Case 5: General Electric ;

ENERAL LECTRIC S ORPORATE TRATEGY

Like the premature obituary of writer Mark Twain, reports of the death of the conglomerate are often

exaggerated. Diversified companies, straddling multiple industries, or even just dijferent parts of one

large sector, remain a dominant, if not always fashionable, feature of stock markets from the US.

to continental Europe and Asia. But a new backlash against conglomerates suggests that a more

lasting shift in investor preferences may be taking place-driven in part by the growing influence of

hedge funds and private equity houses. In public markets, big has rarely appeared less beautiful. 1
Through the 199os and 20oos, large diversified firms, often called conglomerates, largely fell out of favor with
investors. Arguments against conglomerates ranged from complexity in management to the difficulties that
analysts and investors had in understanding their operations. More recently, conglomerates have regained some
respect. As the largest of the US. diversified multinational firms, General Electric Company (GE), with over
300,000 employees, generated a variety of opinions, such as:

Increasingly restive General Electric Co. shareholders, frustrated with six years of meager returns,

are pressuring Chairman Jejfrey Immelt to break up the conglomerate. But some shareholders and

analysts argue that GE s sprawling businesses are better Ojf together than apart. GE s big umbrella,

these investors say, can balance dijfering product and economic cycles, while helping all its busi-

nesses financially. And that would boost the stock price over the longer term.

“T he main appeal of GE is its diversification, ”says Mark Demos, portfolio manager at Fifth Third

Asset Management, which owns 12.6 million GE shares. He says this isn’t the time to break up the

company, because global economic trends and investor sentiment are moving toward bigger more

international companies such as GE.2
GE’s Background
GE’s roots go back to 1890 when Thomas Edison established Edison General Electric Company. In 1892,
Edison General Electric Company merged with Thomson-Houston Company. The new company was called
General Electric Company. Several of Edison’s early products were still part of GE in 2008, including lighting,
transportation, industrial products, power transmission, and medical equipment. GE is the only company listed
in the Dow Jones Industrial Index today that was also included in the original index in 1896.

Over the century after its founding, GE made hundreds of acquisitions and expanded far beyond its original
businesses. By 1980, GE products ranged from plastics, consumer electronics, and nuclear reactors, to jet engines.
In 1981, Jack Welch became CEO and radically restructured the company. Welch urged his employees to be
“better than the best” and challenged each of the diverse GE businesses to be the number one or number two
competitor or disengage. Between 1981 and 1990, GE divested more than 200 businesses and made over 370
acquisitions. Acquisitions included NBC, Kidder Peabody, Thomson/CGR medical equipment, Borg-Warner
Chemicals, Penske Leasing, Tungsram light bulbs, and Polaris aircraft leasing. Businesses sold included small
appliances, consumer electronics, RCA Records, outdoor lawn equipment, oil exploration and refining, car
auctions, and mining. Welch also slashed layers of management and began a series of internal initiatives, many
of which set the standard for business practice around the world, such as Six Sigma. In 1980, the year before
Welch became CEO, GE recorded revenue of $26.8 billion; in 2000, the year before Welch retired, revenue was
nearly $130 billion.

C. Inkpen with research assistance from Ms Edens and Siva Palli for the purpose of classroom discussion only, and not to indicate
either efifective or inefiieetive management.
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

Download
Google Translate
Bing Translator
Edit Online

For the exclusive use of W. Li, 2015.

TB0383

Andrew C. Inkpen

General Electric’s Corporate Strategy
Like the premature obituary of writer Mark Twain, reports of the death of the conglomerate are often
exaggerated. Diversified companies, straddling multiple industries, or even just different parts of one
large sector, remain a dominant, if not always fashionable, feature of stock markets from the U.S.
to continental Europe and Asia. But a new backlash against conglomerates suggests that a more
lasting shift in investor preferences may be taking place—driven in part by the growing influence of
hedge funds and private equity houses. In public markets, big has rarely appeared less beautiful.1

Through the 1990s and 2000s, large diversified firms, often called conglomerates, largely fell out of favor with
investors. Arguments against conglomerates ranged from complexity in management to the difficulties that
analysts and investors had in understanding their operations. More recently, conglomerates have regained some
respect. As the largest of the U.S. diversified multinational firms, General Electric Company (GE), with over
300,000 employees, generated a variety of opinions, such as:
Increasingly restive General Electric Co. shareholders, frustrated with six years of meager returns,
are pressuring Chairman Jeffrey Immelt to break up the conglomerate. But some shareholders and
analysts argue that GE’s sprawling businesses are better off together than apart. GE’s big umbrella,
these investors say, can balance differing product and economic cycles, while helping all its businesses financially. And that would boost the stock price over the longer term.
“The main appeal of GE is its diversification,” says Mark Demos, portfolio manager at Fifth Third
Asset Management, which owns 12.6 million GE shares. He says this isn’t the time to break up the
company, because global economic trends and investor sentiment are moving toward bigger, more
international companies such as GE.2

GE’s Background
GE’s roots go back to 1890 when Thomas Edison established Edison General Electric Company. In 1892,
Edison General Electric Company merged with Thomson-Houston Company. The new company was called
General Electric Company. Several of Edison’s early products were still part of GE in 2008, including lighting,
transportation, industrial products, power transmission, and medical equipment. GE is the only company listed
in the Dow Jones Industrial Index today that was also included in the original index in 1896.
Over the century after its founding, GE made hundreds of acquisitions and expanded far beyond its original
businesses. By 1980, GE products ranged from plastics, consumer electronics, and nuclear reactors, to jet engines.
In 1981, Jack Welch became CEO and radically restructured the company. Welch urged his employees to be
“better than the best” and challenged each of the diverse GE businesses to be the number one or number two
competitor or disengage. Between 1981 and 1990, GE divested more than 200 businesses and made over 370
acquisitions. Acquisitions included NBC, Kidder Peabody, Thomson/CGR medical equipment, Borg-Warner
Chemicals, Penske Leasing, Tungsram light bulbs, and Polaris aircraft leasing. Businesses sold included small
appliances, consumer electronics, RCA Records, outdoor lawn equipment, oil exploration and refining, car
auctions, and mining. Welch also slashed layers of management and began a series of internal initiatives, many
of which set the standard for business practice around the world, such as Six Sigma. In 1980, the year before
Welch became CEO, GE recorded revenue of $26.8 billion; in 2000, the year before Welch retired, revenue was
nearly $130 billion.
Copyright © 2014 Thunderbird School of Global Management. All rights reserved. This case was prepared by Professor Andrew
C. Inkpen with research assistance from Wes Edens and Siva Palli for the purpose of classroom discussion only, and not to indicate
either effective or ineffective management.

This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

In 2001, Jeff Immelt became CEO and was still in the job in 2014. According to Immelt, the job of the
CEO is to “pick initiatives and businesses to get involved in, shape the company culture, pick great people.
Strategy is about the creation and allocation of right resources, to the right place, in the right way over time.
Whether you call it allocating capital resources or picking the initiatives and businesses to get involved in, the
heart of strategy is choices around where you want to play and how you want to win over whatever timeframe
is important to you.”3
Among Immelt’s early goals were to strengthen GE’s global presence and create a more collaborative culture.
Under Immelt, GE sold its insurance and plastics businesses, and its entertainment business, NBC Universal,
and strengthened its presence in healthcare, financial services, and oil and gas. In 2014, GE was actively trying
to sell its appliance business, one of the last of GE’s BTC businesses.

GE’s Strategy
GE organized its operations in seven main businesses: power and water, oil and gas, energy management, aviation, healthcare, transportation, home and business solutions, and GE Capital. Exhibit 1 provides a summary of
each of the businesses. The exhibit shows that each of the businesses employed tens of thousands of employees
and was a highly diversified business in its own right. If spun off from GE, the businesses would be among the
largest and most profitable companies in their respective sectors.
Given the diversity of businesses, what was the strategic logic that held the company together? The CEO’s
letter to the shareholders in the 2003 Annual Report stated:
We are another year along with our five-initiative strategy to create high-margin, capital-efficient
growth:
•     Technical Leadership: Technology and innovation are at the heart of our initiatives. Technical
leadership produces high-margin products, wins competitive battles, and creates new markets.
•     Services: Technical leadership has created a massive installed base of more than 100,000 longlived GE jet engines, power turbines, locomotives, and medical devices for which we can provide
high-margin services for decades.
•     Customer Focus: One of our successes is in “vertical selling,” the practice of aligning our offerings in four industries that are critical to GE: healthcare, energy, transportation, and retail.
They represent $47 billion of industrial revenues and $169 billion of financial services assets. GE
brings a unique array of capabilities to these industries, including products, services, information,
and financing. On this broad foundation, we can build deeper partnerships with our customers.
•     Globalization: We can take every growth idea and multiply its effectiveness through globalization. Globalization is a GE core competency. We have made and sold products outside the U.S.
for 100 years, and one-third of our leadership team is global. Our global revenues were almost
$61 billion in 2003, up 14%, and should grow 15% in 2004. We succeed because we recognize
one central fact: global growth requires more than simply shipping products. You must be equally
committed to developing capabilities and relationships in the markets where you want to succeed.
•     Growth Platforms: A key GE strength is our ability to conceptualize the future, identify “unstoppable” trends and develop new ways to grow….We follow a disciplined process for growth. First,
we segment broad markets and launch with a small platform acquisition. Then we transform the
business model using our growth initiatives, such as services and globalization. Finally, we apply
our financial strength to invest in organic growth or acquisitions. We can get big quickly while
generating solid returns.

The CEO’s letter to the shareholders in the 2006 Annual Report included:
Our strategies create strengths and capabilities, which, in turn, drive competitive advantage. The
consistent execution of the same strategic principles year after year provides the foundation to invest
and deliver.
We expect them [the businesses] to be industry leaders in market share, value, and profitability. We
want businesses where we can bring the totality of the Company—products, services, information,
and financing—to capitalize on the growth trends I mentioned earlier. We run these businesses with
common finance and human resource processes. We have one leadership development foundation
2    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

and one global research infrastructure to achieve excellent results with a common culture. We have
a few Company-wide Councils, like Services, so we can share ideas with minimum bureaucracy…
when we find that a business cannot meet our financial goals or could be run better outside GE, we
will exit that business rather than erode shareowner value.
Our “average hold” of a business is measured in decades. We do not “flip” assets. We are builders
of businesses. This takes people who believe in teamwork and have pride in workmanship. We have
a team that is focused on building a company that has enduring value and makes the world a better
place. Our culture matches the expectations of long-term investors.

In 2008, GE described itself as a reliable growth company. At GE’s Annual Leadership Meeting in early
2008, Jeff Immelt described four strategic principles to achieve growth:
1.     Invest in Leadership Businesses: We have spent the last six years assembling a portfolio to
drive growth in today’s more interconnected global economy. We will continue to refine the mix
to capture market opportunities that ensure our portfolio keeps generating faster growth, has
more balance, and creates a stronger competitive advantage. In 2008, we will continue to drive
results from our Growth as a Process initiative by:
•
•
•
•
•

Sustaining technical leadership
Accelerating globalization
Driving services growth
Bringing lean and enterprise to customers
Building adjacencies to the installed base

2.     Execution and Financial Discipline: This year we are formalizing a process around operational
excellence that will help us to grow margins and returns in a tough environment. Our process
is being led by a new Operating Council and shared metrics to measure results.
3.     Growth as a Process: Our focus on Growth as a Process continues to enable us to deliver organic revenue growth of 2-3x GDP. Our process is accelerating, it’s visible, and it creates high
confidence for investors. In 2006 and 2007, we achieved 9% organic revenue growth and, in
2008, we expect to maintain this level of growth.
4.     Great People: GE has always attracted great talent. Converting talent into a strategic advantage
means developing and retaining that talent so that we have the best leadership team. In 2008,
we will do this by focusing on core capabilities of LIG [Leadership Innovation and Growth],
accessing local knowledge for global growth, and leveraging our deep expertise.

In recent years, GE talked more about organic growth. According to Jeff Immelt:
The focus on organic growth is also going to require people to stay in the same jobs longer. You
can’t plant a tree and see it grow in a year. This is very countercultural in an organization where
building a career has always meant packing your bags every 18 months. Going forward, you’re still
going to have some 18-month jobs, but over the course of 30 years, you’re going to have more jobs
that last five years.4

In 2012, GE said its strategy was based on five pillars: technological leadership, services acceleration, enduring customer relationships, resource allocation, and globalization.5 Immelt described the company as a winning
company because of its ability to create its own future. In his own words:
It starts with a culture—the foundation for any successful enterprise—a culture that inspires our
people to improve every day. Our team is mission-based: We build, move, power, and cure the world.
We constantly learn from our customers, our competitors, and from each other. Strategy is not set
through one act or one deal. Rather, we build it sequentially through making decisions and enhancing
capability. As we look forward, it is more important that investors see the company through a set of
choices we make for the purpose of creating value over time.

