Case 22  eff Immelt and J the New General Electric When Jeff Immelt got up to welcome shareholders to General Electric Company’s annual general meeting in Oklahoma City on April 22, 2015, it was the 14th annual general meeting of the company he had presided over since his appointment as chairman and CEO in 2001. Yet his address to the meeting also made it very clear that General Electric (GE) was still a work in progress. In his address, Immelt outlined his vision of GE as a “connected industrial company” that stood at the intersection of the physical and digital worlds and blended “the best elements of speed, scale and flexibility.”1 To further this vision, GE would be undertaking major adjustments to its business portfolio during 2015: completing its biggest ever acquisition, Alstom’s power equipment and grid businesses, and divesting the major part of its financial services company, GE Capital. The recreation of GE under Immelt’s leadership had been a turbulent process. When in September 2001 Immelt took over from his predecessor, Jack Welch— “living legend” and “best manager of the 20th century”—he knew that leading GE would be a difficult challenge. Little did he know just how tough his job would be. Four days after Immelt took over the chairman’s suite, two hijacked airliners crashed into New York’s World Trade Center, setting off a train of events that would profoundly affect GE’s business environment. A month later, Enron’s collapse precipitated a crisis of confidence over ethics, corporate governance, and financial reporting, which soon engulfed GE, forcing it to restate earnings and reveal the details of Jack Welch’s staggeringly generous retirement package. Then came the financial crisis of 2008–2009, which, due to GE Capital’s position as one of America’s leading financial institutions, threatened GE’s survival, forcing it to seek a $3 billion equity injection from Warren Buffett’s Berkshire Hathaway group. Despite the turbulent circumstances of 2001 to 2015, during this period Immelt had systematically put in place a long-term transformation strategy for GE. This strategy had involved reconfiguring GE’s business portfolio, reorienting its performance goals toward revenue growth, refocusing GE’s competitive advantage around technological innovation and customer service, and adjusting GE’s structure, management processes, and corporate culture. The April 2015 decision to sell off most of GE Capital was the culmination of that strategy. The changing shape of GE’s overall business makeup is shown in Figure 1. However, for all of Immelt’s success in transforming GE’s business model and guiding This case was prepared by Robert M. Grant. ©2015 Robert M. Grant. Case22JeffImmeltandtheNewGeneralElectric.indd 681 09/11/15 3:06 PM 682 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS Figure 1 General Electric’s changing business portfolio, 2001 and 2015 2001 2005 2016 Insurance 8% Insurance 15% Capital Finance 25% Capital Finance 24% Capital Finance 43% Infrastructure 41% Infrastructure 75% Infrastructure 34% Plastics, Media 20% Plastics, Media 15% Source: General Electric shareowners meeting (April 25, 2012) and Annual Letter to GE Shareholders (2014). GE through the challenges of the 21st century, the company’s financial performance had lagged. Early in his tenure, Immelt had set ambitious performance targets for GE: sales growth at 2–3 times that of global GDP, 10% plus earnings growth, and a 20% plus return on total capital.2 GE’s performance had fallen well short of these targets (Table 1). GE’s share price told the story: when Immelt’s appointment had been announced late in 2000, GE’s stock was trading at $53: since taking office, GE’s share price had never regained these heights (Figure 2). Throughout his 15 years at GE, Immelt had been haunted by the question of whether GE’s shareholders would be better off if the company were broken up altogether. Since the early 1990s, highly diversified companies had been deeply unpopular with investors and investment analysts and were subject to a “conglomerate discount”: diversified companies had stock market values that were below the estimated aggregate valuation of their individual businesses. As a result, most conglomerates (including ITT, Tyco International, General Mills, Fortune Brands, and Vivendi Universal) had been broken up—or, in the case of Danaher, were proposing Table 1 General Electric: Performance indicators, 2001 and 2014 Year Sales ($billion) Net income ($billion) Return on equity (%) Return on invested capital (%)a 2001 2014 125.9 148.6 13.7 15.3 26.0 11.9 27.0 10.6 Market ­capitalization, 31st Dec. ($billion) 397.9 187.8 Employees Non-US (thousand) employees (%) 310 305 49 57 Note: a Industrial businesses only (excludes GE Capital). Source: General Electric, 10-K reports. Case22JeffImmeltandtheNewGeneralElectric.indd 682 09/11/15 3:06 PM Case 22 Figure 2 Jeff Immelt and the New General Electric   683 General Electric share price, 1995–2015 ($) 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 1995 2000 2005 2010 2015 to do so. The trend had spread to other diversified companies: Kraft Foods had split into two, Kraft, a processed foods company, and Mond-elez International, a chocolate and snacks company. The case against highly diversified companies was reinforced by the growing recognition of the need for in-depth domain expertise for senior managers. Andrew Hill of the Financial Times raised the question: “If the demand is now for depth over breadth, will there be enough ‘serial masters’ capable of understanding, let alone running, companies of the scale and scope of General Electric?”3 In a subsequent article he addressed the broader question: “Have some companies become too big to manage?”4 The challenge for Jeff Immelt, therefore, was not only reinventing GE, it was also reinventing the management model of the diversified corporation. He rejected the description of GE as a conglomerate—“That word does not apply to us”5—and argued: GE is … bound together by common operating systems and initiatives, and a common culture with strong values. Because of these shared systems, processes, and values, the whole of GE is greater than the sum of its parts.6 The challenge for Immelt was to create the systems, processes, and values that could demonstrate that GE was more valuable as a single entity than as a number of separate businesses. Table 2 summarizes GE’s financial performance during 2008–2014. The History of GE The GE that Jeff Immelt inherited in 2001 was the world’s most valuable company (in terms of market capitalization) and was widely regarded as the world’s most successful. It was the only company to have remained a member of the Dow Jones Case22JeffImmeltandtheNewGeneralElectric.indd 683 09/11/15 3:06 PM Case22JeffImmeltandtheNewGeneralElectric.indd 684 1.8 11.5 130.6 144.8 11.3 9.2 44.1 6.2 82.7 371.1 4.49:1 516.8 3.9 12.5 128.2 145.3 10.6 11.2 42.7 7.2 87.5 349.5 3.99:1 500.2 Note: a Includes R & D funded by customers (principally the US government). b GECC = General Electric Capital Corporation, also known as GE Capital. Source: General Electric 10-K reports. 146.0 15.2 4.6 29.0 29.1 12.2 28.09–20.68 28.03 656.6 221.7 307 2013 148.6 15.3 4.2 27.5 (5.0) 11.6 27.94–23.69 25.27 648.3 200.4 305 2014 45.4 6.2 81.9 397.0 4.85:1 539.4 6.0 11.4 123.0 141.3 11.7 12.4 146.7 14.6 4.5 31.0 11.3 12.1 23.18–18.02 20.99 681.7 236.1 305 2012 49.1 16.5 77.1 443.1 5.75:1 584.5 2.2 9.4 116.4 129.0 11.6 9.0 (0.0) 147.3 14.2 5.4 33.4 19.9 11.9 21.65–14.02 17.91 717.2 243.5 301 2011 49.91 2.2 69.0 470.5 6.82:1 605.3 0.5 9.6 118.9 133.1 11.8 7.6 (1.6) 150.2 11.6 4.9 36.1 32.4 12.1 19.70–13.75 18.29 747.8 293.3 287 2010 General Electric: Selected financial data, 2008–2014 ($billion unless otherwise indicated) GE Consolidated Revenues Net earnings R & D expenditurea Cash from operating activities Cash from (used in) investing activities Return on average equity (%) Stock price range ($) Year-end closing stock price ($) Total assets Long-term borrowings Total employees (thousands) GE data (industrial businesses) Short-term borrowings Long-term borrowings Shareowners’ equity Total capital invested Return on average capital invested (%) Borrowings as % of capital invested Working capital GECC b data (financial services) Revenues Net earnings Shareowner’s equity Total borrowings Ratio of debt to equity at GECC Total assets TABLE 2 51.8 1.4 70.8 493.3 6.96:1 650.4 0.5 11.7 117.3 135.3 10.6 9.0 (1.6) 156.8 11.0 4.4 24.6 43.0 11.6 17.52–5.87 15.13 781.8 336.2 304 2009 71.3 7.1 53.3 514.6 8.76:1 660.9 2.4 9.8 104.7 123.5 14.8 9.9 3.9 182.5 17.4 4.3 48.6 (35.4) 15.9 38.52–12.58 16.20 797.8 330.1 323 2008 684 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS 09/11/15 3:06 PM Case 22 Jeff Immelt and the New General Electric   685 industrial index since the index was created in 1896. The key to its success had been to combine massive size with constant adaptation. Over the decades, GE had adapted both its business portfolio and its management systems to the demands and opportunities of a changing world. GE was founded in 1892 from the merger of Thomas Edison’s Electric Light Company with the Thomas Houston Company. Its business was based upon exploiting Edison’s patents relating to electricity generation and distribution, light bulbs, and electric motors. Throughout the 20th century, GE was not only one of the world’s biggest industrial corporations but also “a model of management—a laboratory studied by business schools and raided by other companies seeking skilled executives.”7 Under the leadership of Charles Coffin, between 1892 and 1922, GE successfully married Edison’s industrial R & D laboratory to a business system capable of turning scientific discovery into marketable products. After the Second World War, chairman Ralph Cordiner, assisted by Peter Drucker, pioneered new approaches to the systematization of corporate management. Under Fred Borch (CEO 1963–1972), GE’s corporate management