Financial Daily from THE HINDU group of publications
Monday, Oct 07, 2002
`India's treasure is its intellectual capital' Mr Jeff Immelt, Chairman and CEO of GE
NEW DELHI, Oct. 6
IN 1902, twenty-three years after Thomas Alva Edison invented the electric bulb in 1879, the company he founded, the General Electric Company, was in India building a hydro-electric plant.
A hundred years later, Edison's successor, Mr Jeff Immelt, Chairman and CEO of the company that is now called simply GE, is in India seeking to enthuse the 18,000 work force here to enlarge what is already a multi-billion dollar operation.
His company is still in the electric bulb business it pioneered, but it fancies itself in many more: 31 separate businesses in India, including financial services, medical equipment, call centres and software. Fifteen years ago, GE perceived India as a potentially huge market for its products, but it guessed wrong: the market has not grown fast enough. Instead, it discovered India's treasure was its intellectual capital, the ability to do software and engineering design, a strength the company is exploiting in increasing measure.
GE accounts for 8 per cent of India's software exports. Armed with a diet coke and transparent candour, Mr Immelt spoke to a group of journalists in New Delhi on India, China and how companies must cope with the global economy.
Here are some of the remarks he made during the interaction:
On India and China as markets
We looked intently at re-entering India in the mid-80s based on the perceived potential of the market. But the market has developed slower than we thought it would. If we go back 20 years, India and China started in the same place. But China's market developed more rapidly. The key ability to grow is much stronger in China.
In 1995, the healthcare market in India and China was of the same size. China is now six times India in terms of revenue.
GE looks at countries at three levels. One, as a market: whether it has people that can buy GE products. Two, its capability: what are the natural and engineering resources of the country, and three, its people. What I found about India is that the market is promising, but is one that never quite reaches that promise. But anytime we have invested in the people, we have done exceptionally well.
On manufacturing in India and China
The manufacturing effort in India has been fairly successful, especially our medical equipment business (exports: $200 million this year, and expected to be $500 million by 2005) and motors for washing machines ($20 million).
The cost of manufacturing in the two countries is more or less similar. But China gives us access to a vast local market. We will continue to manufacture in India for the local market and export. What I tell my technical teams here is they have to compete against Chinese engineers, Chinese manufacture. The disadvantage you have is that the market is not domestic, it is going to be in the US, Europe or China. What India lacks is not in manufacturing capability or quality; it is its consumption market that is under-performing vis-à-vis China.
I am not going to invest in the lighting business here. I have many other places where I can invest more profitably. Likewise, in the power generating business, aircraft engines and plastics. What's holding India back? I don't see a consistency in purpose. The power sector (for example). It has been known for decades that power should be privatised, and that there is the need to develop the infrastructure. And yet, we are still having the same discussion about power that we had 10-15 years ago.
China seems to be going ahead in a straight line. Whoom! (his hands scythe the air like a karate chop) The roads, the highways, the (telecom) bandwidth. Done! Done! Done!
On India's intellectual capital
Even the US focuses on the things it is good at. India's strength is in its intellectual capital. GE was the first to recognise the value of Indian software capability; we also make some of the most hi-tech medical diagnostic tools here.
We have built a great engineering centre in Bangalore and discovered that the treasure for GE is the quality of the people, the intellectual capital, the ability to do software, engineering design.
India is a great place for the call centre business. In four years, we have gone from zero to 11,000 employees. I see a great future for GE's investment in intellectual capital in India.
His first year as CEO
It has been a tough economy. A period of robust growth has been replaced by a 2 per cent growth. Then you have a bubble burst, trillions of dollars lost in the stock market, fraud, abuse and corporate greed. It has not made running companies difficult. That is still about selling goods to people, and cutting costs (of doing so). But companies have been impacted in other ways. Boards need to be strengthened, there has got to be greater disclosures to investors and we have to think of different ways to compensate executives. The management rule is different.
The silver lining in having a tough economy and so many changes is that people do not ask me about Jack (Welch) any more. It's a new day.
The glass ceiling
Of the top 500 managers at GE, 22 per cent are now women as against 11 per cent five years ago. Women managers run $25-billion worth of businesses (out of a total of $125 billion).
I am confident about the future. If I stay at my job for the next ten to twelve years, I am sure a woman can take my place. But I have got to stay around for a while.
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