Daniels, GE's Immelt hold public discussion on innovation, talent

So first, it's great to be here too. Good to be here at Purdue. You know, I've known a lot about the school and maybe been here a little bit over my career, but we have a huge number of Purdue grads. So to the faculty that are in the room, I want to say thanks for what you do. I would say you're in the product development business like I am, and your products are pretty damn good, so thanks for that. And we're frequent recruiters, both in the internship program and also in direct hires, so thanks for that. I think the main reason why we like Purdue are really a couple of reasons. One is you've got incredible technical domain talent. So whether you're at Krannert School or whether the engineers from different engineering disciplines, we're recruiting and hiring people that are willing to be great engineers, great at what they do. We know deep domain is necessary but not sufficient. Ultimately, to be successful, what is added on that I think is a certain culture at Purdue: that people are inherently curious. So you have a sense that when you graduate from here, you're not ending your academic career, you're really beginning it. The students here have an innate curiosity and sense for learning. You have a sense of teamwork. There's a cultural norm at Purdue that has a sense that the world is a little bit bigger than just yourself, and you're willing to be able to play on teams, and that's extremely important. I think you have a sense of humility, engagement. It's something about being in the Midwest for people who know how to engage at all levels of an organization and know how to be great participants. And then you have, I think, a sense of persistence that comes with getting an engineering degree and again comes from the cultural norm of the school. So every successful person I've ever met has been a learner, has had a certain sense of humility, and has a sense of teamwork, and has an incredible sense of ability to get the most out of themselves and others. And that's what we've seen at Purdue, and that's very much appreciated. You know, there's nothing that ever replaces smart and hardworking. If you give me smart and hardworking, I can make you a success. I guarantee it.

I joined GE in 1982. In the early eighties, you basically had GE at $24 billion dollars, and I joined 80% inside the United States. So we were an American manufacturing company, and we had these big bomber plants. Over the subsequent 20 years, globalization took place. People worried about labor cost, and you saw American companies moving plants from the United States to Mexico. Everything was about labor relations and things like that for probably the first part of my career, maybe a full 20 years. A lot changed during that time period in a couple broad ways. One was material science changed to the point where materials basically dominated the cost structure of every product we made. Labor, which was... I worked in the laundry in the 1980s in our appliance business, and fundamentally, I was 32 years old when I went there, and I was in my office and we had strikes almost every week. The relationships between management and labor, with fault on both sides, was horrible. So that changed. The nature of products changed, the nature of labor relations changed. The only thing that changes is technology. There's technology today in manufacturing: 3D printing, novel processing, new ways to manufacture. So fast forward to 2013, really today. The world we live in today, you can make almost anything almost anywhere. It doesn't take a thousand people to achieve scale; you can do it with 100 to 150 people. Basically, labor as a substantial content is very low, so America is quite competitive vis-a-vis China and some new places around the world. Speed to market is important, innovation is important. So the future is going to be about small factories, more technically German. It's going to be about... I was in a factory in Asheville, mine, that makes aviation components. It's the lowest-cost factory in the world. The hourly people get paid $26 an hour. They earn a great wage, they're extremely productive, they compete with anybody in the world, and they all are self-directed. There's basically one manager, the rest were teaming. And that's the norm. Now add to that one final thing: I can now take a bracket for an aircraft engine and put that online and do a quest online, and I can get 5,000 candidates who will give me design ideas for that bracket. And we now can go in a digital, democratic, decentralized way and really be able to fulfill almost anything we can do. Now, I have to comment for the people in this room: it used to be, for probably 10-15 years, we could get people signed up for manufacturing training programs, but it just wasn't sexy. Anybody in this room would look like, 'My god, I gotta wear steel-toed shoes and see this factory stuff, it's grungy.' Now manufacturing is sexy. People view it as incredible work. It's got technology rippling through it, it's got tremendous potential. So some of you are going to join a company in a completely different way, whether you're in a small company or big company. Manufacturing has changed dramatically. I'd say the thing you'll recognize in your lifetime is that there's nothing more satisfying for somebody like me than walking through a factory that really works. I appreciate work. I think if you ever lose sight of the value of jobs, you can't be a good leader, you can't be a good manager. And that's why, when I travel the world, going to Germany or China, the people I'm talking to, a president or prime minister, that's how you know. I'm going on about this other stuff, financial services, but could you build a factory here? Could you put people to work? It is the economy's big multiplier. And I think manufacturing has changed more dramatically than anything else in the 30-year career that I've seen.