TB0383    3
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

In the letter to shareholders, Immelt described five strategies for growth (see Figure 1):
First, we have remade GE as an “infrastructure leader” with a smaller financial services division.
About $60 trillion of infrastructure investment is needed by 2030 to support billions of new consumers
joining the middle class in the emerging world, and to support developed-market productivity. Over
the last decade, we have grown our infrastructure platforms by investing in adjacencies, pursuing
opportunities that are closely related to the core. About one-third of our infrastructure revenues
comes from businesses we weren’t in a decade ago. These include fast-growth businesses like Oil and
Gas, Life Sciences, and Distributed Power. This growth has come through organic investment and
focused acquisitions. At the same time, we are creating a smaller, more focused financial services
company—one that has a lower risk profile and adds value to our industrial businesses. Our goal is
to have infrastructure earnings reach 70% of our total over time.
Second, we are committed to allocating capital in a balanced and disciplined way, but with a clear
priority for dividend growth. GE will generate $100 billion for allocation over the last few years,
including cash from existing operations, dividends from GE capital and dispositions. The top priority
remains growing the dividend. Since 2000, we have paid out $106 billion in dividends, more than
any other company. We like GE to have a high dividend yield, which is appealing to a majority of
our investors.
Third, we have significantly increased investment in organic growth, focusing on R&D and global
expansion. We believe that investing in technology and globalization is key to gaining market share.
Annually, we invest more than $10 billion to launch new products and build global capability. We use
the entire GE enterprise to improve the value of our investments in technology and globalization. For
technology, we have a “Global Research Center Network” that builds strategic capability, spreads
technology around the world, and innovates for local markets.
Fourth, we have built deep customer relationships, based on an outcome-oriented model. Our
goal is aligned with customer outcomes, and our products improve their productivity. We believe in
a solutions-oriented selling model, one that can deliver outcomes for customers. We only win when
customers win.
Fifth and finally, we have positioned GE to lead in the big productivity drivers of this era. This is
important for growing our margins while keeping our customers competitive. The levers of productivity are constantly changing. For more than a century, GE has been a leader in productivity and
innovation.6

GE’s Acquisition Strategy
Acquisitions and divestitures played a key role in GE’s corporate strategy. Exhibits 2 and 3 show GE’s main
acquisitions and divestitures over the past few decades. GE exited all or most of its insurance, materials, equipment services, entertainment, and industrial platforms. GE also exited its U.S. mortgage origination business
and its personal loan business in Japan. In 2007, GE sold its chemicals business because of “rampant inflation
in raw material costs.” In 2014, GE announced that it would divest its consumer credit business in an IPO that
valued the business at about $20 billion.
Over the same time period, GE acquired many new businesses. GE investments resulted in one of the
largest renewable-energy businesses in the world. GE diversified its healthcare business by investing in life sciences and healthcare IT. GE created a new high-tech industrial business called Enterprise Solutions and made
several investments in financial services businesses in global markets. GE acquired Vetco Gray, a company that
produced products for the upstream oil and gas industry. In 2014, GE acquired the French engineering company
Alstom for $17 billion.
Not all of GE’s acquisitions were successful. It was widely acknowledged that the acquisition of brokerage
firm Kidder Peabody in the mid-1980s was a huge failure. The system of individual risk-taking and incentive
compensation at Kidder Peabody never meshed with GE’s culture and values. Many questions were also raised
when GE created NBC Universal in 2003 via the 80% acquisition of Vivendi’s film and television unit, which
included Universal Studios and theme parks. Universal had gone through several M&A deals before the GE
acquisition. In 1990, the large Japanese electronics company Matsushita acquired MCA, Universal’s parent, for
4    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Figure 1. GE Growth Strategy: A Six-Part Process

Source: T. A. Stewart, “Growth as a Process: The HBR Interview Jeffrey R. Immelt,” Harvard Business Review, June 2006, pp.
60-70.

$6.59 billion. In 1995, the Canadian spirits company Seagram acquired 80% of MCA from Matsushita for $5.7
billion. In 2000, Vivendi Group acquired Seagram. At the time of the deal, many pundits raised questions. For
example, The Wall Street Journal wrote, “The strategic elements of the deal are harder for GE to justify. The media
business is far more competitive than other industries in which GE can use its financial heft and strong brand
name to squash the competition. GE executives have said they had no interest in owning a movie studio, with
its unpredictable earnings and difficult personalities.”7 NBC Universal was divested in 2012, and Immelt said,
“When we looked at NBC, we made the transition from network to cable and the next transition was Internet
and I didn’t want to make that transition as I didn’t think we were particularly skilled in that. I wasn’t sure if we
are positioned to play that game”8
In his 2012 letter to the shareowners, Jeffery Immelt wrote: “We will continue to execute on focused acquisitions, a capital efficient way to grow the company. We will keep our focus on acquiring specific capabilities
where GE can add substantial value.”

TB0383    5
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

GE’s Culture and Values
GE’s corporate values can be found in corporate statements that identify the traits that should be embodied by
leaders. Table 1 shows an example of a GE value statement during Jack Welch’s tenure as CEO.
Table 1. GE Value Statement
GE Leaders—always with unyielding integrity:
•     Have a passion for excellence and hate bureaucracy
•     Are open to ideas from anywhere, and committed to work out
•     Live quality and drive cost and speed for competitive advantage
•     Have the self-confidence to involve everyone, and behave in a boundaryless fashion
•     Create a clear, simple, reality-based vision, and communicate it to all constituencies
•     Have enormous energy and the ability to energize others
•     Stretch, set aggressive goals, and reward progress, yet understand accountability and commitment
•     See change as opportunity, not threat
•     Have global brains, and build diverse and global teams

Table 2 shows a more recent statement of values and actions.
Table 2. GE Values Card

GE evaluated its leaders based on various traits. According to Jeff Immelt:
By the end of 2004, we came up with five growth traits. The first is external focus. Then there’s
imagination and creativity. And a growth leader must be especially decisive and capable of clear
thinking. Inclusiveness is also vital. Finally, leaders in these high-growth companies tend to have
deep domain expertise.9

Table 3 provides more detail on the growth traits. For each growth trait, there were measurable behaviors
that represented “outstanding” and “needs improvement.” For example, for clear thinking, “Confident in standup skills…without the PowerPoint” was an outstanding behavior. “Getting bogged down in details” was evidence
of a need for improvement. GE used these behaviors to evaluate its leaders and managers.
A few years ago, GE leadership asked whether the above growth traits were still the right values. GE looked
outside the company by having its senior executives meet with leaders from more than 100 organizations, including large multinationals, universities, and small start-ups in emerging markets. The conclusion was that the five
growth values were still relevant for GE.
6    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Table 3. GE Individual Growth Traits
External Focus
•     Defines success in market/industry terms…understands customer needs, marketplace dynamics, industry trends, and
the competitive landscape in your industry or function
•     Considers the external impact of business activities and decisions on customers, market/industry, investors, media,
government, and communities
•     Anticipates customer needs and ensures that they are met…measures processes and performance through the customer’s
eyes
•     Stays current with industry trends, including market intelligence and competitive analysis, and takes an active role in
shaping their industry and/or function
•     Takes action to enhance GE’s reputation among all stakeholders…represents the Company well
Clear Thinking
•     Simplifies strategy into specific actions, makes decisions, and communicates priorities
•     Has strategic capacity to sift through complex information and focus on the critical few priorities
•     Communicates messages clearly and concisely
•     Able to translate strategy into business objectives with clear accountability
•     Decisive…able to make decisions with speed and accuracy…based on best available information
•     Is accountable for organic growth and frees up resources to fund innovation
•     Reality…ability to bring reality to situations to identify gaps between perception and facts
Imagination and Courage
•     Has the imagination to take risks on both people and ideas…bold thinking to imagine a better way and the courage
to make it a reality
•     Generates new and unique ideas…makes fresh connections; an original thinker
•     Courage to take action on ideas…fights for growth, both internally and externally
•     Supports an environment in which people can take risks, consistent with integrity, and experiment
•     Brings creative ideas to fruition…good instincts about which ideas will work and when
•     Viewed as an advocate of innovation…pushes for “big bets” to accelerate our competitive advantage
Inclusiveness
•     Can energize teams through inclusiveness and connection with people…builds loyalty and commitment
•     Creates an engaging work environment…appeals to the unique interests of each team member
•     Builds a connection with the team through personal involvement and trust…inspires people to want to perform at a
higher level
•     Promotes an environment that recognizes and celebrates individual and cultural differences
•     Develops others…provides others with feedback and coaching…encourages personal growth
Expertise
•     Has the confidence and perspective that comes through depth in industry/function to impact growth
•     Learns from living with the impact of their decisions and actions
•     Has demonstrated leadership throughout different business cycles
•     Gains perspective through varied experiences and build-up of skills
•     Continually strives to increase knowledge with up-to-date information

Comments on GE Culture
Dennis Dammerman, former GE Vice Chairman and CFO, made the following comments about how the GE
culture evolved during Jack Welch’s tenure:10
Eventually, the businesses began to get flatter and flatter, with some interesting phenomena as byproducts. For one, a whole new type of leader became necessary. One could no longer be a colorless, impersonal autocrat, a technician who could manipulate the management structure to produce
results. The structure was gone. The leader now had to emerge from the corner office, and excite
teams—energize them, lead them rather than manage them. Not everyone was capable of doing that.
Many stumbled for a while and retired or otherwise departed. Some adapted amazingly well and
became excited and younger in their new role. The bureaucrats, many at significant pay levels, had
a bad time of it. The kitchen light came on, and suddenly there were no longer the pipes and cabinets
of bureaucracy to hide under. They left by the battalions.
TB0383    7
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

The phenomenon that best captures the sharing, learning, cooperative atmos

Case 5: General Electric ;

ENERAL LECTRIC S ORPORATE TRATEGY

Like the premature obituary of writer Mark Twain, reports of the death of the conglomerate are often

exaggerated. Diversified companies, straddling multiple industries, or even just dijferent parts of one

large sector, remain a dominant, if not always fashionable, feature of stock markets from the US.

to continental Europe and Asia. But a new backlash against conglomerates suggests that a more

lasting shift in investor preferences may be taking place-driven in part by the growing influence of

hedge funds and private equity houses. In public markets, big has rarely appeared less beautiful. 1
Through the 199os and 20oos, large diversified firms, often called conglomerates, largely fell out of favor with
investors. Arguments against conglomerates ranged from complexity in management to the difficulties that
analysts and investors had in understanding their operations. More recently, conglomerates have regained some
respect. As the largest of the US. diversified multinational firms, General Electric Company (GE), with over
300,000 employees, generated a variety of opinions, such as:

Increasingly restive General Electric Co. shareholders, frustrated with six years of meager returns,

are pressuring Chairman Jejfrey Immelt to break up the conglomerate. But some shareholders and

analysts argue that GE s sprawling businesses are better Ojf together than apart. GE s big umbrella,

these investors say, can balance dijfering product and economic cycles, while helping all its busi-

nesses financially. And that would boost the stock price over the longer term.

“T he main appeal of GE is its diversification, ”says Mark Demos, portfolio manager at Fifth Third

Asset Management, which owns 12.6 million GE shares. He says this isn’t the time to break up the

company, because global economic trends and investor sentiment are moving toward bigger more

international companies such as GE.2
GE’s Background
GE’s roots go back to 1890 when Thomas Edison established Edison General Electric Company. In 1892,
Edison General Electric Company merged with Thomson-Houston Company. The new company was called
General Electric Company. Several of Edison’s early products were still part of GE in 2008, including lighting,
transportation, industrial products, power transmission, and medical equipment. GE is the only company listed
in the Dow Jones Industrial Index today that was also included in the original index in 1896.

Over the century after its founding, GE made hundreds of acquisitions and expanded far beyond its original
businesses. By 1980, GE products ranged from plastics, consumer electronics, and nuclear reactors, to jet engines.
In 1981, Jack Welch became CEO and radically restructured the company. Welch urged his employees to be
“better than the best” and challenged each of the diverse GE businesses to be the number one or number two
competitor or disengage. Between 1981 and 1990, GE divested more than 200 businesses and made over 370
acquisitions. Acquisitions included NBC, Kidder Peabody, Thomson/CGR medical equipment, Borg-Warner
Chemicals, Penske Leasing, Tungsram light bulbs, and Polaris aircraft leasing. Businesses sold included small
appliances, consumer electronics, RCA Records, outdoor lawn equipment, oil exploration and refining, car
auctions, and mining. Welch also slashed layers of management and began a series of internal initiatives, many
of which set the standard for business practice around the world, such as Six Sigma. In 1980, the year before
Welch became CEO, GE recorded revenue of $26.8 billion; in 2000, the year before Welch retired, revenue was
nearly $130 billion.

