In Strategy Shift, G.E. Plans Lower-Cost Health Products
The New York Times
May 7, 2009
The move is part of a wide-ranging marketing and business initiative announced on Thursday, called “healthymagination.” General Electric’s health business, known for its medical imaging and diagnostic machines, is struggling in a weak economy.
The hospitals and clinics that buy such sophisticated and costly equipment are reducing capital spending in the downturn. In the first quarter, revenue for G.E.’s health care business fell 9 percent, to $3.55 billion, and its operating profit fell 22 percent, to $411 million.
“The high end in health care is never going to go away,” Jeffrey R. Immelt, G.E.’s chief executive, said in an interview on Thursday. “But this will make us broader in terms of price points and offerings.”
As part of the new health strategy, G.E. said it would invest $3 billion to develop at least 100 product and services innovations by 2015. The criteria for the new products, G.E. said, will be that they lower cost, increase access and improve quality by 15 percent. The threshold measurements will be done by Oxford Analytica, a consulting and analysis firm.
At a news conference in
From $200 million to $300 million a year of the health research and development spending would be additional money, Mr. Immelt said, while the rest would be from the health unit’s existing research budget.
Broadly, the innovations are intended to address four needs: accelerating the adoption of health information technology like computerized patient records, delivering high technology medical equipment at lower prices, improving the access to health care by underserved communities and supporting consumer-driven preventive care.
“This is going to force G.E. to wrestle with big issues — technical
ones and beyond,” said Noel M. Tichy, a professor of management
and organizations at the
The G.E. initiative will involve businesses beyond its health care division. In June, the company’s MSNBC cable television network plans to introduce a daily health program, anchored by the NBC News chief medical editor, Dr. Nancy L. Snyderman.
G.E., which is based in
The health campaign is broadly modeled on the company’s “ecomagination” initiative, begun in 2005. It is focused on making G.E. and its products more environmentally friendly. Since 2005, the company has invested $1.5 billion on research and development for “green” products, tripled sales of such products to $18 billion and reduced the company’s carbon footprint by 8 percent, saving $100 million a year.