Jeff Immelt candidly told Boston’s business and political elite yesterday about what GE hoped to get from the company’s move to Boston. He said GE moved to Boston for two reasons: to win the Internet of Things and rethink how companies work in this winner-take-all technology innovation economy.
He also said he liked Boston because of the chip the tech community has on its shoulder; an obvious reference to the Silicon Valley’s domination of nearly every segment of technology. The Boston technology ecosystem, arguably the richest and most diverse R&D center in the world seems to have lost the DNA for growing big tech companies like the personal Internet, social or the sharing economy.
The Boston tech ecosystem hasn’t produced a big winner in a long, long time leaving the community feeling cheated like the Red Sox fans who waited 86 years for a World Series Championship. There isn’t a living history of going-concerns like there is in Silicon Valley where Hewlett-Packard, Intel, Apple, Google, Facebook and Uber all demonstrate successful evolutions.
If GE’s top management can add the missing ingredient by transferring the know-how for growing businesses to billions of dollars in quarterly revenue, Boston could regain its preeminent position for technology business leadership equal to its reputation for leading-edge R&D. If projections become reality, the Internet of Things or the industrial Internet as Immelt calls it could be the industry that restores this leadership. IC Insights estimated to have reached $12.4 billion in revenues last year and Cisco predicts that will grow to $14.4 trillion by 2022.
Two-hundred people will run GE from the company’s new headquarters in the Fort Point part of the city and another 600 will work in its labs. According to Immelt’s vision, the headquarters will be open for interacting with startups and academia in which GE is both convener and catalyst.
When asked why not just build an innovation lab like so many companies did to tap into Silicon Valley innovation, Immelt said that top management’s interaction with the innovation economy from its remote Fairfield, Conn., headquarters was via video conference. The move will let top management spontaneously and personally interact with startups, innovators and academia.
GE’s industrial internet will be built on what GE knows from the multibillion dollar businesses it operates such as energy, healthcare, transportation to name a few. Sue Siegel, CEO GE Ventures & Healthymagination, said the company’s expertise in fields such as material science that get less press coverage should not be overlooked as an advantage in creating the industrial internet.
A more vibrant tech economy was cited as a cure for another chip on the shoulder worn by Bostonians, the brain-drain of STEM talent to California. According to a study cited by Massachusetts Gov. Charlie Baker just 10% of the STEM graduates produced by Massachusetts universities stay in the state to pursue their careers with many leaving for West Coast careers.
Immelt told a good story; made believable by the distinction he drew between GE’s top management’s intimate and personal engagement with startups, VCs and academia from its Boston headquarters compared to having a long-distance relationships from its Fairfield campus through the filter of video conferences. He said that this move was vital to the future success of the company which interpreted in the context of open and collaborative innovation trends would make it impossible for top management to stay in Fairfield, isolated from the dynamics of the innovation ecosystem that creates big winner-take-all businesses.
With all the politicians in attendance, much of the session was very political and much less interesting. Protestors outside voiced opposition to the tax incentives given to GE and inside Gov. Baker and Boston Mayor Marty Walsh defended their decisions with explanations of how they plan to spend the $50 million that GE will donate to the Boston school system, for improving the states STEM workforce and to improve healthcare.
It’s too early to predict GE’s impact on the local economy or how fast the industrial internet market will grow. Adding the headquarters of a company with annual revenues of more than $100 billion will at least generate tax revenues from property taxes and the personal income taxes of top bracket earners in addition to the $50 million committed to the city and state. But with luck, GE management’s appetite for innovation from Boston’s ecosystem will make Immelt’s wish come true: GE’s move to Boston will create a long term impact in Boston like Hewlett-Packard had in Silicon Valley.