C. Inkpen with research assistance from Ms Edens and Siva Palli for the purpose of classroom discussion only, and not to indicate
either efifective or inefiieetive management.
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

Download
Google Translate
Bing Translator
Edit Online

For the exclusive use of W. Li, 2015.

TB0383

Andrew C. Inkpen

General Electric’s Corporate Strategy
Like the premature obituary of writer Mark Twain, reports of the death of the conglomerate are often
exaggerated. Diversified companies, straddling multiple industries, or even just different parts of one
large sector, remain a dominant, if not always fashionable, feature of stock markets from the U.S.
to continental Europe and Asia. But a new backlash against conglomerates suggests that a more
lasting shift in investor preferences may be taking place—driven in part by the growing influence of
hedge funds and private equity houses. In public markets, big has rarely appeared less beautiful.1

Through the 1990s and 2000s, large diversified firms, often called conglomerates, largely fell out of favor with
investors. Arguments against conglomerates ranged from complexity in management to the difficulties that
analysts and investors had in understanding their operations. More recently, conglomerates have regained some
respect. As the largest of the U.S. diversified multinational firms, General Electric Company (GE), with over
300,000 employees, generated a variety of opinions, such as:
Increasingly restive General Electric Co. shareholders, frustrated with six years of meager returns,
are pressuring Chairman Jeffrey Immelt to break up the conglomerate. But some shareholders and
analysts argue that GE’s sprawling businesses are better off together than apart. GE’s big umbrella,
these investors say, can balance differing product and economic cycles, while helping all its businesses financially. And that would boost the stock price over the longer term.
“The main appeal of GE is its diversification,” says Mark Demos, portfolio manager at Fifth Third
Asset Management, which owns 12.6 million GE shares. He says this isn’t the time to break up the
company, because global economic trends and investor sentiment are moving toward bigger, more
international companies such as GE.2

GE’s Background
GE’s roots go back to 1890 when Thomas Edison established Edison General Electric Company. In 1892,
Edison General Electric Company merged with Thomson-Houston Company. The new company was called
General Electric Company. Several of Edison’s early products were still part of GE in 2008, including lighting,
transportation, industrial products, power transmission, and medical equipment. GE is the only company listed
in the Dow Jones Industrial Index today that was also included in the original index in 1896.
Over the century after its founding, GE made hundreds of acquisitions and expanded far beyond its original
businesses. By 1980, GE products ranged from plastics, consumer electronics, and nuclear reactors, to jet engines.
In 1981, Jack Welch became CEO and radically restructured the company. Welch urged his employees to be
“better than the best” and challenged each of the diverse GE businesses to be the number one or number two
competitor or disengage. Between 1981 and 1990, GE divested more than 200 businesses and made over 370
acquisitions. Acquisitions included NBC, Kidder Peabody, Thomson/CGR medical equipment, Borg-Warner
Chemicals, Penske Leasing, Tungsram light bulbs, and Polaris aircraft leasing. Businesses sold included small
appliances, consumer electronics, RCA Records, outdoor lawn equipment, oil exploration and refining, car
auctions, and mining. Welch also slashed layers of management and began a series of internal initiatives, many
of which set the standard for business practice around the world, such as Six Sigma. In 1980, the year before
Welch became CEO, GE recorded revenue of $26.8 billion; in 2000, the year before Welch retired, revenue was
nearly $130 billion.
Copyright © 2014 Thunderbird School of Global Management. All rights reserved. This case was prepared by Professor Andrew
C. Inkpen with research assistance from Wes Edens and Siva Palli for the purpose of classroom discussion only, and not to indicate
either effective or ineffective management.

This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

In 2001, Jeff Immelt became CEO and was still in the job in 2014. According to Immelt, the job of the
CEO is to “pick initiatives and businesses to get involved in, shape the company culture, pick great people.
Strategy is about the creation and allocation of right resources, to the right place, in the right way over time.
Whether you call it allocating capital resources or picking the initiatives and businesses to get involved in, the
heart of strategy is choices around where you want to play and how you want to win over whatever timeframe
is important to you.”3
Among Immelt’s early goals were to strengthen GE’s global presence and create a more collaborative culture.
Under Immelt, GE sold its insurance and plastics businesses, and its entertainment business, NBC Universal,
and strengthened its presence in healthcare, financial services, and oil and gas. In 2014, GE was actively trying
to sell its appliance business, one of the last of GE’s BTC businesses.

GE’s Strategy
GE organized its operations in seven main businesses: power and water, oil and gas, energy management, aviation, healthcare, transportation, home and business solutions, and GE Capital. Exhibit 1 provides a summary of
each of the businesses. The exhibit shows that each of the businesses employed tens of thousands of employees
and was a highly diversified business in its own right. If spun off from GE, the businesses would be among the
largest and most profitable companies in their respective sectors.
Given the diversity of businesses, what was the strategic logic that held the company together? The CEO’s
letter to the shareholders in the 2003 Annual Report stated:
We are another year along with our five-initiative strategy to create high-margin, capital-efficient
growth:
•     Technical Leadership: Technology and innovation are at the heart of our initiatives. Technical
leadership produces high-margin products, wins competitive battles, and creates new markets.
•     Services: Technical leadership has created a massive installed base of more than 100,000 longlived GE jet engines, power turbines, locomotives, and medical devices for which we can provide
high-margin services for decades.
•     Customer Focus: One of our successes is in “vertical selling,” the practice of aligning our offerings in four industries that are critical to GE: healthcare, energy, transportation, and retail.
They represent $47 billion of industrial revenues and $169 billion of financial services assets. GE
brings a unique array of capabilities to these industries, including products, services, information,
and financing. On this broad foundation, we can build deeper partnerships with our customers.
•     Globalization: We can take every growth idea and multiply its effectiveness through globalization. Globalization is a GE core competency. We have made and sold products outside the U.S.
for 100 years, and one-third of our leadership team is global. Our global revenues were almost
$61 billion in 2003, up 14%, and should grow 15% in 2004. We succeed because we recognize
one central fact: global growth requires more than simply shipping products. You must be equally
committed to developing capabilities and relationships in the markets where you want to succeed.
•     Growth Platforms: A key GE strength is our ability to conceptualize the future, identify “unstoppable” trends and develop new ways to grow….We follow a disciplined process for growth. First,
we segment broad markets and launch with a small platform acquisition. Then we transform the
business model using our growth initiatives, such as services and globalization. Finally, we apply
our financial strength to invest in organic growth or acquisitions. We can get big quickly while
generating solid returns.

The CEO’s letter to the shareholders in the 2006 Annual Report included:
Our strategies create strengths and capabilities, which, in turn, drive competitive advantage. The
consistent execution of the same strategic principles year after year provides the foundation to invest
and deliver.
We expect them [the businesses] to be industry leaders in market share, value, and profitability. We
want businesses where we can bring the totality of the Company—products, services, information,
and financing—to capitalize on the growth trends I mentioned earlier. We run these businesses with
common finance and human resource processes. We have one leadership development foundation
2    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

and one global research infrastructure to achieve excellent results with a common culture. We have
a few Company-wide Councils, like Services, so we can share ideas with minimum bureaucracy…
when we find that a business cannot meet our financial goals or could be run better outside GE, we
will exit that business rather than erode shareowner value.
Our “average hold” of a business is measured in decades. We do not “flip” assets. We are builders
of businesses. This takes people who believe in teamwork and have pride in workmanship. We have
a team that is focused on building a company that has enduring value and makes the world a better
place. Our culture matches the expectations of long-term investors.

In 2008, GE described itself as a reliable growth company. At GE’s Annual Leadership Meeting in early
2008, Jeff Immelt described four strategic principles to achieve growth:
1.     Invest in Leadership Businesses: We have spent the last six years assembling a portfolio to
drive growth in today’s more interconnected global economy. We will continue to refine the mix
to capture market opportunities that ensure our portfolio keeps generating faster growth, has
more balance, and creates a stronger competitive advantage. In 2008, we will continue to drive
results from our Growth as a Process initiative by:
•
•
•
•
•

Sustaining technical leadership
Accelerating globalization
Driving services growth
Bringing lean and enterprise to customers
Building adjacencies to the installed base

2.     Execution and Financial Discipline: This year we are formalizing a process around operational
excellence that will help us to grow margins and returns in a tough environment. Our process
is being led by a new Operating Council and shared metrics to measure results.
3.     Growth as a Process: Our focus on Growth as a Process continues to enable us to deliver organic revenue growth of 2-3x GDP. Our process is accelerating, it’s visible, and it creates high
confidence for investors. In 2006 and 2007, we achieved 9% organic revenue growth and, in
2008, we expect to maintain this level of growth.
4.     Great People: GE has always attracted great talent. Converting talent into a strategic advantage
means developing and retaining that talent so that we have the best leadership team. In 2008,
we will do this by focusing on core capabilities of LIG [Leadership Innovation and Growth],
accessing local knowledge for global growth, and leveraging our deep expertise.

In recent years, GE talked more about organic growth. According to Jeff Immelt:
The focus on organic growth is also going to require people to stay in the same jobs longer. You
can’t plant a tree and see it grow in a year. This is very countercultural in an organization where
building a career has always meant packing your bags every 18 months. Going forward, you’re still
going to have some 18-month jobs, but over the course of 30 years, you’re going to have more jobs
that last five years.4

In 2012, GE said its strategy was based on five pillars: technological leadership, services acceleration, enduring customer relationships, resource allocation, and globalization.5 Immelt described the company as a winning
company because of its ability to create its own future. In his own words:
It starts with a culture—the foundation for any successful enterprise—a culture that inspires our
people to improve every day. Our team is mission-based: We build, move, power, and cure the world.
We constantly learn from our customers, our competitors, and from each other. Strategy is not set
through one act or one deal. Rather, we build it sequentially through making decisions and enhancing
capability. As we look forward, it is more important that investors see the company through a set of
choices we make for the purpose of creating value over time.

TB0383    3
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

In the letter to shareholders, Immelt described five strategies for growth (see Figure 1):
First, we have remade GE as an “infrastructure leader” with a smaller financial services division.
About $60 trillion of infrastructure investment is needed by 2030 to support billions of new consumers
joining the middle class in the emerging world, and to support developed-market productivity. Over
the last decade, we have grown our infrastructure platforms by investing in adjacencies, pursuing
opportunities that are closely related to the core. About one-third of our infrastructure revenues
comes from businesses we weren’t in a decade ago. These include fast-growth businesses like Oil and
Gas, Life Sciences, and Distributed Power. This growth has come through organic investment and
focused acquisitions. At the same time, we are creating a smaller, more focused financial services
company—one that has a lower risk profile and adds value to our industrial businesses. Our goal is
to have infrastructure earnings reach 70% of our total over time.
Second, we are committed to allocating capital in a balanced and disciplined way, but with a clear
priority for dividend growth. GE will generate $100 billion for allocation over the last few years,
including cash from existing operations, dividends from GE capital and dispositions. The top priority
remains growing the dividend. Since 2000, we have paid out $106 billion in dividends, more than
any other company. We like GE to have a high dividend yield, which is appealing to a majority of
our investors.
Third, we have significantly increased investment in organic growth, focusing on R&D and global
expansion. We believe that investing in technology and globalization is key to gaining market share.
Annually, we invest more than $10 billion to launch new products and build global capability. We use
the entire GE enterprise to improve the value of our investments in technology and globalization. For
technology, we have a “Global Research Center Network” that builds strategic capability, spreads
technology around the world, and innovates for local markets.
Fourth, we have built deep customer relationships, based on an outcome-oriented model. Our
goal is aligned with customer outcomes, and our products improve their productivity. We believe in
a solutions-oriented selling model, one that can deliver outcomes for customers. We only win when
customers win.
Fifth and finally, we have positioned GE to lead in the big productivity drivers of this era. This is
important for growing our margins while keeping our customers competitive. The levers of productivity are constantly changing. For more than a century, GE has been a leader in productivity and
innovation.6

GE’s Acquisition Strategy
Acquisitions and divestitures played a key role in GE’s corporate strategy. Exhibits 2 and 3 show GE’s main
acquisitions and divestitures over the past few decades. GE exited all or most of its insurance, materials, equipment services, entertainment, and industrial platforms. GE also exited its U.S. mortgage origination business
and its personal loan business in Japan. In 2007, GE sold its chemicals business because of “rampant inflation
in raw material costs.” In 2014, GE announced that it would divest its consumer credit business in an IPO that
valued the business at about $20 billion.
Over the same time period, GE acquired many new businesses. GE investments resulted in one of the
largest renewable-energy businesses in the world. GE diversified its healthcare business by investing in life sciences and healthcare IT. GE created a new high-tech industrial business called Enterprise Solutions and made
several investments in financial services businesses in global markets. GE acquired Vetco Gray, a company that
produced products for the upstream oil and gas industry. In 2014, GE acquired the French engineering company
Alstom for $17 billion.
Not all of GE’s acquisitions were successful. It was widely acknowledged that the acquisition of brokerage
firm Kidder Peabody in the mid-1980s was a huge failure. The system of individual risk-taking and incentive
compensation at Kidder Peabody never meshed with GE’s culture and values. Many questions were also raised
when GE created NBC Universal in 2003 via the 80% acquisition of Vivendi’s film and television unit, which
included Universal Studios and theme parks. Universal had gone through several M&A deals before the GE
acquisition. In 1990, the large Japanese electronics company Matsushita acquired MCA, Universal’s parent, for
4    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Figure 1. GE Growth Strategy: A Six-Part Process

Source: T. A. Stewart, “Growth as a Process: The HBR Interview Jeffrey R. Immelt,” Harvard Business Review, June 2006, pp.
60-70.

