Growth

Strategy of
General
Electronics

IM551 IT Management & Strategy

KAIST Business School
Information & Media Management

McGinsey & Company

1

McGinsey & Company

Kim, Seok Tae
Moon, Sung Jin
Lee, Jin Soon
Im ,Jae Hyoun
Jeffrey R. Immelt
2

Agenda
I. Corporate Overview
II. Success Factors
III. Business Process
IV. GE, for the next
V. Suggestion

McGinsey & Company

I. Corporate
Overview

GEs Present
History of GE
Key Person of GE
Business Portfolio
Performance

McGinsey & Company

Company Overview
KEY PEOPLE

REVENUE
NET INCOME
EMPLOYEES
Market Value
Characteristics

GEs Present

Jeff Immelt, Chairman &

CEO
Keith S. Sherin,CFO
Gary M. Reiner, CIO
$173 billion USD (2007)
$22.5 billion USD (2007)
320,000 (2007)
$4,200 billion USD
The only company listed in
the
Dow Jones Industrial Index
today
that was also included in
the
5
original index in 1896

Company Overview

History of GE

1876
Thomas Edison opened a new laboratory in New Jersey

1896
General Electric was one of the original 12
companies listed on the newly-formed Dow Jones
Industrial Average. GE is the only one that
remains today.

1960s
General Electric was one of the eight major
computer companies with IBM

1890
Edison had organized his various businesses into
the Edison General Electric Co.

1919
The Radio Corporation of America (RCA) was
founded by GE and American Telephone &
Telegraph (AT&T)

1981
Jack Welch inaugurate to CEO

1996
Introduction of Six Sigma Quality

2001
Jeffrey Immelt inaugurate to CEO

2004
NBC Universal, 3rd largest media company from
Vivendi Universal

2005
GE reorganized its 11 businesses into 6 large
units
6

Company Overview
Tomas Edison
Founder, 1847 1931

Invent the
phonograph
and electric light
bulb
hold 1,093 U.S.
patents

Jack F. Welch Jr.

CEO, 1981 2001

Customer-Focused
Methodology to Improve
Quality without Defect
TodayRigorous Employee
6 Certification

Key Person
Reginald H.
Jones CEO, 1972
1981

Managerial qualities
Relationship
between
business and
government

Jeffrey R. Immelt
CEO, 2001 Present

New Frontiers & Strategic

Alliances for GE
Business Transformation

Company Overview
6 Global Business Unit

Business Portfolio

Healthcare
Medical Diagnostic
Clinical Systems
Life Sciences

Infrastructure

Commercial
Finance
Capital
Solution

Oil & Gas

Transportation
Aviation
Water

Real Estate
Corp Finance SVC
Healthcare Finance SVC

NBC Universal

Industrial
Customer & Industrial
Enterprise Solution
Security/Sensing

Television Group
Universal
Digital Media

Europe
Asia
America
Australia

GE Money

Company Overview

Performance
Earnings

Consolidated Revenues
2003
(in $

Compound
annual growth
rate of 13%

105

2004
2007

2005

billion
152
s) 137
124

2003

17
3

Revenue by Business
A. Infrastructure 29% D. Healthcare 10%
B. Industrial
23%E. Commercial
C. NBCU
10% + GE Money 28%

E
C

2004 2005
2006
2007
(in $ billions)
22.
19.4
5
17.4

2006

Compound
annual growth
rate of 14%

13.3 15.6

Revenue by Region
A. US
50% D. Americas
B. Europe
23% E. Others
C. Pacific Basin 13%
D

7%
7%

D
C

II. Success Factors

of GE
Executive for Growth
Summary of Success Factor
- Organic Growth
- Biz Transformation
- Globalization
Lessons from Jack Welch &
Immelt

McGinsey & Company

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Executive for Growth

Growth
Leadership Traits
Growth
Growth
Leaders
Leaders

Inspire
Inspire and
and
develop
develop
people
people that
that
know
know how
how to
to
help
help
customers
customers
and
and GE
GE grow
grow

Lean Six Sigma

Customer
Customer
Net Promoter Score
ss
Use
Use process
process
excellence
excellence to
to
satisfy
satisfy
customers
customers
and
and drive
drive
growth
growth

Innovatio
n

Generate new
ideas and
develop
capabilities to
make them a
reality

Execute for
Emerging
Growth
Markets
Globalizati
Globalizati
on
on

Create
Create
opportunities
opportunities
everywhere
everywhere
and
and expand
expand in
in
developing
developing
global
global markets
markets

