Fireside Chat with Jeff Immelt (Former CEO, GE)

🎵 and I've never gotten the kickoff spot, so I guess I'm doing something right. Congratulations. I don't know if it's me or you, Jeff, but anyway, that's good. Great. Well, look, I'm really honored to be up here with you today. I mean, you've got an incredible career. You ran a large, really important, you know, company, GE, for 16 years and took it through quite a transformation. You've since left. You're now chairman of Athena Health. Also at NEA, doing a lot of investments and looking for, you know, the next generation of companies. So you have a really unique perspective. Plus, you've worked in D.C. on some U.S. policy councils. So I think that's a, there aren't very many people that look like you, both very large companies as well as smaller companies. So thank you for joining us today. Good to be here. Thanks. Great. So I wanted to start a little bit about, you know, taking a large company, you know, GE, large Fortune 500 company and talking a little bit about how you decide one day to wake up and did you just wake up one morning and say, wow, I'm going to go through a digital transformation and make this a more tech -focused company or did it happen over evolution? So maybe you can just talk a little bit to help frame that and we'll move on from there. So Michelle, I think, you know, maybe I'll do it kind of really in micro, but then maybe broaden it out and be more pervasive. The biggest asset we had as a company was the long-term equipment we had with our customers. So the replacement value of GE assets in the field is like $2 trillion. Jet engines, MR scanners, gas turbines, things like that. And so you always have to be keen on what technology is going to help those assets perform better. Historically, that has been material science, but starting at about 2010, the combination of kind of sensors, analytics and things like that started to allow you to change the way you interface with your customers, right? Business models also change. So you used to sell jet engines. Now you sell time on wing. Now you sell outcomes. So I think our notion wasn't so much that we had envy of Silicon Valley or anything like that. It was really this context of how do you become a fantastic, productive supplier to your customers? And that led, I think, a lot of industrial companies down a digital journey. Now, I think if you broaden that, Michelle, there's a wave of technology that's coming through the system right now from blockchain to big data, AI, things like that, that are going to interface with every company in the world. And you just have to figure out, you know, what's your make-buy strategy in that context. In our case, owning the analytics around our products, that was a make strategy, right? We had to do that. Things like security and things like that, that's a buy strategy. It's equally important, but it doesn't make any sense for us to be basic and things like that. So that's how we, that was the decision. So you really decided, what are we going to build ourselves and what are we going to buy? Because you definitely hear that, and then you committed. Totally committed, because you basically say in, you know, think about Amazon with AWS. You know, I don't think Jeff woke up one day and said, I'm going to backward integrate into cloud computing. What he recognizes, he was the use case for that. Right. He was the definitive use case for that. So in data for industrial products and additive manufacturing, we were the use case for that. We were the biggest practitioner. We knew more. We had more domain. Why not do it? You know, on AI, you know, if you compared our computing power with Google's or something like that, we're a pimple. Like we're like an ant. So it's kind of weaving through all that stuff to decide, you know, kind of what your make-buy strategy going to be. And so, you know, you use the AI example and how you're an ant. And so in that case, you probably partner with a lot of the other companies where you feel like they're the leaders and betting on them to find a path forward to drive good outcomes for your customers. I would say that and I would go beyond that to say from an industrial company standpoint, you know, the first wave of the Internet more or less passed us by, right? So in other words, you know, in IT, your IT department is really project managers. So you would implement an ERP from Oracle or CRM from Salesforce, but you didn't really know anything about where ultimately it was going to go. You know, your expectations for benefits were low. I think the next wave of IT tools are really practitioner-based. These are outcome-based, right? So the metrics have to be different. The talent has to be different. And I use this as an excuse to just upgrade, you know, in the 90s and 2000s, an IT person for a big industrial company was a project manager, not a technologist. So whereas we had great material scientists, we didn't have great digital technologists. And I just think that's such a weakness in the world today. If you don't have some capability, you can't even be a smart buyer of the kind of technologies that have to be installed. But that's a good point that even if you need to have some technology expertise inside, otherwise, how can you be potentially buying the right tools to help drive outcomes for your business? Especially if you're tools-based, right? If you're trying to do cyber, if you're trying to do RPA, if you're trying