Jeff Immelt’s call to action: Where do we begin?

Last Friday a recent graduate of our MBA program, who now works for GE, sent me a copy of a speech that CEO Jeff Immelt was making at the Detroit Economic Club. He’d just signed an agreement for GE to partner with the State of Michigan to build GE’s Manufacturing Technology and Software Center, for the purpose of developing technology to provide clean energy, better transportation, and affordable healthcare.

Mr. Immelt offered encouraging words to the hard hit people of Detroit. “The people of this great state have been told that the decline of their manufacturing base was inevitable. I reject that pessimistic view. I believe that good jobs can again return to Michigan and in manufacturing centers across America.” He opined that America prospered from the productivity of the information and services age, but has forgotten the fundamentals of its core competencies.

“As a nation, we’ve been consuming more than we earn, saved too little and taken on far too much debt. Growth in research and development has slowed. …While some of America’s competitors were throttling up on manufacturing and R&D, we de-emphasized technology. Our economy tilted instead toward the quicker profits of financial services….What has been the impact? Unemployment is at the highest point in 26 years. And, as a percentage of S&P 500 earnings, financial services expanded from 10 to 45 % over a quarter-century.”

“You know something is wrong when a mortgage broker is pulling down $5 million a year while a Ph.D. chemist is earning $100,000.”

Mr. Immelt went on to call for America to set its sights on being a leading exporter based on a strong manufacturing base (20% of jobs should be in manufacturing, he claims) , to invest more in R&D (it’s currently at an all-time low of 2% of GDP), and to address the major challenges of clean energy and affordable health care.

Was Mr. Immelt’s speech self-serving? Absolutely. GE’s stock crashed along with everyone else’s, thanks in large part to its enormous financial services business. Surely, not all of our problems would disappear with a return to manufacturing. But the focus on innovation? On technological innovation? On investment in technology? It’s the only sure bet. But it begs the question that we hear repeatedly from corporations around the country. Where do we begin. How do we capture breakthrough opportunities? What processes must be aligned to realize the full potential and earnings from new discoveries, new services, & new technologies?

The answer is not simple but requires a change in perspective and a change in how corporations fund, resource and manage innovation platforms and the functions that support them. The
learning we as researchers impart to corporations working to develop innovation capabilities , is that the management processes developed by large companies to provide incremental innovation will kill off breakthrough innovations, and that companies must develop fundamentally different methods of managing breakthrough innovations. It’s the only sure bet.


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