Commerci
Commerci
al
al
Excellence
Excellence

Develop
Develop worldworldclass
class sales
sales and
and
marketing
marketing
talent
talent and
and
One GE:
demonstrate
demonstrate
the value
value of
of
Enterprise Solutions the
one
GE
one
GE
& Brand

Imagination
Breakthroughs
CECOR framework

Great
Great
Technolog
Technolog
y
y
Have
Have the
the best
best
products,
products,
content
content and
and
services
services

New Product
Introduction

11

Organic Growth
Work-out
CAP (Change Acceleration Process)
Six sigma
Performance Ranking System (Vital Curve)
Crotonvill

Performance
Execution

12

Business Transformation
How we fit into GEs strategy
Help sustain a healthy portfolio
filled with great businesses
Add
+ New technologies
+ New geographies
+ New growth
platforms

Substract
- Low
return
- Low
growth
- Low tech

+ Scale / cost
reduction

Help
strengthen the competitive
+ Capabilities
position of our businesses

Strate
gic
Analysi
s

Dispos
itions

Acquis
itions

Sustai
n
Growth

Portfol
io
assess
ment

JVs
and
Partne
rships

Integr
ation
and
deintegr
ation

13

Business Transformation

GE is
continuously evolving

Strong portfolio

14

Globalization
Global revenue

100

13%

Developing counties-growth

50

80

40

60
40

60

75

81

87

30

50

20

20

10

21

29

05'

06'

07'
$ in billions

05'

06'

10'

$ in billions

- In 2005, global revenue : 75$ billion, 21$ billon from

developing countries
- In 2004, impressive 37% increase on the previous year.
- Over the next decade, 60% of GEs growth : developing
countries (predict)
- China, India, Russia, Europe, Southeast Asia, Middle East,
South America.
15

Jack Welchs Leadership

Biz Portfolio Restructuring
- No.1 or No.2 : Fix, Sell, or Close
- 3-Circle concept :
12 Division, Finance/ Service

Reorganization
- Downsizing
- Delayering
- Empowerment

Cultural revolution
- Crotonville
- Work-out
- CAP
- Performance Ranking System

Core Business : Power Systems, Appliances,

Lighting, Transportation
Technology : Aircraft Engine, Aerospace,
Materials, Medical Systems
Service Business : Finance Service, Communications,
Information Service, Broadcasting
16

Immelts Leadership
Establish much more openness and trust
Rebalancing the portfolio
Marketing-oriented
At the customer, For the customer (ACFC)
Growth :New platforms, New process
New people profile
Infrastructure for developing countries

17

Jack Welchs

vs

Jack Welch

Paradigm

Efficiency Oriented
Strong business and
down-sizing
1.2 or sell

6 Sigma
Methodolog
Quality and costs
y
Finance
Target
Market
Portfolio

Immelt
Jeff Immelt
Effectiveness Oriented
Growth engines for the
future
Growth
External growth
Marketing

EU, USA

Developing countries

Cash Generator
finance, Service

Growth engine
Infrastructure

Responsibili
Within the law
ty

Social responsibility
18

III. Business
Process
Why Process is Important
Business Process in GE
Tools for Change
Methodologies
- Work Out
- Six Sigma
- CAP

McGinsey & Company

19

Strategic

Why Business Process is

Important
Strategy-Process
Alignment

Strategy

Monitor &
Feedback

KPI / Action
Item

Align to changing external

factors (market,
competition, technology
and customers)

Operational

Process
Execute

Process
Improvement
Plan

Process
Control

Improve

Continuous
Process Improvement
- Standardization
- Optimization

20

Business Process in GE

21

Tools for change

Component of Change

Scopes of Changes

Quality
Technical Strategy

Acceptance
Cultural Strategy

Small

Large

Work-Out
Expert-driven

Six Sigma
Data-driven

Leadership Development
Corp. Entry Programs
Crotonville Courses
GE Values & 360 Reviews
Learning Organization

Change Acceleration
Process(CAP)
Cultural Integration

22

Methodologies: Work- Out

Improvement and implementation of a new Open Culture

- Building Trust : Tear down barriers within the organization

Goal

- Empowering Employees : Leverage individual creativity and potential

- Elimination of Unnecessary Work : Remove bureaucracy
- A new paradigm for GE : Participation through a sense of accomplishment and
ownership
Work-out Process

How

PrePreMeeting
Meeting
(D(D4Weeks)
4Weeks)

Derive Issue
Clarification of Driving
Body
Compose Participants

Work-Out
Work-Out
Session
Session
(D)
(D)

