The September/October issue of the Harvard Business Review contains multiple articles on GE’s complete business makeover including an article authored by outgoing CEO Jeff Immelt himself written concurrently with his retirement. Immelt described how as part of an overall business transformation GE decided to go all in with 3D technology and wasn’t going to take an incremental approach with something like minority investments.
Immelt explains that with the multi-year cumulative investment of almost $2 billion, GE estimates it now has a 20 percent share of the global 3D printing market. Immelt noted that with this huge financial commitment it was clear to the entire corporation that 3D printing was going to completely permeate the way the enterprise does business. GE has always had a sophisticated corporate tax function department and has been a long-term user of the R&D tax credit.
The Research & Development Tax Credit
Enacted in 1981, the federal Research and Development (R&D) Tax Credit allows a credit of up to 13% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:
- New or improved products, processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Eligible costs include employee wages, cost of supplies, cost of testing, contract research expenses, and costs associated with developing a patent. On December 18, 2015, President Obama signed the bill making the R&D Tax Credit permanent. Beginning in 2016, the R&D credit can be used to offset Alternative Minimum tax and start-up businesses can utilize the credit against payroll taxes.
The Plan to Transform GE
Immelt himself described how GE has a 5-to-6-year meaningful commitment to 3D product development and perhaps a 10-year commitment to 3D printing materials development. GE has also made large investments in software and digital technology across all business functions. With this powerful 3D printing product, material and software development framework, GE has the perfect test bed to apply comprehensive 3D printing resource across a wide range of portfolio industrial businesses including aviation, healthcare, oil and gas equipment, and rail.
The R&D tax credit is available for all of GE’s 3D printing activities including further product development, further materials development, further software development and product line application. GE is experienced enough to utilize the R&D tax credit to support its massive and continuing 3D printing investment.
GE Additive is dedicated to developing the largest laser-powered 3D printer that will have the capabilities of printing materials from metal powder. These components will be suitable for automotive, power, and oil and gas industry manufacturers. The new innovative business GE has added shows their commitment to being a top innovator in the 3D printing industry and taking the first steps to tapping into upcoming advantages of various industries.
In a companion global strategy piece, Ranjay Gulati of Harvard’s advanced management program explains how 3D printing, robots, analytics and sensor laden internet connected equipment is enabling GE to operate local businesses in 180 countries at a much lower cost scale. It should also be noted that GE is one of the underlying investors in Desktop Metal, a revolutionary 3D metals printer company that is attracting a lot of attention.
The long-term results of GE’s business transformation will need to stand the test of time. One irrefutable fact is that when it comes to 3D printing, GE is a company that has put the pedal to the metal. With a full commitment, GE is increasing their presence in the digital industrial transformation through 3D printing innovations.
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Charles R. Goulding of R&D Tax Savers discusses GE Additive and metal additive manfuacturing
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