Reimagining GE India

For one of the world’s biggest companies, the Fairfield, Connecticut, US-based General Electric, the potential of a trillion-dollar plus economy growing at an average of 8% for the past few years, has remained just that, merely a potential. At a time when strong India sales was lifting many a multinationals’ global sales and profit boats?from PepsiCo, Coca-Cola, Huwaei to Boeing?GE botched its chances to leverage its century-old presence in India to act as its global growth engine. Indian operations contribute just 1.2 % of GE’s $ 157 billion sales annually. GE India sales has constantly missed its revenue targets in the last decade, and this is when the market for its core businesses?power equipment, aircraft engines and leasing, medical devices and finance?was booming.

All that is history, claims 49-year-old John Flannery who took over as chief of Indian operations last year; ?I am at a level where my volume to transmit the message at global headquarters is way louder than what it was for other people before in the same position. There are lot of things that have changed in the past 18 months.? There is much riding on Flannery, GE boss Jeff Immelt’s choice for getting its Indian subsidiary in fighting shape, after a far from happy two-year stint of Tejpreet Chopra. And Flannery is only too aware of the task he’s upto and he has set out with a vengeance. His goals are clear- focus on marketing and sales, deepening opportunities in all growing segments along with the strongest three (energy, aviation and healthcare), speeding up the decision making process and continuing existing joint ventures along with looking at acquisitions.

With one boss, and that too in India, to report to, unlike the practice of reporting to global vertical heads earlier, the company has cut out the flak and is responding faster to the market, and even routine activities like hiring and cutting deals have speeded up according to Flannery. Growth is up 30%, order books are overflowing and there is generally spring in the company’s step after a long hiatus. Says Flannery; ?In quantitative terms, we are further ahead than the forecast we had then made. As I keep learning, I keep raising the bar. In India, the opportunity is bigger than I appreciated.? Flannery will need to keep up all that enthusiasm and smarts to decouple the company from its history of many a missed milestones.

Grow Fast, Avoid Past Mistakes

Sometime in mid 2000s, Scott Bayman, the company’s India CEO for 14 years, famously announced that GE India will aim at $ 5 billion in sales by 2010. Last December the company did barely $ 2 billion in sales, excluding exports.

Flannery takes the bull by its horns. ?We were declining in revenue in India and there are a few contributing factors. We are set up globally as a product driven organisation. In that context, in the last 10-20 years India was just not big enough a market and we did not have enough focus on it. At the end of the day, when you run a global business and create a structure like us, you radically face a focus issue. That was the issue.?

He adds that the company also got distracted and spent too much time focusing on GE Capital International Services, Gecis (its captive BPO, which was spun off 2004, now Genpact) and its the technology center in Bangalore. GE took its eye off the surging domestic market and focussed disproportionately on doing research & development and back-office operations in India.

Flannery says he has put the focus back on sales across all key verticals?energy, aviation, healthcare, capital and technology infrastructure. ?When I came in here, I realised the sales force was not big enough to serve the country. The opportunity was bigger than resources in sales and marketing.? As a result, across verticals, the company is almost doubling its sales force, from just under 679 at end of 2009 to over 1,100 by end of the year.

The additional feet on ground is also helping the company in its localisation strategy, another cornerstone of GE’s turnaround plan in India. GE wants to be a local company which understands the local customer, and tailors its global technology to deliver products that Indian customers can afford.

A case in point is some deft reverse engineering with few products in its booming healthcare business, a decade-old joint-venture with Wipro. As part of GE’s global ‘healthymagination’ initiative that kicked off in 2009, GE India developed a low-cost ECG machine, Mac I, that sells for Rs 25,000, a fifth of price of an imported ECG machine. A low-cost baby-warmer-cum-incubator, Lullaby costs 70% less compared to a similar imported product. At present, the company has about 20 products which are locally developed. ?In the past, we might have had 2-3% people in the tech center who would work specially for India, but now the number has reached 10-12% . And this will only continue to migrate in the future,? adds Flannery. Agrees Sanjay Correa , managing director of the company?s John F. Welch Technology Centre in Bangalore; ?We have a lot of resources now in India to know what the customer wants, which was not the case previously. We are now interacting upfront with the customers and this makes it easy to develop local products in various verticals.?

