Carolina Dybeck Happe CFO of General Electric
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Hi everyone and welcome to our podcast In Good Company. I'm Nikolaj Tangen, the CEO of the Norwegian Sovereign Wealth Fund and your host today. In this podcast, I talk to the leaders of some of the largest companies we are invested in so that you can learn what we own and also meet these impressive leaders. Today, I'm speaking to Karolina Dybæk-Happe, who is the CFO of General Electric. Now, General Electric is America's best known industrial company and it was founded all the way back in 1892.

Karolina is a top-ranked CFO in what is one of the toughest CFO jobs in the world. She was the first non-American to get the job. Karolina talks a lot about the importance of teams. A really interesting talk, so stay tuned.

Karolina, it's a great pleasure to have you on the show. Big thanks for taking the time. Thanks for having me. Pleasure is all mine. Wonderful. So Karolina, I met you many, many years ago when you were the CFO of Assa Abloy in Sweden. And now you are one of the most powerful CFOs in the whole world. So tell me about that journey. My journey started in Sweden. I grew up in Stockholm.

My dad was a businessman and my mom was a radiologist, and I feel connected to both of them and their work. And today I have to say, when I walk through our manufacturing floors at GE Healthcare, and I can see the products that my mom used and how they have developed over the years, it's truly exciting.

If I look at my journey in finance, I would say that I've always been drawn towards more operational CFO jobs. And what I mean with that is working closely with the CEO and the businesses. And I would say the critical and dynamic businesses of GE and what we do is what really drew me to this role. And I also felt that I could add lasting value in shaping the future of these important businesses.

And if I look back at my own history, probably one of the most important parts for me was when I moved to Germany and I became CFO for Assa Abloy and Dach & Benelux in those days. It was my first big industrial CFO role. And that's when I learned how it all comes together. Basically how manufacturing works, how innovation works, commercial teams. And it's also how I learned to lead teams. What does a CFO do?

I think as a CFO, you decide what role you have together with the CEO and the team. And I would say for me, it's always been important to be a wingman to the CEO. And you do that on different levels, strategically, tactically and operationally. And you really work together to drive improvement in the businesses.

And it's also about working with the business leaders so that they can see how what they are doing in the business translates into the financials and in the end shareholder value. But it includes things like financial planning, controlling, accounting, tax, investor relation, audit, etc.

I mean, wow, that's a lot to have on your plate, no? Absolutely. And that's why it's so important to have a good team. Because what you have is that you have excellent specialists in all of the different areas. And together as a team is how you drive the value. And that's why I've been so fortunate because I have a great team that really delivers and comes through every time. Yeah.

You also worked in Denmark before you went to the US. Yes. How was that job? So I would say through my career, I have worked for Swedish-based, Danish-based companies, now US-based companies. I've also been on a board in a German-based company and in a French company. So when I look at all of that, there are a lot of differences, but there's also a lot that is in common.

And I have to say that what has been in common has been the passion for innovation. And I've been drawn to it and the companies have been very focused on that. And I think that that's because it's so important for the success of the companies. If you look a little bit in my perception on the differences, I would probably say that the Scandinavian businesses tend to embrace decentralization a bit more. While in the US, it's more focused on talent and talent development.

You are on the board of Ericsson, you've been on the board of E.ON, you're on the board of Schneider. You have some very important board memberships. What do you learn from these board memberships? First, you learn about the business and the business model and what drives success and how you can support that.

I think as a board member, you're there to support on the strategic direction as well as the governance. But you also know how important it is with the team. And that probably comes from my business background that

It's really, really key with the team. So that's been something that I've been impressed by all of the companies, how strong the teams are. And also something that I continue to push on innovation and the team. Now, the CFO job in GE is probably one of the toughest CFO jobs in the world. And you are the first non-American to actually have that role. How did you end up in that position?

Well, I'll start by saying that my time at GE has been anything but boring. I literally started the new job in a new country in the middle of the pandemic, which certainly was far from ideal. I did get to use Microsoft Teams very, very well by that time. Now, three years in, I can only say that it's been an amazing journey and there's still a lot more to do. But the GE team both impresses and inspires me.

and we've had major steps forward since I joined. I'm really proud of that. We've talked about deleveraging

You know, Nikolaj, we've taken down debt by $90 billion. We've made big portfolio moves that enabled us to focus on our industrial core. And as importantly, we're transforming the culture and operations. And we do that through lean and decentralization. And now we're getting really close to spinning our healthcare business as we move forward to become three independent, industry-leading, investment-grade public companies.

