April 11, 2006
Jeffrey Immelt

Ipek Cem met with Jeffrey Immelt, Chairman of the Board and CEO of GE to discuss the latest in global business trends as well as the latest in innovative technologies and emerging markets.

Ipek Cem: Our guest today is Jeffrey Immelt, chairman and CEO of GE. Welcome to Global Leaders.

 

Jeffrey Immelt: Thank You. It's good to be with you.

 

Ipek Cem: A company which is successful for many years, 128 to be exact, how does one keep that ball rolling?

 

Jeffrey Immelt: You know I think you have to know what has to stay the same and then you have to know what has to change. What I would say is that, it's always been a company that's been about people. It's always had a bedrock of integrity but it has also had a profound commitment to change. And that means changing technology, it means globalizing, it means teaching leaders new things. But we've just always had a healthy disrespect for history and we've always had a profound thirst for change. And if you have that you can be successful for a long period of time.

 

Ipek Cem: You took the helm of GE in 2001 and actually it was four days before the September 11 attacks. These attacks really changed the landscape for global business and politics. How was it in those starting days when you had to face this and move on with that?

 

Jeffrey Immelt: Actually three things happened at the same time. More or less the same time. The 9/11 tragedy for sure had an impact I think on globalization, had an impact on the mood of just not the United States but many other countries around the world. The second thing that happened was the Enron crisis, the Enron scandal that had a real impact on the way companies were viewed inside the United States and around the world. And the third thing was the end of the bubble economy in the late 90's in the United States and so I think what it meant for all business leaders at that time was that it was a new environment, there were new expectations for CEOs and it was really a brand new day. In someways it was hard for me because I was new. And in some ways it was easier for me because I could really plot my own pathway in an environment that was radically different than the one that existed in six months or a year before that time.

 

Ipek Cem: Did you see any negativity geared towards you because you are a big US company especially after these events?

 

Jeffrey Immelt: You know I think that there is always a fear about size. You know in other words I've never felt really an anti- American sentiment about the company. I think GE is generally held in high esteem. But people don't like big things anymore. They don't like big companies, they don't like governments, they don't like a lot of things. And I think what we've always tried to do was try to make size an advantage and not a disadvatage. We know how to be a good citizen, we know how to be an innovator, and we try to do those things and not just be big for the sake of being big.

 

Ipek Cem: GE has always been linked with business strategy and leadership and basically since you took the helm, globalization has been very much in full force and movement into other markets. I know you set a very aggressive goal of  %8 organic growth. How is this coming about? Is this a fullfillable goal in the next 3 to 5 years?

 

Jeffrey Immelt: You know we've talked about having a goal that to be able to grow at two to three times the GDP and to try to do it consistently. You know people always say that a company our size is just too much to ask for. What we've done is we've picked businesses that just ended up themselves how to be able to grow at five or six percent a year and then initiatives that will propell that to be maybe seven or eight percent as time goes on. You don't get that just by talking about it you have to take concrete action. And I would say the actions that we've really taken have made us more innovative, more technically based, closer to the customer but there's no doubt that globalization has been a big part of the way in which we can drive above average growth on a sustainable basis. Globalization is a big driver. Can we do it every year, can we do it forever? You know I think so and that's clearly the way we run the company. But I'd say it doesn't do any good to have any initaitive that doesn't have a hard metric associated with it. And so when we talk about two to three times GDP growth, that motivates our work force and it's not a negative so I view metrics as always being motivational.

 

Ipek Cem: Your background being in mathematics?

 

Jeffrey Immelt: Yes.

 

Ipek Cem: So, when you look at Turkey you look at many markets. I know when you look at Turkey, GE has been in Turkey for decades but you also recently made moves in the finance sector and we see you as a company who is positive on Turkey. What are some of the investment attributes of Turkey that you feel are on the right track?

