Scenario - Case Study on General Electric (GE) by Jeffrey R. Immelt (Article ada

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Scenario - Case Study on General Electric (GE)

by Jeffrey R. Immelt

(Article adapted from Harvard Business Review)

A CEO has different tasks in different cycles. Some CEOs are founders and builders. Others have the luxury of managing momentum through a stable economy or a period when business models aren’t being disrupted. My task was different: remaking a historic and iconic company during an extremely volatile time.

I led a team of 300,000 people for 6,000 days. I led through recessions, bubbles, and geopolitical risk. I saw at least three “black swan” events. New competitors emerged, business models changed, and we ushered in an entirely new way to invest. But we didn’t just persevere; we transformed the company. GE is well positioned to win in the future.

For the past 16 years GE has been undergoing the most consequential makeover in its history. We were a classic conglomerate. Now people are calling us a 125-year-old start-up—we’re a digital industrial company that’s defining the future of the internet of things. Change is in our DNA: We compete in today’s world to solve tomorrow’s challenges. We have endured because we have the determination to shape our own future. Although we’re still on the journey, we’ve made great strides in revamping our strategy, portfolio, global footprint, workforce, and culture. I want to share what I’ve learned more broadly about how to lead a giant organization through massive changes. There are several lessons.

First, you must be disciplined and focused. You need a point of view. Your initiatives should be interconnected—and it’s the leader’s job to connect the dots for everyone in the organization. All the major initiatives we implemented during my tenure as CEO were aimed at making GE one of the 21st century’s most valuable technology-driven industrial companies—one that can grow; one that can generate greater productivity for ourselves and our customers.

The second lesson concerns the journey a leader must embark on before undertaking a transformation. You have to go through a period of rewiring your brain—getting yourself to the point of profoundly believing that the world is changing and that the survival of your company depends on either anticipating the change or being in the vanguard of those reacting to it.

Third, you have to get people in your organization to see the need for change as existential. Fourth, you have to be all in—you must make a bold, sustained commitment to the transformation.

Fifth, you must be resilient. I subscribe to the words of the great philosopher Mike Tyson, who said, “Everyone has a plan until they get punched in the mouth.” It is so difficult to predict events. It is difficult to sustain transformation during tough times, but it’s the only way to create a better future.

Sixth, during the transformation you have to listen and act at the same time. You need to allow new thoughts to constantly come in, and you need to be open to the reality that your organization will have to pivot when it learns something new, while still having the courage to push people forward.

Finally, you must embrace new kinds of talent, a new culture, and new ways of doing things. We have hired tens of thousands of people—managers at all levels; software developers and engineers; data scientists; and folks in sales, marketing, HR, and other functions—many of them outside the United States. In 2001, 43% of our workforce was outside the United States; today 65% is.

Before delving into each lesson, I’ll describe the transformations we’ve undertaken.

The Transformations

During my time at the helm, we did five things that were transformative. We radically changed our portfolio by focusing on our core industrial businesses and divesting slower-growth, low-tech, and nonindustrial businesses (except for the portion of GE Capital that supports our industrial businesses). We reestablished GE as a technology company: I more than doubled our investment in R&D. We became a truly global company, with a strong local presence in the 180 countries we serve. We became a major force in the technologies that will drive productivity in this era: the industrial internet and additive manufacturing. And we made GE a vastly simpler company in terms of how it runs—it now has much less administration and shorter cycle times, is more decentralized, and is more willing to let people deep in the organization who are close to their markets take risks without having to undergo multiple reviews.

All these transformations dovetailed to a certain extent. They were intended to focus us on creating value for customers by making our core businesses leaner, faster, more technical, and more global, and putting them on the cutting edge of the digital age. They have positioned the company to be more valuable over time. We had come out of an era when many at GE believed that a good manager could manage anything. I didn’t buy that. I thought that companies—and business leaders—were good at certain things.

Another theme of our transformations was the desire to use our scale to drive growth and efficiency. I have long felt that nothing is worse than a big company that can’t grow organically. I never wanted GE to be a $100-billion-plus company that had flat lined on organic growth. We conceptualized the GE Store, a global knowledge exchange. The idea is to build capabilities that can be shared across our businesses: horizontal strengths that can be harnessed to create scale-based innovation and dominant global distribution.

Connected to that were my beliefs that the days of 4% annual growth in the developed economies were over and that the forces of economic nationalism would only gain strength. When GDP is growing by 4% a year, no business is hard. When GDP is growing by 1% a year, no business is easy, so you’ve got to be percolating new and different ideas. That meant figuring out how to innovatively leverage technologies that would allow us and our customers to achieve leaps in productivity. And it meant getting into faster-growth parts of the world at scale.

Now I’ll turn to what I’ve learned about leading transformations.