to do AI, you're not going to do that just by with a process chart, you know? So in the 1990s, Oracle would come in and sell you an ERP. They would do all the consulting for you, and it was really a compliance tool. It wasn't really an outcomes tool. Now everything you have is an outcomes tool. You need to have people that know how to be a good practitioner. So during that kind of conversation, the word people came up many times, and I just want to spend a few minutes talking about people because, you know, you said you need to bring a different type of person into GE to be able to make the right decisions and to help execute on this vision that, again, is so that you articulated so clearly. How did you do that? How did you go and recruit new types of digital talent into GE, and then I'd like to hear about, and then the current team you had, how did you get them to buy in with this change? Because that's not easy. So I would say you have to demonstrate that the use case is interesting, you know? So in other words, that you're committed to it and the use case of, if you actually want to know kind of how to build advanced models around a jet engine, that actually is quite a good technical challenge, and this is the best place to do it, and we're committed to build the right kind of capability and talent around doing it, and unless you can do that, unless you can really commit to being the best, people are just going to think you're pretending, right? They're just going to think you're just kind of going through the motions and, you know, maybe to a fault, I basically brought in the digital team and protected them because the only way to get talent is to demonstrate that you're actually in it to win it, and again, in that particular space, you know, there's C3IoT, there's Uptake, there's a bunch of companies that are venture-based, but, you know, in that world, I had as much juice as anybody, you know, at that point in time. Now, I would say the hardest thing by far, whether we're talking about security or digitization or anything like that, is what do you do with your legacy, right? What do you do with your legacy assets? What do you do with your legacy people? Do you run two camps and try to merge them over time? And I think that's one that's always, you're always on a continuum between isolating the digital focus, giving it room to breathe, and slowly but surely bringing all the legacy capability with it. Because at the end of the day, you have to bring everybody One team. So if you think about the world you're in, think about security, and then put yourself in my shoes. So 330,000 people, 185 countries, 40,000 suppliers. That's thousands of assets and factories around the world. That's on the make side. On the sell side, 15-year-old CT scanners, digital assets on utilities, jet engines, locomotives. So you sit down one day and say, how do I keep my institution secure from a cyber standpoint? It's a daunting task. So I think you just have to be committed to bring people with you, but have to be equally rigid on the speed with which you allow people to embrace change. And at the end of the day, you can't run any institution and not have people that understand the fundamental technology. Whether you're going to buy everything or make everything, you've got to have people that understand the fundamental risk and the fundamental technology. I think that I've seen some places where that doesn't work. And so that really resonates. You know, I just want to talk about your leadership team for a little bit as you were making these changes and how that changed. Did you have to reconfigure a lot of your leadership team or was it very similar to the rest of the organization? Look, I mean, I think I remember the first time my predecessor brought Six Sigma to GE and I said, what in the hell is he doing? Really? It didn't resonate with me at all. I said, Jesus Christ, what are we doing? We've lost our mind, right? Just before you go on, earlier in my career, I went through Six Sigma training. It was a really big deal earlier. Yes, yes. But with digital, it's one of those things where everybody in the organization sat there and said, this makes sense, right? It's going to drive productivity. It's going to make our customers more productive. You know, when I would go to a customer meeting like the one you had yesterday, and let's say I would do it in Riyadh and I would invite all of our customers from all the oil and companies in the Middle East or power companies in the Middle East or hospitals in the Middle East. They would all sit there and nod their head about asset performance management, predictive failure, time on wing, going from CapEx to OpEx, outcome selling, stuff like that. You would just see a thousand heads nodding, right? Yes. So I think to a certain extent, the leaders understood the context. What was more difficult was, look, there were thousands of people that could tell you, here's the where, a strange study on this nickel alloy and what does this ceramic do at 2,000 degrees, but nobody really understood what a systems architect or things like that. So you had to do a little bit of a mosh pit between the technology people you were bringing in and the people that they were working with every day. And so some people left, but some people, you know, the person that runs the, this guy named Lorenzo Simonelli, he runs the oil and gas business. Look, he's now a digital native, right? Because that's what that