On a Friday morning in early March, I went to see Jeff Immelt at General Electric’s temporary office, a converted warehouse in the Seaport complete with exposed-brick walls—a daring motif for the bluest of blue-chip companies. About a week before, a Wall Street Journal article had speculated about who would replace Immelt as CEO, which came as an ominous sign considering Immelt has given no indication that he plans to step down. So I was surprised to find him loose and relaxed. “I hear he’s wearing jeans today,” his press liaison told me when I arrived. “He must be trying to make a statement.”
Upstairs, I spotted Immelt—6-foot-4 and built like an offensive lineman—loping around the office, his tuft of unruly white hair bobbing as he occasionally stopped to chat with employees. At a coffee machine, he rehashed highlights from a recent Celtics-Cavaliers game with a man who seemed about a foot shorter than him. “LeBron dove into the stands,” Immelt said, blinking excitedly. “He almost took out Belichick.”
A few minutes later, Immelt greeted some photographers who had set up a makeshift portrait studio in a corner of the open-plan office. In front of a gray screen, with a spotlight trained on him, he stood with his shoulders slouched, arms hanging. He grinned broadly. There was something self-effacing, even goofy, about his demeanor. It was as if he was trying to make himself smaller, to lessen the impact of his stature, which is staggering both physically and socioeconomically. As the chairman and CEO of one of the world’s biggest companies, he earned $21 million last year while commanding a workforce of 295,000 people. “This is for Boston’s best-looking, right?” Immelt asked, chuckling. A photographer quipped that it was for more of a calendar. “Hold on,” Immelt replied, “I’ll go take my shirt off.”
Cracking jokes with the photographers, Immelt appeared unfazed by the previous week’s Journal article and the criticism that followed. If you believe his friends, that might be because Immelt rarely shows signs of stress—not a bad thing given that Wall Street investors, who own the vast majority of GE, appear to be turning on him. “The heat in the kitchen is way up,” says Nick Heymann, a longtime GE analyst at William Blair.
Immelt knows this territory well. Fierce criticism, which escalated recently into agitation for Immelt to step down, has been nearly constant during his 16 years at the helm of GE—a period of decline for one of America’s most venerated companies. Founded by Thomas Edison after he pioneered the incandescent light bulb, GE grew over the next century into a sprawling conglomerate that sold everything from toasters to jet engines and owned an insurance business, not to mention NBC. For decades, it was a darling of Wall Street investors, who viewed the company as a proxy for the American economy—and a reliable source of investment returns. When Immelt took over in 2001 from the legendary Salem native Jack Welch, GE was the most valuable company in the world, worth $402 billion.
Under Immelt, though, GE’s stock price—along with the company’s value—has fallen by about 25 percent, infuriating Wall Street investors, many of whom now want the boss sacked. And the slide hasn’t stopped there. Roughly a dozen publicly traded companies are now worth more than GE—including Facebook, which didn’t even exist when Immelt became CEO. Formerly regarded as America’s premier employer, GE no longer gets its pick of the country’s top young business talent. Today, says Jay Light, dean emeritus of Harvard Business School, “the big company that a lot of people want to go to is Google.”
Much of this is not Immelt’s fault. Enormous multinationals such as GE are in decline worldwide. And Immelt has successfully navigated GE through one storm after another, including 9/11, the 2008 financial crisis, and the collapse of oil prices. At the same time, he’s been striving to radically transform the 125-year-old business so it can survive in the 21st century. What was once a massively diversified industrial behemoth will become, in Immelt’s vision, a dedicated infrastructure company that doubles as a top-10 software firm, a bleeding-edge tech innovator, and a leader in a field many see as the next revolution in computing: the Industrial Internet.
If this idea sounds preposterous, that’s because it is. But Immelt, a cerebral, long-term strategist, is certain his vision is the only way forward. As he’s said, “It’s this or bust.” Yet he knows full well that success isn’t guaranteed.
