JimPinto.com - Connections for Growth & Success™
No. 194 : 25 October 2005

Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.

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GE's Jeff Immelt - The Bionic Manager

The September issue of Fortune magazine has a good article "The Bionic Manager" on Jeff Immelt, CEO of GE. This is summarized here, and includes some of my own comments.

The Fortune article starts like this:

    "If you could build a CEO to specs, you'd engineer someone with machine-like stamina, with intelligence enough to excel at the best schools, vision to recognize the most promising business opportunities, a discerning judge of talent, tough enough to push aside managers who don't deliver, budgets his time with iron discipline. Since you could do whatever you want, you might as well include all of those with a disarming package: tall (6-foot-4), good-looking, genial, relaxed, approachable."
Jeff Immelt, 49, is that wish-list CEO, the alpha male executive, just ninth in a line of succession that began with Thomas Edison. He is trying to solve one of the biggest problems any CEO ever faced by pulling off one of the largest transformations in decades.

Since Jeff Immelt took over in Sept. 2001, GE stock is down 15%. Think of this in dollars: If GE stock had simply matched the S&P 500 after Immelt took charge, GE would be worth over $100 billion more. For perspective, there are less than 25 US companies with a total market cap of $100 billion.

To get GE's poorly performing stock back on track, Immelt has to make the giant grow faster. To do that he has to find out which countries and which industries will grow fastest and biggest during the next decades. And he has to get 320,000 employees to follow his lead.

Whether he succeeds or fails will determine the future of the most widely owned company on earth. Millions of people are betting hundreds of billions of dollars on his success.

There's a big difference contrast between Jeff Immelt and his predecessor, Jack Welch. Immelt appears to have ice water in his veins, and is tougher than Welch. Welch himself says, "At times I might get too emotional. He doesn't."

Fortune 500 CEOs are an extremely hard-working group, but Jeff Immelt is outstanding in that class - he's been working 100 hours a week for 24 years. He says, "There are 24 hours in a day, and you can use all of them." Of course, one has to wonder how his wife and family feel about him never quite being at home. His wife Andrea (who he met while they were both working at GE Plastics) is mentioned in the Fortune article, but only in passing.

Immelt is completely recasting GE, changing the business portfolio. Many of his acquisitions have been small, but always with the opportunity for future growth. Some buys were quite large; his biggest acquisition was Amersham, the British health-care company that he bought (for $9.5 billion) and combined with GE's CT scanners and MRI machines. His divestitures were in GE's insurance business, which wasn't producing the required returns on capital.

Immelt is reviving GE's scientific research labs. He thinks that technology innovation is a key to growth because virtually every product and service in today's markets is in danger of being commoditized. Also, innovative products create the best opportunities for services, where GE's manufacturing businesses excel. So he's re-casting GE as a tech-company, an image it hasn't had in decades.

Marketing had become a lost function for GE during the 1990s and Jeff Immelt's growth strategy includes a culture that is more market-driven and externally focused. GE's marketing drive will become as strong as its famed finance and human resources operations.

Right now, Jack Welch would be out-of-date for GE. Jeff Immelt is the right man, at the right time. Will he achieve his objectives? My guess: Yes, but it will take time. Will GE's stock recover? Yes, it's a "hold".

Click Fortune (Sept. 2005) The Bionic Manager

Click The NEW GE Corporate Culture - The Jeff Immelt Difference

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Schneider acquires Citect for software

After recent recurring discussion on the JimPinto.com Schnieder weblog about why Schneider has not acquired Wonderware, Intellution, or one of the industrial software leaders, news broke this week which indicated that this was right on track.

Sydney, Australia based Citect is being acquired by Schneider. The expected acquisition, for cash, agreement was announced by both companies saying, "Citect's global footprint in the SCADA and MES markets would significantly enhance Schneider's industrial automation offerings."

Under the proposed transaction all Citect shareholders will receive a cash payment of $1.50 per share plus a special dividend of $0.05 per share. This equates to about A$80 M (US$60 M), and represents a 42.2% premium based on the closing market price on 18 Oct. 2005, a 59.9% premium over the average price for the previous 30 days.

With 2004 revenues of A$61.5 M (US$ 45 M) and A$4.4 M (US$3.3 M) net profit after tax in 2004, Citect has grown both top and bottom lines in 2005. The company's website boasts that 85,000 software licenses have been sold to date. With expected Citect 2005 growth, the acquisition price:revenue ratio is slightly better than 1:1 - not bad in a flat market, but not spectacular.

The usual sweet-nothings were part of the announcement: There will be no immediate impact to staff, no downsizing or closing offices, Citect's employees represent an exceptional pool of talent, etc. The meeting at which shareholders will approve the sale will be held in late December 2005.

It's interesting that Citect's new CEO, Rick Webb will stay for just a month after the acquisition is complete. He was granted 510,000 Citect share rights as a long-term incentive when he became CEO in April 2005. 340,000 of those rights were due to vest on Jan. 1, 2007 if Citect achieved its profit targets for the year ending Dec. 31, 2006. The remaining 170,000 were due to vest in 2007 under similar terms. Schneider has agreed that Webb's rights will be worth at $1.50 when he leaves Citect. Not bad for less than a year at the helm.

