The World I See: Jeff Immelt’s Advice To Win In Time Of Anger About Globalisation

Many people around the world are angry
about globalisation and companies and
governments are both to blame for it. But now
is not the time to turn inward as a result, GE
Chairman & CEO Jeffrey R. Immelt told
graduates of NYU’s Stern School of Business
on May 20 during a commencement address.
Here are Immelt’s prepared remarks to the
graduating class:
You’ve earned a degree from a business
school as fine as they come. Thirty-two of you
did so after serving in the United States
military – and for that you have our thanks.
This class is truly global with members from
59 countries. What a great chance to learn
from each other about the world.
You are entering a volatile global economy,
the most uncertain I have ever seen. This is a
world that needs better leaders, with new skill
sets. The playbook from the past won’t cut it
today. My advice for you as you enter this
world is to be flexible, be bold, and don’t fear
criticism. Today, I want to discuss how these
lessons can be used to navigate the seismic
transformation underway in globalisation.
I built my career in a time when productivity,
innovation and globalisation were essential to
success, the way to win. Now they are reviled,
particularly globalisation. There were a few
things I thought that I knew: companies that
gave people good jobs, made good products,
and contributed to their communities would
be valued; governments would at least try to
nurture growth and address big problems;
above all, global integration was a force for
good and would continue to grow.
In the past two decades, we have halved the
number of people living in extreme poverty.
The global economy has tripled in size.
Income inequality at the global level has been
substantially reduced. Innovation delivered
better and more accessible health care,
cheaper energy and connected people across
the world like never before.
America was at the center of globalisation –
quite consciously. American companies that
invested in global operations were a source of
pride, of jobs, of overseas influence. We
became woven into the global economy. I
joined GE in 1982 and 80 percent of our
revenue was in the U.S.; this year, 70percent
of our revenue will be global. GE has
customers in more than 180 countries and
exports over $20 billion worth of goods to the
world each year. Our U.S. workers earn high
wages because they make leadership products
that can be sold around the world. Being
global has helped us become more efficient,
more competitive.
These bonds have fractured. Today big
companies are distrusted; governments and
global institutions are failing to address the
world’s challenges; globalisation is being
attacked as never before. This is not just true
for the U.S., but everywhere. These sentiments
have traction in Europe and Latin America, on
both the right and the left. The future of the
EU is an open question. Protectionist barriers
are rising in Asia and Africa. China is
repositioning its economy to be more
sustainable and inclusive.
Many people feel left behind. The global
economy is growing too slowly. Some workers
have been displaced by outsourcing, the
middle class has been squeezed and income
inequality has risen to unacceptable levels. As
technology and globalisation race forward,
people understandably fear their impact on
jobs and incomes, and distrust the motives of
companies and government.
Where does the fault lie? In part, with
business. Business is complicated. It is always
important that the power of our innovation is
evident, not just constraints. Productivity
growth has slowed to a crawl. At a time of
massive liquidity and low interest rates,
capital investment is declining. Financing is
more difficult to get, particularly for small
business and infrastructure projects.
Investment is required for productivity which,
in turn, supports higher wages.
Part of the fault lies with technology.
Innovation has driven growth but also leads to
greater instability. The internet can connect
people, but doesn’t necessarily give them jobs.
Technology has raised the competitive
requirements for companies and people. This
exacerbates economic insecurity.
Part of the fault lies with Government.
Government has failed to promote growth in
almost every corner of the world. In the U.S.,
regulation has expanded while infrastructure
has lagged. Education has failed to keep up
with the need for modern skills. Small
business creation, the engine of growth, has
trailed previous times.
Our politics make it impossible to reform old
systems: our tax code is 30-years old; our
immigration system is broken; and a huge
structural deficit clouds the future.
Many other places are worse. While I believe
in the European Union, it is tough to see
Brussels driving growth. It has added
bureaucracy without the ability to solve
problems.
