Jeff Immelt wants a radical transformation of GE
It’s probably not completely fair to say that a deer changed the course of one of the world’s great companies, but one might assume that as Jeff Immelt stared out the window of his office in suburban Connecticut, he saw one too many.
He didn’t want to see deer. He wanted to see engineers, techies, kids with big ideas and sharp minds out to change the world.
Immelt didn’t want or need to change the world. He just wanted to change General Electric Co. and to change just about everything about it. Which in no small way explains why the chief executive officer of a famously staid conglomerate now works in a suite with exposed brick smack in the middle of the crowded Fort Point Channel district of Boston.
In the makeshift headquarters, the executive dining room has been replaced with common space that features free Jack’s Abby craft beer on tap.
You see, the company cofounded by Thomas Edison in 1892, that made its proudly generic name by producing achingly reliable light bulbs, refrigerators, and microwave ovens, now wants to be a tech company — an Apple for modern industry, bringing smarts and the power of the Internet to hulking gear like jet engines, turbines, and MRIs.
Immelt, Harvard MBA and a second-generation GE man, is close to completing a corporate transformation that is as radical as it is methodical, as essential to the company’s survival as Steve Jobs’s iPhone was to Apple’s.
After 16 years at the helm, the GE Immelt has built is unrecognizable from the one he took over from his legendary predecessor, Jack Welch. Immelt has sold off signature parts of the company — plastics, appliances, NBC, and the bulk of a finance division so big it rivaled Wall Street banks. Consumer lighting — yes, those light bulbs — could be next.
It is a brazen reshaping of one of America’s most stalwart companies, yet outside of business circles, Immelt is hardly a household name like Welch was. The Salem native was one of America’s first celebrity CEOs, presiding over GE during the frothy ’80s and ’90s. He earned the admiration of Wall Street by producing predictable profits and the antipathy of Main Street by ruthlessly cutting jobs.
Immelt has been the anti-Jack: the Midwestern math major who is partial to sweater vests, the guy who likes to drive his own car to work and park in public garages at night, the industrial titan whose subdued public persona exudes extreme competence more than charisma, and who has a talent for bringing out the best in the people who work for him.
On top of it all, he has had the unglamorous job of steering the company through sobering times, including cataclysmic events such as Sept. 11 and the Great Recession.
In uprooting the headquarters to Boston last August, Immelt might finally get to have as much fun running GE as Welch did. In May, the company will break ground on a $200 million futuristic complex overlooking the Fort Point Channel.
Immelt gets giddy over what many Bostonians take for granted, marveling how one city can be home to some of the world’s leading life sciences companies and teaching hospitals. He is beside himself when he thinks about the brainpower at the universities from MIT to Harvard, and the fact that all of this is just a 10-minute drive from his office door.
“That just kind of lets you see why being here matters,” he said in an interview at GE’s Boston office.
Or, put it another way, he was lonely out amid the tranquil lawns of GE’s Fairfield, Conn., compound, where the company had been headquartered since the ’70s.
Impatience on Wall Street
“He would say you would walk out of the building, and there’s no one to play with,” said Sue Siegel, who oversees GE Ventures, the arm that invests and collaborates with startups. “When you think about innovation, you want access. You want to feel it.”
Life would be great for Immelt — if not for Wall Street. His vision banks on a long-term payoff, but shareholders are growing impatient.
While Welch notched astronomical returns over two decades, investors in Immelt’s GE would have made more by putting money in a plain-vanilla index fund.
Immelt recently said the company would tie executive bonuses to the performance of GE’s industrial operations, a step taken after discussions with Nelson Peltz, a big shareholder who is pressing GE for better returns
“He’s been down there fighting the gators for a long time,” said Nick Heymann, an analyst who follows GE for the investment banking firm William Blair. “If he can climb the wall, on the other side is finally going to be Jeff’s promised land.”
The real question: Is Boston that promised land?
When Immelt took the reins from Welch on Sept. 7, 2001, among the rookie CEO’s biggest concerns was getting out of his predecessor’s shadow. Neutron Jack was legend, Fortune magazine’s “Manager of the Century.” Love or hate him, everyone knew who Welch was — and who would want to be measured against his record?
