Jeffrey R. Immelt came to the top job of General Electric (GE) in September, 2001, with the goal of significantly changing the company. Despite a tough economy, terrorist attacks, and a climate marred by corporate scandals, Immelt continues to push the revolution. And he's getting real results. BusinessWeek Senior Writer Diane Brady recently met with GE's chairman and CEO to talk about where he goes from here. Here are edited excerpts of their conversation:
Q: At GE's big managers' meeting in January, you voiced two fears -- executives not taking enough "swings," and GE ceasing to be, well, interesting. Does that really keep you up at night?
A: When you're in front of a big group, you try to be aspirational. In the environment we're in right now, though, growing is the thing that makes a company distinguished and interesting. I now tell our managers, "you're not going to stick around this place and not take bets. If you see your job as a five-year run, instead of an 18-month run, you're going to have to take those bets." The places where we've gotten in trouble is in the businesses where we haven't invested consistently.
Q: I spoke to one executive who said that, for her the first time in her life, she feels that she can fail. Is that true?
A: Failure is not our goal! But you want to have people who take swings. The ones who aren't going to make it are the ones who don't try. The people who take swings and learn and get better will make it.
We succeed more than we fail, but we are trying to do new things. We have about 80 "Imagination Breakthrough" [projects] right now. Some aren't going to make it. If I fire the people who don't make it, we're not going to have more imagination breakthroughs.
Q: Tell me about these "Imagination Breakthroughs." How do these projects differ from the usual plans to build on a core business?
A: What we've tried to do is aggregate these growth projects to fund them and make sure we get a process around them. We're looking at things that can give us incremental growth of $100 million, and those things that can grow the boundaries of this company. The way I see this working is that, a year or two from now, we will have 500 "Imagination Breakthroughs," and they ripple throughout the company.
The difference is the notion of funding incremental growth, of getting them pulled out of the pile, of learning from them. It's just another piece of how you keep the innovation process fresh and growing.
Q: Has it been easy to turn this culture toward innovation?
A: I wouldn't say it's easy. I think there's a need for somewhat of a mindset change. We need to have a consistent external focus. We've always had the research labs. We've always had the resources to be innovative, and we've been innovative in a number of businesses. But, in any big company, you have to constantly push people to look at markets and customers, rather than look internally at themselves.
Q: Fund managers say GE is a great barometer of the economy. Do you think you're better than that?
A: I do, but it doesn't bother me. People are always going to say that because of our size and diversity. What we try to do is create a portfolio that can grow at two to three times the GDP, organically, and have businesses that can go against the cycles. The segment of the company that is economically sensitive is now less than 10% of the company.
Q: You have said this is best time to be at GE. That's a bold statement for a company that was started in the late 1800s.
A: I believe it. This is a good set of businesses for where we are in the world right now -o big energy, big health care, big transportation, big infrastructure, consumer finance, better entertainment. The balance sheet, in terms of free cash flow and financial flexibility, is as good as we've had. We have good initiatives around growth.
And we have a very strong reputation. GE is respected around the world. When I go to places like Turkey and Russia, I find that this is a company that means something. We can use that to our advantage. I'm not 125 years old, so I speak with some hyperbole, but I think it's a great time to be a part of GE.
Q: Let's switch to where business is hot, like in China. You predict $5 billion in sales there this year. How do you play that market?
A: China is really about infrastructure. There will be tremendous investments made in infrastructure, health care, energy, water, water, security. GE can approach China as one company and form a company-to-country relationship that's bigger than any of the pieces.
We're getting more comfortable with the rule of law. We've been careful so far. Our investments only trail our ability to understand what the rules are going to be. When I go there today, there's a tremendous focus on the financial system. They've got external consultants working on it. China is not a slam dunk. But it's right in GE's sweet spot, so we've got to play and play big.
Q: You're even pushing in slower-growth places like Europe. One of your executives told me the story of how you had a meeting with [German Chancellor Gerhard] Schr?der and walked out determined to open a research center.
A: There's no place in GE where you feel more like a loser than in Germany. You have Siemens (SI) and Phillips (PHG), and we haven't been that good. You can go to Japan or China, and GE gets some respect. You go to Germany, and you sit at the back of the bus.
Can we survive and not have great revenue in Germany? Sure. But there are a lot of important customers there. We wanted to put a research center in Europe. It's a marketing tool, as well as a research tool. You have better access to thought leaders. The Chancellor didn't insult me or anything like that. There was just a sense that we could do better.
Q: You're expecting $165 billion in sales this year. Do you ever look at this company and think it's just too big?
A: We don't think that way. We try to be big in big industries o- health care, energy, infrastructure, finance. If I were talking about 30 different industries, boy that would be tough to get your arms around. But if we can be meaningful in industries that are integral in the world, that's the GE of the future.
If you look at the contemporary themes for today -o personalized medicine, energy efficiency, advanced security systems, growth in China -- the only thing that GE isn't a leader in is computational science, with no desire to go there. Beyond that, this is a company that has as meaningful a set of capabilities for the period of time we're in as any company in the world.
Q: Do you still [annually] cut the bottom 10% [of your managers], as [former GE chief] Jack Welch did?
A: We still do it, but it's not as in your face. It's not something where we have to walk you in the door and head-butt you with it.
Q: The stock is still off its highs.
A: Investors want to see the consistency come back, and I understand that. I loved the bubble, but energy and insurance added some volatility. As we perform, I know this is a company that will have a nice premium to the S&P 500. I'm more passionate about taking it up another level. We're playing offense vs. defense now. I feel like we've got tremendous opportunities to do better. But I like where we are, and where we're going.