The growth of China has impacted global
dynamics. Their focus on exports has stirred
populist fears in the West. China is extremely
skilled at connecting economic development
with geopolitical influence.
While U.S. companies can win globally, the
U.S. doesn’t engage effectively enough on the
world economic scene. With just 5 percent of
the world’s population and 25 percent of the
GDP, we have a lot to gain, but are looking
inward. Our trade deals are languishing in
Congress, and we remain the only developed
country in the world without a functioning
Export Bank. Industrial exports are not a
priority for the U.S.
In the face of this headwind, we are having a
raucous Presidential election, one where every
candidate is protectionist. Globalisation is
being blamed for unemployment and wage
inequality; there is a general sense that this
must be somebody else’s fault; and improving
competitiveness is not an option. Even though
all of these trends hurt small companies more
than big ones, it is difficult to achieve a
productive global game plan between business
and government.
Flexible thinking is required. Going forward, it
is safe to say that trade deals will be very
difficult without U.S. leadership. Every
country wants more jobs and will seek their
own advantage. The anti-free-trade sentiment
will not be solved by one election or in one
country or with one leader. So the
globalisation I grew up with – based on trade
and global integration – is changing.
As a business leader, it is difficult to decide
when to defend the old way (what you were
taught) or when to change based on what you
see.
With globalisation, it is time for a bold pivot.
GE has $80B of revenue outside the U.S., so
global growth is critical to our success. In the
face of a protectionist global environment,
companies must navigate the world on their
own.
We must level the playing field, without
government engagement. This requires
dramatic transformation. Going forward:
We will localise. In the future, sustainable
growth will require a local capability inside a
global footprint. GE has 420 factories around
the world giving us tremendous flexibility. We
used to have one site to make locomotives;
now we have multiple global sites that give us
market access. A localisation strategy can’t be
shut down by protectionist politics.
We will always be a strong American
manufacturer. But, we also have built
factories all around the world. We have
learned to manage through extended supply
chains and developing small business. For
every GE job, there are eight in the supply
chain. We are not pursuing low wages; we are
using a manufacturing strategy to open
markets.
We will produce for the U.S. in the U.S., but
our exports may decline. At the same time, we
will localise production in big end-use markets
like Saudi Arabia. And countries with effective
export banks, like Canada, will be more
attractive for investment.
Our competitive advantage is digital
productivity. In the past, productivity could be
achieved only through low-cost labor in large
factories. In the future, manufacturing will be
driven by new materials, additive techniques
and digitised plants. Factories will be smaller
and more flexible. Our goal is to make what
we want, where we want. Workers will be
more productive and more valuable.
Meanwhile, the digitisation of assets also
facilitates global productivity, through what
we call the Industrial Internet. The
combination of physical and analytical will
improve infrastructure productivity. In
Pakistan, we are using analytics to improve
energy efficiency and expand capacity. In
India, we can use the internet to deliver
healthcare to remote regions. In China, engine
analytics are improving airline productivity.
Every industrial company must also be a
digital leader. This is the next wave of
competitiveness.
We can accelerate growth by solving local
problems. In the past, every solution was
viewed as a “global solution,” where one size
fits all. In the future, companies will impact
the way the world works by innovating to
solve problems with local capability. To that
end, we have built unique solutions for clean
energy and healthcare access. We have built
local teams to deliver outcomes in markets like
India and Brazil and Africa. Today, solutions
from the developing world improve outcome
in developed markets.
Businesses can also have a unique impact on
society. Two years ago we opened a business
process outsourcing center in Saudi Arabia
that will employ 3,000 women and is led by a
woman. Our vision was to tap into a pool of
talented Saudi women to execute process
support for our activities in 50 countries. The
center is growing and competing globally.
Sometimes businesses can drive change faster
than governments. It is tough to hate a
company that is reducing climate change and
creating jobs.
Financing is the new oxygen of global growth.
While global problems require local solutions,
they also require capital. The financing needs
for infrastructure are $1 trillion a year. One-
third of the world still lacks access to
electricity; this is unacceptable when we have
the technologies to meet demand right now.
