When Jeff Immelt took over as CEO of GE, he followed a tough act. Jack Welch had been the legendary CEO of GE for some 20 years, setting high marks for earnings growth and establishing a reputation for grooming the best managers. Immelt took over days before the 9-11 attacks, and faced a different world. Welch struggled for the several years of his tenure, including layoffs of over 100,000 people, earning him the nickname “Neutron Jack” after the neutron bomb – the people were killed but the buildings were left standing. Seven years later, we are entering a recession, and GE missed the announced earning target. The incoming started immediately, including from Welch (who later retracted his sniping).
Immelt is making major changes in his company and recognizes the changed world. He initiated the strategy of “eco-imagination”, a push to create products that are more efficient in terms of pollution and energy efficiency across the GE product line, from locomotives to light bulbs to jet engines. It’s a big bet, and a company with the size and breadth of GE can create change in how businesses around the world behave. But he recognizes that this is the direction where consumers, government and business are going for a variety of reasons. The reasons are not the issue – it’s up to GE to create products and services that address the demand.
Immelt’s bet is a long term move – and he is right. Unfortunately, there are people out there who have the ability to move in and out of the company with impunity and low switching costs. Businesses cannot switch change direction with the click of a mouse key – it takes time to understand a new industry, identify the players, find new customers and land new business.
We are in for a rough ride over the next 5-10 years as this generation pulls back, realizing that some of the lessons from our parents and grandparents stand the test of time. People will be more frugal, energy costs will impact the entire economy (directly or indirectly) and the drop in housing prices will send people in different directions. This may be a time to pull out Plan B.