Be Disciplined

The leader has to be disciplined about nesting initiatives within one another—showing how each one fits with the rest—and staying away from new ideas that don’t fit.

Soak

Good leaders, good CEOs, are curious. They are absorbing information about potentially important trends and developments all the time, but they don’t instantly react to them. They contemplate them. They read about them. They listen to internal and external experts with a variety of perspectives. They engage in what I call a “soak period” before they reach a conclusion about what the input means for their company and how to act on it.

Make It Existential

Every time we drove a big change, I treated it as if it were life or death. If you can instill that psychology in your management group, you can get transformation.

Another crucial way I enlisted people in the cause was by forging personal relationships. One weekend a month, a GE officer and his or her spouse would have dinner with my wife, Andrea, and me at our home. Those weekends were a way to hear perspectives I might not get otherwise. In addition, they gave me a chance, person by person, to build deep connections, which are important in driving change.

Be All In

Half measures are death for big companies, because people can smell lack of commitment. When you undertake a transformation, you should be prepared to go all the way to the end. You’ve got to be all in.

Be Resilient

Transformation requires staying power. At GE, we had a pretty good track record of investing through a crisis, particularly in technology and globalization. For example, we doubled our investment in commercial engine technology from 2009 to 2012. Our competitors did not. That explains why at this year’s Paris Air Show we booked $30?billion in orders and our competitors booked about a couple billion.

I led GE during the financial crisis. Those were very lonely days. Despite our portfolio work, our financial services businesses were still too big in 2008, when Lehman Brothers went down. It was my fault. But we didn’t stop or point fingers. We fixed the problems. And a better company emerged.

Transformation takes grit. It requires risk taking. Many large companies change their CEOs every three to five years; GE’s CEOs have tenures that are a multiple of that. This is because driving change at scale is an imperfect science. It takes time and resiliency.

Be Willing to Pivot

One of the hardest challenges in driving change is allowing new information to come in constantly and giving yourself the chance to adapt while still having the courage to act and push people forward. Also, nothing we’ve done has ever turned out exactly as it began. But we will do whatever it takes to be successful. We’re going to win.”

Embrace New Kinds of Talent

The leader has to defend a new group for as long as it takes for the core culture to pivot so that unification takes place. You’ve got to be more supportive of your colleagues.

You can’t have a transformation without revamping the culture and the established ways of doing things. In our case, that has meant choosing speed over bureaucracy and killing the bureaucracy, employing new ways to recruit talent, and retaining the best people by giving them an opportunity to lead.

We have changed—and are continuing to change—our culture and operating rhythm enormously. We’ve radically changed our values, which are integrated into everything we do, including our language, to signal that we are in the middle of a reinvention.

Process is the means to methodically achieving great ideas at scale; it’s important, but it’s not an end itself. Companies get into trouble when process—not outcomes for customers—becomes the endgame.

CONCLUSION

My legacy at GE will be a complicated one. In our core businesses, earnings have tripled during my tenure. Our $324?billion backlog is up more than $150?billion in the past decade. We have record-high market share. Our financial performance has outpaced that of our peers over the past five years. We have paid more in dividends during my tenure than during the previous 110 years of GE history combined. Nonetheless, our P/E ratio has gone from 40:1 to 17:1 in the past decade, and the stock price has underperformed. Thus it is with transformation.

It will take years for GE to fully reap the benefits of the transformations. But as I contemplate my departure, I love where the company is positioned. I love what we’re targeting. The company in 2001 was certain that the future would look like the past. The company in 2017 is ready for any future. I’m confident that I’m handing over a company that will flourish in the 21st century.

Q4: GE case study, explain different barriers of change that came in the way of company, and how did these barriers influence leadership‘s decision making abilities. Apply Kurt Lewin’s force field analysis change model to determine opposition and support for changes sought by GE, and critically evaluate how all this helped GE to meet its organizational objectives

Explanation / Answer

The barriers to change that GE encountered are as follows:

How these barriers influenced leadership’s decision-making abilities and overcame barriers to change management.

“Kurt Lewin’s force field analysis is a technique that is used for identifying, discussing, and documenting factors that support change and factors that oppose change. For a successful change to occur the force driving change should be stronger than the factors opposing change.”

The key factors supporting and opposing GE changes are as follows:

Supporting factors

Objectives achieved

Opposing factors

Disciplined approach

Lean organization

Slow GDP growth just 1%

Absorbing and adopting new technology

Earning touched 324 billion i.e tripled in a decade

Volatile economy

Acquiring diverse cultural talent

The organization became technologically driver

Diverse cultures

Brainstorming and implementing new ideas

Customer oriented approach was followed

Globalization

Give 100% to change management and new ideas

The company was positioned as a market leader

New competition

Making organization more efficient and lean, technology-driven