That’s where Boston comes in. For 42 years until last summer, GE’s headquarters was a grassy corporate complex in suburban Fairfield, Connecticut—isolated from the world and, especially, from the centers of technological innovation. Being able to “look out the window and see deer” had become a problem, Immelt has said. Boston, on the other hand, while it lags behind California and possibly even New York in headline-grabbing, consumer-oriented startups, is a leader in the kind of tech that attracts CEOs rather than smartphone-wielding teens. “[Boston’s] strengths are robotics, supply chain management, enterprise software, artificial intelligence, database technology,” says Maia Heymann, a Kendall Square venture capitalist. “This is the tech GE is looking for.”
Governor Charlie Baker and Mayor Marty Walsh might like to think that their negotiating skills and the more than $145 million in financial perks they offered GE are what enticed the company to move its world headquarters here. In reality, though, it was Boston’s brains and tech—ranging from startups to university labs—that sealed the deal. (The perks, Immelt told me, “weren’t the best incentives we saw.”) For Immelt, the move to Boston is meant to be the next phase of his ongoing transformation of GE, not a final act as CEO—as some investors would prefer. Last year, he even dropped $7.5 million on a Commonwealth Avenue townhouse, as if to send the message I’m here to stay. The mayor, the governor, and local CEOs are rooting for him. They’d like to see Immelt last long enough to restore GE to its former glory and, along the way, transform business in Boston. The question is: Can he do it before Wall Street shoves him out the door?
When I sat down with Immelt after his photo shoot to discuss his grand plans, he adopted his typical interview style: folksy charm that masks, with some success, the fact that everything he says is calibrated to spare GE and himself any harm. Many of his answers began with a disarming Oh gosh, and it struck me as we spoke that he might make an excellent politician in the mold of Barack Obama—friendly and professorial but, above all, restrained. When I asked, for instance, how he met his wife (she worked with him at GE in the early ’80s), he demurred, saying, “Well, I can’t tell you everything.” Can you tell me anything? I asked. He chuckled, and then said, flatly, “No.”
In more than a few ways, Immelt is a magazine writer’s nightmare. He’s an earnest, midwestern Protestant who’s been happily married to the same woman since 1986. His politics are sensible and center-right. He has been praised as dispassionate. His famously abrasive predecessor, “Neutron Jack” Welch, once said of Immelt, “At times, I might get too emotional. He doesn’t.” Immelt is competitive, but not too competitive. “It’s in a good way,” his brother, Steve, says. His friends say he likes to talk shit on the golf course, but assure me there’s never any swearing. Trash talk, for Immelt, means gentle goading about putts. In the public sphere, the spiciest thing he’s done in years is call out Bernie Sanders for claiming, as only Sanders could, that GE was “destroying the moral fabric” of America. (The political left criticizes Immelt for his company’s aggressive negotiating with labor unions and infamous tax-minimization shenanigans.) “We’ve never been a big hit with socialists,” Immelt retorted in a Washington Post op-ed. “We create wealth and jobs, instead of just calling for them in speeches.”
Whether he knew it or not, Sanders had provoked Immelt in just about the only way possible: by impugning the integrity of his beloved GE. If nothing else, Immelt is a true GE homer. “I love this company,” he’s professed numerous times. When I asked why, he said, “Oh gosh, I have a different context than most people.” His father, Immelt explains, worked in GE’s aircraft engine division near Cincinnati for 38 years. Immelt, for his part, has never seriously considered pursuing a career anywhere else. At Harvard Business School, where he studied after his undergraduate years at Dartmouth, his ambition to climb the ranks at GE was common knowledge. “In our second year of business school,” says Steve Mandel, a former roommate whose wife, Susan, was a classmate, “my wife made a bet that Jeff would eventually run GE.”
