However big you are, however successful you are today, however thoroughly you dominate your sector, plan for a time when your current strategy no longer works. Change always happens, and this means that strategies must be renewed and revised.
Corporate leaders need to ask themselves: What is the pipeline? What is driving growth? What are we going to run out of? GE is not unique in having failed to pose and respond to these questions. Chrysler lost its minivan advantage to Honda over reliability and durability issues. Sears never updated its strategy to account for discount retail.
By contrast, Walmart had a strategic pipeline. Although it ran out of places to locate stores in the rural southern US, it expanded north to keep growing. Sam Walton was not short of ideas for what to try next. He tested drugstores, hardware stores, a warehouse club, and other retail formats. Walton moved Walmart into the high-volume grocery business to drive traffic into his stores.
He pioneered expansion outside of the US as well, fully understanding that he needed growth to continue. GE pioneered its particular approach to mergers and acquisitions, but it was imitated.
Other large public companies also became engaged with buying companies. This left Jeff Immelt looking at an entirely different chessboard. In the days of building GE, the company was one of the few players big enough, fast enough, successful enough, and with enough access to capital to make the deals work. It earned a gold-plated level of acceptance at all levels of business, from being one of the best places to work and a company with among the highest stock market values to having the best growth record and the best trained management teams, and so on.
Immelt was serious about acquisitions. He used the full set of GE-trained managers onboard, and deployed the principles honed in the Jack Welch era in order to make the acquisitions work. Immelt was the handpicked successor, the best of the best. Strategies should not be straightjackets that constrain action so much as frameworks for decision-making. Once private-equity firms became able in the s to raise vast sums of capital, as well as to establish generous bank lines to fund their acquisitions, every juicy acquisition suddenly had too many bidders.
This pushed prices ever higher, forcing increasingly risky bets. The lesson here is that no market stands still. Successful companies spawn competitors; rivals will replicate winning strategies and may do so cheaper, faster, or smarter. A robust strategist will expect this competition from the outset, identify its likely sources, and plan how to stay ahead.
In spite of the company's performance, Immelt maintained a pair of private corporate jets without telling GE's board of directors. Although Welch publicly supported Immelt, he later admitted to other GE executives that the choice was one of his biggest mistakes, according to Fox Business.
John Flannery, the head of GE's health care business, took over after Immelt after having been with the company for 30 years. Since Larry Culp took over in , GE has been steadily reducing its debts and selling off parts of its business. The years were not without controversy however, as a whistleblower accused the company of accounting fraud in Those claims did not appear to have merit. In November , the company said it would spin off its last remaining three business divisions — aviation, healthcare and power — into separate publicly traded companies.
Even so, the GE's share price is little changed compared to what it was when he took over three years ago. Get the latest General Electric stock price here. For you. World globe An icon of the world globe, indicating different international options.
Get the Insider App. GE's record of being ahead of the game is remarkable. Under Charles Coffin, who led the firm from to , GE set principles of organizational design that would guide large companies--above all, the idea that the company's most important product was not light bulbs or transformers but managerial talent. In the s it produced the famous "blue books"--five volumes of ultra-detailed guidance for GE managers--that shaped management everywhere. In the s it led the move to strategic planning.
In the s and s, it took concepts like leadership development, Work Out, and Six Sigma and made them the stuff of the global management culture. Most organizations will never establish any kind of intellectual leadership. Maintaining it for years is a unique achievement. But wait a minute. A lot of those ideas are dead. Isn't strategic planning now generally scorned, for example? Aren't the blue books and the whole centralizing ethos behind them long since abandoned?
Yes--and GE led the scorning and abandoning. Here is another GE trait that businesspeople especially admire: an ability to change direction unabashedly. It's hard to find any other organization that so enthusiastically destroys its own creations.
Coffin created an organizational structure based on functions; Ralph Cordiner CEO, , broke it to pieces. Reg Jones CEO, established a layer of sector executives and bought a coal-mining company; Jack Welch abolished the layer and sold the mines. Welch built up the insurance business; Immelt offloaded it. Immelt is putting his own stamp on the company by reemphasizing its scientific research labs and a long-dormant marketing function.
The result of GE's seamless, constant reinvention of itself is that while companies are constantly emulating GE, they're frequently a step or more behind, and they know it. That's another reason they consistently admire the company. GE does one more big thing: develop people, evaluate them, and act on the results.
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