 

Jeffrey Immelt: You know what I would say is that Turkey has three potential advantages. One is clearly location. The geographic position of Turkey both looking towards Europe and also looking towards I think an expanding kind of Islamic zone. I think if you look at the Middle East, Northern Africa, countries with increasing wealth and capability and so we think Turkey has a great advantage in that regard. The second thing are the people. It's a young, vibrant, well educated work force and very competitive. And then I would say the third thing is that the industrial complex in Turkey is pretty strong. I mean the manufacturing base is strong. The big conglomerates, people like Dogus and some of the collegues, and Sabanci and people like that, these are good industrialists. They make good partners and allow us to invest with a reasonable certainty that we're going to have a competitive framework by the time it's all set and done. So Turkey, you know it's 80 million people, I'd say the downside case for Turkey is that it becomes a good domestic market, over time. The upside case for Turkey is it's not only a good domestic market but it's also a good exporter. And if it does that it can be a very, on a very good growth trajectory for a long time.

 

Ipek Cem: We see that the target of many global companies are very much focused on huge markets like China and India. These markets are dwarfing some other countries.

 

Jeffrey Immelt: I think that you've got to have a strategy to be open to every corner of the world if you are our size and if you want to be successful. China and India are very important, no doubt about it. And GE will have a big presence in both countries. But if you only go there you're missing out on other substantial opportunities. I think Latin America is very exciting today. I think Eastern Europe is very exciting today. I think Turkey is exciting, I think Northern Africa, the Middle East.. We have to have  our point of view open to every corner of the world today. We just have to. And so I don't look at it as either or, I look at it as and.. Turkey and China and India and Brasil and Vietnam and and and and.. That's the way you have to be today.

 

Ipek Cem: When we look at the business environment today, issues like global warming and scarcity of resources including oil and including water, which is an important topic for you these days, are very much on the agenda. How have these new paradigmes changed the way you look at business and the way you structure your businesses globally?

 

Jeffrey Immelt: You know what I would say is that this is people, people like me are paid to pick up trends, not just pass judgement on them and what I would say is that the economics of scarcity is an increasing trend. You mentioned it, it's a shortage of oil, it's a shortage of water space, it's a desire to reduce greenhouse gas emissions.. Now what I try to do is, I'm not a politican. In other words it's up to other people to set regulations and do other things around them. What I try to do is develop products and services that can make a meaningful impact on solving some of those issues. So dissalination in water, hybrid technology, battery technology, wind power and provide a variety of technologies that can solve customers issues with these economics of scarscity. We launched an initiative called Ecoimagination in 2005 that was really targeting using technology to help solve some of these problems. In 2006, we had 12 billion dollars of revenue with these products. We think we will have more than 20 billion dollars of  revenue  by the end of this decade. So that's how we try to make a business case for it.

 

Ipek Cem: I know you have a pledge to put and you've already put a lot of R&D money into these new technologies. Are they coming along in the pace that you were predicting?

 

Jeffrey Immelt: I'd say; without question. We started with I think 17 products. It's now up to 40. It will be more than 60 by the end of this year. So that the pipeline of technologies is very robust. And I don't think GE is alone. I think a lot of other companies are now are following suit. So I think the richness of technology is ultimately how you solve some of these problems and make profit from it at the same time.

 

Ipek Cem: In your opinion what is like one of the most innovative products you have come up with when it comes to solving a real problem?

 

Jeffrey Immelt: I would say a hybrid locomitive, that can be, that can fuel transportation with maybe a 10 to 15 percent energy savings, coal gassification which can take coal and produce a power that's as clean as natural gas. Hybrid technologies, battery technologies and then I think you know one of the questions is will there be a resurgence of nuclear power and will that be one of the products because it is a from an emissions standpoint, anyhow a very clean technology. So there is, there's a variety of things. Dissalidation that can stretch the usage of water in an aggressive way. These are all technically driven solutions that are going to be very meaningful for the future.

 

Ipek Cem: When you look at the European markets because Turkey is now also on the way to become a EU member, of course we don't know in which point in time, but how does that affect the way you look at the Turkish market? Is that a plus, does that not matter anymore?

 

Jeffrey Immelt: I think you said it the right way. What I would say is that we make investments in Turkey without assuming the EU accession takes place. I think if the EU accession takes place it just takes everyting about Turkey and makes it better, makes it more filled with promise and opportunities. You know we are, I would say both, I'd say as a company we are believers that common markets are a force for good and you know even though there's a lot of debate inside Europe about how far they'll go and how fast even in the European community, I think it does drive better efficiency. I think it does make the markets more robust and I would say Europe right now is actually growing faster than we had thought and I think the common market is one of the reasons why.

