Riding the Productivity Waves to Growth ~ Jeffrey R. Immelt, CEO at GE.
America can turn a slow recovery into a strong comeback, one that grows our economy and firmly reestablishes our country as a powerhouse of ideas and production. One of the keys — and what will determine the winners and losers of an exciting new era — is our willingness and ability to lead the next “big waves” of productivity.
There are four new drivers of productivity, and success in each depends on the technology and talent we develop. The first is how shale gas is changing the energy debate and the balance of energy power. The second is the Industrial Internet — owning and connecting the analytical layers around industrial products in order to improve performance and efficiency. Next is speed and simplification: the only way to serve our customers better is by working faster and smarter. The last driver and the focus of a forum GE is convening today, is advanced manufacturing. Manufacturing excellence, forgotten for too long, is once again a competitive advantage.
Manufacturing is still an essential driver of the U.S. economy, employing about 12 million people in America, or 9 percent of the workforce. It generates $1.7 trillion in value each year, and manufactured goods account for 53 percent of all U.S. exports. Seventy percent of private sector spending in research and development in the U.S. comes from manufacturing companies. Manufacturing also has an outsized impact on our economy as a whole. It is responsible for roughly 7 million American jobs in other industries, and every dollar in manufacturing sales generates $1.34 in output from other sectors.
Despite all of this, companies have historically outsourced critical capabilities in their supply chain and focused too much on cheap labor rather than speed, innovation and market access. As a nation, short-term gains fooled us into believing that we could build a sustainable economy solely based on service jobs. We also didn’t fully appreciate the negative effect that poor labor/management relations and eroding “systems of competitiveness,” from the regulatory environment to education, had on our ability to innovate and grow the economy.
Today, we can reverse these trends. Indeed, advanced manufacturing — both imbedding technology into products and processes and creating the highly skilled workforce that can support these efforts — and other new innovations in manufacturing are changing what we make, where and how we make it, and even who makes it. Large or small companies that invest in their own capabilities and “own” or control a local supply chain have a competitive advantage as they develop their next breakthrough.
GE Aviation is a great example. To date, we’ve manufactured jet engine components mostly by casting, stamping and cutting steel and alloys. Now, through 3D printing, or additive manufacturing, we can “print” complex parts layer by thin layer. Our newest jet engines like the CFM LEAP, a joint venture with France’s Snecma, will have printed combustion system components and other parts inside, reducing engine weight and saving our customers money.
There are other examples across our businesses. Researchers in our Global Research Center labs in Niskayuna, N.Y., invented a new sodium-based battery technology that stores nearly four times as much energy as the lead-acid batteries used today. GE teams also designed an advanced manufacturing process to build the battery efficiently in Schenectady, just a few miles away, where our Energy Storage business is headquartered.
Now is the time to bring these and other efforts to scale, changing both the way we build complex machines and the entire competitive landscape. The rise of analytics and software in the industrial world only multiplies the opportunity in front of us. America must capitalize.
We are on the right path, but to lead in manufacturing and to compete and win globally, we must:
- Make manufacturing jobs a priority: Job creation and manufacturing leadership require a sense of urgency and a sense of prioritization. Around the world, leaders unabashedly support their manufacturing sector. The United States must do the same.
- Recommit to research and development for the next generation of technology: The American economy is built on innovation. But, R&D spending hovers at around just 2 to 3 percent among U.S. companies. To pioneer the growth of nascent technologies, including additive manufacturing, and to accelerate the economic recovery, we must make a stronger commitment to pursue new ideas and find breakthroughs.
- Focus on people: The American workforce is unmatched; we can compete with anyone. But we can’t divide labor and business. We can’t shut our doors to the most creative and inventive people in the world, whether they are born and raised here, or come to our shores from elsewhere. And we can’t deny our workers the skills today’s economy demands; in fact, our efforts must start with revitalized math, science and engineering instruction during the K-12 years and continue through job training. In our recent survey, 81 percent of global business executives said that aligning the education system better to business needs should be a top priority.
- Nurture relationships between big and small businesses to facilitate innovation: Innovation happens everywhere. At GE, we partner with small and mid-size businesses throughout the supply chain to create a culture of constant learning, in which game-changing ideas can be brought to scale. At the same time, we can learn from these partners and create a more entrepreneurial environment and a “start-up” culture.
- Grow exports: Open markets and exports are critical to the U.S manufacturing sector. The U.S. must do more to open markets abroad for American goods while maintaining the openness of its own market. We can do this with unilateral, bilateral and multilateral trade-expansion initiatives. Today, most of GE’s revenues come from outside the United States. GE exports about 80 percent of the turbines we make in Greenville, South Carolina. We sell in 140 countries. The marketplace is global, and our ability to reach customers around the world supports American jobs.
- Improve our “systems of competitiveness”: We must create an environment where we cultivate systems that enable growth and competitiveness. That means regulatory reform — for instance, aligning state and federal regulations so America can take advantage of the natural gas boom. It also means having the fiscal certainty that gives businesses the confidence to make long-term decisions. Gridlock over the budget, debt ceiling, meaningful entitlement reform and taxes impedes growth and investment.
The United States cannot be afraid to lead. The ability for highly skilled workers to integrate technology into products and processes has us on the cusp of a productivity revolution. If we make the most of this moment, we will create new jobs and new businesses. We will accelerate economic growth, renew prosperity and together build a world that works better.
Jeffrey R. Immelt is the Chairman and CEO of GE.