Is Immelt right that human innovation will overtake outsourcing?

A recently published interview with Jeff Immelt from GE in a series of articles in HBR on the future of manufacturing, despite reading like a thinly veiled advertisement for both GE and Obama’s re-election campaign, was thought-provoking.

Immelt’s main message is that human innovation creates a competitive advantage that cannot be outsourced. He says human innovation has three elements:

Concept #1:  Innovation capability, meaning hiring large numbers of technical people to analyze data and design new processes/products. I agree that this skill set can help, but it is expensive and risky to maintain this function in-house long-term. People who flourish in these roles want plenty of challenging work to do, rapid development and promotions, and expect to be compensated well. When they do great work in a corporate role, they will be offered a prominent role as an operations leader. All of these factors contribute to high attrition of “hard to fill” roles–meaning higher HR and indirect (i.e., leadership time) costs.

Ahhh...smells like GDP

Theory to practice #1: Leaders will achieve stronger results across the full economic cycle by managing a small, talented core of innovation capability internally, supplemented with targeted use of external consulting resources when a “surge” of innovation is required.

Concept #2: Lean manufacturing: Those of you who have seen improvement fads rise and fall will find it interesting that Six Sigma has dropped from the GE vocabulary. How many tens of millions of training and activity dollars have fallen away too?

Theory to practice #2: Every business needs to have a common improvement process that is straightforward to apply (i.e., easier than what people would do otherwise), and continuously roots out waste in the business, whether or not you describe it with a Japanese-sounding word. A component that is missing from most of the “fads” is a method to expose more opportunities than people would naturally believe is possible, such as Stroud’s Zero Based Analysis.

Concept #3: New model for labor relations: Immelt delicately asserts that trust and respect are required in any employment situation (remember, there are a lot of votes on the line here…don’t make us get out the inflatable rat!). While I agree with him, I also believe this is the least actionable of his three points. Having union problems is like being a little bit pregnant…either you have them and it completely preoccupies you, or you don’t (yet).

Theory to practice #3: Set up your manufacturing facilities in “Right to Work” states whenever possible. Offer your employees a work environment and culture that they are proud to participate in, competitive total compensation, and professional development opportunities to keep their minds and hands fully engaged each day. And finally, make sure your salaried staff have been trained to run all the equipment in case it all goes pear-shaped.


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