And remember, this transformation, it's been taking place during the global pandemic and also a number of geopolitical crises. So I would say it's been...

great leadership challenge and opportunity. And I'm really excited about what's ahead. So we had the CEO of AMD, Lisa Su, on the podcast a little while back, and her advice to people was to run towards problems and to really take on the most challenging tasks. It really seems like that's something you have been subscribing to. Yeah, that's probably true. The combination of companies that are focused on driving innovation and

and change has been something that's been important for me. Lisa said run towards challenge, and I do think that that is important because driving change, particularly in this hybrid work environment, isn't easy. And I talked about joining during the pandemic and Microsoft Teams helping me as you listen and learn. But when it comes to really driving change and shifting the way we work,

there is really no substitute for being on the ground with your teams. So spend time with the teams.

and together show the what, the how, and the why. And then together you can really make big differences. And I would say today we've never seen a more challenging operating environment. You have the pandemic, the global supply chain, labor constraints, inflation, and competition is much tougher and it's truly global. And if you combine that with the fact that the pace is much faster and

It means that it is key to have empowered people close to the action that can take the right decisions with speed. And that's why I believe that decentralization is so important. And that's also why I'm so grateful that I have the team I have in the times like they are now. Tell me about your attitude to speed.

I would say with speed, of course, it starts with quality and then delivery and then cost. But today, what we can see is that companies need to change because the world is changing faster and faster, which means companies also have to adapt. And that's why I think it's important to have empowered people close to where the action is so that they can take the right decisions. Because with that speed, you will beat competition. Absolutely.

And what's the best way to empower people? I think it's important to be clear about what the strategic goal is and then be clear about what the path is to get there. And in Lean, we talk about Hoshinkanri, which is really about strategy to action.

So you make sure you get people aligned on the strategy, but then you also show what the path is to implement that strategy and make sure that everyone knows what their role is, because then you know that if everyone does that, you will achieve the strategic goals that you have. And I think that's really empowering. Thank you.

Now, changing tack a bit, GE has got an amazing history when it comes to innovation, going all the way back to Thomas Edison and electricity via jet propulsion, MRI, and so on. And at the beginning of this century, it was one of the largest companies in the world. I mean, how important and powerful was GE at its peak? GE is an iconic American company with a proud 130-year history.

The work GE has done throughout its history, but also today, matters to the world. A couple of examples. Today, more than 2 billion patient scans a year use GE healthcare technology. And GE Venova solutions generate more than a third of the world's power. And GE Aerospace, the world's leading supplier of jets and turboprop engines,

Three out of four commercial flights are powered by our technology. So the GE business technologies literally helped transform our society of the last century. And I mentioned a couple, but there are more. We've also talked about other areas like computing languages or media platforms. Innovation is in our DNA. And when we drive transformation, it doesn't only have the power to define the industry. It really shapes the world around us.

Well, at the beginning of the century GE was one of the largest companies in the world, but then there were a lot of challenges. Tell us what happened. Well, I would say the financial recession in '08 was difficult for, I would say, all companies, including GE, and it really forced a fundamental decision to rethink how we operate and to begin to separate the businesses.

And we've become much less complex with a lot of the businesses either spun or IPO'd or sold and merged. So I would say that that was really about finding the best home for everyone. I think we've also learned to recognize the value of focus. And that's what's leading us today and what's leading the thinking with the current three spins. I would say some of the lessons learned internally are,

have been focus beats diversification and the wrong kind of scale. Decentralization drives much more accountability and keeps much of the decision making close to where the action is. And humility and transparency is in our culture and they are key to success. You have to put the good and the bad on the table. You have reduced the debt level at GE very, very significantly. What was the problem at the time of having so much debt?

So as a company, and especially as a CFO, it's about capital allocation. And when you have as much debt as we had, priority number one is to reduce debt.

Because for the businesses to thrive, you want to do capital allocation as in investing in growth. You want to invest in organic growth. You want to invest in inorganic growth. That's where you want to put your money. But to do that, you have to have the balance sheet that's strong enough. And protecting the company is always job number one. And that's why priority number one was to reduce debt significantly.

When you have a lot of debt like the company had at that stage, does that lead to the company becoming too short-term thinking? No, I don't think so. It's about working with what you have. And that's also what we did.

what you do is you make sure that you focus on improving operations and you make sure you improve the businesses. And that's why, for example, one of the big focus areas have been to drive cash flow, operational cash flow. So running the business is better through lean and decentralization and therefore driving profitable growth,

better profits and working capital management that generates free cash flow. And you know, Nicolai, we generated almost 6 billion of free cash flow last year from the operations. So that's been the focus. And then in balance with that, also strengthening the balance sheet. And now you are basically making three different companies out of what was one company. Tell us, why is that good for shareholders?

I'll tell you this, that I've had a lot of discussions with investors and we've had great response since we announced this about a year ago. They recognize that as independent companies, each business will be better able to define what's right for that business and for those customers.