Immelt joined GE straight out of HBS and came face to face with the company’s astounding breadth. His early jobs forced him to learn the finer points of refrigerator compressors and raw plastics. In 1997, when Immelt was promoted to run GE Medical Systems, a high-tech unit that manufactured CT and MRI scanners, he found a business he loved. In the three years he led the division, he grew sales by 75 percent, increased market share, and turned around the flagging European market. His performance ultimately won him the confidence of Welch, who handpicked Immelt as his successor in 2000. The following year, Immelt, then 45, took the reins of the world’s biggest company.
Reflecting on his rise, Immelt says, “So much of it is luck.” Still, he had become a highly confident leader. He recalls a lunch in the 1990s with Welch and other CEOs. “I remember thinking, I may not be as good as he is,” Immelt says, referring to Welch, “but I’m as good as any of these guys.” Now with Welch’s endorsement and buoyed by his success at Medical Systems, Immelt entered the top spot with an ambitious plan that would lay the foundation for today’s transformation. “Even before I became CEO,” he tells me, “the vision I had for GE was that we needed to restore the technical foundation of the company.” Translated, that meant investing in high-tech innovation and focusing the company on making big, complex machines such as medical scanners and jet engines. At the same time, this long view set him on a crash course with Wall Street investors more concerned with the next quarter’s profits.
Immelt’s long-range plans, though, soon had to take a back seat. The September 11 attacks, which occurred on Immelt’s fifth day as CEO, ushered in a period of sustained crisis for the company, including the 2008 financial disaster that nearly bankrupted GE’s $661 billion finance division, called GE Capital. “You’ll never in your lifetime go through something quite that intense,” he tells me. In fact, he once described 2008 and 2009 as the “toughest years of [his] life.” As the global financial system teetered on the brink of collapse, he had a private ritual that helped him project an air of calm to his employees and the public. “You tend to be your own worst critic,” he says. So every night he went to bed feeling like a failure. “But in the morning, you’re reborn.” In front of the bathroom mirror every day, he would say to himself, “Hello, handsome” and start over.
During these years, Immelt earned a reputation as a steady navigator, yet GE’s performance lagged. Even as the stock market rocketed upward after 2009, the company never returned to its pre-crisis heights. Investors blamed Immelt, and beginning in 2014, the knives came out. That fall, Scott Davis, an influential Wall Street analyst, called for a “full AT & T–style breakup” of GE. A few months later, he went even further, suggesting that Immelt could be replaced as CEO within a year. “[M]ost investors are ready for change at the top now,” he wrote. Others ditched the stock altogether. “GE has not been well managed at all,” one prominent money manager said after abandoning his GE position. Taking stock of Immelt’s tenure, Davis wrote that he “knows that he doesn’t have a ton of time to repair his legacy.”
What Wall Street didn’t yet know was that Immelt, after years of putting out fires, had finally set in motion the key components of his plan to overhaul GE. On April 10, 2015, surrounded by his top executives, Immelt sat down in a windowless conference room in Fairfield for an early-morning phone call. On the other end of the line were a dozen analysts, many of them deeply skeptical of Immelt’s leadership. In a jargon-laden monologue, Immelt told them that, beginning immediately, GE would sell almost all of GE Capital, accelerate its transformation into a high-tech infrastructure company, and double down on becoming a software giant. For Immelt, this was a watershed moment. GE Capital had grown to ridiculous proportions. “Being 50 to 55 percent of [GE’s total] earnings,” Immelt says, “that wasn’t where we wanted to be.” Selling it would free him to invest in GE’s industrial businesses and would streamline the company along the lines of the bold “breakup” Davis had called for.
The analysts were almost giddy. “Congrats. This is big stuff,” Davis told Immelt. “I know we’ve all given you a lot of crap over the years, but this is pretty good stuff for redemption.” He added: “You can keep your job a little longer, I guess.” Immelt and his coterie laughed—perhaps a bit too effusively. After all, the rumors of his undoing hadn’t been a joke.