Regulation has created a huge gap in
infrastructure project finance. So we are
taking it on, by building local infrastructure
finance teams, capable of tapping global
capital markets.
These teams are critical as we cannot count on
the U.S. Exim Bank. One Senator has blocked
the will of 70 percent of Congress. This
reinforces my point that companies must
control their own destiny globally, protecting
against government dysfunction.
We have positioned GE to capitalise on
investment flows from new sources. These
include the Chinese government‘s “One Belt
One Road” initiative. This is their attempt to
build relationships in Central Asia, the Middle
East and Africa leveraging their financial
strength. We are supplying apower project in
Pakistan using Chinese financing.
Unlike the U.S., most countries are increasing
their export financing. So we will export
turbines to Asia and the Middle East, made in
France supported by French financing.
Executing a new global strategy requires
simpler organisations. Complex and
centralised bureaucracies are obsolete. Change
requires new business models … leaner,
faster, more decentralised. The days of cycling
global ideas through a central headquarters is
over. Globalisation requires pushing capability
to local teams who are empowered to take
risks without second guessing.
We tend to think of globalisation as a
philosophy, but it is much more about what
you do on the ground. Success requires
hundreds of little things, and decisions made
with a local context. A good global leader has
an appreciation for how people do their work
in a local culture. They try to make a team‘s
work meaningful to their country. This allows
us to hire the best talent in every country
where we compete.
By taking these bold actions … by pivoting … I
am confident we can continue to grow. Our
global sales have grown six-fold since 2000,
and we want that to continue. I know we will
be more competitive by selling and producing
in more countries. I know we will be more
relevant by designing local solutions and
building multicultural teams.
One thing I know about globalisation is that
there will always be plenty of critics. It
requires a long-term view to see the “win
win.” Hell, to understand globalisation, you
actually must have a passport. You have no
idea how many times I have been criticised in
Washington for doing business around the
world. Global leaders need thick skin.
Early in my career, I worried way too much
about what people thought. Over time I
realised that progress counts for more than
perfection and that anything worthwhile takes
persistence and resilience. Criticism has made
me hungrier, tougher, sharper.
My shield consists of competency, hard work
and fairness. I don’t listen to people who have
no global context, never been in a factory or
don’t want to compete. I run a meritocracy
with the highest standards. Everyone who
joins GE … Americans, Mexicans, Chinese,
Nigerians … men and women … Muslims and
Christians … straight and gay … know they
have a future if they perform. Discrimination
has no place in business — in the United
States or anywhere else in the world.
Similarly, our factory teams know that, while
we cannot guarantee markets, we can
guarantee effort; we always play to win. I
believe these to be American values.
I know that these values resonate globally. By
adopting this approach, we have become a
better global company.
So be flexible, be bold, don’t fear criticism. We
are going through a transformational change
in globalisation, which will require fresh, new
thinking. I hope you join me. I am proud of
my profession. Our goal is to build an
economic ecosystem that is the most
competitive in the world. To create great jobs
through private enterprise and ingenuity. To
give back competency and innovation directed
at solving the world’s toughest problems.
There is nothing elitist, or establishment,
about this task. Giving speeches about jobs
doesn’t create jobs. Only by being in the arena
can you create work for others. Whether you
are going to a start-up, or a company on Wall
Street, your work matters in a vibrant
economy.
The discord we see in the U.S. today is
primarily due to slow growth and the wealth
discrepancy it creates. This problem will not
be solved by any bureaucracy. It requires new
leaders who see the world as it is and are
willing to drive change.
Two weeks ago I gave the commencement
speech at Clemson. I tell seniors in college not
to be too bummed out. They can still party a
bit and their jobs won’t be too intense. For
MBA students … like you … there is no
comfort. It is time to go to work and pay off
your loans! We need you now, and there are
some amazing days ahead.
Jeffrey R. Immelt is the chairman & CEO of GE.