General Electric 20131014

CASE STUDY:
GENERAL ELECTRIC A BUILT TO LAST

COMPANY

PAPADIAMANTI VASSO
ATHENS UNIVERSITY OF ECONOMICS AND BUSINESS
EXECUTIVE MBA MANAGEMENT AND LEADERSHIP
PROF: DIMITRIOS BOURANTAS
OCTOBER, 2013

2
Case Study: General Electric: a Build to last company

Vasso Papadiamanti - Executive MBA: Management and Leadership, 14/10/2013

TABLE OF CONTENTS

INTRODUCTION ........................................................................ 3
1. WHO IS GE? ....................................................................... 3
2. THE BUILT TO LAST MODEL .................................................. 4
3. HOW IS GE EVOLVING SUCCESSFULLY? ...................................... 5
4. THE LESSON LEARNT .............................................................. 7
SOURCES AND REFERENCES ......................................................... 9

3

INTRODUCTION
The General Electric Company (GE) is widely regarded as one of the worlds most successful
corporations of the 20th century. The purpose of this paper is to briefly examine how the GE fits the
built to last model as described by professor Bourantas. The presentation of the case study is
organized in four (4) sections:
1. Who is GE?
2. What is the Built to last model?
3. How is GE evolving to success?
4. What is the lesson learnt?

1. WHO IS GE?
GE, founded in 1892, is a diversified technology and financial services company. The products and
services of the Company range from aircraft engines, power generation, water processing, and
household appliances to medical imaging, business and consumer financing and industrial products.
It serves customers in more than 100 countries. Its segments include Energy Infrastructure, Aviation,
Healthcare, Transportation, Home & Business Solutions and GE Capital.
According to Forbes Lists
1
it ranges
#4 Global 2000
#21 in Sales
#24 in Profit
#44 in Assets
#6 in Market value
#8 World's Most Powerful Brands
#90 Innovative Companies

Since its foundation GE has been a leading business partner of the American government
2
having an
important political and economical influence. According to the New York Times Its extraordinary
success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative
accounting that enables it to concentrate its profits offshore
3
. GE is one of the principal partners of
president Obama supporting his current policies for jobs creation in the United States and the
development of a 7 billion dollars energy infrastructure project in Africa as well.

1
http://www.forbes.com/companies/general-electric/
2
GEs Two-Decade Transformation: Jack Welchs Leadership, HBS 9-399-150
3
http://www.nytimes.com/2011/03/25/business/economy/25tax.html?pagewanted=all&_r=0
4

2. THE BUILT TO LAST MODEL
Built to Last was a best seller book that studied the factors associated with companies that made
great progress over competitors for a sustained period of time. In summary, it was the visionary
nature of these companies that helped built their brand and distinguish them from their competitors.
Built to Last is about enduringly, great organizations, known as visionary companies that have
prospered over long periods of time through multiple product life cycles and several generations of
leadership.
Based on seven timeless principles of visionary companies: Be clock-builders, not time-tellers;
Embrace the and, reject the or; More than profits; Walk the talk; Preserve the core ideology
while stimulating progress; Never-ending process; and Build the vision; Collins and Porras presented
the results of a six-year research project at the Stanford University Graduate School of Business using
a comparative research model that traces the performance of eighteen visionary companies and
their comparison companies (Collins and Porras 2002). General Electric was one of the visionary
companies.
The lasting success of a company depends on 7+1 independent parameters (Bourantas, 2005)
presented in the following figure:

The built to last companies:
Understand their environment and emerging opportunities
Change to fit the environment and make new rules for the others
Know what to change and what to keep
Manage the contradiction
Develop the critical success factors
Do the right things right (Peter Drucker)
Focus to results
5

3. HOW IS GE EVOLVING SUCCESSFULLY?
Long regarded as a bellwether of American management practices, GE was constantly undergoing
change. In the 1930s, it was a model of the eras highly centralized, tightly controlled corporate form.
By the 1950s, GE had delegated responsibility to hundreds of department managers, leading a trend
towards greater decentralization. But a subsequent period of profitless growth in the 1960s caused
the company to strengthen its corporate staffs and develop sophisticated strategic planning systems.
Again, GE found itself at the leading edge of management
4