But four days later none of that mattered after terrorists turned planes into weapons attacking the World Trade Center and the Pentagon. Two GE employees were killed, a recession kicked in, and the company’s stock plummeted. GE’s aviation businesses — jet engines and commercial aircraft leasing —took a big blow with the world not knowing if flying would ever be the same again.
Later, when the 2008 recession hit, GE Capital, which had been producing more than half of the company’s operating profit, was battered just like the big banks it competed against. Along with companies such as Bank of America and Goldman Sachs, GE took a government lifeline to stabilize its finances and restore the confidence of investors and customers.
A lesser executive might have cratered, but Immelt came to the top job having been groomed from the day he landed at GE after graduating from Harvard Business School in 1982. He was a rising star at GE Plastics when Welch himself plucked him in 1989 to become president of consumer service for GE Appliances.
It was Immelt’s first big test, landing right in the middle of a massive recall of 3 million refrigerators with bad compressors.
“I was like 32 years old. I had 7,000 employees, and it was a crisis,” he recalled. “I grew up a decade in two years. It taught me about managing people in a crisis. How you communicate, how important showing up was. . . . It taught me a lot about how to be a good operating leader and how to be methodical in how I did things.”
He passed the test and bigger assignments came his way, eventually returning to the plastics division as general manager and later running GE’s health care business before being named at 45 years old as Welch’s successor.
“I think Jeff is as skilled in crisis management as anyone in the country,” said New England Patriots owner Robert Kraft.
How would he know? The billionaire owner is among a cadre of Boston business power brokers Immelt has gotten to know through the years, including State Street CEO Jay Hooley, Bank of America CEO Brian Moynihan, and Bain Capital chairman Steve Pagliuca.
Kraft formed a bond more than a decade ago with Immelt back when GE still owned NBC. Kraft headed the league’s broadcast committee, and Immelt wanted the network to air NFL games on Sunday nights. The two stitched a deal together.
But that’s not how Kraft came to know Immelt’s crisis management prowess. As Kraft and the Patriots became embroiled in the Spygate and Deflategate scandals in recent years, advice came from an unexpected place.
“On a personal level, he has been a great friend to me,” said Kraft. “Jeff called me literally from the other side of the world — one time was the Middle East, the other time was Asia. When everyone was coming after us, he gave support, advice, and counsel. That has meant so much to me and endeared me.”
Immelt, who played football at Dartmouth College, makes it out to a Pats game with Kraft at least once a year.
“In today’s world of CEOs of public monolithic companies, he’s a real people person,” said Kraft.
Innovation for survival
Every CEO talks about making his or her company more innovative, but for GE it’s a matter of survival. GE is a corporate mainstay, the only original stock left in the Dow Jones industrial index, which began tracking the performance of large public companies in 1896. It must succeed now in a world in which the only constant is change.
His task is monumental because GE is nothing like a startup; it’s a behemoth. Immelt has to find a way to bring along some 300,000 employees in 180 countries at a company that generated almost $124 billion in revenue last year.
Immelt’s first decade as CEO was spent fixing the house that Jack built. Immelt knew a lot of Welch’s tactics to drive growth would no longer work. The hardest breakup would be with GE Capital, which required shedding some $500 billion in assets.
Still, Immelt hasn’t been afraid to reshape GE through dramatic deals. He bought the power and grid business of French multinational Alstom in 2015 to expand GE’s holdings in that sector, and last year announced a deal for Houston oil services company Baker Hughes, doubling down on GE’s oil and gas business.
“He doesn’t accept the status quo. He doesn’t accept the easy way,” said Brackett Denniston, who was GE’s longtime general counsel until he retired in 2015. “He refocused the place completely on its inventiveness and its strength in innovation.”
Coming to Boston was a way to show the world how serious GE is about transformation. When Bain cochairman Pagliuca first visited the new headquarters, he thought he was in the wrong place.
“I was shocked,” said Pagliuca, who was a Harvard MBA classmate of Immelt’s and has done business with GE through the years. “This felt like Silicon Valley.”
Immelt hasn’t done all this solely by imposing his will. Ben Shapiro, one of Immelt’s faculty advisers at Harvard Business School, recalls how his easygoing nature put classmates at ease. Immelt wasn’t the academic star of his class, or the hardest worker in that workaholic realm, but he was notably good with people.
