Boston Leaders Expect New GE CEO Flannery to Stay on Immelt’s Path
Jeff Immelt has struggled to please Wall Street during his nearly 16 years as General Electric’s chief executive. The question now is whether his successor, John Flannery, can deliver on Immelt’s vision while also blazing new trails and reinvigorating the company’s stock performance.
Flannery, named the next CEO of GE on Monday, will spend the next few months meeting with investors, customers, and employees, and reviewing “all aspects of the company,” a spokeswoman said in an e-mail. Bloomberg quoted Flannery saying he will evaluate GE’s (NYSE: GE) various businesses “with speed and with urgency and with no constraint.”
But, despite the potential for changes, the early prediction among some local business leaders is that the 55-year-old Flannery will continue down the path Immelt has put GE on, broadly speaking. If that’s the case, it could bode well for the business community in GE’s new home base of Boston, as well as for startups and other potential partners in sectors like industrial software, healthcare technology, energy, and 3D printing.
“I wouldn’t expect a real departure from the strategies that Jeff put forward,” said Michael Greeley, a co-founder and partner at Boston-based healthtech venture firm Flare Capital Partners. “I think Jeff made a lot of the hard decisions.” (GE is a “strategic partner” of Flare, and the corporation’s venture capital arm has co-invested in startups with Flare, Greeley said. He has met with Immelt a few times but isn’t close to him, he added.)
Immelt (pictured above, left) transformed GE into a “simpler” and “deeper” company, Flannery (pictured above, right) said during a town hall discussion broadcast live Monday on Facebook. Under Immelt, GE got out of the appliances and plastics industries, sold NBC Universal, divested much of its capital business, and announced it plans to sell its lighting business—its oldest legacy. Meanwhile, the giant corporation made acquisitions in areas like energy, life sciences, software, avionics, and 3D printing.
“My guess is they’ve probably got the portfolio of businesses close to what they want it to be,” Greeley said. “Then you’ll see them doubling down, is my guess, on some of the core pieces of that.”
The overarching goal has been to shift GE to a more digital-focused industrial firm—or at least that’s the narrative Immelt has been pushing.
“GE’s digital-first transformation is a sound strategy, and I’d be surprised if they changed course,” said Tom Hopcroft, president and CEO of the Massachusetts Technology Leadership Council, in an e-mail.
Flannery, who will assume the CEO role Aug. 1, seems poised to continue that emphasis. During the town hall, he said Immelt was “miles ahead of the world in redefining us as a digital industrial company.”
“He made a lot of transformative calls, and, frankly, courageous calls and, I would say, frequently lonely calls,” Flannery said. “We’re in an incredible position to go forward.”
Still, Wall Street investors haven’t been impressed with the company’s performance. Overall, GE’s stock has dropped 30 percent since Immelt took over for Jack Welch in 2001, making it the worst performer in the Dow Jones Industrial Average during that period, according to MarketWatch. At the same time, the S&P 500 index more than doubled, Reuters reported.
Wall Street signaled early approval of GE’s leadership transition. The company’s stock rose about 3.6 percent on Monday, closing at $28.94 per share. GE’s current market cap is $251.3 billion.
“People are expecting more bold steps with a new leader coming in to make his mark,” Greeley said. “You may see some big deals in those few verticals where they’re now much deeper.”
During the town hall discussion, Flannery said he thinks GE will be a leader in areas like digital products and 3D printing. He also noted the potential to grow GE’s already-large healthcare business, which Flannery led for the past three years in Chicago. GE Healthcare makes products like medical imaging equipment. The digital strategy comes into play in this business, as well—GE is trying to make the software that runs those machines more sophisticated.
“I think we’re just scratching the surface of what we can be with that business,” Flannery said of GE Healthcare.
It’s worth noting that Immelt also ran GE Healthcare before he was tapped for GE’s top post.
“I’m thrilled that the successor is another GE executive that ran their healthcare business,” Greeley said. “That’s clearly a strong signal to the market where they think an important part of their future lies.”
The timing of the CEO announcement caught Greeley and other local leaders by surprise. GE began the process of relocating its global headquarters from Fairfield, CT, to Boston last year, and Immelt has made efforts to connect with the local business community. He also bought a home in Boston’s Back Bay neighborhood last year, the Boston Globe reported.
“It felt like his agenda [at GE] is not quite complete,” Greeley said, pointing out that Immelt is only 61.
GE has recently faced pressure from activist investor Trian Fund Management to cut costs and make other changes. But GE said the CEO changeup is part of a succession plan six years in the making, with the board deciding four years ago that the summer of 2017 would be the timing for the transition.
Hopcroft wasn’t surprised by the announcement, given the length of Immelt’s tenure. As Immelt told the Washington Post, the average CEO tenure is eight years.
Greeley hopes Immelt will get more involved in the Boston business community after retiring from GE at the end of the year, perhaps by serving on boards and mentoring startups.
“We may actually see more of him,” Greeley said. “It’s not like he’s going off into the sunset. I don’t think any of us expect that.”
GE, meanwhile, is expected to continue building its relationships with the local business community, including startups.
“While the change of CEO is a major announcement, we’re confident GE will maintain its important work in the energy space and continue making investments in promising, budding energy and clean technology startups,” according to an e-mailed statement from a spokeswoman for local cleantech incubator Greentown Labs.
In an e-mail, a GE spokeswoman reaffirmed the company’s commitment to Boston, calling the relocation “the right move for GE.” GE broke ground on a new headquarters May 8. Flannery and his family will relocate to the Boston area, the spokeswoman said.
“I think having a new CEO always creates opportunities for more outreach and engagement, and [I] hope to see John dig in to his new job in [GE’s] new home town,” Hopcroft said.