“I want some 29-year-old Ph.D. student at MIT to punch me right in the nose and say, ‘All of GE’s technologies are wrong and you’re about to lose,’” Immelt said. Holding forth inside the Boston Harbor Hotel ballroom, he sat grinning, waving his huge hands, and chuckling along with the crowd. Intentionally or not, his down-home, self-deprecating shtick was having the ideal effect. The gray-haired business leaders arrayed before him—including Robert Kraft and the bosses of Wayfair and Raytheon—were eating up his jokes.
Immelt was there to announce the site of GE’s new headquarters—a 2.4-acre plot on the banks of the Fort Point Channel—and to explain why his company, which he has taken to calling a “digital industrial,” was coming to Boston. “I want [GE employees] that are down in the Seaport…to walk out of their office every day and be terrified,” Immelt said. “I want them to be completely paranoid. Are we moving fast enough? What can we do better? Who’s smarter than we are? I want to be in this sea of ideas so that paranoia reigns supreme inside the company.”
Since arriving in Boston last August, Immelt has pushed his employees to engage with the city’s tech community. Investors from GE Ventures, the company’s venture capital arm, meet with startup founders at District Hall, in the Seaport. GE managers attend Industrial Internet brainstorming sessions at the offices of Rethink Robotics, a Seaport neighbor. GE will also literally open its doors to techies, with a coworking space inside its headquarters, once its 12-story Seaport fortress is built. (Groundbreaking is scheduled for May 8 and the opening for some time in 2019.) So far, the Boston business community has welcomed GE’s efforts with unbridled exuberance. “Boston is so lucky to have a large, thoughtful, successful corporation move here,” Maia Heymann, the tech venture capitalist, gushes.
Until recently, though, “digital industrial” was not a recognized species of business. There were digital companies, like Microsoft, and there were industrials, like GE and Siemens. But there were no true hybrids. Nevertheless, Immelt believes that to survive in the 21st century, GE has to become one.
During his first 14 years as CEO, Immelt had focused on the “industrial” part of the transformation. “We started right away,” he tells me. Even as he dealt with the financial consequences of 9/11 and the recession that followed, he increased the budgets of GE’s research labs and bought healthcare technology startups. Later he sold off extraneous businesses such as GE’s insurance operations, NBCUniversal, and GE Appliances. Finally, after the financial crisis, he poured billions into GE’s power plant and oil and gas businesses.
Next came the “digital” phase: creating the software that would connect industrial machines to each other, and to the cloud. This nascent technology is called the Industrial Internet—essentially the Internet of Things for big machines and infrastructure. Immelt believes it is the next revolution in computing—a technology sector with the potential to boom in much the same way the consumer Internet has over the past 15 years. “The wave has taken off,” Immelt tells me, “and our customers are grabbing it.”
How big is the potential opportunity for GE? “Oh, it’s completely insane,” says Isaac Brown, an Industrial Internet expert with Landmark Ventures. “Every factory, every oil rig, every power line, every farm, every tractor.” They can all be connected. Immelt estimates the potential size of the market is $100 billion a year. “Look, this is big,” he says bluntly. “Really big.” Immelt’s GE is poised to capitalize—if it can innovate quickly enough. But big corporations usually aren’t good at leading the charge into new technologies. In fact, their track record is terrible.
The most famous failure may be IBM’s. In 1980, it had created the first personal computer for mass-market distribution. But in a crucial blunder, IBM paid a startup called Microsoft to provide the operating system—the software that made the computer run—rather than developing the software itself. The operating system, MS-DOS, was a precursor to Windows and turned out to be the more valuable part of the business. Even though IBM had been perfectly positioned to dominate the market, it missed out—and Bill Gates became the richest man in the world.