system based on strategic business units and portfolio analysis became a model for most diversified corporations. Reg Jones, GE’s chairman from 1972 to 1981, linked GE’s techniques of strategic planning to its systems of financial management. During his two decades at GE’s helm, Jack Welch had led the most comprehensive strategic and organizational upheaval in GE’s long history. Welch reformulated GE’s business portfolio through exiting low-growth extractive and manufacturing businesses and expanding services—financial services in particular. By the time he retired, GE Capital represented almost half of GE’s revenues and the majority of its assets. At the heart of Welch’s remaking of GE was the creation of a performance culture supported by comprehensive systems for setting and monitoring performance targets and providing powerful incentives for their achievement: Changing the culture—opening it up to the quantum change—means constantly asking not how fast am I going, how well am I doing versus how well I did a year or two before, but rather, how fast and how well am I doing versus the world outside. Are we moving faster, are we doing better against that external standard? Stretch means using dreams to set business targets—with no real idea of how to get there … We certainly didn’t have a clue how we were going to get to 10 inventory turns [a year] when we set that target. But we’re getting there, and as soon as we become sure we can do it—it’s time for another stretch.8 Welch declared war on GE’s elaborate bureaucracy and stripped out layers of hierarchy. His management style was direct, personal, and confrontational: managers were encouraged to commit to ambitious performance targets, after which they and their subordinates were under intense pressure to deliver. Every aspect of GE’s management systems was redesigned from the ground up, from strategic planning to human resources. Welch also introduced periodic challenges for the whole organization. These included: “Be #1 or #2 in your global industry”; “Work-out,” a process for company meetings that allowed grassroots ideas about organizational change to be implemented; “six sigma,” a program of company-wide initiatives to improve quality and reliability; and “Destroy your business dot.com,” an initiative to drive the adoption of internet technologies. Case22JeffImmeltandtheNewGeneralElectric.indd 685 09/11/15 3:06 PM 686 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS Under Welch’s leadership, GE enjoyed two decades of outstanding performance. Between 1981 and 2001, revenues grew from $30 billion to $126 billion, net income from under $2 billion to $14 billion, and stock market capitalization from $14 billion to $510 billion: an average annual return to stockholders of 24%. Jeff Immelt Jeffrey R. Immelt was appointed CEO of GE at the age of 44. He had previously been head of GE’s Plastics business and, most recently, head of Medical Systems. He had a BA from Dartmouth and an MBA from Harvard. He was second-generation GE— his father had spent his entire career at the company. On joining GE from Harvard in 1982, Immelt was identified as a “young high potential,” which meant his progress would be carefully tracked by top management at GE. At GE Appliances, GE Plastics, and GE Medical Systems, Immelt acquired a reputation for turning around troubled units, driving customer service and exploiting new technologies. He also demonstrated the ability to motivate others, an aptitude that he had revealed as an offensive tackler for Dartmouth’s football team.9 In December 1994, the GE board began to consider possible candidates to replace Jack Welch. Between 1995 and 1999, the list had been cut from 20 GE executives to three. The final choice of Immelt was primarily the result of his outstanding leadership of GE Medical Systems. His personality and leadership style contrasted sharply with that of Welch. “Where Welch ruled through intimidation and thrived as something of a cult figure, Immelt opts for the friendlier, regular-guy approach. He prefers to tease where Welch would taunt. Immelt likes to cheer people on rather than chew them out. That style has given him a very different aura within GE. He may not be a demigod, but it’s his man-of-the-people nature that draws praise from the top ranks to the factory floor.”10 This style of leadership had implications for the organizational and management changes that Immelt would introduce; however, it was radical changes in GE’s business environment that would be the dominant drivers of GE’s strategic and organizational development. GE’s Business Environment, 2001–2015 GE’s financial performance under Welch was in an economy effused with optimism, confidence, and growth. The new century presented a new set of challenges. In his first letter to shareholders, Immelt observed: “The exuberance of the late 1990s and the inevitable downturn have created difficult times. Entire industries have collapsed, poor business models have been exposed, large companies have filed for bankruptcy and corporate credibility has been called into question.”11 In a world of turbulence, Immelt viewed GE’s diversified portfolio of businesses as a source of stability over the business cycle. Throughout his 15 years at the helm he emphasized the merits of a portfolio of businesses that smoothed the volatility that afflicted individual businesses. The GE annual report for 2014 emphasized, “Diversity provides strength through disruptive events and commodity cycles,” thereby constituting a key source of “value from a Multibusiness Company.”12 Case22JeffImmeltandtheNewGeneralElectric.indd 686 09/11/15 3:06 PM Case 22 Jeff Immelt and the New General Electric   687 A further key change in the business environment was the discrediting of the 1990s’ obsession with shareholder value maximization. From the outset, Immelt was anxious to disassociate himself from cruder versions of shareholder value maximization. In all his communications to shareholders, Immelt was emphatic that the job of the CEO was not to manage the stock price but to manage the company for the long-term earnings growth that would drive the stock price: “We all want the stock to go up. But to do that we have to manage the company. In fact, the only way you can run GE is to believe that performance will ultimately drive the stock.”13 The critical challenge of the business environment of the 21st century, believed Immelt, was to identify the potential sources of profit for GE. Under Welch, GE had created value through cost reduction, eliminating underperforming assets, and exploiting the opportunities offered by financial services. By the time Immelt took over, these sources of value had been mined out: GE would need to look into new areas. Top-line growth, he reasoned, would have to be the driver of bottom-line returns—despite the generally poor outlook for growth in the world economy. In identifying opportunities for profitable organic growth, Immelt identified four global trends he believed would offer business opportunities for GE: ●● ●● ●● ●● Demography: The aging of the world’s population would create opportunities for goods and services required by older people, in particular healthcare services. Population growth in the developing world would also offer expanding demand for many of GE’s other businesses, including entertainment. Infrastructure: GE predicted massive investments in infrastructure. GE’s positioning in infrastructure products, services, and financing offered it opportunities in energy, aviation, rail transportation, water, and oil and gas production. Emerging markets: China, India, Eastern Europe, Russia, the Middle East, Africa, Latin America, and South-East Asia would offer rates of GDP growth around three times that of the world as a whole. These countries would be key centers of business opportunity for GE. Environment: The challenges of global warming, water scarcity, and conservation would become increasingly pressing, creating the need for technologies and innovatory responses to alleviate these problems. Reshaping GE’s Business Portfolio Growth, organic growth in particular, became the primary goal for Immelt’s strategy. In 2002, he committed GE to an organic growth rate of 8% per annum (under Welch organic growth had averaged 5% a year) and to “double digit” earnings growth. This 8% revenue growth was based upon the idea that GE should be able to grow at between two and three times that of world GDP. Profits would grow faster than revenues, explained Immelt, because of reductions in general and administrative expenses as a percentage of sales and higher margins resulting from new products and services. Between 2002 and 2007, GE comfortably met these targets: revenues grew at 13% each year; operating earnings, at 14%. However, during 2008–2009, revenues and profits contracted sharply and during 2010–2014 there was no growth in either. Case22JeffImmeltandtheNewGeneralElectric.indd 687 09/11/15 3:06 PM 688 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS To position GE for stronger growth, the company would need to exit slow-growth businesses, reallocate resources to businesses where growth prospects were strong, and enter new businesses. A key theme in Immelt’s reshaping of GE’s business portfolio toward higher growth was the creation of “growth platforms.” These could be extensions of existing businesses or entirely new areas of business. Identifying new growth platforms became a central strategic challenge for GE’s businesses. In several cases, GE’s growth platforms involved existing businesses where there was potential to greatly expand the company’s market presence. For example: ●● ●● ●● ●● Healthcare: GE was the world leader in diagnostic imaging: X-ray equipment, CT scanners, and MRI scanners. Under Immelt it became a major area of growth for GE, expanding its range of products and services and its geographical presence. Key acquisitions included: Amersham (a UK-based diagnostics and medical