$6.59 billion. In 1995, the Canadian spirits company Seagram acquired 80% of MCA from Matsushita for $5.7
billion. In 2000, Vivendi Group acquired Seagram. At the time of the deal, many pundits raised questions. For
example, The Wall Street Journal wrote, “The strategic elements of the deal are harder for GE to justify. The media
business is far more competitive than other industries in which GE can use its financial heft and strong brand
name to squash the competition. GE executives have said they had no interest in owning a movie studio, with
its unpredictable earnings and difficult personalities.”7 NBC Universal was divested in 2012, and Immelt said,
“When we looked at NBC, we made the transition from network to cable and the next transition was Internet
and I didn’t want to make that transition as I didn’t think we were particularly skilled in that. I wasn’t sure if we
are positioned to play that game”8
In his 2012 letter to the shareowners, Jeffery Immelt wrote: “We will continue to execute on focused acquisitions, a capital efficient way to grow the company. We will keep our focus on acquiring specific capabilities
where GE can add substantial value.”

TB0383    5
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

GE’s Culture and Values
GE’s corporate values can be found in corporate statements that identify the traits that should be embodied by
leaders. Table 1 shows an example of a GE value statement during Jack Welch’s tenure as CEO.
Table 1. GE Value Statement
GE Leaders—always with unyielding integrity:
•     Have a passion for excellence and hate bureaucracy
•     Are open to ideas from anywhere, and committed to work out
•     Live quality and drive cost and speed for competitive advantage
•     Have the self-confidence to involve everyone, and behave in a boundaryless fashion
•     Create a clear, simple, reality-based vision, and communicate it to all constituencies
•     Have enormous energy and the ability to energize others
•     Stretch, set aggressive goals, and reward progress, yet understand accountability and commitment
•     See change as opportunity, not threat
•     Have global brains, and build diverse and global teams

Table 2 shows a more recent statement of values and actions.
Table 2. GE Values Card

GE evaluated its leaders based on various traits. According to Jeff Immelt:
By the end of 2004, we came up with five growth traits. The first is external focus. Then there’s
imagination and creativity. And a growth leader must be especially decisive and capable of clear
thinking. Inclusiveness is also vital. Finally, leaders in these high-growth companies tend to have
deep domain expertise.9

Table 3 provides more detail on the growth traits. For each growth trait, there were measurable behaviors
that represented “outstanding” and “needs improvement.” For example, for clear thinking, “Confident in standup skills…without the PowerPoint” was an outstanding behavior. “Getting bogged down in details” was evidence
of a need for improvement. GE used these behaviors to evaluate its leaders and managers.
A few years ago, GE leadership asked whether the above growth traits were still the right values. GE looked
outside the company by having its senior executives meet with leaders from more than 100 organizations, including large multinationals, universities, and small start-ups in emerging markets. The conclusion was that the five
growth values were still relevant for GE.
6    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Table 3. GE Individual Growth Traits
External Focus
•     Defines success in market/industry terms…understands customer needs, marketplace dynamics, industry trends, and
the competitive landscape in your industry or function
•     Considers the external impact of business activities and decisions on customers, market/industry, investors, media,
government, and communities
•     Anticipates customer needs and ensures that they are met…measures processes and performance through the customer’s
eyes
•     Stays current with industry trends, including market intelligence and competitive analysis, and takes an active role in
shaping their industry and/or function
•     Takes action to enhance GE’s reputation among all stakeholders…represents the Company well
Clear Thinking
•     Simplifies strategy into specific actions, makes decisions, and communicates priorities
•     Has strategic capacity to sift through complex information and focus on the critical few priorities
•     Communicates messages clearly and concisely
•     Able to translate strategy into business objectives with clear accountability
•     Decisive…able to make decisions with speed and accuracy…based on best available information
•     Is accountable for organic growth and frees up resources to fund innovation
•     Reality…ability to bring reality to situations to identify gaps between perception and facts
Imagination and Courage
•     Has the imagination to take risks on both people and ideas…bold thinking to imagine a better way and the courage
to make it a reality
•     Generates new and unique ideas…makes fresh connections; an original thinker
•     Courage to take action on ideas…fights for growth, both internally and externally
•     Supports an environment in which people can take risks, consistent with integrity, and experiment
•     Brings creative ideas to fruition…good instincts about which ideas will work and when
•     Viewed as an advocate of innovation…pushes for “big bets” to accelerate our competitive advantage
Inclusiveness
•     Can energize teams through inclusiveness and connection with people…builds loyalty and commitment
•     Creates an engaging work environment…appeals to the unique interests of each team member
•     Builds a connection with the team through personal involvement and trust…inspires people to want to perform at a
higher level
•     Promotes an environment that recognizes and celebrates individual and cultural differences
•     Develops others…provides others with feedback and coaching…encourages personal growth
Expertise
•     Has the confidence and perspective that comes through depth in industry/function to impact growth
•     Learns from living with the impact of their decisions and actions
•     Has demonstrated leadership throughout different business cycles
•     Gains perspective through varied experiences and build-up of skills
•     Continually strives to increase knowledge with up-to-date information

Comments on GE Culture
Dennis Dammerman, former GE Vice Chairman and CFO, made the following comments about how the GE
culture evolved during Jack Welch’s tenure:10
Eventually, the businesses began to get flatter and flatter, with some interesting phenomena as byproducts. For one, a whole new type of leader became necessary. One could no longer be a colorless, impersonal autocrat, a technician who could manipulate the management structure to produce
results. The structure was gone. The leader now had to emerge from the corner office, and excite
teams—energize them, lead them rather than manage them. Not everyone was capable of doing that.
Many stumbled for a while and retired or otherwise departed. Some adapted amazingly well and
became excited and younger in their new role. The bureaucrats, many at significant pay levels, had
a bad time of it. The kitchen light came on, and suddenly there were no longer the pipes and cabinets
of bureaucracy to hide under. They left by the battalions.
TB0383    7
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

The phenomenon that best captures the sharing, learning, cooperative atmosphere at the new GE is
what we call the CEC, our Corporate Executive Council meeting, which takes place quarterly. The
leaders of our 12 big businesses—the senior corporate leadership and a few others, about 25 of us
in all—assemble from around the world for two days and meet in a small room at our management
center, downstate from here at Crotonville, to share insights, best practices, market intelligence,
warnings, technology, anything of value, in an atmosphere I can only describe as approximating a
coed frat house. The CEC is a family meeting with a lot of laughing, arguing, shouting, good-natured
insults, usually initiated by Welch, and incessant sharing. Someone who once sat in on this CEC
meeting remarked with some amazement that “these guys sound like they actually like each other.”
A political remark, a “puffy” chart, a self-serving presentation are now so culturally alien that a pall
of embarrassed silence descends over the room on the infrequent occasion one slips in.
Our business leaders go away from these meetings refreshed, enlightened, renewed. They go back to
the competitive wars knowing that every resource and every brain in this 100 billion dollar global
enterprise is instantly at their disposal, and whatever they need will be willingly given if they just
pick up the phone. Those who persist in lumping GE with the classic conglomerates would need less
than 10 minutes in that Crotonville meeting room to arrive at a new view.
If there is a simple but profoundly important lesson we learned from those days, it is this: you must
have a vision that—like “number one or number two in every business”—is so clean and so clear
that everyone from a trainee on a drill press to a Vice Chairman can understand it, and repeat it
until you wake up at night saying it, then say it again the next day. And even more important, you
must reinforce that vision with every action you take and, by proxy, every action your management
team takes, because culture change can be smothered in its cradle by a very small number of visible
contradictory actions.

Other comments on the culture from a former executive:
I was proud to be a GE employee. GE always had a good reputation. I could go to the airline as my
customers and say I was from GE—that gave me some respect.
It was a tough place to work. There were always financial measures. You had to embrace the culture.
You could have fun, be challenged, be rewarded.
Working at GE is rewarding, intense, and unforgiving. It is results-driven and measurement-driven.
It is unforgiving about integrity and business practices, unforgiving with regard to values, and unforgiving if you do not embrace the business measurements and initiatives.
We used to say they would throw you in the swamp and then tell you it was full of alligators.
GE was recognized for its training. I felt I could do battle with the best of them. I started from humble
beginnings.

GE Initiatives
Like his CEO predecessors, Jeff Immelt tried to put his stamp on the culture. He spoke often about the importance of risk taking, innovation, and growth. In doing so, he had to counter the often hard-driving processoriented culture that was heavily focused on financial metrics. The company encouraged its leaders to come up
with “Imagination Breakthrough” proposals that would take GE into a new line of business, geographic area, or
customer base, and give GE an incremental growth of $100 million.11
New initiatives were regularly introduced at GE. Table 4 provides a list of initiatives under way when Jeff
Immelt became CEO, and Table 5 shows some new initiatives started after Immelt became CEO.

8    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Table 4. GE Initiatives in Place When Jeff Immelt Became CEO
•     Best Practices Sharing: Identifies particularly effective approaches and spreads them across GE’s businesses.
•     Change Acceleration Process: Equips leaders with a proven method of managing change and prepares them to succeed as change agents.
•     Crotonville Customer Programs: Deploy the resources of GE’s renowned internal training facility for the benefit of
customers.
•     Multigenerational Product Development Plan: Ensures that new products are not simply optimized for the near
term but have the ability to evolve with customer needs.
•     Process Mapping: Creates visual representations of business processes to facilitate understanding and simplification.
•     Quick Market Intelligence: Builds on Wal-Mart’s innovation of tapping into real-time data about customer and
competitor behavior and disseminating that insight rapidly throughout the organization.
•    Simplification: Drives out extraneous costs incurred by overcomplicated processes and proliferation of options in
sourcing and other areas.
•     Six Sigma: Employs Motorola-pioneered methods to bring defect levels below 3.4 defects per million opportunities.
Intensive quality training yields “green belts,” “black belts,” and “master black belts.”
•     Work Out: Uses cross-functional teams and town hall meetings to find ways to take unproductive work out of the
system, like meetings, reports, and approval levels that add no value.
Source: T. A. Stewart, “Growth as a Process: An Interview with Jeffrey R. Immelt,” Harvard Business Review, June 2006, pp. 60-70.

