Last week, I visited General Electric Company's (NYSE:GE) global research headquarters in Niskayuna, N.Y., located just outside Schenectady, where GE's original research center was founded in 1900 in a barn.
Since those humble beginnings, the Niskayuna site has replaced the Schenectady site and remains home to some of GE's brightest minds working on developing next-generation industrial technology and providing solutions to technical challenges currently facing the company's seven industrial segments.
During the visit, I toured the campus, met with various engineers and scientists, and got a sense of how research and development is conducted at the industrial giant. Here's what I learned from the experience.
1. General Electric's research centers have a simple purpose.
On a high level, GE's nine research centers across the world have been built to support its industrial businesses. Their main purpose is to work through the discovery and feasibility stage of developing new applications and technologies, and then connect its findings to the needs of the businesses.
In other words, GE's research centers help the company maintain -- and possibly extend -- its competitive advantage in the marketplace.
2. GE's research centers are held accountable by the businesses.
Internally, GE's research centers are treated as a separate entity from the rest of the company even though they're largely funded by the businesses. It's as if GE's research centers have been "hired" by the businesses to help it develop next-generation technology.
This operating structure holds GE's research centers accountable to deliver solutions that suit the business needs, which, in turn, provides incentive for the businesses to continue funding GE's research centers. It also creates an accountability loop that helps ensure GE's researchers are balancing their time wisely between shorter-term and longer-term research initiatives.
3. Research helps create an enduring organization.
During the nearly 125 years that General Electric has existed, it's endured two World Wars, the Great Depression, several major recessions, and numerous other crises. Historically, diversification has been cited as a huge contributor to GE's long-lasting legacy, but research has also played a major role in allowing the company to carry on for well over a century.
After all, GE operates one of the last remaining industrial research centers in the world, giving the company an opportunity to remain relevant and adaptable as the world changes.
4. GE's researchers are adaptable.
It's not uncommon for a GE research scientist or engineer to have dramatically shifted their focus to a completely different area during their tenure. Although this may be largely the result of how underlying science and engineering conventions are the same regardless of application, it gave me the sense that GE's engineers and scientists have the ability to adapt around the needs of the business -- another encouraging sign that GE is built to last.
5. Domain expertise lays the foundation of the GE Store.
The GE Store initiative aims to centralize research and development across GE's seven industrial segments so that one segment can borrow from another's implementation. It's a way for technological breakthroughs and best practices to be proliferated throughout the organization.
Behind the scenes, the foundation that the GE Store is built on is the company's domain expertise, a fancy way of saying that GE has a gathered heaps of knowledge in certain areas from running its various industrial businesses. The idea is that GE's domain expertise in one area can transcend its initial application and give the company a competitive advantage elsewhere.
One of GE's most prominent areas of domain expertise is its understanding of harsh environments, whether it's jet engines, gas turbines for power generation, diesel-powered locomotives, or oil and gas equipment. To illustrate this concept, I was told a story about how GE's aviation team developed an anticorrosive coating for its jet engine components and later applied the same concepts to mitigate corrosion in harsh oil and gas environments.
From a competitive perspective, being diversified and having domain expertise that can transcend applications can be a powerful proposition. After all, a pure-play oil and gas company without an aviation segment may not necessarily have the same level of corrosion domain expertise as GE.
6. Materials development is a cornerstone of GE's research efforts.
A major emphasis during my visit was GE's focus on developing new materials. Whether the goal is to make a stronger, lighter weight, or more efficient material, the motivation is to make a better product for the end user, while trying to gain a competitive advantage in the marketplace.
Over the last 28 years, GE has spent over $1 billion developing ceramic matrix composites, or CMCs, which have the strength of metal with one-third the weight, and can withstand significantly higher temperature environments. Consequently, CMCs require significantly less cooling than its metal counterparts inside harsh environments like a jet engine, which paves the way for improved fuel efficiency.
CMCs have only begun making inroads in aviation. The upcoming LEAP jet engine that GE is manufacturing with CFM International will be the first commercial engine to feature CMC components inside its hot section. As the LEAP program matures, the potential of CMCs replacing additional metal components in the engine could translate to up to 2% in total fuel savings.
Although it may not sound like much, a 2% improvement in fuel efficiency is a massive figure in the context of fuel costs for the global airline industry. Moody's estimates the global airline industry will spend $140 billion on fuel this year, meaning a 2% gain in fuel efficiency across the industry would equate to $2.8 billion in annual savings at current jet fuel prices.
7. The Brilliant Factory initiative is in its infancy.
The goal of GE's brilliant factory initiative is to improve factory productivity by more effectively allocating people, parts, and machines, in real time. Converging these elements into a real-time solution is a monumental task, requiring complex analytics, network connected machines, digital manufacturing environments, and factory employees, working in harmony.
In terms of progress, GE's Brilliant Factory effort appears to be in its early stages, as there is significant work ahead until the company can transform its footprint of approximately 400 factories into Brilliant ones.
Currently, a top priority of GE's Brilliant Factory team is to build out "Brilliant" manufacturing platforms that emphasize scalability across the organization. While this may result in slow progress in the short term, the hope is that building out platforms will lead to more effective outcomes over the long term, because it will give GE the systems and understanding to continuously improve its factories for decades to come.
Putting it all together
After touring General Electric's global research headquarters, it's become abundantly clear to me that GE isn't a company that rests on its laurels. Its scientists and engineers are continuously pushing the boundaries of science, technology, and manufacturing to improve how they can move, power, build, and cure the world.
In the end, GE's culture of discovery and innovation that took root during the days of Thomas Edison appears to be alive and well over 100 years later.
Steve Heller has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.