equipment company) and Abbott Diagnostics (the world’s leading provider of in vitro diagnostics). Energy: Power generation was GE’s oldest business; in addition it had developed a promising business supplying equipment to the oil and gas sector. Immelt viewed energy as a particularly attractive growth platform for GE. One major growth area was alternative energy where key acquisitions included Enron’s wind energy business, ChevronTexaco’s coal gasification business, and AstroPower, which supplied solar energy products. In conventional power generation, the Alstom acquisition made GE the undisputed world leader in turbines. In oil and gas, a series of acquisitions established GE as a key player in supplying oilfield equipment and services. Broadcasting and entertainment: During 2001–2007, GE expanded its entertainment activities beyond its NBC broadcasting and cable TV businesses. Key acquisitions were Telemundo, which took GE into the fast-growing market for Spanish-language broadcasting, and Vivendi Universal’s entertainment business, which took GE into film studios and theme parks. However, by 2009, it was increasingly evident that NBC Universal did not fit with Immelt’s identification of GE as a technology-based industrial company. As a result, NBC Universal was merged with Comcast’s cable TV channels, with the new company 49% owned by GE and 51% by Comcast. In 2013, Comcast bought out GE’s remaining 49% stake. Technology infrastructure: Infrastructure provided a valuable umbrella for a number of Immelt’s growth initiatives. In 2003, he announced: “We are taking the company to a place where few can follow: big, fundamental, high technology infrastructure industries in which GE can have enormous competitive advantage.”14 In addition to GE’s core electrical generation business, with the acquisition of Alstom GE developed new growth platforms such as: security systems; water treatment; and aerospace, where GE built upon its strong position in jet engines to diversify into avionics (Smiths Aerospace was a major acquisition). Divestments focused on areas either where growth and profit prospects were poor—such as domestic appliances—or that did not fit with GE’s capabilities or its management model—such as NBC Universal. GE also exited other businesses, most notably plastics, where it believed high petroleum prices would limit growth opportunities and where it lacked the critical mass of the major petrochemical companies. Case22JeffImmeltandtheNewGeneralElectric.indd 688 09/11/15 3:06 PM Case 22 Jeff Immelt and the New General Electric   689 However, by far its greatest divestment challenge was its financial services business, GE Capital. Despite Immelt’s emphasis on GE as a technology-based industrial company and his commitment to shrinking GE Capital, GE Capital continued to grow during 2001–2007 as a result of organic growth and acquisitions in equipment leasing, commercial finance, credit cards, and consumer finance that were only partly offset by the sale of GE’s insurance businesses in 2004 and 2005. In 2006 and 2007, GE Capital accounted for almost half of GE’s total net profit (up from 25% in 2001). With the financial crisis Immelt came under urgent pressure to shrink GE Capital’s assets (i.e., reducing its loan exposure), increase its liquidity, improve its risk profile, and redefine its role within GE. Increasingly, GE Capital was reconceived as a supplier of specialist financial services with a particular emphasis on “mid-market lending and leasing, financing in GE domains and a few other specialty finance segments.”15 In 2013, US financial regulators designated GE Capital as a “systemically important financial institution.” The requirement that GE Capital would have to hold higher capital reserves effectively eliminated the competitive advantage of GE Capital as a non-bank supplier of financial services and, combined with the generally poor outlook for the financial services industry in the US, encouraged the decision to break up and dispose of most of GE Capital.16 The GE Capital businesses that would be retained comprised “vertical financial businesses”—those that were closely linked to GE’s core industrial businesses such as GE Capital Aviation services, Energy Financial Services, and Healthcare Equipment Finance. Table 3 lists GE’s principal acquisitions and disposals during Immelt’s tenure. Building GE’s Competitive Advantage A major theme of all Immelt’s speeches and strategy presentations as chairman and CEO was his emphasis of the competitive advantages that GE shared across its different businesses. Immelt placed a particular emphasis on three sources of competitive advantage: technology and innovation, customer focus and integrated solutions, and global presence. Technology and Innovation Immelt identified technology as a major driver of GE’s future growth, emphasizing the need to turn the corporate R & D center into an intellectual hothouse and to speed the internal diffusion of new technologies. His commitment to technology was signaled by expanding GE’s R & D budgets. This began with a $100 million upgrade to GE’s corporate R & D center in Niskayuna, New York and the construction of new Global Research Centers in Shanghai, Munich, and Rio de Janeiro. By 2015, GE claimed to have about 37,000 technologists working in R & D within its businesses and its eight global research centers in the US, Germany, China, Brazil, Israel, and India. Under Immelt, GE focused its research upon fewer, bigger, longer-term programs. This emphasis was reflected in GE’s Advanced Technology Programs in molecular imaging and diagnostics, nanotechnology, energy conversion, advanced propulsion, and sustainable energy. Case22JeffImmeltandtheNewGeneralElectric.indd 689 09/11/15 3:06 PM 690 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS TABLE 3 General Electric’s principal acquisitions and disposals, 2001–2015 Year Acquisitions 2001 2003 NBC acquires Telemundo, a Spanish language TV network GE Healthcare acquires Instrumentarium GE Capital acquires Transamerica Finance from AEGON NBC acquires the entertainment assets of Vivendi Universal, to form NBC Universal (80% owned by GE) GE Healthcare acquires Amersham PLC for $9.5bn GE Capital acquires Dillard’s credit card unit for $1.25bn GE Security acquires InVision Technologies, a leading manufacturer of airport security equipment GE Commercial Finance acquires the financial assets of Bombardier, for $1.4bn GE Healthcare acquires IDX Systems, a medical software firm, for $1.2bn GE Water & Process Technologies acquires Zenon Environmental Systems for $758mn GE Aviation acquires Smiths Aerospace for $4.6bn GE Oil & Gas acquires VetcoGray for $1.4bn NBC Universal acquires Oxygen Media (cable TV channel) GE Co. acquires Vital Signs Inc. for $860mn GE Energy Infrastructure acquires Hydril Pressure Control (oilfield equipment) GE Capital acquires Merrill Lynch Capital, CitiCapital, and Bank BPH GE increases its ownership of BAC to 75% GE Healthcare acquires Clarient, Inc. GE Energy Infrastructure acquires Converteam, Dresser, Inc., the Well Support division of John Wood Group PLC, Wellstream PLC, and Lineage Power Holdings, Inc. GE Capital acquires $7bn bank deposits from Metlife Acquires oilfield pump maker, Lufkin Industries, for $3bn 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Acquires power and grid business of French engineer Alstom for $17bn 2015 Disposals Sells 60% of GE Capital International Services (GECIS) for $500mn GE’s life and mortgage insurance businesses spun off as Genworth Financial GE Advanced Materials division is sold to Apollo Management for $3.8bn Sale of GE Insurance Solutions and GE Life to Swiss Re for $6.5bn GE Plastics is sold to Saudi Arabia Basic Industries Corp. for $11.7bn GE Capital sells Regency Energy Partners LP Sells 51% of NBC Universal to Comcast for about $19bn GE Capital sells Mexican assets to Santander Sells remaining 49% of NBC Universal to Comcast for $16.7bn Spinoff of retail finance business, Synchrony Financial Sale of appliances business to Electrolux for $3.3bn GE Capital Real Estate sold to Wells Fargo and Blackstone for $26.5 billion Announces sale of majority of GE Capital Sources: General Electric annual reports and press releases. Immelt was particularly interested in identifying and supporting projects that offered large-scale market potential. “Imagination Breakthroughs” were promising projects with the potential to create $100 million in sales over a three-year period. By mid-2006, some 100 Imagination Breakthroughs had been identified and individually approved by Immelt. Imagination Breakthroughs included: ●● evolution hybrid locomotive: an energy-saving locomotive that would use energy lost in braking to be stored in batteries; Case22JeffImmeltandtheNewGeneralElectric.indd 690 09/11/15 3:06 PM Case 22 ●● ●● Jeff Immelt and the New General Electric   691 Smart Grid: a marriage of IT with electrical infrastructure to support 21st-century energy needs; sodium batteries: a novel, patented battery technology for large-scale electricity storage. GE’s “Ecomagination” was a program of product and business development launched in 2005 as “GE’s commitment to address challenges such as the need for cleaner, more efficient sources of energy, reduced emissions, and abundant sources of clean water.”17 The Ecomagination program provided funding and coordination for developing environmentally friendly products and business solutions across GE’s different business divisions. In 2011, it was credited with generating $21 billion of clean energy revenue. During 2013–2015, GE further reconceptualized its technological focus and its approach to innovation. It described its R & D focus as “breakthrough innovations in areas such as molecular imaging and diagnostics, energy conversion, nanotechnology, advanced propulsion and security technologies.”18 One of the most important areas of opportunity for all GE’s industrial business lay at the “interface of the physical and