I would start with saying I had the opportunity to work on President Obama's Competitiveness Council, travel the world extensively in my career. One of the big competitive advantages even today in the United States is the university structure that we have. We truly have exceptional colleges and universities that are filled with technology, great ideas, great people. And that's still true today, but it's under threat. The threat is the fact that in some ways, as we reduce the size of government, it clouds the future for universities. It's just that we are more common than we can afford, and that's just the state of affairs. So what it really means is that the private sector has to do even more with universities than before. So companies like GE, we spend a lot on R&D, more than $6 billion every year. We very much believe in open architecture. We believe that we don't invent all the good things, that we need collaborations with colleges and universities and with outside people. We've done this for generations and will continue to do it. What we have to do is up this. Businesses are going to have to be more externally focused on research and development, and universities have to be bigger catchers in that process. There's a need, and there's only one strategy we can pursue: businesses have to do more R&D with universities. Now, I do this to me: there are two issues right now. One is intellectual property, and that's a fault on both the business side and on the college side, and that's being corrected. The other one is that almost all research is done on a university's complete lock, sort of deputy. We have a Purdue grad who works in Cincinnati. She has a favorite professor that has a project that has allowed her to work. It's done. That's a hard way to run a railroad. Good luck is almost never good strategy. We have to do things more systematically. I think where this goes is it goes along big themes that can be done at a couple universities that are cross-functional in nature, that have real outcomes and skin in the game, where a university and a company are completely aligned and do it over multiple years. I think in some way, there's going to be a new model that emerges that has to happen that way. It's going to have to be bigger, longer, and around big pursuits, big problems. Some things like we've launched a big initiative inside the company called the Industrial Internet. This is basically taking analytics around machines that have sensors. You can take a jet engine, GE has 20 sensors, it takes a couple terabytes of data on a continuous basis. If we can model their performance, the way the blades work, the optimal fuel performance, we can save our customers billions. That's going to be data science. We're going to do some inside the company, we're going to do some outside. But there will be a university that has an Industrial Internet lab that we're going to be counting on to give us people, give us practices, and things like that. So universities are going to have to elevate, and companies are going to have to make more long-term commitments on big themes that are more substantive. The two are going to have to meet in the middle. And we plan to do a couple of those, I'd say, early next year, just to see how they work.