And the separate entities will also be much more attractive for investors to have a deep domain expertise in these industries. Think about it. If you have a narrower scope, it means greater understanding of the business, its nuance and future trends. And that's harder to do when you're multiple businesses under one roof. I'll give you an example. One investor said to me in the past,

I love healthcare, but I don't know and I don't invest in aero or energy. So people want to invest in what they know and what they love. And this will allow them to do that. So the way I see it, it's highly value creating move for the company and for investors. You'll have three well capitalized investment grade companies with seasoned leadership teams, greater focus and growth.

what I feel is very important, tailored capital allocation decisions and framework for each of them. And I do believe that in the long run, that is what differentiates companies. Strong, well-defined capital allocation framework is key.

It's something you have been pretty good at in Sweden. It's to streamline companies and where you worked for many, many years as Abloy actually came out of Securitas in the old days. So you were a believer in this. Yeah, definitely. And I see my role here as...

setting up each of the businesses for success. And it's sort of from a financial, from an operational and from a technical standpoint. And it begins with the leveraging because that's really the foundation that allows each of the businesses to operate from a position of strength. And I would say for me, the priorities have been clear, strengthen our balance sheets, simplify our capital structure, decentralize our operating model and improve free cash flow generation.

But then also about a framework for capital allocation being key and really a framework both from an organic growth perspective, like R&D and commercial deals, as well as M&A. I really believe that that's key to success in the long run.

Then you have the technical separation of the three companies, and that's not a small task either. And here my teams have been leading, I would say, the critical work to untangle thousands of legal entities across the globe. And why is this separation so difficult technically?

You have a 130-year-old company, one of the largest companies in the world, present in most countries of the world, and you have a lot of different businesses in here. So just the sheer size and scope of it is something. But I do have a really strong team that helps execute this. And we've also come out now and said that we're going to go with healthcare first week of January. So making progress also on the technical side.

Well, let's change direction a bit here and focus in on your aerospace division. Why is aerospace a good business to be in? G-Aerospace is an exceptional business operating in attractive commercial and military sectors. Three out of four commercial flights worldwide are powered by our technology.

And now, as the industry recovery momentum continues, our focus is really on delivering for our customers and helping them to meet this historical ramp that the industry is facing as more and more passengers return to the skies.

And I would say driving operational improvement with lean is what will enable us to really capture the full growth opportunity we have here and deliver. And at the same time, Nicolai, we continue to invest in technologies to shape the future of flight and also unlock new growth. How do you work with decarbonization?

Decarbonization is very important to the work that we have done and are doing. And we have really worked over decades to advance, I would say, sustainability technology and renew our products.

And if you think about it as the propulsion provider of three out of four commercial departures, we also have a responsibility and a sense of purpose that drives innovation here. So together with industry and government partners, we're working hard to come up with solutions to reduce flights carbon footprint.

Really proud to say that we work with our customer United and we powered the first ever experimental flight with passengers using 100% sustainable aviation fuel, which is known as SAF, in one engine. GE and our partner engines can all operate on SAF blends today. So now the goal is to make SAF more affordable and available.

It's also within the IRA. There are important provisions that will help lower the cost per gallon. Is this the most exciting innovation you are working on now? Yes, it is. But I don't see a single solution here. The industry getting to net zero is going to take a combination of SAF together with other options like hydrogen and hybrid electric flights. And we're working to make the traditional engines more fuel efficient.

And now our CFM RISE program will utilize what's called an open fan architecture that could reduce fuel consumption and CO2 emissions by more than 20% compared to today's engines.

So a lot of work and focus here with a lot of good traction. In the aerospace division, you're also doing military equipment. What are you seeing in terms of demand here? Our military business is a proud partner to the US military and the allies around the globe to help them be more effective in combat, provide humanitarian effort and to come home safely. And we continue to see strong demand for our products.

Change in Tech, Carolina, how would you describe the corporate culture in GE? I would say that our culture is really focused on rising to the challenge of building a world that works. So what does that mean? Innovation is at our core and we're motivated by what innovation does for our customers, but also for our world and what our products deliver.

The other part I would say is continuous improvement. That's really at the core of our culture. And that's why we talk a lot about lean and what that does. So lean and digital are sort of a natural culture mindset. And you add to that decentralization, which is about moving decision making closer to the customers. And this is the culture that we have in our DNA.

And I would say our leadership behaviors are also important. So we talk about act with humility, lead with transparency and deliver with focus. These leadership principles, do you feel that they are American or the European? What are they?

I would hope to say that they are global. And you talk a lot about technical issues. How do you think about people? The team is everything. And that goes for GE and that goes for me. You build everything with your team. So you need to have the right people on the bus, as someone said. And that is also something that we have focus on in the company. And what do you look for? I mean, who do you want to have on your bus?