Table 5. New GE Initiatives Since Jeff Immelt Became CEO1
•     Acquisition Integration Framework: Outlines a detailed process for ensuring that acquired entities are effectively
assimilated into GE.
•     At the Customer, for the Customer: Brings GE’s internal best practices, management tools, and training programs
to customers facing their own managerial challenges
•     CECOR Marketing Framework: Connects innovation and other growth efforts with market opportunities and
customer needs by asking questions to calibrate, explore, create, organize, and realize strategic growth.
•     Customer Dreaming Sessions: Assemble a group of the most influential and creative people in an industry to envision
its future and provoke the kind of interchange that can inspire new plans.
•     Growth Traits and Assessments: Outline and enforce the expectation that GE’s next generation of leaders will display
five strengths: external focus, clear thinking, imagination, inclusiveness, and domain expertise.
•     Imagination Breakthroughs: Focus top management’s attention and resources on promising ideas for new revenue
streams percolating up from anywhere in the organization.
•     Net-Promoter Score: The percentage of customers who say they would recommend GE to other companies minus
those who wouldn’t.2
•     Developing Health Globally (DHG): DHG builds healthcare capacity across national public healthcare systems in
the developing world.
•     Reverse Innovation: Innovating products in a poor country and selling those products in a rich country.3
•    Ecoimagination: GE’s commitment to build innovative solutions for today’s environmental challenges while driving
economic growth.
T. A. Stewart, “Growth as a Process: An Interview with Jeffrey R. Immelt,” Harvard Business Review, June 2006, pp.
60-70.
2
K. Kranhold, “Client-Satisfaction Tool Takes Root; GE Embraces Measurement of Customers’ Experience; Winning
Back ‘Detractors’,” Wall Street Journal, July 10, 2006.
3
http://hbr.org/2009/10/how-ge-is-disrupting-itself/.
1

TB0383    9
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

The Impact of GE Initiatives
A GE executive had the following to say about initiatives:
We took the initiatives very seriously. Some were a pain, but I tried to see how they would help my
business. For example, in aircraft engines a Multigenerational Product Development Plan was absolutely critical. At the Customer, for the Customer was something we practiced. We would help our
customers implement some of our best practices such as Six Sigma. After 9/11, we had customers who
needed help and we went in to see what we could do. We set up special courses for our customers at
Crotonville—sometimes Jack [Welch] would show up and hang out in the bar.
Every business is looking for a best practice to spread. Why would I want to share a best practice
with another part of the company? Because there are rewards for me. For example, I might be trying
to sell aircraft engines to a customer and I remember that one of our lighting guys mentioned something that might be useful to the customer. I might contact the light bulb guy to do an assessment in
Brazil. He will do it because it is part of the culture and also because there are rewards for doing it.
If someone said no I would go around him. I don’t think anyone ever said no to me.
We often worked with other businesses. In a real case, we had an aircraft company customer that
was willing to buy from us. They wanted GE Capital to help control some of their money. When an
aircraft company sells aircraft, their customers need to know that the company has the financial
capital to stay in business and support their products. With GE Capital involved, the aircraft company
became more creditworthy. The customer wanted GE engines because the engines were good, and
they wanted GE Capital to because it created legitimacy for them. GE Capital got involved because
it was good business and because it helped us.

GE Processes
GE used a variety of processes that were shared across the corporation. These “business rhythms,” or essential
business processes, included Session 1 (strategy and markets); Session 2 (operating plan), Session D (compliance),
and Session C (ranking). Once a year, all GE salaried employees were evaluated and ranked in a process known
as Session C. Session C, a performance appraisal and leadership assessment process developed in the 1950s, was
a vehicle for identifying high-potential individuals across the firm. It was also a vehicle for the professional development of individuals and for considering succession into management roles. During this process, managers
give their people candid and frank feedback based on achievement of stretch objectives and demonstration of
company values.12
According to a GE executive:
Session C happens every year at the same time. The process starts in January and the final deadline
is usually in March. There is a set of instructions that identify the ranking criteria. You need a good
HR manager because every year the criteria and instructions change a bit. We were allowed to have
some local attributes depending on the nature of the business.
The instructions might say, “Separate employees into 3 categories: the top 10, bottom 10, and
middle 70.” We had to identify high potentials and least effective. A high potential is someone who
can move two levels of management on the organization chart. There is a limit to the number of high
potentials, and I usually had to debate with my peers about who was a high potential. My boss was
the ultimate arbiter. If you made it into the top 10% and were classified as a high potential, it meant
that your career would change.
I had to do about 7-8 direct reports, and my direct reports would do their reports, and so on. This
would be done for the whole organization in all the different business units. I had about 200 salaried
employees, and they would all get ranked. Everybody was graded on the same criteria.
After the rankings were rolled up and everything was approved by the CEO, the computer was locked
and we would get notices that it was time to do employee appraisals. We would have to meet with
employees and discuss the appraisal. We had to fill out the section on areas for improvement. Both
my employee and I would have to acknowledge in the computerized system that the appraisal was
being done.

10    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

There are rules about the distribution of salaries. We were forced to discriminate between employees. I also had to make recommendations on stock options. There were guidelines, such as a certain
percentage has to be given to people who had never received them.
There was a time when I believed taking out the bottom 10% was ruthless and uncaring. Over time,
I began to realize that businesses need the right people and that it is best for the individual and the
company to make the change. You cannot afford to not have the best team….I had confidence and I
did not find the system threatening. You got a taste for success and you had to adapt and change. It
is a human system. I think it is as fair as a system like this can be. I think we generally got it right,
but there were a few exceptions. This was the culture and this was the way it was done. There were
always a few people who believed that the system was against them. As a manager, Session C is not
taken lightly because I am getting judged on this.

The Session C process concluded with the CEO going into the field to each of GE’s businesses to personally review the performance and development plans for GE’s top managers. At the conclusion of Session C
discussions, the CEO and senior executives agreed and signed off on developmental actions for each individual.
In doing so, the corporate headquarters at GE “owned” the top 500 leaders and “rented them out” to the firm’s
businesses.13 Managers who tried to hold on to top people and not share could receive negative evaluations.
According to Susan Peters, GE’s Senior VP Human Resources, the goal of leadership development:
is [to] find the best people, put them in the top, recognize, reward them, grow them, ensure that the
people who are really carrying the company are getting the right feedback and support and training and development. Those who are not moving apace too get feedback in development as their
first course of action, but if they cannot make it then we help them leave with respect and dignity.
We always believe in differentiation. We are more about guidelines than specific numbers. We don’t
want people to put 10% in this box. We want people to use judgment in the process. There might be
teams in GE who have no people that are on that list; there are others who have 15%. You have to
talk about it and you have to be fair and give people time.14

Succession planning was another critical HR process. GE managers in operational roles moved frequently,
usually within a business unit but sometimes across businesses. Finance, legal, and HR managers would be frequently moved across businesses as a means of sharing ideas and transferring best practices.
Once a year we had to do succession planning using a formal system. For my direct reports, I had
to identify 2-3 people per position who could take over the management positions. I did it with my
organization from the bottom up, and I had had a lot of debates with my staff. I had to defend my plan
to my boss who had to defend it to his boss. Managers would get feedback as part of the appraisal
process on where you fit in the organization and where your career would be going.
Part of the success of the company was the ability to move people around. Without this system, GE
would not be as successful. There was a time in my career where I got three job offers in a week. My
boss thought I was getting a bit stale in my job, so he put the word out to HR that I might be interested
in a move. HR is the dealmaker and they know all the top talents. They make a list for all the jobs. I
was offered two jobs that would have required an international move and I turned them down. The
third job I took. Can you turn jobs down? Yes, but it needs to be done quickly and gracefully.
We had to sell ourselves as well as our products. Every year you are getting judged. Once you change
jobs a few times, you start to believe that you have the set of skills to be transferable to other jobs.
You look forward to new jobs because there is a network of people behind you who can help.

Growth and Change
The culture at GE revolved around change. The Change Acceleration Process (Table 4) was an initiative introduced specifically to help GE managers manage the change process. Several decades ago, Jack Welch described
change at GE:15
You’ve got to be on the cutting edge of change. You can’t simply maintain the status quo, because
somebody’s always coming from another country with another product, or consumer tastes change,

TB0383    11
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

or the cost structure does, or there’s a technology breakthrough. If you’re not fast and adaptable,
you’re vulnerable. This is true for every segment of every business in every country in the world.
People always ask, “Is the change over? Can we stop now?” You’ve got to tell them, “No, it’s just
begun.” They must come to understand that it is never ending. Leaders must create an atmosphere
where people understand that change is a continuing process, not an event.
The changes are always bigger than you initially sense. In the beginning of something like the defense industry downsizing, people are in denial—they can’t get themselves to believe how big the
change will be.
How do you bring people into the change process? Start with reality. Get all the facts out. Give people
the rationale for change, laying it out in the clearest, most dramatic terms. When everybody gets the
same facts, they’ll generally come to the same conclusion. Only after everyone agrees on the reality
and resistance is lowered can you begin to get buy-in to the needed change.
GE recognized that to drive change you need to stick with it. You drive everyone by using the tools.
You need to get scale so that the tool gets better. You don’t allow for variation on the tools and initiatives because you need to build scale.

Another executive stated:
Change is in the GE DNA. The initiatives were always changing. Session C was a bit different every
year. We were always hearing from Jack Welch about the need for change. If you are not comfortable
with change, GE is not the place to be.
We were always looking for new ideas and we wanted to share ideas with each other. We looked
outside our business—Jack used to say don’t look at competitors; they probably have the same challenges. We looked outside the business for ideas we could use. People were encouraged to look at
best practices at other companies.

Conclusion
To conclude, some comments by Jeff Immelt:
Investors often ask how we can execute in a company with such diverse businesses. We do it by running the Company with common initiatives around growth and financial discipline….I want investors
to see that GE is truly more than the “sum of the parts.” The strength of GE is in the “totality.” It is
the ability to deliver in good times and bad.16
Our ability to create our future is why GE can win any environment. It starts with a culture—the
foundation for any successful enterprise—culture that inspires our people to improve every day.
Our team is mission-based: We build, move, power, and cure the world. We believe in a better way;
we constantly learn from our customers, our competition, and each other. We seek solutions for our
customers and society. And we are “We Company.” We know that strong teams with great people
outperform individuals. That is why GE works.17
We like the way GE is positioned in the environment: a great portfolio of world-class, technologyleading businesses; a strong position in fast-growth global markets; leading-edge service technologies that achieve customer productivity; high visibility with a backlog of $210 billion; and a strong
financial position. We want investors to see GE as a safe, long-term investment. One with a great
dividend that is delivering long-term growth.

12    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Endnotes
1

D. Roberts and J. Authers, “The Harder They Fall,” www.FT.com, October 27, 2005.

K. Kranhold, “For GE, No Lack of Ideas; As Frustrated Investors Identify Units to Sell, Others Back Status Quo,” Wall
Street Journal, May 9, 2007, p. C1.
3
http://www.forbes.com/sites/georgebradt/2011/09/07/ge-ceo-jeff-immelts-long-term-view-10-years-in/.
4
T. A. Stewart, “Growth as a Process: An Interview with Jeffrey R. Immelt,” Harvard Business Review, June 2006, pp. 60-70.
5
http://sloanreview.mit.edu/article/ge-talent-management-aligning-hiring-with-strategy/.
6
2012 GE Annual Report.
7
K. Brown, “Will GE Be Enjoying the Movie? As it Jumps Into the Vivendi Deal, Conglomerate is Buying Low, But
Investors Question the Fit,” Wall Street Journal, September 3, 2003, p. C.1.
8
http://www.cbs.com/shows/60_minutes/video/2150575024/why-immelt-sold-nbc-universal.
9
http://sloanreview.mit.edu/article/ge-talent-management-aligning-hiring-with-strategy/.
10
D. Dammerman, Executive Speeches. October/November, 1998, 13, No. 2, pp. 1-6.
11
http://www.businessweek.com/stories/2005-03-27/the-immelt-revolution.
12
http://blogs.hbr.org/2011/06/you-get-what-you-expect-from-p/.
13
R. Fulmer, P. A. Gibbs, M. Goldsmith, 2000. “Developing Leaders: How Winning Companies Keep on Winning,” Sloan
Management Review, October, pp. 49-59.
14
http://articles.economictimes.indiatimes.com/2013-11-15/news/44113596_1_leadership-development-developmenttheory-things.
15
S. Stratford, “A Master Class in Radical Change,” Fortune, December 13, 1993, pp. 82-86.
16
2007 GE Annual Report.
17
Ibid.
2

TB0383    13
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Exhibit 1. Summary of GE Businesses
•     GE Aviation
2012 Revenue: $20 billion; 2012 Profit: 18.7%; Number of Employees: 25,000
Aviation Services, Aviation Systems, Business and General Aviation, Commercial Engines, GE Capital Aviation Services
(GECAS), Marine Engines, Military Engines
•     GE Capital
2012 Revenue: $46 billion; 2012 Profit: 3.9%; Number of Employees: 60,000;
Commercial Lending and Leasing, Consumer, Real Estate, Energy Financial Services, Aviation Financial Services
•     GE Energy Management
2012 Revenue: $7.4 billion; 2012 Profit: 1.8%; Number of Employees: 30,000
Automation & Process Control, Controls, Critical Power, Drives, Electrical Distribution, Geospatial Systems, High
Voltage Equipment, Industrial Communications, Monitoring And Diagnostics, Motors And Generators, Power Conversion, Protection And Control, Smart Metering, Substation Automation, Utility Operation Systems
•     GE Healthcare
2012 Revenue: $18.3 billion; 2012 Profit: 15.9%; Number of Employees: 46,000
GE Blueprint for Low Dose, GE Healthcare, GE Healthcare Education, GE Healthcare Life Services, GE Healthcare
News, GE Healthcare Products, GE Healthcare Services, GE Healthcare Specialties
•     GE Home and Business Solutions
2012 Revenue: $7.9 billion; 2012 Profit: 3.9%; Number of Employees: 28,000
Avantapure, Homespring, Home Standby Generator Systems, Pro Elite, Sealants
•     GE Oil and Gas
2012 Revenue: $15.2 billion; 2012 Profit: 12.6%; Number of Employees: 37,000
Products: air filtration, air-cooled heat exchanges, artificial lift controls, blowers, capital drilling equipment, centrifugal
pumps, chemical injection pumps, compressors, controls—generator, drilling measurements, gasification, generators,
nuclear energy, oil and gas reducing and metering systems, petroleum reactors and steam condensers, pipeline solutions,
radiation measurement, solar power, solar turbines, subsea wellheads, surface flow control, surface pumping systems,
turboexpanders, utility operations software, wind turbines
•     GE Power and Water
2012 Revenue: $28.3 billion; 2012 Profit: 19%; Number of Employees: 37,000
Products: gas turbines, gas engines, generators, nuclear energy, solar power, steam turbines, water, process and treatment
equipment, wind turbines
•     GE Transportation
2012 Revenue: $5.6 billion; 2012 Profit: 18.4%; Number of Employees: 12,000
Diesel marine power, diesel stationary power, drilling motors, energy storage, locomotives, railway signaling and communication, railway traffic control and dispatch, software
Source: Various GE sources.

