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

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

Summary: 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.

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TOPICS: India, China
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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.jpg

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."

immelts-2.jpg

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.

Topics: India, China

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  • And will America be addressed? Or are we left to rot?

    I've dealt with some Indians and they seem no better than the rest of us.

    It's also because their cost of living allows $10/hr jobs to be goldmines, when the same $10/hr job can barely allow a person to live in the States.

    That's also why these big companies can invest so much into it. I thought that was a handout - welfare. Isn't welfare wrong?

    When globalization becomes truly global and not a "migration out of the US despite allowing H1Bs to come and go as they please" problem, let me know. Not many Americans want to spend tens or hundreds of thousands in dollars in education for a field that's going offshore.

    And don't tell me the world owes nobody anything and be anti-abortion and/or pro-military at the same time. :)
    HypnoToad72
    • I owe you an apology.

      I was a bit rash, and harsh.

      But given the lack of any infrastructural development in America, with plenty of good Americans capable to do the work - or willing to do it or even get a loan if it meant being able to use the knowledge learned, there are a LOT of people who are genuinely concerned and feelings of abandonment by the American population at large right now.

      The Earth can always use more scientists, but the 300 million in America are surely potentially just as valuable as the 1.5 billion in India?

      Or is it really about money, a concept I've heard and parroted myself. Despite emotion, I am open to hear new ideas but what we are seeing is the decline of America and that is truly disheartening.
      HypnoToad72
      • Unfortuneatly, we can blame no one but ourselves

        We are a county that wants to receive great wages for our work, while at the same time looking to spend as little as possible on every product we purchase.

        How can a company produce and sell a computer for 300 dollars if every employee at the company earns 50,000 dollars a year or more? So the same cmputer now costs 650 dollars and what do we do?

        Wee walk part it at the local electronics retailer and purchase the 300 computer made by some other company overseas.
        GuidingLight
        • Cost of living is still a factor.

          Again, India's vs America's. And that's what's being exploited.

          I wouldn't mind taking the time and money to become a computer engineer; a highly paid profession that's being shipped overseas. But if even the costs of training are higher in America, who's going to spend the money? Not the prospective employer. Not the prospective employee. That is the imbalance that needs to be corrected. It's not just worker wages. It transcends that.

          We have more than ourselves to blame, though I agree, we should take our part as well. But as I said, and will say again, the cost of living in India is lower. That's how their middle class can bloom and prosper while we whither.

          More amusingly, I've yet to see a new computer that costs $300. Except Wal-mart, but the quality of the components used would be so bad, the thing would fail within a year - long after the 90 day warranty ending...
          HypnoToad72
          • 300.00 computer?

            Dell was selling Dimension E520, 3.0GHz Pentium D, 512 RAM, Windows Vista or XP for 309.00 dollars with a 1 year warrenty. Our company has some of the older Dimensions (2300, 2350, 2400 series) still working fine afte all this time, so I can see what GL is saying

            Part of the issue is their was a time where you worked your way up the job skill ladder if you wanted more money, in the last couple of years the quick money is in real estate or stocks, so why learn a technical skill?
            John Zern
          • Why not open up the case

            and look inside the computer you used to post this message?

            I would hazard a guess that except perhaps the CPU - and that too not in its entirety - everything else in the $650/= PC is actually manufactured overseas, most probably in China. Today tha largest manufacturer of RAM is Samsung of Korea.

            The $300/= Wal-mart pc probably does not include an OS or the monitor. For that price I can build a PC with dual core 64 bit CPU & 1 GB of ram including all the other necessary paraphernalia with a 3 year warranty on all the components that matter by way of value.

            As a matter of fact your bagger at Walmart makes more than a very well qualified programmer in India.

            Why don't you accept the fact that the American people are spoilt to such an extent that they cannot face the music? You are just getting a little bit back of what you have dished out to the rest of the world in the last century.
            pmshah@...
        • No, Blame Falls on the Corporations

          GuidingLight, can you point me to one of those companies that pays $50K/yr minimum for each employee in its organization? I want to work there.

          No, you can't.

          It is NOT too much to ask that a living wage is paid to workers in the US. With the vast majority of jobs paying less than $21K a year--an amount that is NOT a living wage without social subsidies--it's no wonder there's a so-called scarcity of workers in many fields. Once taxes, rent and fuel is taken off that, there is not much left over for necessities and emergencies. Much less buying a house or even a $600-$1K computer.

          I don't think people want 'great wages' for their work...but they DO want wages they can LIVE on. Geez.

          Should the US worker be blamed for expecting a wage they can live on? Or should the corporations gouging the US consumer while at the same time paying the lowest wage they can--and off-shoring a large part of its labor--be held accountable?
          TechinMN
          • Vicious circle

            America is caught in a vicious circle. Wage rise - cost rise.

