General Electric Case Study
In what ways has Jeff Immelt redirected the strategy of GE?
In 2001, after taking over from the predecessor – Mr. Jack Welch – “living legend” and “best manager of the 20th century” - Immelt knew that leading GE would be a significantly difficult challenge. Indeed, shortly after he became the CEO of GE, a series of events unexpectedly took place and strongly affected to the circumstance of corporation. These challenges he met included 9/11 attacks, and a subsequent series of high profile company collapse (i.e. Enron, WorldCom) with many scandals. Then came the financial crisis of 2008 – 2009, which affected severely to the GE’s primary growth source – GE Capital with the accumulation of bad debts and asset write-downs. These impactful events made a considerable uncertainty and led to a critical crisis of confidence and trust among the investors, GE shareholders and the community; and more global competitors.
Despite the turbulent situations of 2001 to 2015, Immelt still had systematically came up a long-term transformation strategy for GE. Due to the changes of internal and external environment, Immelt had an important step in analyzing and developing a new strategy to adapt with the circumstances at that time. He especially paid attention to redirect the strategy of GE through:
- Altering new approaches to competitive advantages and value creation;
- Strengthening the business portfolio;
- Innovation platform
- Adjusting in organization structure;
- Modifying in management systems;
Below is the comparison of strategy between Jeff Immelt and his predecessor - Mr. Jack Welch, and how he re-invented the strategy of GE during his period as GE’s CEO:
JACK WELCH | JEFF IMMELT |
Period | |
1981 - 2001 | 2001 -2017 |
Leadership Style | |
Autocratic/Commanding (Goleman,2000) | Democratic (Goleman,2000) |
Business Portfolio and Strategy (Figure 1) | |
+ Divestment and Massive Global M&A | + New approaches to competitive advantages and value creation; Selective Global M&A |
- Remained a fairly diversified business portfolio - Concentrated on a limited number of sectors with potential growth and developed globally --> Achieved by divesting the weak performance businesses and retention of businesses which identified as number one or number two in their industry (Grant 2015, p.685) | - Continuing to divest areas which had poor growth and profit prospects or did not suit to GE’s capabilities or its management model. Noticeably, Immelt's commitment to shrinking GE Capital for emphasizing on GE as a technology-based industrial |
- Particularly expanded services - finance services - GE Capital - through a series of acquisitions and became one of the world's leading diversified financial services companies (Grant 2015, p.685). | - To position GE for a stronger development, discovering new opportunities from existing businesses or entirely new sectors of business which have potential strong growth prospects and greatly expand the company’s market presence such as: Healthcare, Energy, Broadcasting and Entertainment, Technology Infrastructure (Grant 2015, p.688). Especially, globally extending to emerging markets (China, India, Eastern Europe, Russia, the Middle East, Africa, Latin America, and South-East Asia) |
- Strongly focusing on speed and short – time results | - Focusing on long-term earnings and organic growth |
- "Six Sigma" (Appendix 1) and “Destroy your business dot.com” (Grant 2015, p.685) | - Strongly paying attention to technology and customer relations - excellence in both has been determined as the primary fundamental for extending GE’s competitive advantages in the markets it serves: satisfying customers’ needs by bundling products (both goods and services) through GE's different business sectors |
INNOVATION | |
- High number of short-term projects | - Fewer, bigger, longer-term projects |
- Low investment in R&D activities | - Expanding investment in GE's R&D budgets |
| - Particularly concerned to identifying and supporting projects which offered large-scale market potential |
| - R&D was reconceptualized as “breakthrough innovations in areas such as molecular imaging and diagnostics, energy conversion, nanotechnology, advanced propulsion and security technologies". Moreover, "Interface of the physical and digital worlds", "Industrial Internet", "Internet of Things" are strongly focused (Global R&D Fact Sheet, 2015) |
ORGANIZATION STRUCTURE (Figure 2) | |
+ Linear, rigid and simple | + Crossing, versatile and complex |
- Eliminated the middle layer | - Integrating different businesses of the corporation |
- Divided business operation into six parts | - Enhancing knowledge learning, sharing and collaboration between internal divisions |
- Business divisions classified as the core, managed by the headquarters | - Creating multidisciplinary expertise |
PERFORMANCE MANAGEMENT | |
+ Management driven company | + Customer driven company |
- Designed and implemented quantitative performance measurement metrics (Cost efficiency, Productivity, and Profitability) | - Customer Focus and Integrated Solutions Equally implemented to GE's metrics-driven approach to customer satisfaction |
- Emphasized on management improving | - Increasing investment in certain functions – especially marketing |