Reports are circulating this morning that Jeff Immelt, former CEO of General Electric, is poised to become CEO of Uber. If true, this represents a massively retrograde step for Uber, and one that could seal its fate as a business.
Immelt is your classic ‘operational’ CEO, focused on optimizing the existing business and sweating existing assets while selling assets to raise cash for reorganizations.
The argument for Immelt is that Uber has been through a rough period, and needs someone to inspire the confidence of the markets, get the company back on its feet, and run Uber like a serious business.
It’s a model that works very well in mature, low-growth companies like IBM and CA, and in the world of private equity, where the name of the game is milking existing profits and license revenue.
Uber is not that kind of business. Uber’s business model up to this point has been operating at below cost to suck the life out of the market for point-to-point rides and establish a monopoly over installed users. Your Uber costs so little because a VC is spotting you a third of the cost of the ride.
Eventually though, Uber will run out of VC cash, and will need to find a way of removing the largest cost in its operation: drivers. Uber’s current $68.5 billion valuation is based entirely on the potential that one day Uber will get to a network of driverless cars and a massive installed user base.
To get there, you can’t run Uber like GE. Unlike a business in private equity, or a large mature software company, tt doesn’t have the profits or license revenue to milk. Restructuring existing assets will only get you so far. You need the driverless cars to happen, as you can’t carry on paying drivers.
Nothing about Immelt’s record suggests that he is the kind of person to get Uber to driverless cars. His record at GE is that of an old school ‘operational’ CEO focused on optimizing the old business. He’ll get the car running more smoothly, but he won’t turn the Chevy into a Ferrari.
There is a time for CEOs like Immelt. CEOs like Immelt work very well in low-growth companies and commodity industries, as they can get the business running smooth as a nut and help the business work with what it has. But Uber is in classic ‘growth’ mode. In fact, they need growth and innovation so that they can even survive to the point where they can become that kind of business.
Only at that point would they need a CEO like Immelt.