Size is the enemy. I'd start by saying, you know, the truth is, for a company like GE, institutionally, the problem is how do you make size a strength, never a weakness? How do you make size and scale powerful but never allow it to become an encumbrance, too bureaucratic, too unable to move? We're a big company. We're almost $160 billion in revenue. We do business in 160 countries. We have 310,000 people. So just about no matter what scale you step on, that's big. I would say first, culture counts. We actually have a culture. We think about a culture for the company as well as things that bind people together. When you think about our culture, it is mission-based. People are in the industries they want to play big in. It's a culture where we search for a better way. We never think we're the best in the world at anything; we think we can always improve. We're solutions-oriented. We really talk about solving problems for society and our customers. This is a 'we' company, not a 'me' company. This is about the totality, never the individual. When I leave, the goal is to make sure people come in and say, 'He did a few things, but others have moved the institution forward.' That's what we all fundamentally believe in. About 50% of the people who join GE leave by their fifth year, but if you stay, you stay forever. We tend to go through a process of knowing who we are, and people have to decide how they fit into the culture. I don't say that is either a good thing or bad thing; it's just who we are. So I think culture counts. And you have to add to that dissatisfaction with slowness. There has to be a healthy skepticism about headquarters. I say that even though I am headquarters now. There's a healthy skepticism about anything that is slow, or anything that is centralized, or anything that doesn't add value. People are encouraged to be participants. And I would say something that my predecessor was awesome at, that I learned, is this sense of informality and access. In a short period of time, I have seen this image because I've known him a long time. He always embodied this sense of informality and access. I think the way we run GE is everybody that works for the company thinks the CEO can intersect with their life any given day. There's a sense that everybody has a voice. Nobody is allowed to hide behind a layer. Everybody is expected to travel, to speak their point. So culture, healthy skepticism about size. And then on the integrity part, with 310,000 people, it's like a city. When I'm sitting here right now, there are probably 10 people that are doing something I really hate right now. I'd be incredibly naive if I didn't think that. But what I do know is they're not at the top. They're not the senior leaders. And we're going to find them and fire them. In other words, we can spare no expense to find them and instantaneously fire them. So it's a combination. Look at the top. These are all people who have been with the company, who wear it in their heart. We have 185 officers in the company. We wear this company in our heart. If you don't have that, you've got nothing. But we have a very active ombuds program. We have an audit staff. We find things. We want people to raise their hand if they see something wrong. We want to find things. That's how you can run a company. You have to have a unanimity approach at the top, and you have to be very active at the bottom. A public hanging once in a while helps. Nothing corrupts an organization more than when you close your eyes to anything. We have 185 officers in the company. We have an officer meeting every year. I start this meeting by saying, 'Let me start with integrity first. You're at the top of the company. Everybody looks up to you. In this room, one strike and you're out. You don't have a union steward. I'm your union steward.' So there's no gray area. You guys know how to conduct yourself, and that's the expectation. Nothing corrupts more than the inability to... We still think roots coming. My view on reputation is you're crazy if you use it. We do a lot of business in Nigeria, a lot of business in Russia, in very difficult places. But that's because of our reputation. I think if you have a good compliance process, and don't be afraid to kind of blow your nose every now and then, I very much believe in that as well.

We're a conglomerate, right? We're a multi-business structure. We have big product lines. In my 10, 12 years, I've sold half the company. So we're now more focused than we've ever been. We do a couple things. We manage the portfolio. We manage capital allocation. We sell a business and buy a business. We're always active around the portfolio. One thing I did just recently is we sold our media business, which was NBC, which we owned for 20 years. You try to be self-aware about whether you're adding value. It was a perfectly good business, but I found myself increasingly, we run the company as an operating company, not a holding company. I found myself increasingly not being able to add much value. Other than telling the team to go make better shows, I wasn't really adding much personal value. And I saw another space in oil and gas technology where we were relatively small, and there was a place that I thought we could do 30 things better than our competitors. So in that case, you exit something and then you put the allocation into something else. We're constantly trying to do that. At the same time, we work on five things that we can spread across the organization. Technology turns out, globalization is something that's very scale-based. So we can really use our global brand, leadership development, capital allocation, and customer franchise. Those five things we try to spread across the company. The thing that keeps us fresh is a strong external focus. We have people who live in the markets. We're very paranoid about our competition, our customers. We consciously have an external focus. Now, I'm on the board of trustees at the school I went to, so we all suffer from this. It's nothing unique to Purdue. You're in a community that is self-contained. You're here in the middle of Indiana with a lot of great people and students, but it's not like you have a ready-made competitor, a crisis right at your doorstep. So you don't have this imminent external threat. People use to meeting our goals, academic articles that say change is upon us, and it's like being in a dentist's chair. People get numb to the fact that something might change. The difference today is things really have changed. What's different today than 10, 15, 25 years ago is we're finally at a point where it's going to change, and it's going to be driven by, I think, two things. One is funding. Funding is going to change, both in terms of where the government is but also in terms of the social aspect. In the United States today, the haves and the have-nots, the rich and the poor. Can we really afford to tag kids with these big tuition bills when they graduate and the economy is not that good? The other one is technology. The ability to teach in a digital fashion. Those things are in confluence right now. I think you know how to change. I've seen you when you were at Lilly. You just gotta do it. The best I can say from GE is we need Purdue to always be leading edge. We are so committed to the school. We need you to continue to be the best. I would just encourage that in some way, shape, or form in the next decade, education is going to be invaded with new technologies, new principles, new practices. Nothing ever happens as fast as you first think, but in 10 or 20 years, there's going to be some real winners and losers in terms of how advanced education takes place in this country. When I was in the media business, everybody always made you feel like you were a company that didn't know anything about how to make a show. You just had to nod your head for things like that. If you ever want to talk about change, they'd say, 'No, let's make the show the same we did in the 1930s.' You'd make a show and deliver it with a pony. And then you'd be talking about all the content online, and I'd be like, 'My God, we're going to have all this online media.' Sometimes the smartest people were the last ones to want to change. I think that's something you have to work on here. The best I can do is be a reporter of what's going on in the rest of the world, and we have to find ways to fit in on that.

