Technological Innovation Key to Profits, GE Chairman Tells Builders - 2/2/2004 - Mortgage Loan Refinance Debt Equity

Technological Innovation Key to Sustaining Profits, GE Chairman Tells Builders

Citing the U.S. housing industry’s “tremendous growth and resilience during an economic downturn” and calling it “the most successful industry in the world” and “an engine for growth in the economy,” Immelt said there was “more to come” in the way of high performance this year, but beyond the November elections, GE is planning for slower growth and an economy “where the people who can make their own growth will survive.”

“You are probably feeling pretty good right now,” he said, “but it is always better to change before you have to change.”

Immelt ticked off five trends that are having an impact on U.S. business: excess capacity in almost every industry, with pressure on pricing; the changing nature of global competition as more countries gain access to technology (“You can hire two to three engineers in China for the cost of one production person in Kentucky,” he said); the consolidation of the distribution of products and services, which presents “great value for the consumer but is a challenge to profits;" a growing bubble of the aging population in the U.S.; and more volatility in most industries as the result of world events.

In this environment, “everything has to be focused on growth,” he said, and good business people will: focus on operational strength; make a real investment in technological innovations, with the aim of being dedicated to customer service; maximize what they can get out of their customers; understand globalization; and take an interest in growth industries.

Like every great company, GE stands for competitiveness, Immelt said, and it is based on a “culture of productivity and a business model that generates cash.”

Immelt said his company’s current strategy is to focus on simplification and reduce its processes, with the view that “every dollar that doesn’t fund growth is a resource that’s wasted.”

“Everything is based on cash flow,” he added, “otherwise you can’t invest in growth in the future.”

Immelt said he spends one week a month in front of his customers so that he has a good understanding of how they feel, and he noted that GE is spending 15%-20% more each year on new products and innovations. “Your future profitability will be crushed if you’re not a technological innovator,” he said.

GE is investing $25 billion in services, he said, which he described as “ways to make customers more profitable and good margins for you.” For example, he said that his company is developing the ability to offer home builders a complete package of goods and services. “Customers are going to be the king and they are going to rule in the next 10 years and beyond,” he said.

“Here are the places where I would drive change,” he said: operational productivity; new trends and innovation; building a portfolio of services; “finding ways to make yourself indispensable for your customers;” understanding the world; and “a desire to grow and build new things.”