Citect already has 80% industrial software market-share in Australia, with strong system integration and professional services capabilities, which account for over 50% of current revenues. US and European software growth are clear targets and Schneider expects to make further investments to integrate Citect's software suite as a core component of its industrial automation offerings. P> The impact on the automation scenario remains to be seen. My guess - good timing and move for both companies.

Click Citect - SCADA, HMI and MES Industrial Automation software

Click Australian Stock Exchange (ASX) - CITECT CORP. Ltd. (CTL)

Click Citect press release - Schneider Electric offer for Citect

Click JimPinto.com Schneider weblog

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Robotics - VCs smell growth

Venture capitalists are supposed to be risk-takers. But most of them are fairly conservative people. When they invest in technology, it's because they expect good returns in 3-5 years.

After some false starts in automation manufacturing a couple of decades ago, robotics technology has not been on VC funding lists.

But now, with the announcement of a $115 million IPO by iRobot (manufacturer of the Roomba home-vacuum robot featured in eNews), robot technology is starting to attract VC attention.

iRobot is the clear leader in the commercial robots market. They've shipped more than 1.2 million Roomba robotic vacuum cleaners at about $150-275 each. And they have a line of high-priced and effective military robots.

Another robot company, Zoom Systems, recently raised $12 million in a funding round led by NeoCarta Ventures. The company makes and operates robotic kiosks located in hotels and airports, selling snacks, drinks and high-end items such as iPods at up to $500. They hope to have 10,000 machines in place by 2010.

In health care, robotics startup InTouch Technology recently raised a new round of $12.1 million. The company develops remote-presence robots that allow busy doctors to do virtual consultations. With a growing nursing shortage, InTouch's 5-foot robots help nurses provide care to several patients at a time. Some hospitals are now using the robots, usually for routine discharge procedures.

Just recently, Mitsubishi introduced an Internet-linked robot "Wakamaru", a friendly, 40-inch tall, 60-pound robot with a female voice. It recognizes as many as 10 people and calls them by name, approaches and greets family members when they arrive home, gives telephone messages and offers to read e-mails. Walkamaru costs about $15,000 and Mitsubishi expects to sell thousands. Several other robot "companions" are also being introduced to serve as assistants, able to learn new skills and grow their capacities with constant human interaction.

After several autonomous robotic vehicles crossed the finish line in the recent DARPA $ 2 million challenge, robotics technology showed that it has advanced significantly, and several groups are now considering investments for military and other applications.

As I've suggested many times in eNews - the robots are coming....

Click MIT TechReview - Robotic Rollouts

Click Mitsubishi Walkamaru Robot Companion

Click Robots: Flexible Automation for a Strong Economy

Click JimPinto.com - Intelligent robots will be everywhere

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Kurzweil Book: The Singularity is Near

Ray Kurzweil is one of many leading futurists who envision an event - the "singularity". Here's what he expects:
    "Within just a few decades life as we know it will be completely different. Non-biological intelligence will match the range and subtlety of human intelligence. It will then speed past it because of the continuing acceleration of information-based technologies, with the ability of machines to share their knowledge instantly. By 2045, we'll get to a point where technical progress will be so fast that un-enhanced human intelligence won't keep pace."
Ray Kurzweil is a prizewinning author and scientist who received the National Medal of Technology and has been inducted into the Inventors Hall of Fame. His books also include "The Age of Intelligent Machines" and "Fantastic Voyage: Live Long Enough to Live Forever". Both books are on the JimPinto.com recommended reading list.

Ray's new book, "The Singularity Is Near: When Humans Transcend Biology" portrays what life will be like after the Singularity - a human-machine civilization when human experiences shift from real to virtual reality. Shades of the "Matrix" movies....

Kurzweil's 670-page book was published in late September 2005. I got an advance copy at the Accelerating Change Conference where Ray was the keynote speaker). I've been carrying it around since.

There was a lot of Singularity discussion at ACS. Vernor Vinge (well-known mathematician & computer guru who lives in San Diego) discussed the possibilities for a "soft singularity", changes that will take place over a few weeks or months, not years; and the "hard singularity", a sudden event which may take place over just a few hours. Scary, but significant.

Ray Kurzweil's book has already become one of the most widely discussed books of 2005. It has climbed to No.14 on the Amazon.com best-sellers list, No.5 in non-fiction, No.1 in Science & Technology.

If you're not intrigued enough to buy this tome, at least read some of the reviews and discussions - web links below.

Click CNET - Ray Kurzweil deciphers a brave new world

Click Wall Street Journal - Here it comes

Click Hey, Maybe the Singularity Really Is Near

Click Amazon.com: Kurzweil book - The Singularity is Near

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Pinto editorial - Poverty: America's blind-spot

After a decade of improvement in the 1990s, poverty in America is actually getting worse. For the first time in 50 years, poverty increased dramatically in 2004 - BEFORE Katrina made it so visible.

