General Electric’s biggest challenge: staying relevant in a digital age
Although the company generates annual revenue of $146 billion, figuring out a way to continually reinvent the organization is seemingly at the center of Immelt’s daily work.
The biggest change he has been working on is GE’s transition from a financial services provider to going back to its roots as an engineering and infrastructure company. To that end, GE (GE) has been gradually selling off many of its financial services units, including its private-label credit cards and retail-finance businesses, which it spun off last summer as Synchrony Financial.
“I’m probably one of the few CEOs that’s done $100 billion in acquisitions and $100 billion in dispositions,” Immelt told Sellers last Thursday as part of Fortune’s new video series, The Chat, at Facebook’s headquarters in Menlo Park, Calif.
In April, GE announced its intentions to part with much of GE Capital, its financial arm, with more than $500 billion in assets at the time. Around that time, GE agreed to sell about $26.5 billion worth of office buildings and commercial real estate debt, and it has just begun the sale process of a $40 billion portion of its U.S. commercial lending assets, Reuters reported on Sunday. The shift has been a part of Immelt’s plans since he took over as CEO and chairman in 2001, but the Great Recession of 2008 certainly created a bigger sense of urgency, he explained.
Ideally, GE’s financial services would make up only about $10 billion of GE’s business, Immelt said, aiming to lift GE’s stock, which has fallen from $40 in 2001 to around $27 today.
Yet as Immelt carried on with the interview, answering Sellers’ questions with a smile and seemingly relaxed demeanor, another side of his goals emerged: attracting young and innovative talent. Despite ranking high in the Fortune 500 list of America’s largest companies and No. 9 on Fortune‘s latest ranking of the Most Admired Companies, GE is still working to become a destination employer as attractive to young professionals as Google (GOOG), Facebook (FB), and startups have been.
“We have to be setting up shops to collect some of you guys when you’re thinking about leaving,” Immelt admitted to his audience of bright Facebook employees.
Throughout the interview he continued attempts to connect with his audience, stand-ins for the broader generation of young people he clearly wants to attract to GE. Just like his company, Immelt is a man with both old school roots and an enthusiasm for current trends — his favorite band is still the Allman Brothers, but People Magazine is his guilty pleasure, he revealed.
“I root for Facebook every day, but our plan is to make GE worth a lot more,” he told them in a subtle reference to Silicon Valley’s “world-changing” aspirations. In fact, he wants them to find jet engine factories exciting instead of “stodgy” — a tall order for a generation spending much of its time on Instagram and watching videos of cats.
He also joked about “minimum viable products,” a core concept in the startup world that refers to building the most basic version of a product that can be released to validate whether its a good idea — inciting quiet laughs as he added that jet engines probably shouldn’t be released in that form for obvious safety reasons.
This isn’t the first of GE’s efforts at Silicon Valley parlance. Last year, it enlisted Eric Ries, father of the “lean startup” methodology, which is focused on continuously improving a startup’s product and keeping costs and wastes low. The goal in working with Ries was to develop a program for GE that would utilize the same principles.
GE’s thirst for startup cool is undeniable. Even when asked about the company’s challenges with Europe’s tight regulations, Immelt couldn’t conceal his preoccupation with connecting with the younger generation of workers. “They don’t want to leave their homes, but they want to participate” in the wave of technological innovation, adding that young Europeans are just as enthusiastic as their American counterparts.
Of course, only time will tell if Immelt succeeds in turning GE into the relevant company of his dreams. Silicon Valley titans like Google and Facebook continue to take fresh talent from top universities’ pools of new graduates, much to the financial sector’s frustration. The lure of startup glory still convinces countless smart young men and women to choose the toil and grind of fledgling businesses over security at a large company like GE. The key will be whether or not Immelt can convince the next generation of workers that GE can continue to change the world.