 

Ipek Cem: I know that you're constantly looking as a company, like every other company, looking for efficient ways to do business and one of the things I've been reading about is cross marketing using the whole enterprise as your product base and maybe selling more than one product to one client. How does that work? Is that a strategy that's taking hold?

 

Jeffrey Immelt: You know I'd say we think about it not just with customers also with countries.

 

Ipek Cem: Okay.

 

Jeffrey Immelt: And we call it enterprise selling. And I would say there's about ten or fifteen percent of our customers who really do want a bigger relationship with GE then just one individual business. And for that 15 percent of customers what we try to do is organize ourselves in a way that can truly satisfy their needs. Now, we also think about it, you know look, we make an investment in Garanti Bank. I form a relationship with somebody like Ferit Sahenk. I never think that that's only going to be about consumer finance with Turkish consumers. I think that he can be a partner in energy investing. He could be a potential partner in real estate. I think our investment in Turkey makes GE more of a local citizen in Turkey. Might help us from an aircraft engine standing point. So I'm always thinking about the broadest context for the company in forming what I call a company to country relationship so that we can connect the dots in front of key influential parties like governments but also key customers that might be partners on a global basis.

 

Ipek Cem: I know this company to country approach is taking hold also in the Middle East and places like China. How does it work when people change, regimes. How does it change, is it very name oriented or is it more institutionalized?

 

Jeffrey Immelt: I think it's more institutional. You know in other words the way I think about GE, is that it's an institution that can endure with or without me. I happen to be here at this period in time but there'll be others that beyond us so we very much think about GE as an institution. And I would say there are countries that feel the same way. I mean I think in China it's an institutional relationship. In much the Middle East it's a relationship with a ruling family or somebody that's going to be around for a long period of time. And I would say even in democracies like Turkey it's a long standing reputation that we do what we say  we're going to do through the decades and political parties may come and go and leaders may change but I think most politicians have an understanding that business investments are 10, 20, 50 years and that relationships have to endure through regime changes.

 

Ipek Cem: It strikes me that over the course of 128 years there were only nine chairman am I correct?

 

Jeffrey Immelt: I think that's about right.

 

Ipek Cem: At GE so you have a tendancy with your employment policies and I guess as a general rule you take long term approaches even, you're always talking about 10, 15 years, which in this day and age is like one hundred years.So is that a company culture?

 

Jeffrey Immelt: You know I would say is that we are a very strongly competitive company.

 

Ipek Cem: Yes.

 

Jeffrey Immelt: So we do have quarterly earnings, we do have annual goals, we do have financial goals and things like that. But I think it's always been, and this goes way back to the beginning of the company is that there's always been a view that in order to drive changes that need to be made you have to have a perspective that might last more than a year, it might be a decade in nature. So I would say that long term planning has always been a cornerstone of GE as has been our staying power. You know sometimes, sometimes business success doesn't come from a brilliant idea, it comes from a pretty good idea that people are too stubborn to give up on over a five or ten year period of time. And if you look at something like, lets take the aircraft engine business. You know an aircraft engine, you might invest a billion dolars in one aircraft engine and it might be ten or fifteen years before you ever get an economic return on that product. But once you get that economic return you might have 50 years of earnings behind that. We came to Turkey in 1948. Between 1948 and 2002 we grew only to 200 million dollars space. And from 2002 to 2006 we went from 200 million to a billion. So I'd like to think that some of that groundwork that went in to place between 1948 and 2002 it's what's allowed us to be successful as the country really has recognized significant growth over the last four five years.

 

Ipek Cem: So what business segment was that?

 

Jeffrey Immelt: Energy, transportation, infrastructure and consumer finance with a little bit of health care mixed in.

 

Ipek Cem: When corporate social responsibility is an important concept for all companies at this point and I see that there's also a link between, for example you're doing a conference on water but you're also doing work with water technologies. What are some of the top topics that GE is focusing on in terms of giving back to society?

 

Jeffrey Immelt: I would say by far the biggest is in education. If you look at the vast majority of our I would say corporate giving, goes back to education in the countries and towns that we do business in for the purpose of helping under privilaged children get better educations.

 

Ipek Cem: Is this a global strategy?