Determined not to repeat IBM’s mistake, Immelt wants GE to lead the way into future industrial technologies. Last September, he spent $1.4 billion on two 3D-printing companies to boost GE’s stake in that promising technology. He has also expanded GE Digital, a software division outside San Francisco tasked with creating Predix, GE’s Industrial Internet operating system. “In 2010, when we started this, we didn’t really know what we were doing,” Immelt admits. Since then he has poached 1,700 programmers and software executives from the likes of Apple, Microsoft, and Cisco. These seasoned hands broadened his view of Predix’s potential, he tells me. “They taught us to say, Gosh, what you see as [merely] a software-apps business could actually be a [whole] platform”—that is to say, a kind of Microsoft Windows for the Industrial Internet. “So I think we got smarter,” he says.
Even so, GE Digital’s work has been slow going, perhaps revealing an Achilles’ heel of Immelt’s long-term strategy. Compared with big corporations, startups tend to innovate faster, so GE has taken to acquiring them or simply white-labeling their technology. “GE is finally realizing that it’s hard to build this stuff internally,” says Brown, the analyst. Immelt dismisses this observation as “too simplistic,” telling me that a combination of in-house development and buying outside startups was always the plan. “When you start something like this,” he says, “you’d be crazy to think you don’t need to do acquisitions to accelerate your work.”
If GE’s in-house innovation is lagging, though, Boston tech companies could score a windfall. GE already has a deal with PTC, a Needham software company, to provide a lot of the tech that underpins Predix. And last November, Immelt spent more than $1 billion on two Industrial Internet startups.
Competition for Industrial Internet dominance is fierce. IBM, Microsoft, and Amazon, which all have vastly greater software experience, are working on their own competing platforms. Nevertheless, Immelt has convinced many tech leaders that GE is a contender in the computing industry’s next arms race. Forrester, a research firm, recently ranked GE’s Predix as one of the most advanced Industrial Internet platforms—a fairly stunning result for a company known, in the popular imagination, for light bulbs.
The progress made is a measure of Immelt’s total commitment to his vision. “No matter how long it takes,” says Brown, who has written critically of GE, “or how many billions of dollars they have to spend on startups, GE is going to emerge as one of the winners, if not the big winner.” He added, “At the end of the day, this is Jeff Immelt’s legacy. This is his whole thing.”
Of course, to do any of this and spend the required billions, Immelt must be around to control the purse strings. Recently, though, Immelt has seen his job security called into question yet again. The grumblings came from the usual critics. A few weeks after the Wall Street Journal’s February article about CEO succession, Scott Davis put a bounty on Immelt’s head. In a note to his clients, he wrote that one of Wall Street’s leading industrial investors predicted that whenever Immelt finally left, GE’s stock would get a 5 percent boost. Then came the most serious blow.
On March 10, Charles Gasparino, a muckraking Fox Business journalist, tweeted that Immelt was “on the hot seat” with his most powerful Wall Street ally, Nelson Peltz, head of Trian Partners, an activist hedge fund. Peltz had staked $2.5 billion on GE in 2015 and endorsed Immelt and his strategy. Now, Gasparino reported, citing unnamed sources, Peltz had lost confidence in Immelt and might seek to push him into early retirement. (Trian said it continued to “work constructively” with GE but did not appear to deny the report.) In response, GE’s stock shot up 2.5 percent during the next couple of hours, demonstrating that Wall Street remains eager for Immelt to step down. After a two-year cease-fire, Immelt was under siege once again.
Investors’ complaints are about arithmetic, not strategy. Immelt hasn’t decreased costs as fast as Trian wanted—or increased profits as much as he’d promised. (In late March, facing pressure from Trian, he agreed to an additional $1 billion in cost cuts.) Additionally, future profits from Predix and 3D printing are so speculative that they haven’t meaningfully contributed to the stock price. Although Immelt has invested in GE wisely, says Noel Tichy, a management consultant to conglomerates who worked closely with Welch and has written extensively about GE, “The numbers haven’t been there for Wall Street,” adding, “He’s got to walk and chew gum at the same time.” In the cold math of Wall Street, Immelt’s GE simply isn’t adding up.
