Innovation Inc. By inviting some of our most savvy customers in for 'dreaming sessions,' we've found a not-too complicated path to real breakthroughs.

Byline: Jeff Immelt (Immelt is chairman and CEO of General Electric.)

Since I became CEO of General Electric in 2001, I've tried to get the company more focused on using technology to solve customer problems. The goal is to drive organic growth, as opposed to growth through acquisitions. Take our rail business. We've been in the diesel-locomotive business for about 90 years. We have deep relationships with the major U.S. railroads, and increasingly with foreign railroads, too. Those companies would like to do a better job of computer-aided dispatching, to know when a locomotive has been shut down for a long time and to figure out how they can get it into more productive service.

So it was natural for us to get into rail- information technology. We had zero revenue in those businesses in 2000. Today we have $500 million in revenue and we'll have close to $1 billion in two or three years. And it comes not from golly-gee-whiz innovation, but from a whole new business that came to us from solving traditional customers' problems.

To find these opportunities, we try to understand our customers' businesses really well. This fall we had about 40 health-care leaders at our training center. They were hospital CEOs, pharma CEOs, people from Washington think tanks. We spent a day framing some of the major trends in health care, discussing how technology needs to integrate with them and going through a whole series of exercises on how we can make it happen. That's what we call a "dreaming session." It's not overly sophisticated. It's really just looking beyond the next quarter to find out what's on customers' minds. Some of that data feed into what we call "imagination breakthroughs." They're projects we think can generate $100 million in incremental revenue within a three- to five-year time period. We've got about 100 of them right now. For example, we have a team working to produce hybrid locomotives.

Creating and implementing these kinds of ideas takes a talented work force, and the quality and costs of labor are two of the key things we think about when deciding where to locate our businesses. In technical businesses, the best of all worlds is when you can locate in a place with a low-cost, ...