14    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Exhibit 2. Select GE Divestitures

Business Sold
Aparatebau A.G. Goldach
Monogram Electric Housewares
KOA-AM and KOAQ-FM
Utah International and Utah-Marcona
Houseware operations
Electro-Chemical Energy Conversion Programs
Simplex-GE
Coronet
RCA Global Communications
NBC radio network operations and stations
Nuclear waste services assets
Software International Corporation
Instrument products operations
Ladd Petroleum
Domestic compressor motor business
Ruffin Village
Disaster Recovery Services Unit
Edison Life Insurance plus home and auto insurance businesses
Water Technologies’ transportation coolant aftermarket business
Nuovo Pignone and retail fueling business
Commercial AC motor unit
Dione PLC
Storage USA
GE Life
Plastics business
U.S. mortgage business
NBC Universal
Mexican Assets (GE Capital)

Value (where available)
$22M
$300M
$4.7M
$160M
$5.5M
$24M
$110M
$542M
$120M
$3.5M
$2.15B
$203.8M
$72.5M
$113M
$2.3B
$910M
$11.6B
$117M
$2.0 B

TB0383    15
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Exhibit 3. Select GE Acquisitions

Company Acquired
Metropolitan Television
Benerson
Intersil
Employers Reinsurance
RCA
Kidder, Peabody, & Co.
Gelco Payment Systems
D&K Financial
MNC Financial
Burton Group
Travelers Mortgage Services
ELLCO Leasing Corporation
Tungsram
Businessland Rents
GNA Corporation
United Pacific Life Insurance
Lockheed Martin Medical Imaging Systems
Imp Leas
Unilec Corporation
Syprotec
Energy and Environmental Research
Harmon Industries
Young Generators
Smallworld Plc.
sofion AG
Heller Financial
Unison Industries
Time Retail Finance
Interlogix
Druck Holdings
Bravo (through NBC)
Enron Wind
PII
International Fiber Systems
Universal
Transamerica Finance
Mountain Systems
Monitoring Automation Systems
OSi Specialties
M.J. Harden Associates
Triple G Systems Group
CitiCapital Fleet Services
Instrumentarium
HPSC
Benchmark Group
BHA Group
Dillard National Bank
DeltaBank (Russia)
Ionics
Invision Technologies
IDX
Edwards Systems Technology
Recreational Vehicle and Marine Financing (from E-trade)
Arden Realty
SBS Technologies
Biacore International AB
Trustreet Properties
Smiths Aerospace
Vetco Gray
Vital Signs Inc.
Dresser Inc.
British Wellstream Holding Plc.
Johnwood Plc.
Lufkin Industries
Alstom

Industry
TV Broadcasting
Manufacturing
Integrated Circuits
Insurance
Consumer Electronics
Investment Banking
Payment Processing
Financial Services
Banking
IT Consulting
Mortgage
Equipment Leasing
Lighting
Rental/leasing
Annuity Sales
Life Insurance
Medical Imaging
Automobile Leasing
Electrical Distribution
Substation monitoring
Nitrogen Oxide Control
Train Crossing Signals
Electrical Generators
GIS/mapping Software
IT Services
Commercial Banking
Aircraft Engines
Consumer Credit
Security Systems
Sensor Technology
Cable Channel
Wind Power
Pipeline Inspection
Fiber Optics
Entertainment
Commercial Lending
Manufacturing Systems
Security Systems
Chemicals
GIS/mapping
Medical Info Systems
Fleet Management
Medical Equipment
Medical Financing
Real Estate
Air Pollution Control
Commercial Banking
Commercial Banking
Water Treatment
Airport Screening
Medical Info Systems
Fire Detection
Online Brokerage
Real Estate
Embedded Computing
Life Sciences
Financial Services
Aviation
Oil and Gas
Health care
Oil and Gas
Oil and Gas
Oil and Gas
Oil and Gas
Engineering

Value
$235M
$1.1B
$6.4B
$600,000
$414M
$329M
$150M
$577M
$550M

$386M
$210M
$5.3B
$210M
$777M
$335M
$1.25B
$325M
$446M
$14B
$5.4B

$72M
$78M
$1.2B
$2.3B
$72.4M
$502M
$239M
$700M
$1B
$885M
$1.4B
$1.4B
$60M
$4.8B
$260M
$439M
$1.2B
$2.4B
$1.9B
$860M
$3.0B
$1.3B
$2.8B
$2.98B
$17B

16    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

Case 5: General Electric (Notes)

1.    Describe the scope of GE based on the three dimensions of corporate strategy.
2.    Describe four principles that have been guiding the acquisitions and restructuring that GE has made.
3.    Describe how Session C—the evaluation of the GE employees—is affected by the following factors:
a.    The strategic goals of GE
b.    GE’s Value Card

Case 5: General Electric ;

ENERAL LECTRIC S ORPORATE TRATEGY

Like the premature obituary of writer Mark Twain, reports of the death of the conglomerate are often

exaggerated. Diversified companies, straddling multiple industries, or even just dijferent parts of one

large sector, remain a dominant, if not always fashionable, feature of stock markets from the US.

to continental Europe and Asia. But a new backlash against conglomerates suggests that a more

lasting shift in investor preferences may be taking place-driven in part by the growing influence of

hedge funds and private equity houses. In public markets, big has rarely appeared less beautiful. 1
Through the 199os and 20oos, large diversified firms, often called conglomerates, largely fell out of favor with
investors. Arguments against conglomerates ranged from complexity in management to the difficulties that
analysts and investors had in understanding their operations. More recently, conglomerates have regained some
respect. As the largest of the US. diversified multinational firms, General Electric Company (GE), with over
300,000 employees, generated a variety of opinions, such as:

Increasingly restive General Electric Co. shareholders, frustrated with six years of meager returns,

are pressuring Chairman Jejfrey Immelt to break up the conglomerate. But some shareholders and

analysts argue that GE s sprawling businesses are better Ojf together than apart. GE s big umbrella,

these investors say, can balance dijfering product and economic cycles, while helping all its busi-

nesses financially. And that would boost the stock price over the longer term.

“T he main appeal of GE is its diversification, ”says Mark Demos, portfolio manager at Fifth Third

Asset Management, which owns 12.6 million GE shares. He says this isn’t the time to break up the

company, because global economic trends and investor sentiment are moving toward bigger more

international companies such as GE.2
GE’s Background
GE’s roots go back to 1890 when Thomas Edison established Edison General Electric Company. In 1892,
Edison General Electric Company merged with Thomson-Houston Company. The new company was called
General Electric Company. Several of Edison’s early products were still part of GE in 2008, including lighting,
transportation, industrial products, power transmission, and medical equipment. GE is the only company listed
in the Dow Jones Industrial Index today that was also included in the original index in 1896.

Over the century after its founding, GE made hundreds of acquisitions and expanded far beyond its original
businesses. By 1980, GE products ranged from plastics, consumer electronics, and nuclear reactors, to jet engines.
In 1981, Jack Welch became CEO and radically restructured the company. Welch urged his employees to be
“better than the best” and challenged each of the diverse GE businesses to be the number one or number two
competitor or disengage. Between 1981 and 1990, GE divested more than 200 businesses and made over 370
acquisitions. Acquisitions included NBC, Kidder Peabody, Thomson/CGR medical equipment, Borg-Warner
Chemicals, Penske Leasing, Tungsram light bulbs, and Polaris aircraft leasing. Businesses sold included small
appliances, consumer electronics, RCA Records, outdoor lawn equipment, oil exploration and refining, car
auctions, and mining. Welch also slashed layers of management and began a series of internal initiatives, many
of which set the standard for business practice around the world, such as Six Sigma. In 1980, the year before
Welch became CEO, GE recorded revenue of $26.8 billion; in 2000, the year before Welch retired, revenue was
nearly $130 billion.

C. Inkpen with research assistance from Ms Edens and Siva Palli for the purpose of classroom discussion only, and not to indicate
either efifective or inefiieetive management.
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

Download
Google Translate
Bing Translator
Edit Online

For the exclusive use of W. Li, 2015.

TB0383

Andrew C. Inkpen

General Electric’s Corporate Strategy
Like the premature obituary of writer Mark Twain, reports of the death of the conglomerate are often
exaggerated. Diversified companies, straddling multiple industries, or even just different parts of one
large sector, remain a dominant, if not always fashionable, feature of stock markets from the U.S.
to continental Europe and Asia. But a new backlash against conglomerates suggests that a more
lasting shift in investor preferences may be taking place—driven in part by the growing influence of
hedge funds and private equity houses. In public markets, big has rarely appeared less beautiful.1

Through the 1990s and 2000s, large diversified firms, often called conglomerates, largely fell out of favor with
investors. Arguments against conglomerates ranged from complexity in management to the difficulties that
analysts and investors had in understanding their operations. More recently, conglomerates have regained some
respect. As the largest of the U.S. diversified multinational firms, General Electric Company (GE), with over
300,000 employees, generated a variety of opinions, such as:
Increasingly restive General Electric Co. shareholders, frustrated with six years of meager returns,
are pressuring Chairman Jeffrey Immelt to break up the conglomerate. But some shareholders and
analysts argue that GE’s sprawling businesses are better off together than apart. GE’s big umbrella,
these investors say, can balance differing product and economic cycles, while helping all its businesses financially. And that would boost the stock price over the longer term.
“The main appeal of GE is its diversification,” says Mark Demos, portfolio manager at Fifth Third
Asset Management, which owns 12.6 million GE shares. He says this isn’t the time to break up the
company, because global economic trends and investor sentiment are moving toward bigger, more
international companies such as GE.2

GE’s Background
GE’s roots go back to 1890 when Thomas Edison established Edison General Electric Company. In 1892,
Edison General Electric Company merged with Thomson-Houston Company. The new company was called
General Electric Company. Several of Edison’s early products were still part of GE in 2008, including lighting,
transportation, industrial products, power transmission, and medical equipment. GE is the only company listed
in the Dow Jones Industrial Index today that was also included in the original index in 1896.
Over the century after its founding, GE made hundreds of acquisitions and expanded far beyond its original
businesses. By 1980, GE products ranged from plastics, consumer electronics, and nuclear reactors, to jet engines.
In 1981, Jack Welch became CEO and radically restructured the company. Welch urged his employees to be
“better than the best” and challenged each of the diverse GE businesses to be the number one or number two
competitor or disengage. Between 1981 and 1990, GE divested more than 200 businesses and made over 370
acquisitions. Acquisitions included NBC, Kidder Peabody, Thomson/CGR medical equipment, Borg-Warner
Chemicals, Penske Leasing, Tungsram light bulbs, and Polaris aircraft leasing. Businesses sold included small
appliances, consumer electronics, RCA Records, outdoor lawn equipment, oil exploration and refining, car
auctions, and mining. Welch also slashed layers of management and began a series of internal initiatives, many
of which set the standard for business practice around the world, such as Six Sigma. In 1980, the year before
Welch became CEO, GE recorded revenue of $26.8 billion; in 2000, the year before Welch retired, revenue was
nearly $130 billion.
Copyright © 2014 Thunderbird School of Global Management. All rights reserved. This case was prepared by Professor Andrew
C. Inkpen with research assistance from Wes Edens and Siva Palli for the purpose of classroom discussion only, and not to indicate
either effective or ineffective management.