I was just earlier today talking to some student-athletes about leadership. I'm a 31-year veteran with GE. In the 2000 time period, I went through a succession process that was incredibly public, almost embarrassing in some ways. But it was a company I loved, and I understood what the process was. My predecessor was a great man, a fantastic CEO. This was the year 2001. He was voted by Fortune magazine the best manager of the previous century. So he set the bar high. What do you do? It's like a century is a long time. You just kind of get into it. I remember we passed it. It's always hard in a situation with such disproportionate power in an institution. It was hard to really get to know and stuff like that. But we had maybe six months together while he was transitioning. I'd been named, I was coming in, and we would make the global trips together. I remember we were going to have dinner, and it was like an elephant and a flea. He was larger than life, even though I'm twice his size. I felt like Minnie Mouse in terms of how you walk in. The whole trick to leadership is knowing who you are. The whole trick to leadership is this incredible ability to take a journey into yourself. It's this combat with yourself. It's self-confidence, self-knowledge. It's this intense journey. You can never do anything in life much except compete with who you are and be willing to deal with that on its own terms. When you go to a tree book, I would say the first rule of following a legend is, and I'm lucky I didn't have that option, I followed a great guy. You prepare before, but it's this comfort with yourself, with who you are. The beautiful thing is the company has a good culture. Inside the company, people instantaneously got on the new team. I didn't have one second of disloyalty. Even while I had to fight for my life outside the company, I never had to battle any disloyalty. That's why I have such a beautiful company inside. If I'd had to deal with that, it would have been just a little bit too much. So for those of you who are coming to do things, never lose this combat with who you are. You draw on self-confidence and self-renewal, and that really counts.

I think it's a great question. There's no doubt that there is an entrepreneurial craze, not just in the US but globally. When I was coming into school, GE would have seen maybe 95% of all qualified people that could have come to work. Now the numbers are lower because a lot of people just want to do their own thing, do a startup. So what we try to do is be where the startups are. When we build our machining center, we go to California, we're in the flow. We make investments in startup companies. I have great admiration and respect. I don't think it's either/or. I think both exist. In our company, we believe in skill-based entrepreneurship. We are in complicated technologies, detailed systems integration that a small company would have a hard time doing. A jet engine, for example. I was with a friend of mine, one of the best venture capitalists in Silicon Valley. He's been the force behind most big startups. He's a Midwesterner, I think from Wisconsin. He wrote an article that said 'software is eating the world.' We were in our minds in Silicon Valley last year, and on the stage we had a GE90 jet engine, the highest thrust engine ever made. I turned to Marc and said, 'Keep this baby.' I don't think it's quite as binary. There are still a lot of people who want to do big systems integration, and that's where we want to be the best. We can work with small companies and startup companies to do it. My pitch when I come to a place like this is: there are a lot of ways you can build a career. Startups are a great way, but if you want to sit in the front seat of history, I give you my personal guarantee: you do energy, my personal guarantee what's going to happen in energy, what's going to happen in healthcare, what's going to happen in aviation, what's going to happen in China. That's my value proposition when I come to a school. So we need all pathways to work, and I have massive respect for the entrepreneurial spirit and what it means.