Of course, you have sort of a base where people are specialists in different areas or you need them for certain tasks. But that's almost table sticks. You really want someone who joins and who is excited about the mission, who then also is prepared to lead with our leadership behaviors. And I do think that this with act with humility is important because

Lead with transparency, just as important. And then not to be forgotten, deliver with focus because nobody can do everything. So it's about focusing on what's important. And how do you make sure that your leaders are humble? What's the key? I would say you can almost tell that from how people behave. And it comes across very early in the process when you're choosing your team members and basically when they're choosing you as well.

But it's important that the people see the we and that it's a team because that's also the way to deliver. What motivates you personally? I would say new perspectives. I really love to travel and immerse myself in new cultures. And Nicolai, by now I've lived in seven countries and I attempt to speak four languages and it's been incredibly rewarding.

I would say personally as well as professionally. And I do hope that that allows me to bring a diverse perspective to my work, which I believe is important. And for GE or any company for that matter, to really rise to what we say, the challenge of building a world that works is

You really need the strength, the smarts, the humility, and the range of perspectives that a truly diverse workforce brings. And then technology and digital innovation, you've probably heard me say, that really motivates me as well. And I'm responsible for digital technology as well. So I'm seeing firsthand how technology shapes our businesses and then how the business in turn shapes our world. And that's

a really thrilling experience for me. Our work has real impact and that makes it exciting to come to work every day. What's the most fascinating thing that you are seeing in the digitalization opportunity just now? I would say we have seen as consumers what digitalization has made for us with 3G and 4G and what that has enabled for us. What's coming now with 5G and the opportunity that that brings us

to corporates and industrials. I think that's truly exciting. And the power of data and how that's going to help us do everything better, I think we're going to see something similar on the enterprise side as we have seen on the consumer side. So for instance, what kind of things could we be expecting?

Well, think about a factory today. We've talked about automation of a factory and we have gone from manual work to automated work or at least semi-automated work. Imagine you connect all of that in a connected digital factory where the data then travels in real time and helps us deliver with better quality, better delivery,

better cost, and I argue even better cash. So I think there are enormous opportunities, but it's not easy because the implementation in an enterprise or an industrial environment takes more, but the unlock and the opportunity there is big.

A lot of leaders have been through tough times and hardship, but then have been able to bounce back. Have you ever had any experience like that? I would say with the pandemic and working to drive change in this environment, that clearly hasn't been easy. What I am really happy about is how the teams have come together and in this truly challenging operating environment,

being able to deliver what we have delivered. And that's also why I'm really grateful to my team. You know, the team works together. We support each other. We even laugh from time to time and we work through the challenges. And in the end, the team has always gotten the job done. Karina, I think you are the person on the podcast who has spoken the most about the team and the importance of team. What is a good team for you?

A good team is a team of strong individuals that understand how important it is to work together as a team and that the best way to deliver is together as a team. And once you create that magic of sort of individual players that together create a strong team, that's how you win.

Amy Edmondson at the Harvard Business School talks about the psychological safety. Is that something you spend time on? I think it's part of what I mentioned about transparency and being sure that people can come to you with bad news.

It's really about them solving the problems. And I think that that is about safety. So people know that something pops up because it does. It happens to every one of us. And then being able to share that with your leader, with your team, and then work together to solve it. I think that's really, really important because without that, you will not have the transparency and then you will not handle things that come up. And if you do, that's how you win. How do you motivate your team?

I give them strategic direction and the main achievements that we want to do. But then I also give them a lot of responsibility to act.

And that's what I have seen good leaders grow in because it's a bit like with decentralization. You give people the opportunity to grow and more often than not, they do. And they deliver far beyond their own expectations and even mine. And in the end, the sum of that is what drives the whole organization forward. And if you are not allowed to mention your own CEO, who are the CEOs in the world who you really admire?

I'll just say a big thank you to the CEOs that I have worked with previously for the good partnership that we've had. That's a great Scandinavian diplomatic answer. I love it. We have a lot of students and young professionals listening to the podcast and they admire people like you who have had a tremendous career. What would be your advice to them? Well, I wouldn't try to plan too much.

What I would say though is choose your boss carefully and then focus on delivering in your current job because the people that work close to you are the ones that are going to see your impact and they are going to give you the most exciting new roles. That's always what brought me the best career opportunities. It was either my boss, my investors, or even board members. And then when that big opportunity comes along, go for it. It probably means stepping outside of your comfort zone and

But I have seen that happen over and over again. And stepping outside of the comfort zone is usually when the real growth happens. Couldn't agree more. All the good things in life happens outside the comfort zone. Carolina, it's been a huge pleasure to have you on. A big thank you for taking the time.