            What the Americans need to do is be able to honestly differentiate between WANTS & NEEDS & learn NOT to keep up with the Joneses.

            Once you can do that your problems will be solved automatically.
            pmshah@...
  • How about a dose of TRUTH!

    http://www.youtube.com:80/watch?v=TCbFEgFajGU


    Can't find American workers. BULLSHAT!!!
    No_Ax_to_Grind
    • Thank you MUCH for posting that link. n/t

      n/t
      HypnoToad72
    • Don't worry, the big companies still prefer US workers, so those of us with

      more than half a brain do not mind competing with foreign workers. As a matter of fact, we LOVE working with brilliant foreigners from different cultures. And, it is the immigrants that have made this country so great.
      DonnieBoy
      • I guess you failed to grasp the video

        Why am I not surprised...
        No_Ax_to_Grind
    • That piece of fiction has gotten you scared?

      Interesting, as you have claimed to be someone of some importance, what was it you said... you are not a wage slave. Whys should that piece even bother you if you are not very low in the ladder?
      B.O.F.H.
      • Its simple

        I am an American, I care what happens to all Americans. Don't like it, to friggin bad, kiss my donkey.

        Oh, and what part of the video did you think was fiction? Do you think it was all done with special effects or something?
        No_Ax_to_Grind
        • And what makes you an American?

          Just because your ancestors came to America not more than 200 year ago? Unless of course you are a true full blooded native American! For all practical purposes there is no surviving American.

          Remember those famous lines by John Wayne in a western movie - can't remember the name - "Only good Indian is a dead Indian"
          pmshah@...
    • Its the bottopm line

      Its all about money. If you are so concerned about it why don't you try one experiment your self.

      When you are finished with your shopping of non food items check the labels for country of origin. Put back everything that is not made in USA. I think you would have to go without most of your regular requirements.

      The only difference here is that the people involved or affected are white collar workers as compared to blue collar workers. They have good education & can voice their concerns which is not necessarily true for the latter.

      I can practically guarantee you that each and every one of those IIT graduate now settled in US came on a student visa for higher/specialized studies & subsequently during his/her work experience period had the visa adjusted by the employer because they were so good.

      You should also hear about what Bill Gates has to say about IITs. What he would like to do is simply hire each and every IIT graduate.

      Of the 300,000 applicants only 4078 get admissions to the IITs. Do you believe the next 5,000 or the next 10,000 are no good? The difference might be something similar to scoring 695 or 700 in your GMAT exams. These average scores of those admitted to Harvard Business School in USA (695) and IIM-Ahmedabad (700). Now that they have the opportunity they are producing at a much lower cost. That is what globalozation is all about.

      If you were to check the 500 highest ever test scores in GRE you might be surprised at the number of Indians in that list.

      Just because we were colonized for centuries and stripped almost bear of our natural resources does not make us any less smart or intelligent.

      And don't ever forget the American History. You got huge & totally virgin land mass by eliminating the natives to be exploited for your prosperity. You cannot begin to comprehend how to compare it with a country like India.

      And finally do remember American continents were discovered by Columbus when they were desperately looking for an alternative route to India for their sheer survival. Thank your lucky stars for that otherwise you just might be languishing in some European location in conditions worse than present day Africa.
      pmshah@...
  • Jeff Immelt for President

    Dan, see my post

    http://dealarchitect.typepad.com/deal_architect/2007/06/jeff_immelt_for.html

    we can sit around moping and playing defense or like him play offsense around the world. Last quarter GE reported Global revenues of $19.6 billion, up 9%, and developing markets revenues of $7 billion, up 14%. One company exporting $ 80 billion a year! - if every US company expported a billion year and there think of the impact on our trade deficit and high level jobs...
    vmirchan
    • Short term flim-flam.

      Giving away jobs is NOT trade. Nor will it resolve the deficit problem in the long term. In fact, it'd worsen it.

      I've read that guy's empty meanderings in the past. As for him, I'll just pray his corporate buddies start drooling over China's cheaper and expanding labor pool. It'll be fun to see the Indians whine about the exact same problem Americans are. ;)

      http://www.neoit.com/media/Feb09_video_ExportingAmerica.html

      Lou Dobbs for President.
      HypnoToad72
    • You fail to grasp something

      GE is not exporting $80 billion a year. They are moving most of the manufacturing and design work that produces that $80 billion offshore. That's not the same as exporting it. They are doing their best to minimize how much of that money comes into the U.S. except as money for the executives. Immelt doesn't really care about a win-win situation between the U.S. and India. He cares about a win-win situation between India and his bonuses.
      JimSatterfieldW
      • GE employs 150K Americans

        check this out ...and they are not $ 5 an hour jobs...these are civil engineers, R&D, medical pros...

        http://www.ge.com/company/citizenship/downloads/pdf/chapters/employees_cit07.pdf
        vmirchan