We do probably two things that build the oneness of the company. One is in technology. We are the last US company, for sure, that actually has an industrial research lab. It dates back to Edison. We now do it in Beijing, Shanghai, Bangalore, Munich, Rio. We're very global. We have a group that really brings together technologies and spreads them across the totality of the company. Then we have a Leadership Institute where we get ideas and best practices. We invest $2 billion a year in training and education. So we do things that pull together the oneness of the company. In an academic setting, I think what Mitch has to do is lay out some pursuits for you guys that are meaningful to society, where academic institutions can participate. You guys have to elevate an inch. In other words, an academic, and I say this with love and respect, the wanna-be entrepreneurs around something small, you need something that they can be true experts in. That's the way the NIH and NSF, the basic funders, have gone niche, niche. I don't deal in micro. In an industrial setting, that is purely lock. I say, 'Look guys, I want to be the best in the industrial setting in the world. Let's go.' So they'll collect a few different ideas as part of that, but as part of a bigger theme. I think the task in a place like this is to get to another elevation, to collect things together without hurting the academic entrepreneurial spirit, but making five different disciplines play together, not 30. Generally, what I just described is not happening anywhere. It's not like I come here and say there are plenty of institutions doing this. There's really a need. Everybody says they want to do it, but it's hard to do in a setting like this. We have so many brilliant people that have basically been rewarded based on being a domain expert in one or two things.

We are, in essence, a big infrastructure technology company. We are energy, oil and gas, aviation, healthcare. We're kind of the composite of the four technologies that are part of that. And we are intensely local. We make centralized decisions, but we make Nigerian decisions in Nigeria and decisions in India. We have a certain technology set, and that gets marshaled in a local selling. I look at these things from a jury perspective. Nigeria has some of the top 10 in the world in oil and gas, so there's good wealth coming in. There's a 40-gigawatt deficit of electricity. So if you go to Nigeria, they need electricity like nobody's business. Everything in between is hard. It's hard to get financing. There are still some places that don't have security. But to me, we have the perfect solution to problems that exist in Nigeria. So I say to my team, 'Let's go. Let's go win. Let's do risk-reward. I'm willing to invest a couple hundred million dollars. Let's go solve the biggest societal problem.' We look at each country from the dimension of what's our unique technology set, and how do we localize it in a way that can help solve those problems. Then we take risk as long as the reward is there. That's how we think about it.

I think in some ways, that's the top of the house job. That's really my job. You just described in a nutshell probably at least half my job: the chief officer of paranoia. You have to have a nose for dissatisfaction. Just to give you an example, I was unhappy after the world's chief should come and bring the financial crisis. When I would spend time in employee meetings or business reviews, I was becoming less happy with what I viewed as our ability to respond and lead. So I spent time in 2010 and 2011 with some of the biggest such personal checks in Silicon Valley with startup companies. I did dinners with them to give back to the essence of what a company should be about. Then I ramped down into an initiative that I now call 'simplification' inside GE, which is about lean management, speed, customer intensity. It's just a 'hey, we're not making enough progress. I'm paranoid about it. I go learn, I come back teach.' You have to have this paranoia. The best number one is everybody and once with you once. You go out and then you have to come back and bring it into the culture. On the cultural side, we have people who want to learn. When I come back and say, 'Let's do it this way, let's go this way,' we can have everybody who wants to go a different way, and the people that don't can be trampled by the rest. The people want to win. We want to be better and are willing to accept different ideas. So the paranoia is one side. On the risk side, I think it's the essence of the company going back to the founder. We make big bets on big things. It's incumbent on every generation to see their life in that way. We invest a couple billion dollars a year on aviation. We're launching half a dozen new engines in the next five years. None of those engines will pay for themselves while I'm CEO. But that's the way you set the table. You have to have an instinct that says, 'This is an industry I want to win, and I'm willing to invest like the bark of a tree if that's what it takes to go win in that industry.' I could give you a 30-page pitch on whether we should do the GEnx extension for the Boeing 787. The guys come to give me a three-hour meeting with a 60-page pitch on how to spend $2 billion to do that for Boeing. When I crack the first page, I know we're going to do it. My real question is how much is it going to cost and more serious medication. But we're in these industries. I became CEO of GE on September 7, 2001. 9/11 happened four days later. We were number one in aircraft engines. We owned 1,200 aircraft on that day. Between September 11, 2001, and December 1, 2001, we had to write off $10 to $20 billion of credit to the airlines. With a rookie CEO. That's risky. But we did it because that's what we do. We wanted to win in that industry so badly. It's not that we're going to take foolish risk, but we knew who we were. I think that's paranoia all the time at the top of the house, and a knowledge that we are in it to win. And if you're not in it to win, we sell. It's just that simple.

