its inventive roots by boosting research and development. R&D spending dropped to 3% of revenues under Welch, but Immelt raised it to 4% in 2010 and 5% annually since 2011.
In particular Immelt sees a bright future for GE in software. Its new research centre near Silicon Valley is dedicated to the “industrial internet”, which connects physical machinery to a digital network. Bill Ruh, VP of Global Software Operations, identifies three main areas where technology built in-house can add value: optimising a machine’s performance, predicting when it will need repairs, and optimising the performance of the
8 July, 2014
It has been 13 years since Jeffrey Immelt took the reins of American colossus General Electric from the legendary Jack Welch. Having weathered the early years, besieged by a storm of economic and business challenges, Immelt is at last taking steps to realise his own vision for GE – which includes moving away from finance, and becoming a more agile and globalised company, focused on its core identity as a maker of industrial equipment.
A recent high point was the acquisition of the energy businesses of French engineering group Alstom. GE will get all of Alstom’s gas turbines and most of its steam turbines business but, as The Economist notes, end up in three joint ventures with Alstom, making wind and hydropower generators, power grid equipment and steam turbines. While the deal surprised many, it represents a decisive move towards Immelt’s strategy of focusing onindustrial equipment.
Achieving this goal will entail shrinking GE’s finance business, GE Capital, which continued to swell early in Immelt’s career as CEO. With the impending IPO of its credit card business, Synchrony Financial, GE should be on track to earn less than 25% of its profits from finance in 2016, down from 45% in 2013.
Realising Immelt’s vision also calls for GE, a company founded by Thomas Edison in 1892, getting back to its inventive roots by boosting research and development. R&D spending dropped to 3% of revenues under Welch, but Immelt raised it to 4% in 2010 and 5% annually since 2011.
In particular Immelt sees a bright future for GE in software. Its new research centre near Silicon Valley is dedicated to the “industrial internet”, which connects physical machinery to a digital network. Bill Ruh, VP of Global Software Operations, identifies three main areas where technology built in-house can add value: optimising a machine’s performance, predicting when it will need repairs, and optimising the performance of the