Follow-up
Follow-up
Meeting
Meeting
(D+12Wee
(D+12Wee
ks)
ks)

Participation of Sponsors
Team start-up
Problem Solving
Execution Plan
Presentation / Decision
Making

Regular/Occasional
Monitoring
Share Success Story
Reward

Typical Org.
Structure

Sponsor

Sponsor
Employee
Empowerment
& Speedy Decision
Making
Set Concrete Goal
Oversee & Support
Follow-Up
Champion
Facilitator

Facilitator
Accurate
Understanding about
Issue at Hand
Develop Facilitation
Skill
Maintain Comm.
With Admin. Office

Admin.Current
Office
Measure
Status & Data
Collection
Continuous
Monitoring
Select & Train
Facilitator

23

Methodologies: Six Sigma

Goal

To maintain its position of advantage, Six Sigma targets a 6

sigma level of quality for all business processes in SVC, product,
sales, etc.
- Targets this level of optimization not only product and SVCs, but all across its
business operations
- Achieve superior management quality and cost competitiveness by eliminating loss
due to faults or mistakes by management systems
Six Sigma Process
DMAIC
Define high-level project
Definition
Definition goals and the current
process

Measurem
Measurem
ent
ent

How

Measure key aspects of

the current process and
collect relevant data

Analysis
Analysis

Analyze the data to verify

cause-and-effect
relationships.

Improveme
Improveme
nt
nt

Improve or optimize the

process based upon data
analysis

Control
Control

Set up control
mechanisms and
continuously monitor the
process

Six Sigma Org.

Structure

Champion

Responsible to represent the needs and to

improve the operational effectiveness

Master Black
Belt

Ensure that quality objectives and targets are

set, plans are determined, progress is
tracked, and education is provided

Black Belt

Heart and soul of the Six Sigma quality

initiative. Lead quality projects and work full
time until they are complete.

Green Belt

Employees trained in Six Sigma

Success Factors
Strong Top-level Leadership
Systematic Nurturing of Six Sigma Experts
Formation of Organizational Structure
committed
to Innovation
Support management in consulting,
training,
finance issues
Link to Reward/Promotion Structure
Regular sharing of Know-How
Sharing of Success Cases/Best
Practices

24

Methodologies: Change
Acceleration Process
Goal

Achieve change
acceleration by increasing
employee acceptance
regarding changes
- Built an competitive organization
through continuous cultural
revolution
- Remove bureaucratic elements
within the org. structure

(Tec
h

Qua

Key Strategy Initiatives

lity

nica
l Str
ateg
y)
Work-Out
tools
ce
eptatn
Acca
ategy)
r
S
l
r
(Cultu

Change Acceleration
Process

7 Stages of Change
Leading
Change

Creating A Shared
Need

Shaping A Vision
Mobilizing
Commitment

How

Making Change
Last

Current State

Monitoring
Progress
Improved
Transition
State
State

Changing Systems &

Structures

CAP Session
Leading a change Secure Champion to drive changes
Creating a
Shared Need
Shaping a vision
Mobilizing
Commitment
Monitoring
Process
Making change
last

Share necessary changes & persuade with

diagnostics & analysis
Share a visionary image of what this change
can achieve
Find and support committed employees to
put changes into practice and spread its
realization
Control and monitor goals, actions and
achievement levels of change activities
Make changes last by training all employees
across the organization

Changing system Set up systems and structures to support,

and structure
drive and complete changes

25

IV. GE's Next

Pressure on GE
customers
Enabling sustainable
growth
GEs commitments
GE's Next

McGinsey & Company

26

Pressure on GE customers

Emerging
Markets Growth

al r
rn e
t e o ld
E x eh
ak s
St

Re
Pr sou
es r
su ce
re

Increasing
Population

Custome
r

Climate Change
Debate

Regulation

Emissions
Standards

Carbon
Constraints
27

Enabling sustainable growth

28

GEs commitments
Energy
Solar, Wind, Biogas, IGCC, Gas turbines

Water
Reuse, Desalination, Industrial, Cooling

Transportation
Aviation, Rail, Automotive, Marine, Fleet

Industrial
Lighting, Appliance, Motor, Finance

29

GEs Next
Year 2100
Year 2020
Year 2010
Year
2000

Adaptive and challenging

attitudes
R&D investment + Customer
R&Dfocused
investment + Customer
focused
Process Management for growth + Organization development

Before
1990s

Product Diversifications + Organization Restructuring + Productivity

GE as a leader

30

Suggestion
V.
Suggestion

McGinsey & Company

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Question
s

McGinsey&Company

?
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