Innovation Behind GE’s Re-Shoring Drive

Each week brings a new report or press release announcing a new government or commercial commitment to bring manufacturing back to the US. With unemployment still at historical highs, and commodity and energy prices breaking new records each year, it’s no wonder that global manufacturers are taking another look at their products and the infrastructure required to design, develop, and produce them.

Just over a year ago, Unites States President Barack Obama named General Electric CEO Jeffrey Immelt to spearhead the President’s Council on Jobs and Competitiveness. A renewed focus on job creation in the U.S. in the midst of a down economy spurred the selection of the CEO of one of the country’s best known and most storied industrial conglomerates.

While there are plenty of critics of GE’s globally distributed product development and manufacturing strategy (half of its 300,000 employees are located outside the US), it is worth noting the very positive evidence of its commitment over the past year to reestablishing a strong base on home soil, and the creation of new jobs as a result.

In a CNN interview broadcast in September of last year, Immelt talked about the creation of 15,000 jobs in the US that are going to help drive GE’s continued status as one of the top net exporters in the U.S. He drove that point home in a subsequent interview with Lesley Stahl of CBS’s 60 Minutes. Global consumption of GE products spurs demand for jobs at home in the U.S.

So how did this increase in home-based jobs at GE happen? How is it able to forecast profitable growth across various divisions? Quite simply, it’s innovation.

While often overplayed, over-hyped, and frankly, a nice soundbyte, innovation means something, especially when your customers’ satisfaction and financial results can prove it. Immelt himself has clearly articulated what kind of innovation GE is focused on developing: human innovation and technical innovation.

He explains that human innovation has three elements: in-house capability, lean manufacturing, and a new model for labor relations. There’s a great deal of insight on each of these three, but what strikes me as particularly unique is the focus of a “one-team” mentality that exists from designer, to engineer, to assembly line worker. GE considers the end product the goal, and each contributor’s part in the process can yield benefit to the customer and to the company.

This is a pretty cool approach that is playing itself out at GE Appliance in Louisville, Kentucky where it will have completely redesigned and manufactured its entire line of appliances by 2013.

When we think about technical innovation these days, we go immediately to the latest and greatest consumer gadgets such as the iPad or car apps. But it seems GE is looking at it a bit differently. According to Immelt, technical innovation at GE works itself out via two core competencies: advanced manufacturing and materials processes.

One decade and $12 billion of investment went into the development of advanced carbon fiber fan blades for aircraft engines that are produced at GE’s new Ellisville, Mississippi manufacturing facility. This technical innovation significantly moved the needle against the competition, delivering lighter, stronger, more efficient components that ultimately reduce the amount of energy needed to fly a new Boeing or Airbus aircraft.

Adding to the excitement this technical innovation brings to the GE customer is its partnership with a number of U.S. universities to advance both materials and manufacturing technology. Close to the Ellisville, MS facility, Mississippi State University has joined with GE to advance manufacturing processes for carbon-fiber composites, while the University of Dayton, in Ohio, will be home to a GE R&D center for avionics. With a commitment to developing future engineers and leaders in manufacturing, GE is securing its pipeline of human capital necessary to stay competitive in a global marketplace.

With “Made in the USA” awareness growing stronger each year, as evidenced by the recent Chrysler ad featuring Clint Eastwood, the bottom line will still be what drives corporate decisions to open or close facilities around the globe. But what was recently an easy decision to move manufacturing to China based on cheap labor, cheap energy, and a weak American dollar, is now more complex as those economic factors have shifted dramatically.

Though global economic factors drive the manufacturers’ location decisions, consumers don’t make purchasing decisions based on where the product is built, but on what value and utility it provides. GE has taken the intelligent approach of casting a fine eye on the economics of production while opening the imagination to what innovations are possible in a constantly changing global economy. Can they continue to bring good things to life? We can only wait and see what’s next. But it looks like the right strategy is in place to create the opportunities to innovate for a while to come.

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