Nick Heymann, who endorses Immelt’s digital strategy, says the boss might not have much time left to turn the math around. “If you don’t achieve the $17.2 billion profit target this year,” he says, “then the pressure will probably be extreme [for the board of directors] to acquiesce and assign somebody else to be the leader.” By all accounts, Immelt currently has the full support of his board.
None of this is to say that Wall Street would necessarily be right to give up on Immelt and his strategy. The stock market can be capricious. When Netflix’s CEO pivoted toward streaming, the stock price tanked and an analyst warned of a “nuclear winter scenario.” Eighteen months later, the stock took off once investors realized the CEO had been right about streaming all along. In today’s market, Immelt tells me, “Everybody’s reacting to every day’s headline.”
Immelt’s supporters tend to come from more sober regions of the business world. Academics have long hailed his leadership during crises and his ability to foster a culture of innovation. And, in the long run, his reforms of GE may pay off. Steven Winoker, an analyst at Bernstein, who’s bullish on GE, predicts that the stock will outperform expectations and climb almost $8 a share, to $38. “Yes, GE is often unloved,” he writes, “but the changes are big and they have come fast and furious.” Even Scott Davis believes the stock is undervalued and has conceded, albeit in a backhanded way, that Immelt has changed GE for the better. “[W]ith CEO Jeff Immelt likely in the final inning of what we see as a rather unspectacular 15-year run,” he writes, “it will likely be Mr. Immelt’s successor who reaps the rewards of an improved GE.”
There’s no guarantee, of course, that Immelt’s successor will share his vision for GE’s future. In fact, if his successor dialed back GE’s software ambitions, he or she might be applauded. But what would a lower-tech GE mean for Boston? In one way, not much would change. GE has annual revenues regularly in excess of $115 billion. With or without Immelt’s grand technology strategy, it will remain a corporate juggernaut, pumping money into the local economy (including, for better or worse, the overheated housing market) and enhancing the city’s business prestige, which can help draw in more investment. The effects on Boston society don’t depend on high technology, either. Already, GE executives are popping up on the boards of companies and charities and the GE logo is finding its way onto everything from student robotics projects to Celtics jerseys.
Yet the greatest hopes for GE’s impact on Boston turn on the company’s own transformation. “After PayPal launched in the Valley [in 1998],” says Michael Greeley, a general partner at Flare Capital Partners, a Back Bay venture capital firm, “there were probably 20 startups that came out of it, a bunch of great entrepreneurs, and people who made a lot of money and became angel investors. So you had this kind of PayPal mafia” that helped kick off Silicon Valley’s consumer-tech boom. “I would hope to see a similar phenomenon from GE,” Greeley says. But GE can only spur that kind of renaissance if it keeps investing in high-tech innovation itself—which might require keeping Immelt at the helm.
Immelt’s holding on for now and has given no indication he wants to step down. When I asked about possible early retirement and the grumblings on Wall Street, Immelt says only that he remains focused on transforming GE. Friends and observers, though, don’t believe he’s going anywhere soon. “I see no difference in Jeff’s commitment and love for the job,” says Ed Kania, one of Immelt’s closest friends. “No sense of fatigue, no sense of It’s time to move on.” Tichy agrees, saying, “He’s not a quitter, and he’s going to want to stay long enough for the world to recognize the company has turned a corner.”
In either case, whether Wall Street gets the leadership change it wants or Immelt rides it out on his own terms, he won’t be around long enough to carry his strategy to fruition—a reality that even he concedes. “Predix is going to take five or 10 years to play out,” he tells me, meaning that it will fall to his successor to see his plans through—or reverse them.
When I spoke with Immelt in March, I asked him how he would evaluate his legacy after retiring. He took the long view, as usual. “You’re probably not going to know the impact I’ve had on this company for years, decades in the future,” he said. Pressed to elaborate, he offered only, “The company is better than when I came here. So I’m able to say, ‘Let’s see how it goes. Let it come.’”