“What impressed me the most about him is that he was a very good listener,” said Shapiro, now an emeritus professor of marketing. “Jeff had this good mixture of emotional IQ.”
He also, from an early age, recognized that success requiredunleashing the creative energies of everyone around him.
“He is not the type of person you would lock up in a closet and ask to come up with an answer in six months,” said Shapiro.
These days, as he tries to cement GE’s new image, Immelt at times can act more like a student of business than the leader of one of the biggest companies in the world.
Since moving to Boston, he has asked Siegel, the GE Ventures CEO, to convene dinner salons at the headquarters attended by local and national players.
The first one, in October, was on the future of work and was anchored by a presentation from the cofounders of Catalant, a Boston startup that received funding from GE Ventures in 2015. Catalant, which began as a class project at Harvard Business School in 2013, has created an online database of business expertise that helps companies find talent for specific projects.
Immelt invited about 15 senior executives from major companies, as well as Harvard Business School Dean Nitin Nohria and Cambridge venture capitalist David Fialkow, whose General Catalyst firm is also an investor in Catalant.
Fialkow works with other big-name CEOs but had never met Immelt until that evening. What impressed Fialkow was Immelt’s command of the many GE businesses, while also knowing what his company is good at and what it isn’t.
He “does not have any N.I.H. — Not Invented Here. That’s really important,” said Fialkow. “Let’s get the best solutions whether inside or outside GE.”
Fialkow, who has been actively finding ways to help Boston keep its young talent, also recognized the moment as a huge opportunity for Catalant and other local startups Immelt may take under his wing. GE Ventures has invested in 10 Boston-area companies since it was founded in 2013.
“For the CEO of GE to bring his peers to this dinner,” said Fialkow, “was the greatest business development event you can ever imagine.”
Beyond the dinners, GE has hosted other local events to establish itself as a thought leader, including a hack-a-thon to dream up new ways to attack the opioid crisis and a forum to showcase its advanced manufacturing. The company has also become a sponsor of startup accelerator, MassChallenge, formed an alliance with MassRobotics, and swiftly inked partnerships with MIT and Northeastern.
Siegel, who has spent most of her career working in Silicon Valley, was wary about coming to GE nearly five years ago and wrestled with whether Immelt was committed to changing the company’s culture.
She has no doubts now. He routinely brings in new economy founders, such as Netflix CEO Reed Hastings, to talk at leadership meetings. More surprising is that Immelt carves out time to regularly meet entrepreneurs who aren’t household names. Take Catalant, which only has 130 employees, but the three cofounders have been meeting with Immelt twice a year.
“He is wildly innovative, entrepreneurial and willing to try to new things,” said Pat Petitti, the CEO and one of the cofounders of Catalant. “You wouldn’t expect that to be the case.”
Massachusetts has stake
It’s not just GE shareholders who are anxious to see Jeff Immelt deliver results, but Massachusetts taxpayers. The state’s relocation package is worth as much as $125 million while the city agreed to give GE a $25 million break on property taxes.
Critics have lined up, wondering why GE, a company with a stock market value of about $255 billion, needs any taxpayer help. Besides, the company has a reputation for taking advantage of laws to minimize its tax bills.
In his public appearances, Immelt is acutely aware of the need to show a return on investment for his new hometown. Upon its arrival, GE pledged $50 million in philanthropy over the next five years to community health centers, Boston public schools, and workforce training throughout the state.
But Immelt sets the bar even higher than that. In his mind, Boston can lead the next digital revolution, the same one GE is trying to engineer. It’s as if he is willing us to think bigger.
Immelt has seen firsthand what the right company at the right time can do.
One of his first jobs at GE in the early ’80s was in the plastics division, which required him to spend time in Silicon Valley.
He would call on Steve Jobs and other computer titans to persuade them to buy GE casings for their processors. Immelt saw how anchor companies like Hewlett-Packard became what he has called a “centrifugal force” in transforming that region into the tech powerhouse it is today.
GE, he believes, can play that same role for Boston in building the industrial Internet, a world in which software and data analytics govern jet engine performance and MRIs as so smart they will know when to replace a part or how to sift through images.
“It’s real, and it’s going to happen,” Immelt told business leaders gathered at a Boston College Chief Executives Club lunch last year. “If Boston isn’t the headquarters of that flow, shame on both of us.”