The US population is about 300 million, with 37 million living below the poverty line. That's more than the total population of California. Think on this: It's like a poor country with more people than all of Canada living inside America. If America's poor were a separate country, it would be the 35th largest country in the world.

America's poverty rate is 12.7%, the highest in any developed country and more than twice as high as most other industrialized nations. But most Americans don't know much about the poor. It's like a giant blind-spot. In the big cities, we know about the homeless in the downtown area, but we usually avoid them. And we don't see the poor in rural areas.

Before Katrina, poverty had disappeared from public view. TV dislikes poor people because their appearance is a downer; according to ratings meters, it causes viewers to switch channels. Powerful politicians aren't sympathetic because poor "folks" don't vote. Republicans ignore the poor, and Democrats take them for granted. No one really noticed that progress in fighting poverty stalled with the economy in 2001.

Who are the poor? With 72% "whites" and 12% blacks (total population) America has more poor whites than poor blacks or Hispanics. About 8% of American whites are poor, compared with 22% of Hispanics and 25% of African-Americans. This represents an advance for blacks in recent decades, thanks to the growth of the black middle class. But it's still a shamefully high number. The jump in white poverty in nonurban areas accounts for most of the recent poverty increase.

The causes of poverty are still being debated. Liberals blame an economic system that's tilted to the rich; conservatives blame the poor for not helping themselves. And no one does much. While hunger, crime, drugs and overt racial discrimination have eased, other problems have worsened: wage stagnation, social isolation and a subtle, insidious form of class-based racism.

The primary economic problem is not unemployment but low wages for workers of all races. With unions weakened and a minimum-wage increase not on the agenda, wages have not kept pace with the cost of living. Since 2001, the US has lost 3 million manufacturing jobs. For the poor, the idea of low-wage jobs' covering the basic expenses is a cruel joke.

    "My bills are all due and the baby needs shoes and I'm busted
    Cotton is down to a quarter a pound, but I'm busted
    I got a cow that went dry and a hen that won't lay
    A big stack of bills that gets bigger each day
    The county's gonna haul my belongings away cause I'm busted."
    - Ray Charles song
Things are very different at higher levels, and vastly different at the top. The rich get richer. Here's a symptom: In 1965, the average CEO made 24 times as much as the average worker; by 2003, that ratio jumped to 185 times. Today it is close to 500:1.

What should you and I do about poverty? I'll appreciate your comments and suggestions.

Click Newsweek - The Other America

Click Understanding Poverty in America

Click Statistics on poverty & food wastage in America

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Bill Morris [billmorris@mailblocks.com] from Arizona is already using alternative fuel:
    "Fuel prices are a sore subject these days, but I don't worry. I don't use ANY petroleum products in any of my vehicles. Instead, I use bio-diesel fuel in both my car and truck, and my wife uses it in her pickup truck. And they all use synthetic oil in the engines. Our costs are about 80 cents a gallon plus or minus.

    "After removing the glycerin (which I use for custom made soaps) from used cooking oil I can burn it directly in my vehicles. Yes it's a pain but I make enough to sell some for a profit to support the equipment necessary to do it.

    "I don't try and lower my costs by producing more because I don't have the time now to do so. But I bet I could sell more than I could make. The really ironic thing about the whole deal is the lack of interest within the community to make bio fuel. Long-term results aren't in yet, but so far so good."

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Ron Davis [ron.davis@synchrony.com] on fuel infrastructure:

    "Many of the discussions I hear of alternative fuels seem to ignore the distribution side of the problem. The world currently has a very extensive infrastructure for the distribution and sale of gasoline and diesel fuel.

    "Replacing or upgrading this infrastructure to accept some other fuel will not take place until there is market demand. There will not be an extensive market for any alternative fuels until there is an infrastructure to support it.

    "New alternative fuels will only be accepted if they can be handled by existing gasoline/diesel infrastructure and treated like a different grade of gasoline or there are extensive government incentives to develop alternative infrastructures and markets."

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Richard P Thompson [thompsonintl@comcast.net] comments on ISA:

    "For 3 years I served as the National Chair of the Emerging Technologies Conference. My greatest claim to fame is that I was replaced last year by Dick Morley. (smile)

    "ISA did most of the work, but the results were more and more disappointing as time went by. The technical level of papers being presented were pretty weak' attendance was abysmal. I always felt that we should be trying to look ahead 5 years, not playing around with new algorithms and the latest self tuning controller schemes. The basic problem was that there were never enough papers submitted to go around. If we were picky, we'd have a couple of good papers for a 3-day conference.

    "Many Universities are doing research into Control Systems, but they are aligned with IEEE, where their research is more respected. And there is also a lot of military work at applies, but is not part of traditional ISA activities. Instead, ISA tends to focus on the manufacturer-agent-customer loop.

    "It just seems that ISA is stuck in a rut. It's traditional base is collapsing in the way you have well described. Before we head off to China and India to recruit new blood into ISA, perhaps we should consider other technology sources here in the US, which ISA has never fully exploited."

The ISA Expo is being held in Chicago this week. I'm not attending. If you attend, please send me an email with your comments and feedback on the event:
Click email: Jim@JimPinto.com

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