digital worlds” through “combining data and physics.” Since 2013, GE had used the term “industrial internet” to refer to the linkage between big data analytics and the “internet of things.” This created opportunities for all GE’s businesses by using embedded sensors on its jet engines, locomotives, oil and gas equipment, healthcare equipment, electricity generators, and so on to link with software that managed maintenance schedules, fuel optimization, accident prevention, factory automation, and enterprise management. For example, a GE Evolution locomotive contained 6.7 miles of wiring and 250 sensors that put out nine million data points hourly that provided input for software tools such as Trip Optimizer (real-time guidance to train drivers on fuel economy), Remote Diagnostics (predicting equipment failures and scheduling maintenance), Yard Planner (to speed the breakup, sorting, and reformation of trains), and Movement Planner (to optimize the movement of trains on individual tracks and rail networks). Customer Focus and Integrated Solutions Throughout his career at GE, Immelt had emphasized customer orientation, the value of spending time with customers, building relationships with them, and working on their problems. Soon after taking over as CEO, Immelt emphasized the primacy of customer focus: We’re dramatically changing our resource base from providing support to creating value. Every business has functions that add high value by driving growth. These are the functions that deal with the customer, create new products, sell, manufacture, manage the money and drive controllership. Call that the front room. Every business has backroom support functions that sometimes are so large and bureaucratic they create a drain on the system and keep us from meeting our customers’ needs and keep us from growing. So we’re going to take more of the back-room resources and put them in the front room—more sales people, more engineers, more product designers. We’re changing the shape of this company and we’re doing it during a recession.”19 Case22JeffImmeltandtheNewGeneralElectric.indd 691 09/11/15 3:06 PM 692 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS The increased customer focus involved increased investment in GE’s marketing function, including hiring talented marketing executives and developing processes for identifying new product and service offerings and unmet customer needs. A major avenue for translating enhanced customer focus into value creation for GE was through bundling products with support services to offer customized “customer solutions.” Expanding the range of customer service offerings included technical services, financial services, training, and other forms of customer support. Creating customer solutions required coordination across GE’s businesses. For example, in the case of a new hospital development, there might be opportunities not just for medical equipment but also for lighting, turbines, and other GE businesses as well. To exploit new opportunities that cut across GE’s existing divisional structure, GE began to create cross-business, high-visibility marketing campaigns. Increasing GE’s capacity to serve customers better through providing integrated solutions was a key goal of the organizational changes introduced by Immelt (see below). Global Presence Immelt believed that some of the biggest payoffs from greater customer orientation would come from GE’s increased success in international markets. Positioning GE to compete in growing emerging markets was a central strategic priority for GE. In 2011, Immelt appointed vice chairman John Rice to lead GE’s international growth efforts, with particular emphasis on high-growth markets such as China, India, the Middle East, and Brazil. Maximizing GE’s potential in these markets required a coordinated approach across GE’s businesses: A great example is our spectacular success with the Beijing 2008 Olympic Games. This event produced $2 billion of revenues across multiple GE platforms, while building our relationships in China. In 2008, we announced a multifaceted partnership with Mubadala, the commercial investing arm of Abu Dhabi, which includes a commercial finance joint venture, projects in renewable energy, and a training center in Abu Dhabi. Mubadala will also become a “Top 10” GE investor.20 This integrated approach to working directly with government to meet host country needs across a range of infrastructure investments was formalized in 2009 as GE’s “Company-to-Country” strategy. While China, India, and Brazil were the initial top targets, in 2012, GE announced that “Nigeria should be our next billion-dollar country.”21 Internationalization involved a fundamental rethink of GE’s approach to product development and an overhaul of its products and services to meet local market needs. GE’s traditional approach had been to develop products for the US market, then to offer simpler, less costly “de-featured” versions to emerging markets. Combining GE’s international emphasis with its increasing customer focus reoriented GE toward a “customer-optimization” approach to product development where local teams were given greater freedom in adapting and innovating products for their own markets. The outcome was “reverse innovation”: many of the product concepts developed to meet the needs of emerging-market customers could be subsequently applied to GE’s clients of the advanced industrialized nations. For Case22JeffImmeltandtheNewGeneralElectric.indd 692 09/11/15 3:06 PM Case 22 Jeff Immelt and the New General Electric   693 example, a low-cost, portable, battery-operated ultrasound machine designed to meet the needs of physicians in India and China became a commercial success in the US.22 Exploiting global opportunities also involved globalizing GE’s organization and its talent base. For example, the headquarters of GE Healthcare was moved to the UK, while in 2011 it announced the transfer of its X-ray business from Wisconsin to Beijing, China. Workforce internationalization extended to core corporate functions: a large proportion of GE’s audit staff was from India. Changing the GE Management Model The management system that Immelt inherited had been reformulated by his predecessor and mentor, Jack Welch, but was also a product of 120 years of continuous development. Immelt respected GE’s management systems and processes, and recognized that many of them were so deeply embedded within GE’s culture that they were integral to GE’s identity and the way it viewed the world. At the core of GE’s management system was its management development—its so-called talent machine—and its system of performance management. Leadership Development and Performance Management From the early days, GE was committed to internally developed leadership: all of its CEOs were promoted from within the company. GE’s meritocratic system of development and promotion was put in place by Charles Coffin, the CEO who succeeded Edison in 1892. Since then, GE had been a “CEO factory,” producing top management talent not only for GE but also for corporations worldwide. Its management development system rested on two key pillars: its corporate university at Crotonville, New York and its “Session C” system for tracking managers’ performance, planning their careers, and formulating succession plans for every management position at GE from department heads upwards. Under Welch the Session C reviews became allday events at each of GE’s businesses where Welch and the division CEO reviewed the performance and potential of every manager. GE’s management appraisal and development processes together with its financial and strategic planning systems formed the core of GE’s performance management system. Under Jack Welch, GE’s system of performance management became increasingly based upon quantitative targets that allowed focus and accountability. Immelt was equally committed to GE’s metrics-driven approach to performance management: “Nothing happens in this company without an output metric,” observed Immelt. All of Immelt’s strategic initiatives—from earnings and organic growth targets to productivity improvements, reductions in overhead costs and six-sigma quality— were linked to precise quantitative targets. In 2005, GE standardized its customer satisfaction metrics, focusing on “net promoter scores” (the percentage of customers who would recommend GE to a friend, minus the percentage who wouldn’t). Immelt’s strategic initiatives represented a challenge to GE’s metrics-based performance management system. Goals such as innovation, enterprise selling, and environmental sustainability tended to be less amenable to quantification and objective measurement than goals of cost efficiency, productivity, and profitability. Case22JeffImmeltandtheNewGeneralElectric.indd 693 09/11/15 3:06 PM 694 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS The shifting of strategic priorities also had implications for GE’s management development system. As with Jack Welch, Immelt saw his most important task as helping to develop GE’s managerial talent. Implementing GE’s growth strategy required GE’s employees to internalize growth as part of their personal mission. This required inculcating among GE’s managers the skills and aptitudes needed to become “growth leaders.” A benchmarking exercise investigating the management characteristics of 15 companies with outstanding records of revenue growth resulted in the identification of five “growth traits.” These included: external focus, imagination and creativity, decisiveness and clear thinking ability, inclusiveness, and deep “domain expertise” (knowledge of the particular business). These growth traits became part of GE’s annual HR review, with each of GE’s top 5000 people rated on each of the five traits and the results of the assessment built into their subsequent development plans. Career planning also changed: because of the importance of domain expertise, managers were required to stay longer in each