Jeff Immelt, CEO of GE Corp., had a message for Alberta’s oil sands on leadership: Challenge yourself to do better and start investing in technology.
“You guys have a collective problem that you have done a terrible job of marketing the technology, and that is on you,” Immelt told a packed audience in Calgary at an event hosted by the Calgary and Canadian Chambers of Commerce. “The fact that you’ve allowed yourself to be painted into this corner is ridiculous.”
Immelt encouraged oil sands producers to think about where they want to be ten years from now, to set a stretch targets for reduction in water and energy use.
Immelt puts GE’s money where his mouth is. GE invests 6 percent of its industrial revenue back into R&D on an annual basis. By comparison, most studies show oil and gas companies invest less than 1 percent.
He also had a challenge for Alberta and Canada. “If I come to a place like Canada and say what is your energy policy, and if you can’t answer that question, you flunked that one from a competitiveness standpoint,” said Immelt.
But an energy policy alone is not enough. “The challenge overall for Canadian economy is that nobody has been able to make the transition from a natural resource-rich environment to be an industrial powerhouse.” (Well, the United States has made the transition, but that took over 100 years.)
Notice Immelt didn’t say “service economy powerhouse”. In fact, he thinks that a focus on developing a service economy was one of the major mistakes of the U.S. and many European economies over the last several decades.
“I think the U.S. and maybe some countries in western Europe had this intellectual case for itself where we would run massive trade deficits and we would slide from an industrial powerhouse to being a service economy. Maybe that was a good chapter in somebody’s business book, but it was a lousy strategy. Great countries don’t have trade deficits. Great countries don’t export their manufacturing base. Great countries – great companies – compete.”
Until recently, Canada has done well in this regard, posting first trade deficit since 1976 in 2009. This trade deficit persists today.
Which brings me to Immelt’s larger message: Leadership.
GE studies companies as diverse as Google and the U.S. Military Academy about every five years to learn about leadership. In their most recent study, GE found that good leaders have the following characteristics:
- Good leaders are analytical thinkers and they are able to leverage global relationships. They are skills-based entrepreneurs. They find out who the naysayers are and bring them in. They know that there is a massive amount of information out there, and they bring it in, understand it, and make decisions on it.
- Good leaders execute with ambiguity. The world is more volatile. Until a few months ago, nobody had thought about Greece for 2000 years. Then a few months ago, Greece almost brought down the European Union. Immelt thinks that we live in a world now where every two or three years we are going to be shocked by unexpected change.
- Good leaders are system thinkers. They need to be able to bring together disparate thoughts or ideas and come up with a solution. (Immelt recommended Roger Martin, Dean of the Rotman School of Management, as someone whose books on system thinking he reads.)
Which brings me back to Canada, Alberta and the oil sands.
Immelt told an MBA class at Stanford last year (see video above) that while energy is a somewhat unique industry. Does it present an innovation challenge? Kind of. But, it is more of a public policy challenge. “Oil prices are set today, but your assets are 40 to 50 years old. The only bridge is public policy.” And while energy is a manufacturing problem, first in or “best in breed” solutions almost never win. It’s second best solutions win. So the line of sight from investment in R&D and innovation isn’t as direct as a CEO might like it to be. “So if you are in energy, you better be a problem solver, because vision isn’t going to get you there.”
Canadians, Albertans and oil sands producers pride themselves on solving problems. So let’s get out of the corner and start driving change.
