GE CEO Jeff Immelt: India, globalization and the economics of scarcity

The influence of India on the technology industry was on display at the Indian Institute of Technology (IIT) Alumni 2007 Global Conference taking place at the Santa Clara Convention Center in the heart of Silicon Valley. The IIT is India's premier technology university and its toughest. Last year nearly 300,000 students applied and 4,078 were admitted. Among the cumulative 100,000 IIT graduates, 25,000 are working in the U.S.

General Electric Chairman and CEO Jeffrey Immelt was the opening keynote speaker, and addressed the U.S.-India relationship. During a lengthy introduction of Immelt, Rajat Gupta, chairman of the Global Pan IIT Board, said, "No corporate leader is a stronger supporter of India than Jeff Immelt."

Immelt lived up to the billing, declaring that GE and India are "destined to grow together" to the receptive crowd of about 3,000 IIT alumni. He noted that GE probably employs the highest number of IIT graduates of any corporation. The company has 50,000 engineers outside the U.S., and its largest R&D center in Bangalore. "We are making it a global intellect, tapping into best brains on global basis," Immelt said.

In addition, GE has major investments in India, including a $500 million infrastructure fund that Immelt said could double over time. GE is working with India on projects such as developing cleaner coal technology, nuclear power and diesel locomotives. Immelt encouraged the U.S. to sign the pending nuclear treaty on the table with India. "It's one of those stupid, crazy political things," Immelt said.

About $50 million of GE's $170 billion in annual revenue comes from emerging markets. India currently accounts for less than $3 billion, but is projected to rise to $8 billion by 2010.

Immelt believes that India is well positioned for the 21st century to become more of a global economic force. "When I joined GE in 1982, Japan was the absolute global threat." Immelt said. "My predecessor sent us to study Japan. The great companies turned out to be those that could leave Japan., such as Toyota and Canon." India's global success will be judged on how well it can "leave the country and become great global companies in the next ten years," he said.

Part of globalizing is creating a win-win situation. "Can the standard of living in India grow by 100-fold without the standard of living in the U.S. going down over time?," Immelt asked.

He didn't have a clear answer his own question, but described the problem. The U.S. manufacturing base is hollowed out, the country has a $1 trillion trade deficit and the education system isn't graduating enough engineering students to compete globally, he said. "We are not working hard enough to be exporters," Immelt said.

India's ability to find the win-win and to help enlarge the whole pie will determine if this is will be the Indian century, he concluded. He gave India an edge over China and Russia in adopting a win-win approach.

For GE, globalization is about an exchange where everybody wins. "If we make money in a country and for a country, we have the right to succeed," Immelt said. "In the end we need to earn the right to globalize," he added, citing government regulation as part of the formula , especially in areas such as energy.

India, as an emerging economy, still has much work to do create an environment for hypergrowth. Immelt, who has met several times with Indian Prime Minister Manmohan Singh, said India has to upgrade its basic infrastructure, such as transportation and electricity, and improve its broader education system.

"If India does those two things it has limitless potential," Immelt beamed to the crowd. He added that he is skeptical about India's ability to improve its infrastructure. "The government hasn't cracked the code on how to do that yet, but private industrialists and states are moving to fill that void." Regarding India's burgeoning economy, Immelt said, "The economy has gotten to the point where the government can't screw it up."

Immelt noted that in the U.S. globalization is not a concept appreciated by the majority. He suggested that in a vote yes or no on globalization 60 percent of Americans would vote no. "There is a lot of misinformation," Immelt said. "Ultimately, we have to rebuild confidence as industrialists. I worry about our fear creeping into our ability to make long-term industrial decisions."

Immelt got down to business in describing GE's large footprint across multiple industries and how he thinks about management and making investments.

"There are four categories that might change the world: Solving a problem, redeployment to where profits get made, allowing people to achieve lower cost and allowing people to create new business models," Immelt said.

"If I had one dollar to spend today, I would invest in solving the biggest problem today--the economics of scarcity." Shortages of water, raw materials and natural resources fall into this category. He cited the need to for energy independence, reducing greenhouse gases and productivity and competitiveness as areas that GE and others will invest in for the next 10 to 20 years.

For example, GE will introduce refrigerators and lighting that consumes half of the energy of what they consume today. The company is investing in healthcare, such as electronic medical records, hybrid locomotives, as well as in coal gas and wind, solar, nuclear power and other "eco-driven products that will earn money by solving society's problems."

Immelt's motto seems to be, "Change the world and GE can profit at the same time." As a part of that goal, GE is focused on designing technology in emerging markets such as China and India to take advantage of emerging market economics. The company is building a magnetic resonance scanner in China that will cost $500 million compared to over $1 million today. "We couldn't engineer it in the U.S.," Immelt said. "We have to think of emerging market economics."

Immelt also talked about the need for new generation of leaders. He said the era of management science focused on process management over the last 20 years is over. "The 'who' and 'how' generation era is basically over, replaced by 'what' and 'where' generation." The 'what' and 'where' is about leaders who have more domain expertise and are better at choosing products and regions to target. "Nothing about management is general any more," he added. "Unless you have a sense of domain or expertise, you just can't lead in the world today--you need more courage, decisiveness, the ability to build teams and to be committed to building a businsess.

Immelt offered his advice to graduates of IIT, who he said have too many choices today. "People moving from company to company and theme to theme are not builders," he said. "People need to get into a technology that they are passionate about, with people they like. They should go to a company or entrepreneurial startup and not leave for five years. They should see it through and discipline themselves to not change their passion for five years."

I doubt Immelt would mind if those IIT graduates chose to spend those first five years with GE.