industry dictates of you. You know, that's what's important. So I think people grab it at different times based on their age or the relevancy in the business they're in, but smart people, as you're building your career, always want to grab, you know, what's next. Now, that's on the, let's say the analytics side. On the cyber side, you know, I chaired the cyber task, you know, working group inside the company because it was the only level at which the right risk could be taken, right? So if I gave it to my general counsel, I normally give it to, we shut the place down. He just say, this is too scary. We can't do anything anymore. And if I gave it to one of my division heads, they would take too much risk. So the idea is kind of like, how do you keep a company more or less safe could only be done really at the CEO level. So I think there's, you know, when we talk about the wave that we're in right now, there's different gradations of different opportunities as you look at it. And I think in cyber, we treated that more like, let's not, you know, let's not all experiment, do it my way. You know, in other words, when it comes to the other stuff, you say, let's experiment, let's see what each business can teach each other. But when it comes to kind of risk mitigation, it was much more of a universal march. A bit more prescriptive. Prescriptive, here's the technology, you know, and I think the, you know, for the people, I can't even tell you how scary it is to run a big company today from a cyber standpoint, really, from a security risk standpoint, because it's hard to really run the company that's in spec. So you get fired two ways. One is by not being vigilant. So you need to have this knowledge of what's happening around you. And the other way you get fired is by not being in spec. So you need to have everybody doing what they're supposed to be doing every day. So you have to have a transfer function between everything you know, but then saying, okay, we're going to do these three things. We're going to mitigate our installed base in 18 months. We're going to do this in seven months. We're going to do this, even though, you know, you haven't solved the problem completely. You have to be walking around with that knowledge. You know, a lot of people love walking around every day with what I call the happy briefcase. They feel like they've got all the answers. They go home at night and say, I've solved every problem. I go home tonight, everything's done. Today, you have just like, you go home because you're tired and you say, shit, man. There's so much going on. I don't know about, how am I going to get on top of it? So that's, that's the challenge. Right. Yeah. And you know, specifically with the cybersecurity where I think that is a question where it's like, is it done? Are we secure? And a leader can never say a hundred percent. Yes, certainty because the work is never done. It's this continued progress and risk mitigation and there's no regulatory, you know, like for us, we're in the healthcare business. There's no real regulatory regime for power yet or for healthcare yet. It's growing in financial services, but there's so many industries we're in where there's just no regime. So you're kind of setting your own best practice, if you will, as you're going through it. And that makes it, you know, that takes whatever was hard. It makes it triply hard because you're actually setting the standard. But, you know, the Deepwater Horizon with British Petroleum and the Gulf in 2010 basically cost the company, let's say 70 or 80 billion dollars, right? Now, in cost, in liability, in cost and things like that. That was with a B, billion. In billion, right? Now, the day that it happened, right, there were 14 standard operating procedures on the platform and they were doing five of them, right? So how do you get in trouble? It's through vigilance and by having a standard and not meeting that standard, those are the two modes of failure ultimately and security, cybersecurity is a little bit the same way. It's very similar. It's kind of like the ABCs. If you do the ABCs, then you get a long way there. Okay. What does the CIO of the future look like, in your opinion? Look, I think you've got to be a deep technology and you've got to understand the user. You know, in other words, I think, Michelle, the day of the CIO is gatekeeper and project manager. That has to dissipate and you really have to get the tools in the hands of the sales leader, the manufacturing leader, the service leader. So you need deep technology and you need use case. So my view is you have a very small central group, very small, and you have incredible depth as it pertains to tools, right, what's going on. The whole notion of platform versus point solution, I have to say, still confuses me because I think to a certain extent, your organization is going to grow beyond the ability to do everything on a Oracle ERP or on an Epic electronic patient record. And so you really are going to have to find ways to have very simple platforms, but get the tools in the hands of the people that use the money. Look, we were, I think Salesforce is an incredible company. I think Mark Benioff is my hero, right? We were one of Salesforce's first customers. I bet we spent 10 or 20 billion dollars on Salesforce.com. If you really asked me, did you make any more money because of that? I'd say, I don't know, really, you know, I hope so. But it's really hard. It's really hard