This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

In 2001, Jeff Immelt became CEO and was still in the job in 2014. According to Immelt, the job of the
CEO is to “pick initiatives and businesses to get involved in, shape the company culture, pick great people.
Strategy is about the creation and allocation of right resources, to the right place, in the right way over time.
Whether you call it allocating capital resources or picking the initiatives and businesses to get involved in, the
heart of strategy is choices around where you want to play and how you want to win over whatever timeframe
is important to you.”3
Among Immelt’s early goals were to strengthen GE’s global presence and create a more collaborative culture.
Under Immelt, GE sold its insurance and plastics businesses, and its entertainment business, NBC Universal,
and strengthened its presence in healthcare, financial services, and oil and gas. In 2014, GE was actively trying
to sell its appliance business, one of the last of GE’s BTC businesses.

GE’s Strategy
GE organized its operations in seven main businesses: power and water, oil and gas, energy management, aviation, healthcare, transportation, home and business solutions, and GE Capital. Exhibit 1 provides a summary of
each of the businesses. The exhibit shows that each of the businesses employed tens of thousands of employees
and was a highly diversified business in its own right. If spun off from GE, the businesses would be among the
largest and most profitable companies in their respective sectors.
Given the diversity of businesses, what was the strategic logic that held the company together? The CEO’s
letter to the shareholders in the 2003 Annual Report stated:
We are another year along with our five-initiative strategy to create high-margin, capital-efficient
growth:
•     Technical Leadership: Technology and innovation are at the heart of our initiatives. Technical
leadership produces high-margin products, wins competitive battles, and creates new markets.
•     Services: Technical leadership has created a massive installed base of more than 100,000 longlived GE jet engines, power turbines, locomotives, and medical devices for which we can provide
high-margin services for decades.
•     Customer Focus: One of our successes is in “vertical selling,” the practice of aligning our offerings in four industries that are critical to GE: healthcare, energy, transportation, and retail.
They represent $47 billion of industrial revenues and $169 billion of financial services assets. GE
brings a unique array of capabilities to these industries, including products, services, information,
and financing. On this broad foundation, we can build deeper partnerships with our customers.
•     Globalization: We can take every growth idea and multiply its effectiveness through globalization. Globalization is a GE core competency. We have made and sold products outside the U.S.
for 100 years, and one-third of our leadership team is global. Our global revenues were almost
$61 billion in 2003, up 14%, and should grow 15% in 2004. We succeed because we recognize
one central fact: global growth requires more than simply shipping products. You must be equally
committed to developing capabilities and relationships in the markets where you want to succeed.
•     Growth Platforms: A key GE strength is our ability to conceptualize the future, identify “unstoppable” trends and develop new ways to grow….We follow a disciplined process for growth. First,
we segment broad markets and launch with a small platform acquisition. Then we transform the
business model using our growth initiatives, such as services and globalization. Finally, we apply
our financial strength to invest in organic growth or acquisitions. We can get big quickly while
generating solid returns.

The CEO’s letter to the shareholders in the 2006 Annual Report included:
Our strategies create strengths and capabilities, which, in turn, drive competitive advantage. The
consistent execution of the same strategic principles year after year provides the foundation to invest
and deliver.
We expect them [the businesses] to be industry leaders in market share, value, and profitability. We
want businesses where we can bring the totality of the Company—products, services, information,
and financing—to capitalize on the growth trends I mentioned earlier. We run these businesses with
common finance and human resource processes. We have one leadership development foundation
2    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

and one global research infrastructure to achieve excellent results with a common culture. We have
a few Company-wide Councils, like Services, so we can share ideas with minimum bureaucracy…
when we find that a business cannot meet our financial goals or could be run better outside GE, we
will exit that business rather than erode shareowner value.
Our “average hold” of a business is measured in decades. We do not “flip” assets. We are builders
of businesses. This takes people who believe in teamwork and have pride in workmanship. We have
a team that is focused on building a company that has enduring value and makes the world a better
place. Our culture matches the expectations of long-term investors.

In 2008, GE described itself as a reliable growth company. At GE’s Annual Leadership Meeting in early
2008, Jeff Immelt described four strategic principles to achieve growth:
1.     Invest in Leadership Businesses: We have spent the last six years assembling a portfolio to
drive growth in today’s more interconnected global economy. We will continue to refine the mix
to capture market opportunities that ensure our portfolio keeps generating faster growth, has
more balance, and creates a stronger competitive advantage. In 2008, we will continue to drive
results from our Growth as a Process initiative by:
•
•
•
•
•

Sustaining technical leadership
Accelerating globalization
Driving services growth
Bringing lean and enterprise to customers
Building adjacencies to the installed base

2.     Execution and Financial Discipline: This year we are formalizing a process around operational
excellence that will help us to grow margins and returns in a tough environment. Our process
is being led by a new Operating Council and shared metrics to measure results.
3.     Growth as a Process: Our focus on Growth as a Process continues to enable us to deliver organic revenue growth of 2-3x GDP. Our process is accelerating, it’s visible, and it creates high
confidence for investors. In 2006 and 2007, we achieved 9% organic revenue growth and, in
2008, we expect to maintain this level of growth.
4.     Great People: GE has always attracted great talent. Converting talent into a strategic advantage
means developing and retaining that talent so that we have the best leadership team. In 2008,
we will do this by focusing on core capabilities of LIG [Leadership Innovation and Growth],
accessing local knowledge for global growth, and leveraging our deep expertise.

In recent years, GE talked more about organic growth. According to Jeff Immelt:
The focus on organic growth is also going to require people to stay in the same jobs longer. You
can’t plant a tree and see it grow in a year. This is very countercultural in an organization where
building a career has always meant packing your bags every 18 months. Going forward, you’re still
going to have some 18-month jobs, but over the course of 30 years, you’re going to have more jobs
that last five years.4

In 2012, GE said its strategy was based on five pillars: technological leadership, services acceleration, enduring customer relationships, resource allocation, and globalization.5 Immelt described the company as a winning
company because of its ability to create its own future. In his own words:
It starts with a culture—the foundation for any successful enterprise—a culture that inspires our
people to improve every day. Our team is mission-based: We build, move, power, and cure the world.
We constantly learn from our customers, our competitors, and from each other. Strategy is not set
through one act or one deal. Rather, we build it sequentially through making decisions and enhancing
capability. As we look forward, it is more important that investors see the company through a set of
choices we make for the purpose of creating value over time.

TB0383    3
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

In the letter to shareholders, Immelt described five strategies for growth (see Figure 1):
First, we have remade GE as an “infrastructure leader” with a smaller financial services division.
About $60 trillion of infrastructure investment is needed by 2030 to support billions of new consumers
joining the middle class in the emerging world, and to support developed-market productivity. Over
the last decade, we have grown our infrastructure platforms by investing in adjacencies, pursuing
opportunities that are closely related to the core. About one-third of our infrastructure revenues
comes from businesses we weren’t in a decade ago. These include fast-growth businesses like Oil and
Gas, Life Sciences, and Distributed Power. This growth has come through organic investment and
focused acquisitions. At the same time, we are creating a smaller, more focused financial services
company—one that has a lower risk profile and adds value to our industrial businesses. Our goal is
to have infrastructure earnings reach 70% of our total over time.
Second, we are committed to allocating capital in a balanced and disciplined way, but with a clear
priority for dividend growth. GE will generate $100 billion for allocation over the last few years,
including cash from existing operations, dividends from GE capital and dispositions. The top priority
remains growing the dividend. Since 2000, we have paid out $106 billion in dividends, more than
any other company. We like GE to have a high dividend yield, which is appealing to a majority of
our investors.
Third, we have significantly increased investment in organic growth, focusing on R&D and global
expansion. We believe that investing in technology and globalization is key to gaining market share.
Annually, we invest more than $10 billion to launch new products and build global capability. We use
the entire GE enterprise to improve the value of our investments in technology and globalization. For
technology, we have a “Global Research Center Network” that builds strategic capability, spreads
technology around the world, and innovates for local markets.
Fourth, we have built deep customer relationships, based on an outcome-oriented model. Our
goal is aligned with customer outcomes, and our products improve their productivity. We believe in
a solutions-oriented selling model, one that can deliver outcomes for customers. We only win when
customers win.
Fifth and finally, we have positioned GE to lead in the big productivity drivers of this era. This is
important for growing our margins while keeping our customers competitive. The levers of productivity are constantly changing. For more than a century, GE has been a leader in productivity and
innovation.6

GE’s Acquisition Strategy
Acquisitions and divestitures played a key role in GE’s corporate strategy. Exhibits 2 and 3 show GE’s main
acquisitions and divestitures over the past few decades. GE exited all or most of its insurance, materials, equipment services, entertainment, and industrial platforms. GE also exited its U.S. mortgage origination business
and its personal loan business in Japan. In 2007, GE sold its chemicals business because of “rampant inflation
in raw material costs.” In 2014, GE announced that it would divest its consumer credit business in an IPO that
valued the business at about $20 billion.
Over the same time period, GE acquired many new businesses. GE investments resulted in one of the
largest renewable-energy businesses in the world. GE diversified its healthcare business by investing in life sciences and healthcare IT. GE created a new high-tech industrial business called Enterprise Solutions and made
several investments in financial services businesses in global markets. GE acquired Vetco Gray, a company that
produced products for the upstream oil and gas industry. In 2014, GE acquired the French engineering company
Alstom for $17 billion.
Not all of GE’s acquisitions were successful. It was widely acknowledged that the acquisition of brokerage
firm Kidder Peabody in the mid-1980s was a huge failure. The system of individual risk-taking and incentive
compensation at Kidder Peabody never meshed with GE’s culture and values. Many questions were also raised
when GE created NBC Universal in 2003 via the 80% acquisition of Vivendi’s film and television unit, which
included Universal Studios and theme parks. Universal had gone through several M&A deals before the GE
acquisition. In 1990, the large Japanese electronics company Matsushita acquired MCA, Universal’s parent, for
4    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Figure 1. GE Growth Strategy: A Six-Part Process

Source: T. A. Stewart, “Growth as a Process: The HBR Interview Jeffrey R. Immelt,” Harvard Business Review, June 2006, pp.
60-70.

$6.59 billion. In 1995, the Canadian spirits company Seagram acquired 80% of MCA from Matsushita for $5.7
billion. In 2000, Vivendi Group acquired Seagram. At the time of the deal, many pundits raised questions. For
example, The Wall Street Journal wrote, “The strategic elements of the deal are harder for GE to justify. The media
business is far more competitive than other industries in which GE can use its financial heft and strong brand
name to squash the competition. GE executives have said they had no interest in owning a movie studio, with
its unpredictable earnings and difficult personalities.”7 NBC Universal was divested in 2012, and Immelt said,
“When we looked at NBC, we made the transition from network to cable and the next transition was Internet
and I didn’t want to make that transition as I didn’t think we were particularly skilled in that. I wasn’t sure if we
are positioned to play that game”8
In his 2012 letter to the shareowners, Jeffery Immelt wrote: “We will continue to execute on focused acquisitions, a capital efficient way to grow the company. We will keep our focus on acquiring specific capabilities
where GE can add substantial value.”