job. Changing Organizational Structure The most visible of the management changes introduced by Immelt concerned the overall structure of the organization. Between 2002 and 2008, Immelt reversed several of the major structural changes Welch had introduced during the 1980s. As part of “delayering” and his effort to create a more responsive company, Welch had broken up GE’s major industrial sectors into smaller divisions. In order to facilitate greater cross-business integration, the bundling of products and services into “systems,” and the creation of new “growth platforms,” Immelt progressively reorganized GE’s divisions into a smaller number of broad-based sectors. Reorganizations in 2002, 2005, and 2008 reduced the number of business sectors reporting to Immelt from 12 to five; before further reorganizations in 2010 and 2012 increased them to nine (Figure 3). Innovation and New Business Development A key challenge for Immelt was to reconcile GE’s famous obsession with profitability and cost control with nurturing the innovation needed to drive growth. Innovation, especially when it involved big, long-term projects, involved substantial risk. The danger was that GE’s obsession with short- and medium-term performance metrics might discourage business unit heads from making big bets on promising new opportunities. Furthermore, given the fact that many of the biggest opportunities were likely to require cooperation across divisions further increased the likelihood that they would fail to get the support they needed. The Imagination Breakthroughs initiative (referred to above) was designed to ensure that major innovatory projects would receive the investment and attention needed to exploit their potential. To ensure the rapid development of promising projects, funding decisions were placed not with the business sectors but with Immelt and the top management team. Once approved, these projects were protected from normal budget pressures. About half involved new products and the other half involved changing commercial structure. Immelt saw these Innovation Case22JeffImmeltandtheNewGeneralElectric.indd 694 09/11/15 3:06 PM Case 22 Figure 3 Jeff Immelt and the New General Electric   695 General Electric’s organization structure, 2001 and 2015 Corporate Executive Office Chairman and CEO Corporate Staff Finance Business R & D Human Legal Development Resources GE Transportation GE Aircraft Engines GE Power Systems GE Industrial Systems GE Medical Systems GE Plastics GE Lighting GE Appliances GE Specialty Materials GE Supply GE Capital NBC 26 businesses organized into five segments: Consumer Mid-market Specialized Specialized Equipment Services Financing Financing insurance Management September 2001 Corporate Executive Office Chairman and CEO Corporate Staff Finance Global Human Legal Commercial, Research Resources Public Relations Global Growth and Operations GE Capital Energy Management Healthcare Appliances & Lighting Aviation Oil & Gas Power & Water Transportation March 2015 Breakthroughs as a means of focusing attention on the goal of business creation and development. Given that some of these projects (GE’s hybrid locomotive, for example) involved substantial expenditures, lifting these projects from the business level to the corporate level took pressure off the business heads and helped address the lack of product managers and systems engineers within GE’s business to run high-visibility, high-risk programs. Case22JeffImmeltandtheNewGeneralElectric.indd 695 17/11/15 1:25 PM 696 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS Achieving closer integration of technology development within GE was a major goal of Immelt. This was necessary not only to increase technology transfer across businesses and from corporate R & D to the businesses but also because more and more technologies were common to all GE’s businesses (especially digital technologies). Rebranding GE Global Research as “The GE Store for Technology” was intended to enhance the responsiveness of GE’s corporate R & D centers to the needs of all the businesses and speed the embodiment of innovation within products. According to Immelt, “It means that every business in GE can share and access the same technology, markets, structure and intellect … it makes the totality of GE more competitive than the parts. No other company has the ability to transfer intellect and technology as GE can through the Store”:23 The GE Store is a place where every business can come for technologies, product development and services that no one else can provide. The work of our researchers ties directly into the operational plans and product roadmaps of our businesses. GE business leaders meet with our technical leaders once every quarter to review their portfolios.24 Marketing and Sales Realizing Immelt’s goal of a customer-driven company required a revitalization of GE’s marketing function: “Marketing was the place where washed-up salespeople went,” observed Immelt.25 Upgrading GE’s marketing was achieved through creating the new senior position of chief marketing officer, the recreation of GE’s Advanced Marketing Seminar, developing an Experienced Commercial Leadership Program, and requiring that every business appoint a VP-level head of marketing. Most important was the creation of GE’s Commercial Council, which brought together GE’s leading sales and marketing leaders to develop new business ideas, to transfer best practices, and instill a commercial culture within GE. A key initiative was “At the Customer, For the Customer,” a program that deployed six sigma in marketing, sales, and customer relations activities, applied GE’s six-sigma methodologies to customers’ own businesses, and used new metrics to track customer satisfaction and customer attitudes. As with all aspects of GE’s approach to management, marketing was subject to the same systematized, metrics-driven analysis as all other functions were within the firm, often with some startling revelations: We’re getting the sales force better trained and equipped with better tools and metrics. A good example is what we’re doing to create discipline around pricing. Not long ago, a guy here named Dave McCalpin did an analysis of our pricing in appliances and found out that about $5 billion of it is discretionary. Given all the decisions that sales reps can make on their own, that’s how much is in play. It was the most astounding number I’d ever heard—and that’s just in appliances. Extrapolating across our businesses, there may be $50 billion that few people are tracking or accountable for. We would never allow something like that on the cost side. When it comes to the prices we pay, we study them, we map them, we work them. But with the prices we charge, we’re too sloppy.26 Case22JeffImmeltandtheNewGeneralElectric.indd 696 09/11/15 3:06 PM Case 22 Jeff Immelt and the New General Electric   697 Managing Integration A central theme of the strategic changes initiated by Immelt was the desire to create value through the many parts of GE working together more closely and more effectively. “Working at GE is the art of thinking and playing big; our managers have to work cross-function, cross-region, cross-company. And we have to be about big purposes,” observed Immelt.27 Implementing Immelt’s strategic vision of GE as a technology-based, customerfocused, growth-orientated industrial powerhouse involved changes in GE’s organizational structure, its management development and appraisal system, and its marketing and technology functions, and a host of other changes designed to align GE’s structure, systems, and processes with the intended strategy. By 2006, these various initiatives had coalesced in Immelt’s mind around an integrated system that he referred to as the “GE Growth Process.” The approach—establishing a process, setting metrics for measuring the performance of that process, then aligning incentives with those metrics—was quintessentially GE. The difference was that Immelt was designing a process that related to the operation of GE as a whole. During 2006, Immelt’s view of GE’s growth engine as an integrated, six-part process was disseminated throughout the organization and became a key part of Immelt’s communication to GE’s external constituencies (Figure 4). However, greater integration across GE’s different businesses created complex coordination problems. Consider GE’s initiatives relating to product bundling and Figure 4 General Electric’s six-part growth process • Growth traits Growth Leaders Inspire and develop people who know how to help customers and GE grow Customer Value Use our process excellence to create customer value and drive growth • Lean Six Sigma • Net Promotor Score Innovation Generate new ideas and develop capabilities to make them a reality • Imagination Breakthroughs • Emerging Markets Execute for Growth • CECOR Framework Globalization Create opportunities everywhere and expand in developing markets • One GE: Enterprise Selling Commercial Excellence Create world-class marketing and sales capability to drive “One GE” in the marketplace Leadership in Technology Have the best products, content and services • New Product Introduction • Ecoimagination Source: General Electric, annual report, 2005, p. 8. Case22JeffImmeltandtheNewGeneralElectric.indd 697 09/11/15 3:06 PM 698 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS customer solutions through its “Enterprise Selling” and “Company-to-Country” initiatives. In principle, these strategies were intuitive and straightforward: If somebody’s building a hospital, that might represent a total package of $1 billion, of which the GE market potential might be $100 million. We’re probably already talking to the C-suite because we sell the medical equipment. What we need to do is set things up so that the medical rep can bring in the lighting rep, the turbine rep, and so on. Similarly with whole countries: In Qatar, the emir wants to know everybody doing business in his country. In a dinner set