for me to say. I know the sales team likes it. And, you know, I think it was amazing in its context, but I don't know, really. And I think those days are kind of over, right? I think you now have the tools have to be in the hands of a practitioner. You have to go from what I would call kind of just transactional selling. You have to guarantee outcomes, you know? So what advantage do we have in the digital space against, let's say, a Silicon Valley startup company? I could go to an airline and say, I'm going to guarantee you 99% time on wing or I'll pay for it. There's nobody out here that's going to do that, right? Because I had the physics and analytics. And so the notion of getting to outcomes is just incredibly, incredibly important as you go forward. That makes a lot of sense. So I want to spend the next few minutes and then we're going to open up for questions to the audience. So start thinking about whether you have a question for our guests. So you led this large organization for 16 years, which is incredible. And then you moved to Silicon Valley and joined NEA as a venture partner. Big change, very big change. And so I'd love to spend the next few minutes talking about that. First of all, how is it going? Yeah, so I lived around the world with with GE, but I had never lived in Silicon Valley and I wanted to see what it was like. I wanted to see kind of what the startup scene was like. I wanted to spend time around growth companies. I joined NEA because I'm a deep domain health care person. I'm a deep domain industrial automation person. The NEA footprint follows, you know, is pretty much the skill set and I wanted to work with private growth companies. I didn't really want to work with big public companies. I want to work with private growth companies. So I'd say it's been, I think it's been fascinating. It's been great fun. It's there's definitely a bubble out here, right? People out here don't know what's actually happening in the rest of the world. But I view that as a real positive, you know, in other words, I don't view that as a negative at all. There's a sense of optimism that is so incredibly powerful in terms of the world today. There's a lot of money, maybe too much money, you know, in terms of how and where to invest and kind of the, you know, there's so many smart people out here, you know, you got a lot of people that can tell somebody like you and Matthew, you know, here's what you should do. I'm better at like, you know, because of my experience I can say, here's what I would do if I were you, which is a different kind of advice or here's what you should do next, right? So I think with growth companies, there's a different nuance than somebody like me can bring. Ken Chenault's a friend of mine who was a CEO of American Express. He's kind of doing the same thing and, you know, it's just, I think it's great fun and really, you know, in healthcare, you know, on the diagnostic side, right, I can sit there and say, you know, look in the 1980s or 1990s, you know, disease like multiple myeloma had a five-year survival rate of let's say 10%. Today, the five-year survival rate is maybe 80%, 85%. The technology is amazing. In 1990s, the administrative cost of healthcare was 20% of the revenue dollar. In 2018, it's still 20% of the revenue dollar in administrative cost. So there's certain things in a market like healthcare that small companies are going to have a chance to really be incredibly disruptive and I wanted to really, particularly in healthcare, I wanted to be a part of that. I think it's pretty amazing that you were a Fortune 500 company and leading this large organization and you decide to come to Silicon Valley. Do you think other Fortune 500 CEOs, once they're done as an operator, might do the same thing? Do you think you're going to set a trend? I really don't know, but I wanted to do stuff that was interesting and fun. It's definitely interesting and fun out here and more importantly, I wanted to work with CEOs. I wanted to work with emerging teams and help make them successful and I think you can really do it here. Cool. Okay. This is a lightning round of three questions and you can answer. Okay, what's been the most surprising thing since you've been here? The funniest thing that's happened and what's one thing you would change? About here. About now in your new role, new lens. Most surprising thing, there's just so much money. You know, I just say it's like, you might want to write this down. Not every idea is a good idea. Just take it from somebody that knows. It's a challenge. So I think it's hard to be discerning when you just have so much money, right? So I think that's been surprising. Funniest. Oh gosh, what's the funniest thing? You know, the time it takes to drive from Palo Alto to San Francisco is actually, you know, for somebody that has never lived out here, you know, the variance of 30 minutes to two and a half hours takes a little bit getting used to. So I'd say that's, the other thing is I think to a certain extent, Michelle, is the, this may not be funny, but I think it's funny, is the impact, you know, Masa has been a friend of mine for 25 years, you know, just what he's done with SoftBank and how that has recreated the dynamics, I think, of the whole venture world is always fun to see, you know, that change, that level of change take place. And people that had an old business model, you know, how they've, how they've struggled with it. And then, what would