The organizational challenges involved in World War II were a vital stimulus to strategic thinking. The
problem of allocating scarce resources across the entire economy in wartime led to many
innovations in management science.
5
America's first corporate development centre for managers is
born in the fifties at Crotonville making of GE a vanguard in management and leadership.
The last three decades GE has moved out of many major product markets in consumer, industrial,
and natural resource sectors, while entering and prospering in new markets such as media, financial
services, and information sectors (figure 2). At the same time, the company has become a global
firm, as its businesses carry out research, sourcing, production, and sales activities throughout the
world. How has the company changed so drastically, while violating so many truths about business
change?
6

GE had to face in each period different political, economical and social context, threads,
opportunities and risks but preserve its core ideology in contrast to its execution that may change
over time and can include policies, procedures and practices (Collins & Porras, 2002).
Confident of this core ideology, Jack Welch defends companys leadership You want to be No1.
There is nothing wrong with that. You dont want to be a loser. Nos 3, 4, and 5 dont have the same
flexibility. You cant do R&D at the same level. What you do with the resources that come from being
a leader thats what determines your future
7
.
Jack Welch became CEO of the GE in 1981 and inherited from his predecessor Reg Jones, a company
focusing on strategic planning with sophisticated processes, complicated organizational multi layer
structure and a technical manufacture portfolio of businesses.
In the following table it is presented an overview of the evolution of the company since 1981 under
the two CEOs Jack Welch (1981 2001) and Jeff Immelt (2001 present) including the major
strategies, management innovations and practices. The overview scheme is organized according to
the parameters of Bourantas model and allows comparing the different periods, observing the
continuity and consistence of companys strategy and understanding the concept of Jack Welch
Never let the present dictate your future that boosts GE to look forward with confidence. That is
because we can shape some of the big growth drivers in any era
8
.

4
HBS-GEs Two-Decade Transformation: Jack Welchs Leadership, Bartlett & Wozny, 2000
5
Working Knowledge- Harvard Business School, How Business Strategy Tamed the Invisible Hand http://hbswk.hbs.edu/item/3019.html
6
Will Mitchell, Duke University, March 2008
7
The new rules, Fortune August 7, 2006
8
GE Works 2012 Jeff Immelt Letter to Shareowners
6

Parameters Jack Welch era (1981 2001) Jeff Immelt era (2001 present)
Historical context US economy in recession
High interest rates
Strong dollar
Highest unemployment since the depression
Japanese competition
9/11,
Corporate scandals (Enron, WorldCom)
Uncertainty, crisis of confidence among investors
Financial crisis 2008
Globalization
Core ideology: Become the #1 or #2 in every market we serve and revolutionalize this company to have the speed and agility of a small enterprise.
Maximize profit for shareholders
GE share price more than doubled despite the dotcom crash of 2000
Focus on long term profit growth for shareowners
Strategy Performance and efficiency
3 circle vision: diversified portfolio
Reduce dependence of traditional industrial products
Downsizing and restructuring
Orientation to services (financial, medical sectors)
On the road to globalization (exploit Mexico crisis 1990s, European
regression 80s, Asian crisis 1997)
Organic growth emerging global trends
3 strategic imperatives
1) Sustaining its strong business model
2) Strengthening the business portfolio
3) Driving growth initiatives
Creating differentiation advantage through innovative product services
Acquisitions and alliances to change
Structure Attack on bureaucratic processes
Reduce hierarchical levels
Fix, sell or close - Integrate new acquisitions
Revitalization of marketing function commercial council
Systems/ technology Six sigma Quality initiative
Cutting edge acquisitions
Industrial internet software and analytics The power of 1%
Performance indicators
Culture Break with the old culture
Speed, Simplicity, Self-Confidence
Openness, confidence, leadership and creative thinking at every
level of the organization.
Simplification
Accountability of outcomes, Speed and compliance
Long term thinking
Striving to be better
People New varsity team
Neutron Jack - shape up or ship out, - A Players 4Es
Globalizing the intellect of the company
Stretch: achieving the impossible
Motivation by encouraging moderating stretch inherited by Jack Welch era)
Imagination at work
Social responsibility

Initiatives - Programs Work out
Best practices
Developing leaders: improvement of Crotonville facilities
Boundaryless behavior
Digitization
Technical leadership
Services
Customer focus
Growth platform
Globalization
Ecomagination