up to talk about oil and gas bids, he might say, “Jeff, I’m going to put $10 billion into a hospital,” or he might mention that they’re going to buy GE engines for Qatar Airways.28 However, the organizational ramifications were complex. Sales and marketing staff were required to focus less upon their particular business and more on the opportunities available to GE as a whole. In practice, this created complex problems of organization, expertise, and incentives. Exhibit 1 describes the difficulties encountered in the apparently simple bundling of medical diagnostic equipment with consulting services. EXHIBIT 1 General Electric Medical Systems Customer Solutions Initiative One of the earliest initiatives to exploit opportunities people had limited understanding of the consulting for bundling products and services was to combine the services being offered by the Performance Solutions sale of medical imaging equipment with consulting ser- unit and provided few sales leads for the new inte- vices. In 2001, GE Medical Systems (soon to become GE grated offering. They were also reluctant to share their Healthcare) created a new unit, Performance Solutions, customers with sales personnel from Performance to provide an integrated approach to hospital diagnos- Solutions. Meanwhile, the sales personnel from tic imaging departments by combining equipment Performance Solutions considered themselves “solu- with technical support and patient-management sys- tion providers” and felt constrained by having to limit tems. A lead customer was Stanford University Medical their solutions exclusively to GE offerings. Center, which transitioned to all-digital imaging for its hospital and outpatient unit. After a promising start, by 2005 Performance Source: Based upon R. Gulati, “Silo Busting: How to Execute on the Promise of Customer Focus,” Harvard Business Review (May 2007). Solutions was in trouble. The medical equipment sales Case22JeffImmeltandtheNewGeneralElectric.indd 698 09/11/15 3:06 PM Case 22 Jeff Immelt and the New General Electric   699 Immelt reflected on the organizational challenges of a customer-centric collaboration across different businesses: I’ve found that few companies are actually structured to deliver products and services in a synchronized way that’s attractive from a customer’s perspective. Individual units are historically focused on perfecting their products and processes, and give little thought to how their offerings might be even more valuable to the end user when paired with those of another unit. It’s not just that the status quo doesn’t reward collaborative behavior—although the right incentives are also critical. It’s that the connections literally aren’t in place. One way to forge those connections is to do away with traditional silos altogether and create new ones organized by customer segments or needs. Many companies, however, are understandably reluctant to let go of the economies of scale and depth of knowledge and expertise associated with non-customer-focused silos. A company organized around geographies can customize offerings to suit local preferences, for instance, while a technology-centric firm can be quick to market with technical innovations. In many cases, functional and geographic silos were created precisely to help companies coordinate such activities as designing innovative products or gaining geographic focus. A customer focus requires them to emphasize a different set of activities and coordinate them in a different way.29 GE Global Growth and Operations—one of GE’s nine business divisions—was created to provide integration and focus across GE’s eight other business divisions in developing GE’s sales to customers in markets outside the US. Headquartered in Hong Kong, GE Global Growth and Operations was organized with separate units for China, India, South-East Asia, Latin/South America, Russia, Canada, Australia, the Middle East, Africa, Germany, Europe, and Japan/Korea. As headquarters became increasingly involved in promoting and supporting developmental initiatives (e.g., Imagination Breakthroughs and Enterprise Selling), so the corporate HQ became more of a partner with the business divisions rather than an overseer of divisional performance and interrogator of business strategies. Looking Ahead Driving innovation and customer orientation within GE required a level of collaboration across divisional boundaries that was not always compatible with its metricsbased system of performance management and culture of internal competition. A more integrated GE changed the relationship between GE’s corporate headquarters and the businesses. Under Welch, there was a clear division of roles and responsibilities between the business divisions and that of the corporate HQ. The business divisions with their individual CEOs were responsible for running their own businesses both operationally and strategically. The role of the corporate headquarters was both to support the businesses through various centralized services and to drive business performance by putting divisional top management under intense pressure to deliver. Immelt’s emphasis on creating value through exploiting the linkages among GE’s different business had meant that much of the simplicity and directness Case22JeffImmeltandtheNewGeneralElectric.indd 699 09/11/15 3:06 PM 700 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS associated with Jack Welch’s management style had been supplanted by an emphasis on managing integration. Could a system that had been built upon management through performance metrics accommodate Immelt’s growing number of initiatives intended to foster integrated approaches to innovation and customer service? Most US companies that had achieved outstanding performance by combining innovation, efficiency, and customer focus in fast-moving business environments— companies such as IBM, Apple, Nike, and Johnson & Johnson—were far more specialized than GE. Certainly the great majority of companies on Fortune’s list of “most admired companies” were strongly based on a single core business. Highly successful companies that were both highly diversified and multinational were unusual. Given GE’s comparatively weak performance during the five-year period 2010– 2015, the management system that Immelt had built at GE remained unproven. As Immelt reminded his top managers even before the upheaval caused by the financial crisis: “The business book that can help you hasn’t been written yet.”30 Appendix: General Electric Segment Performance (from 10-K reports) TABLE A1 Revenues ($billion) Power & Water Oil & Gas Energy Management Aviation Healthcare Transportation Appliances & Lighting Total industrial GE Capital Total Consolidated TABLE A2 2014 2013 2012 2011 2010 27.6 18.7 7.3 24.0 18.3 5.7 8.4 109.9 42.7 152.6 148.6 24.7 17.0 7.6 21.9 18.2 5.9 8.4 103.6 44.1 147.7 146.0 28.3 15.2 7.4 20.0 18.3 5.8 8.0 102.8 45.4 148.2 146.7 25.7 13.6 6.4 18.9 18.1 4.9 7.7 95.2 48.3 143.5 146.5 24.8 9.4 5.2 17.6 16.9 3.4 8.0 85.2 49.2 134.4 148.9 2014 2013 2012 2011 2010 5.35 2.59 0.25 4.97 3.05 1.13 0.43 17.76 7.02 24.78 15.23 4.99 2.18 0.11 4.35 3.05 1.17 0.38 16.22 7.96 24.18 13.06 5.42 1.92 0.13 3.75 2.92 3.07 0.31 15.49 7.22 22.71 13.64 5.02 1.66 0.08 3.51 2.80 0.76 0.24 14.07 6.48 20.55 14.15 5.80 1.41 0.16 3.30 2.74 0.32 0.40 14.13 3.08 17.21 11.64 Profit ($billion) Power & Water Oil & Gas Energy Management Aviation Healthcare Transportation Appliances & Lighting Total industrial GE Capital Total Consolidated after-tax earnings Case22JeffImmeltandtheNewGeneralElectric.indd 700 09/11/15 3:06 PM Case 22 TABLE A3 Jeff Immelt and the New General Electric   701 Assets and capital investment ($billion) Additions to property, plant and equipment Assets Power & Water Oil & Gas Energy Management Aviation Healthcare Transportation Appliances & Lighting GE Capital Total 2014 2013 2012 2014 2013 2012 30.34 27.26 10.98 33.72 29.23 4.45 4.46 500.22 648.35 29.49 26.19 10.31 32.27 27.86 4.31 4.31 516.83 646.56 27.14 20.11 9.59 25.15 28.37 4.20 4.20 539.35 685.00 0.62 0.65 0.18 1.20 0.41 0.13 0.36 10.41 13.84 0.71 1.19 0.14 1.18 0.32 0.28 0.41 9.98 14.39 0.66 0.47 0.16 0.78 0.32 0.72 0.49 11.88 15.38 Notes 1. Transcript, General Electric annual shareholder meeting (April 22, 2015). 2. “Letter to Stakeholders,” General Electric, annual report (2002): 3. 3. “Can a Specialist Run General Electric?” (March 7, 2012), http://blogs.ft.com/businessblog/2012/ can-a-specialist-run-general-electric/#axzz1tv41XKUt. 4. “When Is a Company Too Big to Manage?” Financial Times (February 28, 2015). 5. Letter to Shareholders, General Electric annual report (2001). 6. Letter to Shareholders, General Electric annual report (2003). 7. “What Makes GE Great?” Fortune (March 6, 2006): 90–96. 8. General Electric, annual report (1993): 5. 9. “Running the House that Jack Built,” Business Week (October 2, 2000). 10. “The Days of Welch and Roses,” Business Week (April 29, 2002). 11. General Electric, annual report (2002). 12. General Electric, 10-K report for 2014: 7. 13. Address to shareholders, Annual Shareowners’ Meeting, Philadelphia (April 26, 2006). 14. Letter to stakeholders,” General Electric, annual report (2002): 9. 15. “Letter to shareowners,” General Electric, annual report (2011): 5. 16. “GE to Cash Out of Banking Business,” Wall Street Journal (April 11, 2015). Case22JeffImmeltandtheNewGeneralElectric.indd 701 17. “GE Launches Ecomagination,” General Electric press release (May 9, 2005). 18. Global R&D Fact Sheet. http://www.ge.com/about-us/ research/factsheet, accessed July 20, 2015. 19. General Electric, 2002 Annual Report to Share Owners. 20. General Electric, Annual Report 2008: 6–7. 21. “Letter to Shareowners,” General Electric Annual Report, 2011: 6. 22. J. R. Immelt, V. Govindarajan, and C. Trimble, “How GE is Disrupting Itself,” Harvard Business Review (October 2009): 56–65. 23. GE Chairman and CEO Jeff Immelt’s Annual Letter to GE Shareholders: 2014. http://www.gereports.com/ post/113784948030/ge-chairman-and-ceo-jeff-immeltsannual-letter-to, accessed July 20, 2015. 