 

Jeffrey Immelt: It's very global. We do it in the countries we do business in and towns in the US we do business in. We think it's very important. I'd say beyond that it's very important for companies I think to give back. So I truly believe that. But I think it's also important companies to profit from technology that also solves social problems and there's nothing wrong with that. In fact I would say when there is alignment between investors, companies and solving social problems, problems get solved faster. And when it's just viewed as a gift, quote on quote giving, problems never get solved that quickly. So I do think that there is a world for businesses that also try to align investors with solving social problems.

 

Ipek Cem: The world economy has been expanding for quite a while now and some people are saying it's going to keep expanding because we have so many different markets and so many new economies coming up to scale. You know others are arguing no, this is sort of becoming a bubble, as set prices are overvalued and you know a crash is imminent. And clearly whether it's extremes or not I cannot predict the future.

 

Jeffrey Immelt: They're both right.

 

Ipek Cem: Okay. What is GE's position in terms of growth of the world economy?

 

Jeffrey Immelt: What I would say is that the global economy is very strong and one of the reasons why it's very strong is that there is more diversity globally today than ever before that I can remember. And there's wealth being created in China and India and Turkey and Russia as oil has gone from 20 to 60 dollars per barrel space.It's put more money back into the economy and there hasn't been some of the negatives like high oil prices like we saw in the late 70's and things like that. So I do believe that the economy globally is stronger than it's ever been. It's been more interconnected than it's ever been. I also take great, I think I take great comfort in the fact that Turkey had a bad summer last summer. That there was lots of crisis yet it snapped right back and there was stability and there wasn't anarchy you know I think the same can be said for Thailand and Mexico and places like that. So I think there's great comfort in the fact that global economies appear to be diverse and inter related. Now the last thing I'd say is that the second part of your question is, there's more money today than good ideas. So there are some bubbles being created out there. I'm not sure I know exactly what they are but I do think that there is some excess liquidity and that will create some volitility as time goes on. But I believe the positives of the global economy today far surpass the negatives.

 

Ipek Cem: You said earlier that as a CEO you're also paid to predict trends. In your opinion what are some of the important business trends today that impact business decision makers but also maybe graduates who are looking at new venues to work in?

 

Jeffrey Immelt: You know I talk about six, I talk about infrastructure, global infrastructure, there's just a massive amount of money that's going to be put into energy, water, oil and gas over the next decade or so. Emerging markets..I think for students all over the world to understand. Turkey and China and India and Russia these are the places that are going to dictate the pace of  I think expansion for 10,15,20 years. Environmental technology, what you and I just talked about. I think that's a big theme. Demographics, aging populations in the developed world, expanding populations in the developing world, very important. The internet. It's can be a very big role of play in your business, in the entertainment business. And I would say liquidity, what you and I just discussed. The fact that there is more capital than good ideas and that the way liquidity gets deployed around the world, that's going to be a very big theme as time goes on so I think those are just some of the big things that I think about in terms of GE or that a 22 or 23 year old ought to think about in term of coming out of school.

 

Ipek Cem: In one of your interviews you were mentioning that in the 1990's CEO's became too much like celebrities and you also said "we're just normal people doing our jobs” but it does seem that it requires so much responsibility and you get such a return at the same time. So what are some of your principles that have kept you floating through your whole business life?

 

Jeffrey Immelt: You know what I would say is that, I view that in the case of GE it's really ultimately about the institution. In other words, GE was around long before I got here and it's going to be around as a company long after I leave. And so my role is really to leave the company better than I found it. And in order to do that there are two things that I've got to be good at. One is driving change. Which is picking the trends, it's taking unpopular positions both inside and outside the company and making sure that the boundaries of the company are different in the future that they meet the world of the future, versus where we are today. And the other thing I need to be good at is developing other people. It's spending the time, it's having a good sense for what the next generation of leaders has to look like, it's putting the right people in the right jobs, it's getting the wrong people out of the jobs they are in today and the role of driving change and developing the next generation of leaders are the two things that every CEO in his or her own way has to be good at.

 

Ipek Cem: Okay, and on that note I'd like to thank you very much for your time.

 

Jeffrey Immelt: Thanks, I enjoyed it.

 

This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, NTV networks and Ipek Cem cannot vouch for its accuracy.