GE’s Growth Strategy: The Immelt Initiative

GE’s Growth Strategy: The Immelt Initiative Group 10

GE • Headquarters Fairfield, Connecticut, U.S. • Revenue: US$ 182.515 billion (2008) • Net income: US$ 17.410 billion (2008) • Total assets: US$ 797.769 billion (2008) • Employees: 323,000 (2008) • CEO & Chairman – Jeffrey R. Immelt • Lines of business: Aviation, Jet engines, Electricity, Entertainment, Finance, Gas turbines, Generation, Industrial Automation, Lighting, Medical imaging equipment, Medical technology, Health informatics, Electric motors, Locomotives, Wind turbines, TV motion pictures

Case Background:Jack Welch Jeffrey Immelt • Immelt took over from Welch on September 7, 2001, four days before 9/11 • The resulting uncertainty coupled with the dotcom bubble burst led to GE losing $80 billion in market cap just within a week of Immelt taking charge. • He further stood in the shadow of Welch who in two decades had built GE into one of the biggest companies of the world • Immelt decided that GE had to look to innovation if it was to continue on the same growth of the last two decades

GE’s Growth Strategy • Immelt was focused on building up the core elements of GE’s success: a portfolio of strong businesses, bound by companywide strategic initiatives and managed by people in a performance driven and adaptive culture. • He articulated his vision of a global, technology based, service intensive company by defining a growth strategy based on five main factors: • Technical Leadership – Continuing to focus on technology as the key growth driver. • Services Acceleration – Generate high margins and raise entry barriers by building up a service business around GE’s base of jet engines, turbines, locomotives etc. • Commercial Excellence – Create a world class commercial culture to match the engineering and financial oriented approach under Welch. • Globalization – Expand sourcing and market access across the world, and give special attention to developing countries like India and China. • Growth Platforms – Allocate resources to build new business platforms that would provide growth in future

GE’s Growth Strategy • Immelt considered the size and diversity of GE to be its strengths. • Planned to rebalance and renew the business portfolio to drive growth • Acquired • Telemundo and Bravo networks to target the fast growing Hispanic market. • Enrons Wind energy business. • Interlogix, in the security systems space • Committed $100 million to upgrade GE’s major R&D facility in New York, in keeping with his focus on innovation. • Emphasis on long term research even though they might not give results for a decade or more. • Expanded into developing countries like India(Bangalore) and China(Shanghai)

GE’s Strategy Ongoing Operations • Dispose off underperforming business like the insurance business of GE. • Cut costs, Increase efficiency and effectively manage resources. • Six sigma used to manage inventory and receivables. • Digitization targeted at infrastructure efficiency. • To counter the post-Enron criticism, took steps to make GE more transparent and open. • Higher weightage given to corporate responsibility

Rebalancing Portfolio • Acquired Universal entertainment from Vivendi to supplement NBC and to add strength to GE’s core business. • Acquired Amersham, a life sciences and medical diagnostic company. • Difficult to dispose of unprofitable assets – insurance, motors, super adhesives. • Immelt demarcated GE portfolio into two parts • Growth Engines: Businesses expected to grow at 15% through business cycles • Cash Generators: mature businesses cyclical in nature but having strong cash flows

Innovation Customer Focus & Service Emphasis • Redirected GE’s internal focus – characterised by operating efficiency and cost cutting – to external environment. • Commercial Council – Brought together GE’s best sales and marketing leaders to develop world class marketing, take six sigma to customers and increase sales force effectiveness. • GE saw great growth opportunity in providing services to its massive installed base of engines, turbines, medical systems etc. • For example, GE began bundling its services to its products in medical technology.

InnovationNew Platforms, New Processes • Starting 2002, Immelt tasked his team with identifying growth businesses that would generate $1 billion in the next few years. • In response 6 answers emerged: • Health care Information systems • Security & sensors • Water technology • Oil and gas technology • Hispanic Broadcasting • Consumer finance • Other high growth areas like biosciences(Amersham), Film(Universal), renewable energy, coal gasification were added to upgrade the GE business portfolio. • Acknowledging the importance of people in meeting GE’s targets, the company began specifically training a generation of “growth leaders” – people with customer touch and technical knowledge.

InnovationNew Platforms, New Processes Operating Efficiency Measures • “Cash Entitlement” – Six sigma specialists in GE were tasked with making GE twice as good as competitors on receivables and inventory turnover benchmarks. • “Lean Six sigma” – Reduced working capital and improved return on equity in manufacturing • “Simplification” – Aimed at reducing overhead from 11% of revenue to 8% by reducing headquarters, legal entities etc.

Imagination Breakthroughs • Immelt launched this process to drive home his earlier emphasis on growth platforms and innovation. • These were projects that had the potential to generate at least $100 million in incremental earnings over a three year period. • These projects could be technological innovations, market expansion opportunities or product commercialization proposals • Each business leader was to submit atleast three breakthrough proposals each year for review by the Commercial Council • Immelt had assigned the best talent to drive this program and each of the IB ideas was free from budgetary constraints. • By doing so, Immelt was compulsorily forcing business leaders to come up with innovative products. • IBs were expected to deliver $25 billion in additional revenue over a three year period.

Town Hall Meeting & Dreaming Sessions • Immelt conceptualized these two processes to further the imagination breakthroughs and growth platforms • The town hall meeting consisted of several hundred customers of GE gathering to hear Immelt on where he wanted to take GE and how GE could be more helpful to them • The dreaming sessions consisted of meetings with senior executives from key customer companies who tried to identify major industry trends, their likely implications and how GE could help those companies.

Internationalization • By 2004, revenues from outside US reached $72 billion, $21 billion of which came from developing countries. • The IB program started generating ideas about improving GE business in developing nations. • One example of this is a plan that involved shipping unassembled locomotives to India and China, where they would be assembled in local factories. This plan was expected to generate $100 million in sales. • The “One GE” initiative involved creating vertical teams that aimed at providing a complete range of products and services from energy, security, lighting and health care products.

Reorganization • GE reorganized its 11 businesses into 6 large units that would offer one stop shopping for customers • These units were: • GE Industrial • GE Commercial Finance • NBC Universal • GE Health Care • GE Consumer Finance • GE Infrastructure • In addition to cutting costs, the reorganization was mainly intended to better align the businesses with customer and market needs. • Moreover the reorganization was focused on giving younger growth leaders more freedom to run the business. • All in all, the Growth Strategy of GE as envisaged by Jeffrey Immelt incorporated all the major aspects of the business – Operations, People, Technology and Culture.

Thank You

GE’s Growth Strategy: The Immelt Initiative