24. “The GE Store for Technology,” http://www.genewsroom. com/press-releases/ge-store-technology-279623, accessed July 20, 2015. 25. Reprinted by permission of Harvard Business Review. From “Growth as a Process: An Interview with Jeff Immelt,” ( June 2006): 63. Copyright © 2006 by the Harvard Business School Publishing Corporation; all rights reserved. 26. Ibid.: 64. 27. Ibid.: 69. 28. Ibid.: 64. 29. Ibid.: 67. 30. Ibid.: 61. 09/11/15 3:06 PM Guidance for Module Tutors and Students with Additional Needs and Disabilities In-class, time-constrained tests/assessments (TCAs/TCTs) In-class time-constrained tests are organised by the module tutor and take place during timetabled lectures at a venue and time organised by the module tutor. It is the module tutor’s responsibility to book the room and arrange appropriate invigilation. These tests are not timetabled by the Examinations Office. TCAs/TCTs for students with additional needs and disabilities • All students with additional needs must have an appointment with ASSIST/Mental Health team at the beginning of their studies (or at the point of diagnosis) for appropriate arrangements and adjustments to be put in place for examinations and in-class tests. • At this appointment an Academic Inclusion Report (AIR) will be completed and a copy will be given to the student, the course team and the Examinations Office. The module tutor’s responsibilities for TCAs/TCTs are to: • support the main venue in-class test, book the room, provide the test papers and provide appropriate invigilation • provide the Examinations Office with the date, time, duration, format and online details for all TCAs/TCTs at the start of the academic year • provide the Examinations Office with an electronic copy of the test paper • check the student’s Academic Inclusion Report (AIR) for their test adjustment recommendations • provide all necessary arrangements for student’s requiring extra time and discounted breaks; this includes booking a suitable room, arranging for a member of the course team to invigilate the test, adding extra time to online tests, etc. Types of student adjustments Extra time and/or discounted breaks • Students must contact the module tutor if they require extra time and/or discounted breaks and provide a copy of their AIR if requested. It is the module tutor’s responsibility to make all necessary arrangements for extra time and discounted breaks (this includes booking a suitable room, arranging for a member of the course team to invigilate the test, adding extra time to an online test, etc). Use of a computer (for paper-based multiple choice tests) • For paper-based multiple choice tests, students do not usually need the use of a computer and must therefore contact the module tutor to provide any extra time and/or discounted breaks if applicable. • The exception to this is students with severe dexterity problems or those who are visually impaired. In these situations, the computer, examination room and invigilator will be organised by the Examinations Office. Use of a computer (for short answer / essay style tests), specialist software, an amanuensis (scribe), a reader or an individual room • For students requiring the use of a computer (for short answer / essay style tests), specialist software, an amanuensis (scribe), a reader or an individual room, it is the Examinations Office’s responsibility to make all necessary arrangements (examination room and invigilator). • The Examinations Office will notify the student by email of the test details. Online TCAs/TCTs Online TCAs/TCTs that take place in-class (on Campus) • It is the module tutor’s responsibility to make all necessary arrangements for students requiring extra time and/or discounted breaks. • It is the Examinations Office’s responsibility to make all necessary arrangements for students requiring an amanuensis (scribe), reader or an individual room. Online TCAs/TCTs that take place ‘anywhere’ within date / time parameters • It is the module tutor’s responsibility to make all necessary arrangements to the online test for students requiring extra time / discounted breaks. • If required by the student, the Examinations Office will make arrangements on Campus for students requiring an amanuensis (scribe) or reader. Formal Examinations It is the Examinations Office’s responsibility to make all necessary arrangements for students with additional needs for formal examinations. Help and advice If you require any further information or advice, please contact: Assessment, Ceremonies and Examinations (ACE) H23 Holdenby Building, Park Campus 01604 892476 / 892722 / 892768 exams@northampton.ac.uk Support for Students with Additional Needs In-Class Test Paper-based MCQ Short answer/essay In-Class Test In-Class Test (ALL) Online Online Use of a PC Reader/scribe / Individual Room Extra time / discounted breaks / Use of a PC Reader/scribe / Individual Room Module Tutor The use of a PC is NOT required for paper-based MCQs ACE ACE Module Tutor ACE Provide ACE with draft exam paper for formatting Provide an alternative room and invigilation. It is not acceptable for students with additional needs to take the test in the main room Provide an alternative room and invigilation if the student also requires extra time / discounted breaks Provide ACE with date, time, duration and format of the test and a copy of the test paper Provide ACE with date, time, duration and format of the test and a copy of the test paper Student’s Responsibilities None Notify your tutor that you require adjustments ACE (Assessment, Ceremonies and Exams) Responsibilities Email students a personal timetable detailing the date, time and venue of the exam Adjustment Needed Who is responsible? Tutor’s Responsibilities , In-Class Test In-Class Test Type of Assessment Formal Examination In-class Test (ALL) All Adjustments Extra time / discounted breaks Use of a PC ACE None None None None None Email students a personal timetable detailing the date, time and venue of the test Email students a personal timetable detailing the date, time and venue of the test Provide an alternative room and invigilation. It is not acceptable for students with additional needs to take the test in the main room Provide ACE with date, time, duration and format of the test and a copy of the test paper Notify your tutor that you require adjustments None None Email students a personal timetable detailing the date, time and venue of the test Students with Additional Needs Formal Exams In-Class Tests Online In-Class Time Constrained Tests (TCAs / TCTs) Time Constrained Tests Extra time Short answer / essay style Reader, scribe and/or individual room Extra time and/or discounted breaks Reader, scribe and/or individual room Arranged by ACE Arranged by ACE Arranged by ACE A timetable is sent to the student by ACE with details of the date, time and venue for the test A timetable is sent to the student by ACE with details of the date, time and venue for the test Arranged by Module Tutor Use of Computer and/or Arranged by ACE Assessments Ceremonies and Examinations A timetable is emailed to the student by ACE with details of the date, time and venue for the exam discounted breaks Arranged by Module Tutor Student to contact Module Tutor Module Tutor to arrange a suitable location and invigilator Paper-based multiple choice The use of a computer is NOT required for paperbased MCQs Students to contact the Module Tutor if they require extra time and/or discounted breaks Student to contact Module Tutor Module Tutor to arrange suitable location and invigilator A timetable is emailed to the student by ACE with details of the date, time and venue for the test THE UNIVERSITY OF NORTHAMPTON NORTHAMPTON BUSINESS SCHOOL MODULE: COMPETITIVE STRATEGY & INOVATION Module Code STRM043 Level 7 Credit Value 20 Assignment Brief Assignment title: Weighting: Deadline: GE Case Study 50% 19/08/2017 Feedback and Grades due: 15/09/2017 Resit Date TBC 2016-2017 Module Tutor Nehmat Ayyash Purpose of the Assessment The purpose of this assignment is to: a) test the student’s knowledge of the core concepts, models and frameworks taught in the module and relevant to the strategy process b) allow the student to apply their learning in the module to date in a case study analysis and to present their findings in a high level report format Assessment Task 1. In what ways has Jeff Immelt redirected the strategy of GE? (25%) 2. To what extent is the strategy aligned with a. The requirements of the 21st century business environment? b. GE’s resources & capabilities? (30%) 3. What organisational changes has the new strategy necessitated? Will GE be able to successfully execute the new strategy? (20%) 4. What alternative strategies should GE consider? (25%) Target word count 3,000 + or – 10% (excluding appendices) The case will be made available on NILE Assessment Breakdown The percentages above indicate the weighting given to each section. Assessment Submission To submit your work, please go to the ‘Submit your work’ area of the Module NILE site. It is important that you submit your work to the correct module NILE site, and that your work is submitted on time. Assessment Guidance You will be expected to read the case several times to make sure you understand the context, grasp the detail and then review the key elements using the core strategy models to go through the strategy process, drawing on evidence from the case to support and justify your views. You should carry out further research on GE, however you must only use material drawn from credible sources such as: academic articles and texts; quality newspaper and business periodicals, e.g., the FT, The Economist and the official GE website. You should not use unreliable sources such as non-reviewed websites, e.g., Wikipedia. Academic Practice This is an individual assignment. The University of Northampton policy will apply in all cases of copying, plagiarism