7

4. THE LESSON LEARNT
In spite of all criticism that rose on GEs strategies, behavior, initiatives and practices during the last
three decades the fact is that GE sustain itself for more than 130 years and ranges among the top
global company leaders.
General Electric is both profitable and dynamic
9
. According to Mitchell GE success is due to its:
External Strategy
Acquisition strategy, including both careful pre-acquisition assessment and detailed post-
acquisition integration.
Active alliance identification programs within individual divisions and at the corporate level.
Internal Strategy
Active strategic planning
A few high-powered programs
Boundary-spanning knowledge management
A small-company organization.
Outcome
Differentiation
Cost
Innovation
Power
In Good to Great Collins (2001) analogizes the success of great companies and classifies GE among
them, to that of a flywheel, where a sustained momentum accelerates the energy output. The
companies able to create this flywheel effect had the following characteristics in common
10
:
Level 5 Leadership Level 5 Leaders are not charismatic, media types. Chances are youve
never heard of them. They are humble, self-effacing and more concerned about the
prosperity of the company than their individual success.
First WhoThen What Using a bus analogy, Collins claims that great companies first get
great people on the bus, then decide where to drive it. According to Collins, the right people
are your most important asset.
Confront the Brutal Facts (Yet Never Lose Faith) Good-to-Great companies maintain
unwavering faith that they can and will prevail in the end, regardless of the difficulties, and
at the same time have the discipline to confront the most brutal facts of their current reality
whatever that might be.
The Hedgehog Concept (Simplicity within the Three Circles) Good-to-Great companies do
what they can do best (as opposed to what they want to do best), what they are deeply
passionate about, and they focus on what drives their economic engine.

9
Will Mitchell, Duke University, March 2008
10
Good to Great book summary www.employeradvisorsnetwork.com
8

A Culture of Discipline Having a disciplined culture is the opposite of having a controlled
one. There is no need for hierarchy, bureaucracy, or excessive control.
According to Bourantas model GEs success is due to the following components:
1. GE has a purpose, a core ideology that stimulates progress and strives to improvement.
2. GE understands the external opportunities and threats, and internal strengths and
weaknesses, keeps creating value by mobilizing wisely resources and applying smart
strategies.
3. GE develops its human capital that is the main competitive advantage probably the only one
that competitors cannot copy.
4. GE has a strong corporate culture.
5. GE has flexible structures and processes.
6. GE has a great competence of lifelong learning, improvement, adaptation and change.
According to Jack Welch the difference between winning and losing will be how the men and
women of one company view change as it comes at them. If they see it as a threat, as an ill
wind to be resisted by keeping your hand down and digging your feet in, we lose.
But if they are provided the educational tools and are encouraged to use them-to the point
where they see change as synonymous with opportunity, where they become receptive to it,
even demand of it-then every door we must pass through to win big all around the world will
swing open to us, new markets, exotic technologies, novel ventures, dramatic productivity
growth
11
.
7. GE has integrated the philosophy of meritocracy and mechanisms to permanently develop
Leadership at all levels.

11
Effectiveness and Importance of Leadership in the Changing Period "A secret key to revitalize Japanese firms" by Yasushi Ueno May, 2001
9

SOURCES AND REFERENCES
(2005). : , . .
GE 2012
GE web site http://www.ge.com/
GEs Two-Decade Transformation: Jack Welchs Leadership, HBS 9-399-150
HBS-GEs Two-Decade Transformation: Jack Welchs Leadership, Bartlett & Wozny, 2000
Working Knowledge- Harvard Business School, How Business Strategy Tamed the Invisible Hand
http://hbswk.hbs.edu/item/3019.html
Corporate Strategy Analysis: General Electric Co. (1981present) Will Mitchell, Duke University,
March 2008
The new rules, Fortune August 7, 2006
Good to Great book summary www.employeradvisorsnetwork.com
Effectiveness and Importance of Leadership in the Changing Period "A secret key to revitalize
Japanese firms" by Yasushi Ueno May, 2001
http://www.forbes.com/companies/general-electric/
http://www.nytimes.com/2011/03/25/business/economy/25tax.html?pagewanted=all&_r=0
The Industrial Internet@Work, Marco Annunziata & Peter C. Evans, White Paper, 2013
How GE Teaches Teams to Lead Change, by Steven Prokesch, HBR, January 2009
Is GE a Good Model for Other Companies to Follow? Robert M. Tomasko, 2002

General Electric 20131014

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GENERAL ELECTRIC A BUILT TO LAST

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