Appliances is one of the oldest businesses we have, and it's a competitive industry. It's kind of a ministry. You're at Appliance Park. It was built in 1987, 1990, 1991. The formal labor relations were just terrible. We had strikes all the time. If my boss at that time had given us enough money, I would have shut down the whole damn place and moved to Mexico or China. It was horrible. Then during the financial crisis, some guys came in and they wanted to shut it down. I said, 'Do me a favor, just go back 25, 30 years and do an analysis of all the times we've done that. Are we making more money?' The analysis came back and said at Appliance Park, none of the outsourcing had generated any profit for the company. Not a penny. So I said, 'If it doesn't work, let's do it a different way this time. Let's do lean lines. Let's check out some other big conveyor belts and stuff like that. Let's do lean.' I went to the unions and said, 'At $30 an hour, I've got no jobs. But if you're willing to do this, I'm willing to bring back a couple thousand jobs,' which we've done. You've seen them. The whole task for your team is a flexible workforce, lean lines, rapid cycle times, rapid changeover, some of which automation could do. So what you can do, you do. Now, I would say ethically, my job is to decide where the plant goes, from both an investor standpoint and a societal standpoint. I think automation, I delegate that to the local team. If there's a more productive way to go, that's where we want to be. Manufacturing is no longer really labor arbitrage. Those days are over. It's all about speed to market, localization, innovation. That's what we do in appliances. But we still look at building factories in China, building factories in Russia, building factories in different corners of the world. There's a place for automation where it makes perfect sense for doing repetitive work with high quality and speed. Labor is a piece of a mission. There's no cookie-cutter approach. Today, you want to be close to your markets because that's where the innovations can take place.

I think the best careers today are built deep first and broad second. The first thing I would suggest to all of you is to pick a domain that you want to be really good at. Pick the domain and stick with it for a while, either in industry or function or technology. So think deep first, broad second. The second thing is, no matter where you go, pick the things that represent change and interest inside the company. Try to get involved in big initiatives that are taking place inside the company because it's a great way to get new training and the right skills early on. In a career, it's very helpful to have a good boss. Try to seek out a good leader in your career. You can't argue with that. I had some good ones and some bad ones, but early on, learning from a good boss who teaches good work habits is important. Then I would say manage your time well. The best way to get noticed early in your career is to do 100% of your job in 80% of the time. Something that I became good at very early in my career that I carry with me to this point is great time management, great discipline. So domain, pick an initiative that supports your company or your business wherever you go, find a good boss and manager, manage time well. The last thing I'd say is, by virtue of the fact that you've got a good degree from a school like this, you can take some personal risk. When I was early in my career, I always knew I could get another job, and that gives a sense of confidence. We have a leadership meeting with our top 45 people in the company. I typically bring back GE alumni who are CEOs and do a panel like this. I want our leadership team to see that we're all proud of the work. I don't want any of our good people to leave; I want them to stay. But I want them to know that they could, because I don't want people leading from a standpoint of fear. I want them to lead from the standpoint of 'This is why I want to be here because it's the best.' At the end of the day, the license is to have the self-confidence to know that you can pick different stuff, have more joy, have fun. You're pretty sure that if you ask a sample of a thousand private and public sector leaders in America to name the single most important position in American business, a very healthy percentage would say 'CEO of GE.'