or any other methods by which students have obtained (or attempted to obtain) an unfair advantage. Support and guidance on assessments and academic integrity can be found from the following resources • SkillsHub: http://skillshub.northampton.ac.uk • CfAP: http://skillshub.northampton.ac.uk/centre-for-achievement-andperformance-cfap/ Learning outcomes The learning outcomes being addressed through this assignment are: Knowledge and Understanding a) Identify, critically appraise and select strategies for organisations operating within domestic and international contexts. b) Critically evaluate strategies linked to responding to external environments (fit strategies) and contrast them to strategies linked to core competencies (stretch strategies). c) Recognise, consider and address macro-economic trends in a changing world and their impact on business whilst evaluating competitive, organisational and ethical values. Subject Specific Skills d) Be able to apply the concepts of strategic planning to current organisations and conduct an environmental and competitor analysis of a given organisation or industry, including within an international or global marketplace. e) Develop appropriate policies and strategies within a changing environment for a variety of organisations, to meet stakeholder interests. Key Skills f) Develop and demonstrate key communication and time management skills. h) Demonstrate critical thinking and creativity: engage the creative processes in self and others; organise thoughts, analyse, synthesise and critically appraise alternative strategies and choices. STRM043 COMPETITIVE STRATEGY & INNOVATION Module leader: Adrian Pryce Email: adrian.pryce@northampton.ac.uk Successful organisations need to be flexible and adaptable to rapidly changing circumstances. For managers, this means being able to reconcile a diversity of strategic issues, no matter what their professional background. All managers need the capability to develop and interpret strategies for their organisations, both at corporate and business levels, in order to seek competitive advantage in a fast-changing world where innovation and adaptability are key strategic weapons. OVERALL AIMS FOR THE MODULE • The module helps students develop a broad knowledge and understanding of strategy development in organisations, the external context in which they operate and how they are managed for strategic goals. • They will be able to understand, respond to and lead change and be able to develop intellectual and professional breadth by making integrative links across the various functional areas of organisations whilst taking into account the social, environmental and ethical elements required of leaders today. LEARNING OUTCOMES On successful completion of the Module, participants will be able to: Knowledge and Understanding a) Identify, critically appraise and select strategies for organisations operating within domestic and international contexts b) Critically evaluate strategies linked to responding to external environments (fit strategies) and contrast them to strategies linked to core competencies (stretch strategies) c) Recognise, consider and address macro-economic trends in a changing world and their impact on business whilst evaluating competitive, organisational and ethical values. Subject Specific Skills d) Be able to apply the concepts of strategic planning to current organisations and conduct an environmental and competitor analysis of a given organisation or industry, including within an international or global marketplace e) Develop appropriate policies and strategies within a changing environment for a variety of organisations, to meet stakeholder interests. 2 Key Skills f) Develop and demonstrate key communication and time management skills g) Develop effective group-based capabilities both in terms of leadership and/or participation h) Demonstrate critical thinking and creativity: engage the creative processes in self and others; organise thoughts, analyse, synthesise and critically appraise alternative strategies and choices. INDICATIVE CONTENT: The contents of this module, including a workshop, are shown below: Introduction to Strategy The role and nature of strategic management. Levels of strategy. Overview of the strategic management process. Strategic decisionmaking in practice, including planned and emergent strategies. Characteristics of strategy in the public sector and international context. Resource / Internal Analysis Resource auditing and identifying value-added both within the Organisation and between organisations. From value-added to Developing core competencies and the resource-based view of Competitive advantage. Identifying Strengths and Weaknesses In the organisation Market based / External Analysis Structure of Environmental analysis and rates of change in the Environment from stable to chaotic. Broad structural analysis and Competitive analysis and identifying opportunities and threats. Industry and Competitive Analysis Strategy Choices and Formation Theory of the firm. Generic strategies and market positioning. Identifying potential strategic options for the organisation. Directions and methods for strategic development. Competitive dynamics. 3 Strategy Implementation and Evaluation Issues affecting strategy implementation and change management. Evaluation criteria and techniques emphasising suitability, feasibility and acceptability and allied screening devices. Portfolio analysis and Balanced scorecard approach Strategy in context A look at strategy in the public and third sectors as well as corporate vs business unit strategies Strategic visioning Scenario planning, drivers of change, Blue Ocean strategies, Managing Innovation and Creativity Lateral thinking, managiing innovation and commercial – a stimulating two-day workshop for new skills and reflection on individual attitutes. Global Issues and Trends in Strategic Management Stratgey around the world, key macro-economic issues driving change, business and society, globalisation and technology, risk, corporate social responsibility ASSESSMENT STRUCTURE & CRITERIA There are two assessments for this module, the first of which is an individual presentation analysing a company followed by another individual assignment case analysis, both based on an actual and integrated case studies. The main focus of case based assignments is to test the students’ ability to apply some of the strategic concepts covered in the course to real-world organisations and sometimes their own organisations. Students will need to carry out some independent research to determine the effectiveness of an organisation’s strategy. Harvard referencing system is used at all times for the recording & citing of all academic theory. It is an important academic skill & principal to follow & observe. Students must familiarise themselves with Harvard referencing & make the time to understand & apply it. Assignments should be accurately and appropriately referenced. Marks may be deducted for poor or inadequate referencing. The work submitted must be authentic and original, in other words, the assignment should be your own work. 4 • Where there is concern over the authenticity of an assignment, it will be referred to the School Academic Misconduct Officer. Work that has been plagiarised will be dealt with very severely. • All completed work must be submitted Electronically through the NILE site for the Module. Details will be issued in due course. • It is important that you comply with assignment submission dates as these are non-negotiable. If an extension is given it will only be in exceptional circumstances & be a maximum of two weeks. • If you are unable to submit your assignment by the required date & have legitimate grounds you will need to make an application through the university mitigating circumstances policy, details of which are outlined on the university web site. ACADEMIC OBLIGATIONS Students who enrol on a course at The University of Northampton are expected to fulfil the academic requirements for the course and meet any associated forms of professional or vocational conduct. These include: • • • attendance at all scheduled lectures, seminars and other similar teaching sessions participation in and engagement with all scheduled teaching sessions, including completing appropriate preparatory work providing prompt explanations for unavoidable absence from such sessions Where a student is found not to be meeting these requirements she/he will be subject to the procedure for Failure to meet Academic Obligations. University policies and procedures The Academic Registry intranet site can be accessed by accessing the university web site on www.northampton.ac.uk and then clicking on ‘Academic Registry’ under ‘Schools and Departments’. This contains information on University policies relating to issues such as: Academic regulations and appeals Mitigating Circumstances procedures – crucial to consult and use if you think you cannot submit an assignment on time or cannot sit an exam for a legitimate reason Academic Misconduct and cheating The Student Code of Conduct including your academic obligations as a student 5 READING LIST: Core recommended texts (one of the following): Grant, R. (2015) Contemporary Strategy Analysis, 9th ed, Wiley Johnson, G. Whittington, R. & Scholes, K. (2011) Exploring Strategy, 9th ed, FT Prentice Hall Lampel J., Minztberg H., Quinn, J.B., Ghoshal, S (2014) The Strategy Process: Concepts, Contexts, Cases, 5th ed, Pearson Additional reading: Mintzberg H., Ahlstrand B. and Lampel, J. (2009) Strategy Safari, 2nd edition, FT Prentice Hall Financial Times / FT.com Bouee, C-E. (2011) China’s Management Revolution, Palgrave Macmillan Done, A. (2012) Global Trends, Palgrave Macmillan Lloyd, T (2009) Business at a Crossroads: The Crisis of Corporate Leadership, Palgrave Macmillan Mayle, D. (2011) Managing Innovation and Change, 3rd ed, Open University/Sage Publications 6
Purchase answer to see full attachment