At $300 million (excluding exports) annual sales in 2010, the Wipro GE Healthcare is one of the most successful JV’s for for GE India. Globally a $16 billion business, healthcare can quickly scale up to be a billion dollars in India too by 2015, head of the division V Raja shared with FE a few months ago.

Localisation at GE India now doesn’t just stop at reverse innovations. In the works is a new, $ 200 million infrastructure equipment manufacturing facility in India whose principal user would be the energy sector besides the aviation and health areas. GE plans to recruit over 3,000 people for the same this year. ?We are running 60-90 days behind schedule. We are still finalising the site and you know how these things (greenfield ventures involving land) play out here,? admits Flannery.

New Learning, And Unlearning

Willy nilly GE in India has stuck as a business-to-business brand, with limited footprint in the consumer markets. Take financial services, with GE Capital, for instance. In the past, the company exited many business that were not core to it like unsecured personal lending and truck financing.

?Today, I am focusing on the SBI joint venture for credit cards and other core businesses like corporate finance, commercial distribution financing, energy and infrastructure projects financing, merger & acquisition financing, with mid-market companies as the focus,? says Anish Shah, President and CEO, GE Capital India.

Flannery adds that the focus in the finance business is more on sectors like manufacturing, infrastructure, energy etc. Is it working? ?(Well) the money we have made in 2010 is more than any time before. Our growth rate has been much higher than 30-40%, ? shares Shah.

Its not that GE has abandoned the retail consumer-led business for good. Flannery and team are trying to claw back in some sectors here, like consumer durables. After a decade-old failed JV with Godrej, the company has once again put back its branded refrigerators and washers is shop shelves in some cities in north India. ?The opportunity to be in the big mass-market is no longer there. We’re exploring how we can occupy certain high-value niches in this segment. The foray remains exploratory in nature,? says Flannery.

Historically, GE India’s business has been dominated by the private sector. But considering its presence in infrastructure, manufacturing, energy and power, it stands to gain a lot by tapping government projects which have targeted infrastructure investments of $1 trillion for the 12th Five Year plan, 2012-17. ?The government can be very slow. We have had this experience with railway tenders in particular. We are still optimistic that the railway project is going to have more technologically advanced, more fuel-efficient and low-cost locomotives. It is a good project for us and for the country. The challenge for a company like ours is how do we keep the resources focused and dedicated for a project that keeps pushing back. We have been working on it for a few years .Its a lot of mental focus also,? says Flanerry.

Such is the new found appetite for growth, that everything is on the the table, including acquisitions. The company has put a centralised team of eight people to plan acquisitions. ?There are a couple of themes that are emerging in the acquisition strategy?the product gap, the localisation gap and the distribution in the customer base. The acquisition could be in any space but the energy and healthcare segment look attractive,? adds Flannery. The problem though, as the American CEO puts it, ?Not many people want to sell, because every company is doing well in India.? The solution, turn to joint ventures, where the Indian entrepreneur keeps control and yet its a win-win for both; GE gets the local knowledge and Indian firm gets to leverage the multinational’s brand, processes, and deep pockets. Currently GE has four key JVs in India-?with Wipro for healthcare, SBI for credit cards, BHEL centrifugal compressors and Triveni Engineering in steam turbines. ?Triveni is a successful JV with a 50:50 partnership, but they have a controlling share. This JV continues to fulfil our gap of products, local manufacturing as well as the cost structures, and may very well be the model for us going ahead.?

For everything else that was not right earlier at GE India, a lower base is one thing Flannery surely wouldn’t have an issue with; ?We are starting from an artificially reduced point. We are not as big as we should have or could have been in healthcare, energy or aviation. But, now we are solidly bullish.?

Key Business Verticals

– Energy, healthcare and aviation dominate the pie and continue to grow

– GE Capital in rebounding phase

– Government business faces challenges in India

GE Healthcare:

– Growth rate faster than the company growth rate of 30%, sales approx $ 300mn

– Aggressive on local products (Mac I and Lullaby) and PPP model

– Tap smaller cities

GE Capital:

– Focus areas: Credit card JV with SBI and core business like leasing, commercial finance

– Localisation by customisation for mid market companies

– Growth rate much higher than 30-40% since 2009