you change? Look, I would change, I don't think, I don't think the ecosystem does a good, good enough job of helping people like you. You know, in other words, I think it's, you know, at this moment in time when actually money is plentiful, just being an investor isn't enough. And so I just think there's a, look, I love the NEA, I really love the NEA guys and I'm thrilled to be here, but I have a bigger purview and I think it's just, I think entrepreneurs need something different than what they're getting every day. So that's what, that's what I would change. So you're here to help drive that change. I think it's, it's not just me. I just think it's everything about, you know, how we think about life, how we try to help you, kind of what are the old institutional, you know, old institutional knowledge, you know, what kind of CFO do you need to go public, right? Do you need somebody that's like, comes from, I like Goldman Sachs. I'll just, there's no offense, but somebody that's like, comes from Wall Street, let me tell you, look, if you have a good company, I can take it public with you with like a German Shepherd and a phone, okay? If you have a really good company, just give me a call. I'll help you. If you don't have a good company, it's hard. Okay, you need, you better have more than just a CFO. What a good CFO does is when you're gone, this is the person that's going to help you run the place, right? They know how the, all the pieces come together. They know, they know how to be a good operating right hand for you. And so I think there's certain kind of vestiges of days gone by that aren't necessarily true in the setting that you're at, right? It makes a lot of sense. Okay, I'm going to open up for questions, but I'm going to ask you one question, then I'll ask for questions. So as you look ahead, and again, you know the Fortune 500 leaders and the entrepreneurs. Again, very few people sit in that, like you are very unique. You're a unique unicorn. You're a unicorn in a different sense of the world. I'm a unicorn, I'm like a donkey. Maybe, I don't know. All right, Eileen Lee, the next thing is donkey. So what would you, what kind of advice do you give to the entrepreneurs and the Fortune 500 leaders, and then we'll open up for questions. Oh, like to the entrepreneurs, you just can't give Washington the finger, okay? In other words, the government always wins. So the notion that you're going to be able to kind of skate around, I think, I think being part of that process, being a, being a constructive voice, knowing how to collaborate, you know, in other words, like, you know, I competed, let's say, hand-to-hand combat with Caterpillar for 35 years. But we would recognize in places that we had something in common, we could work together to set a standard or things like that, and it's just, you're just not trained to play well together always as an industry. And I think that's, I don't know, you flunked kindergarten or something in terms of the context of how you, how you work together. What would I tell industrial companies? Future of work. Every, every company, every function is going to be redefined in the next five years. I've never seen a wave of technology that is more profound than the waves of technology that are intersecting with the world today. And you better have a micro strategy, not a, not a PowerPoint strategy, but a micro strategy of how to deal with it. Great. That's terrific. Any questions? Right here in the front row. Thank you. Hi, I'm Arthur Keller from Psyche Analytics, and I'd like to ask about the diffusion of innovation into healthcare. For example, there's a half a century of research showing the medical cost offset of treating psychological issues associated with patients. And yet, that hasn't really happened. In fact, medical payers are actually trying to cram down the idea of paying for behavioral health or psychological health care. And that's actually an opportunity for lowering costs if you invest in it. How can we change that? Look, I mean, the whole healthcare payer technology mix is just completely, I would say, antiquated. And so, I think the first thing you have to disassemble a little bit of people that know the patient best or how the patient pays themselves, how an employer would value things like that has to be kind of redone and not through the prism of UnitedHealth or Anthem or people like that. So, the fact that the payer is so disconnected from cause and effect is a huge challenge. Number two, I would say that just the, so if you think about healthcare just more like maybe a little wonky, you know, the cancer revolution was kind of 70s, 80s. The cardiac revolution was kind of 90s, 2000. The brain remains the most unstudied. The least is known. And so, this whole notion of kind of whether it's a psychological impact, aging diseases, things like that, I would say the next 10 or 20 years of healthcare has to be about real study of the brain, real study of emotions, real study of psychiatry, and how do you match therapies and payments associated with that? You know, because really, that's how people are going to die. That's where the healthcare dollars are going to go. And I just think we're very early still in those days, right? Aging diseases and PTSD, psychology, psychiatry. These are still emerging areas in my mind. Great. It was such an honor and pleasure to have you here. Thanks. Thank you so much, Jeff. Great. Thanks. Jeff Immelt, everyone. Thank you.