TB0383    5
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

GE’s Culture and Values
GE’s corporate values can be found in corporate statements that identify the traits that should be embodied by
leaders. Table 1 shows an example of a GE value statement during Jack Welch’s tenure as CEO.
Table 1. GE Value Statement
GE Leaders—always with unyielding integrity:
•     Have a passion for excellence and hate bureaucracy
•     Are open to ideas from anywhere, and committed to work out
•     Live quality and drive cost and speed for competitive advantage
•     Have the self-confidence to involve everyone, and behave in a boundaryless fashion
•     Create a clear, simple, reality-based vision, and communicate it to all constituencies
•     Have enormous energy and the ability to energize others
•     Stretch, set aggressive goals, and reward progress, yet understand accountability and commitment
•     See change as opportunity, not threat
•     Have global brains, and build diverse and global teams

Table 2 shows a more recent statement of values and actions.
Table 2. GE Values Card

GE evaluated its leaders based on various traits. According to Jeff Immelt:
By the end of 2004, we came up with five growth traits. The first is external focus. Then there’s
imagination and creativity. And a growth leader must be especially decisive and capable of clear
thinking. Inclusiveness is also vital. Finally, leaders in these high-growth companies tend to have
deep domain expertise.9

Table 3 provides more detail on the growth traits. For each growth trait, there were measurable behaviors
that represented “outstanding” and “needs improvement.” For example, for clear thinking, “Confident in standup skills…without the PowerPoint” was an outstanding behavior. “Getting bogged down in details” was evidence
of a need for improvement. GE used these behaviors to evaluate its leaders and managers.
A few years ago, GE leadership asked whether the above growth traits were still the right values. GE looked
outside the company by having its senior executives meet with leaders from more than 100 organizations, including large multinationals, universities, and small start-ups in emerging markets. The conclusion was that the five
growth values were still relevant for GE.
6    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Table 3. GE Individual Growth Traits
External Focus
•     Defines success in market/industry terms…understands customer needs, marketplace dynamics, industry trends, and
the competitive landscape in your industry or function
•     Considers the external impact of business activities and decisions on customers, market/industry, investors, media,
government, and communities
•     Anticipates customer needs and ensures that they are met…measures processes and performance through the customer’s
eyes
•     Stays current with industry trends, including market intelligence and competitive analysis, and takes an active role in
shaping their industry and/or function
•     Takes action to enhance GE’s reputation among all stakeholders…represents the Company well
Clear Thinking
•     Simplifies strategy into specific actions, makes decisions, and communicates priorities
•     Has strategic capacity to sift through complex information and focus on the critical few priorities
•     Communicates messages clearly and concisely
•     Able to translate strategy into business objectives with clear accountability
•     Decisive…able to make decisions with speed and accuracy…based on best available information
•     Is accountable for organic growth and frees up resources to fund innovation
•     Reality…ability to bring reality to situations to identify gaps between perception and facts
Imagination and Courage
•     Has the imagination to take risks on both people and ideas…bold thinking to imagine a better way and the courage
to make it a reality
•     Generates new and unique ideas…makes fresh connections; an original thinker
•     Courage to take action on ideas…fights for growth, both internally and externally
•     Supports an environment in which people can take risks, consistent with integrity, and experiment
•     Brings creative ideas to fruition…good instincts about which ideas will work and when
•     Viewed as an advocate of innovation…pushes for “big bets” to accelerate our competitive advantage
Inclusiveness
•     Can energize teams through inclusiveness and connection with people…builds loyalty and commitment
•     Creates an engaging work environment…appeals to the unique interests of each team member
•     Builds a connection with the team through personal involvement and trust…inspires people to want to perform at a
higher level
•     Promotes an environment that recognizes and celebrates individual and cultural differences
•     Develops others…provides others with feedback and coaching…encourages personal growth
Expertise
•     Has the confidence and perspective that comes through depth in industry/function to impact growth
•     Learns from living with the impact of their decisions and actions
•     Has demonstrated leadership throughout different business cycles
•     Gains perspective through varied experiences and build-up of skills
•     Continually strives to increase knowledge with up-to-date information

Comments on GE Culture
Dennis Dammerman, former GE Vice Chairman and CFO, made the following comments about how the GE
culture evolved during Jack Welch’s tenure:10
Eventually, the businesses began to get flatter and flatter, with some interesting phenomena as byproducts. For one, a whole new type of leader became necessary. One could no longer be a colorless, impersonal autocrat, a technician who could manipulate the management structure to produce
results. The structure was gone. The leader now had to emerge from the corner office, and excite
teams—energize them, lead them rather than manage them. Not everyone was capable of doing that.
Many stumbled for a while and retired or otherwise departed. Some adapted amazingly well and
became excited and younger in their new role. The bureaucrats, many at significant pay levels, had
a bad time of it. The kitchen light came on, and suddenly there were no longer the pipes and cabinets
of bureaucracy to hide under. They left by the battalions.
TB0383    7
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

The phenomenon that best captures the sharing, learning, cooperative atmosphere at the new GE is
what we call the CEC, our Corporate Executive Council meeting, which takes place quarterly. The
leaders of our 12 big businesses—the senior corporate leadership and a few others, about 25 of us
in all—assemble from around the world for two days and meet in a small room at our management
center, downstate from here at Crotonville, to share insights, best practices, market intelligence,
warnings, technology, anything of value, in an atmosphere I can only describe as approximating a
coed frat house. The CEC is a family meeting with a lot of laughing, arguing, shouting, good-natured
insults, usually initiated by Welch, and incessant sharing. Someone who once sat in on this CEC
meeting remarked with some amazement that “these guys sound like they actually like each other.”
A political remark, a “puffy” chart, a self-serving presentation are now so culturally alien that a pall
of embarrassed silence descends over the room on the infrequent occasion one slips in.
Our business leaders go away from these meetings refreshed, enlightened, renewed. They go back to
the competitive wars knowing that every resource and every brain in this 100 billion dollar global
enterprise is instantly at their disposal, and whatever they need will be willingly given if they just
pick up the phone. Those who persist in lumping GE with the classic conglomerates would need less
than 10 minutes in that Crotonville meeting room to arrive at a new view.
If there is a simple but profoundly important lesson we learned from those days, it is this: you must
have a vision that—like “number one or number two in every business”—is so clean and so clear
that everyone from a trainee on a drill press to a Vice Chairman can understand it, and repeat it
until you wake up at night saying it, then say it again the next day. And even more important, you
must reinforce that vision with every action you take and, by proxy, every action your management
team takes, because culture change can be smothered in its cradle by a very small number of visible
contradictory actions.

Other comments on the culture from a former executive:
I was proud to be a GE employee. GE always had a good reputation. I could go to the airline as my
customers and say I was from GE—that gave me some respect.
It was a tough place to work. There were always financial measures. You had to embrace the culture.
You could have fun, be challenged, be rewarded.
Working at GE is rewarding, intense, and unforgiving. It is results-driven and measurement-driven.
It is unforgiving about integrity and business practices, unforgiving with regard to values, and unforgiving if you do not embrace the business measurements and initiatives.
We used to say they would throw you in the swamp and then tell you it was full of alligators.
GE was recognized for its training. I felt I could do battle with the best of them. I started from humble
beginnings.

GE Initiatives
Like his CEO predecessors, Jeff Immelt tried to put his stamp on the culture. He spoke often about the importance of risk taking, innovation, and growth. In doing so, he had to counter the often hard-driving processoriented culture that was heavily focused on financial metrics. The company encouraged its leaders to come up
with “Imagination Breakthrough” proposals that would take GE into a new line of business, geographic area, or
customer base, and give GE an incremental growth of $100 million.11
New initiatives were regularly introduced at GE. Table 4 provides a list of initiatives under way when Jeff
Immelt became CEO, and Table 5 shows some new initiatives started after Immelt became CEO.

8    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Table 4. GE Initiatives in Place When Jeff Immelt Became CEO
•     Best Practices Sharing: Identifies particularly effective approaches and spreads them across GE’s businesses.
•     Change Acceleration Process: Equips leaders with a proven method of managing change and prepares them to succeed as change agents.
•     Crotonville Customer Programs: Deploy the resources of GE’s renowned internal training facility for the benefit of
customers.
•     Multigenerational Product Development Plan: Ensures that new products are not simply optimized for the near
term but have the ability to evolve with customer needs.
•     Process Mapping: Creates visual representations of business processes to facilitate understanding and simplification.
•     Quick Market Intelligence: Builds on Wal-Mart’s innovation of tapping into real-time data about customer and
competitor behavior and disseminating that insight rapidly throughout the organization.
•    Simplification: Drives out extraneous costs incurred by overcomplicated processes and proliferation of options in
sourcing and other areas.
•     Six Sigma: Employs Motorola-pioneered methods to bring defect levels below 3.4 defects per million opportunities.
Intensive quality training yields “green belts,” “black belts,” and “master black belts.”
•     Work Out: Uses cross-functional teams and town hall meetings to find ways to take unproductive work out of the
system, like meetings, reports, and approval levels that add no value.
Source: T. A. Stewart, “Growth as a Process: An Interview with Jeffrey R. Immelt,” Harvard Business Review, June 2006, pp. 60-70.

Table 5. New GE Initiatives Since Jeff Immelt Became CEO1
•     Acquisition Integration Framework: Outlines a detailed process for ensuring that acquired entities are effectively
assimilated into GE.
•     At the Customer, for the Customer: Brings GE’s internal best practices, management tools, and training programs
to customers facing their own managerial challenges
•     CECOR Marketing Framework: Connects innovation and other growth efforts with market opportunities and
customer needs by asking questions to calibrate, explore, create, organize, and realize strategic growth.
•     Customer Dreaming Sessions: Assemble a group of the most influential and creative people in an industry to envision
its future and provoke the kind of interchange that can inspire new plans.
•     Growth Traits and Assessments: Outline and enforce the expectation that GE’s next generation of leaders will display
five strengths: external focus, clear thinking, imagination, inclusiveness, and domain expertise.
•     Imagination Breakthroughs: Focus top management’s attention and resources on promising ideas for new revenue
streams percolating up from anywhere in the organization.
•     Net-Promoter Score: The percentage of customers who say they would recommend GE to other companies minus
those who wouldn’t.2
•     Developing Health Globally (DHG): DHG builds healthcare capacity across national public healthcare systems in
the developing world.
•     Reverse Innovation: Innovating products in a poor country and selling those products in a rich country.3
•    Ecoimagination: GE’s commitment to build innovative solutions for today’s environmental challenges while driving
economic growth.
T. A. Stewart, “Growth as a Process: An Interview with Jeffrey R. Immelt,” Harvard Business Review, June 2006, pp.
60-70.
2
K. Kranhold, “Client-Satisfaction Tool Takes Root; GE Embraces Measurement of Customers’ Experience; Winning
Back ‘Detractors’,” Wall Street Journal, July 10, 2006.
3
http://hbr.org/2009/10/how-ge-is-disrupting-itself/.
1

TB0383    9
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

The Impact of GE Initiatives
A GE executive had the following to say about initiatives:
We took the initiatives very seriously. Some were a pain, but I tried to see how they would help my
business. For example, in aircraft engines a Multigenerational Product Development Plan was absolutely critical. At the Customer, for the Customer was something we practiced. We would help our
customers implement some of our best practices such as Six Sigma. After 9/11, we had customers who
needed help and we went in to see what we could do. We set up special courses for our customers at
Crotonville—sometimes Jack [Welch] would show up and hang out in the bar.
Every business is looking for a best practice to spread. Why would I want to share a best practice
with another part of the company? Because there are rewards for me. For example, I might be trying
to sell aircraft engines to a customer and I remember that one of our lighting guys mentioned something that might be useful to the customer. I might contact the light bulb guy to do an assessment in
Brazil. He will do it because it is part of the culture and also because there are rewards for doing it.
If someone said no I would go around him. I don’t think anyone ever said no to me.
We often worked with other businesses. In a real case, we had an aircraft company customer that
was willing to buy from us. They wanted GE Capital to help control some of their money. When an
aircraft company sells aircraft, their customers need to know that the company has the financial
capital to stay in business and support their products. With GE Capital involved, the aircraft company
became more creditworthy. The customer wanted GE engines because the engines were good, and
they wanted GE Capital to because it created legitimacy for them. GE Capital got involved because
it was good business and because it helped us.

GE Processes
GE used a variety of processes that were shared across the corporation. These “business rhythms,” or essential
business processes, included Session 1 (strategy and markets); Session 2 (operating plan), Session D (compliance),
and Session C (ranking). Once a year, all GE salaried employees were evaluated and ranked in a process known
as Session C. Session C, a performance appraisal and leadership assessment process developed in the 1950s, was
a vehicle for identifying high-potential individuals across the firm. It was also a vehicle for the professional development of individuals and for considering succession into management roles. During this process, managers
give their people candid and frank feedback based on achievement of stretch objectives and demonstration of
company values.12
According to a GE executive:
Session C happens every year at the same time. The process starts in January and the final deadline
is usually in March. There is a set of instructions that identify the ranking criteria. You need a good
HR manager because every year the criteria and instructions change a bit. We were allowed to have
some local attributes depending on the nature of the business.
The instructions might say, “Separate employees into 3 categories: the top 10, bottom 10, and
middle 70.” We had to identify high potentials and least effective. A high potential is someone who
can move two levels of management on the organization chart. There is a limit to the number of high
potentials, and I usually had to debate with my peers about who was a high potential. My boss was
the ultimate arbiter. If you made it into the top 10% and were classified as a high potential, it meant
that your career would change.
I had to do about 7-8 direct reports, and my direct reports would do their reports, and so on. This
would be done for the whole organization in all the different business units. I had about 200 salaried
employees, and they would all get ranked. Everybody was graded on the same criteria.
After the rankings were rolled up and everything was approved by the CEO, the computer was locked
and we would get notices that it was time to do employee appraisals. We would have to meet with
employees and discuss the appraisal. We had to fill out the section on areas for improvement. Both
my employee and I would have to acknowledge in the computerized system that the appraisal was
being done.

10    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

There are rules about the distribution of salaries. We were forced to discriminate between employees. I also had to make recommendations on stock options. There were guidelines, such as a certain
percentage has to be given to people who had never received them.
There was a time when I believed taking out the bottom 10% was ruthless and uncaring. Over time,
I began to realize that businesses need the right people and that it is best for the individual and the
company to make the change. You cannot afford to not have the best team….I had confidence and I
did not find the system threatening. You got a taste for success and you had to adapt and change. It
is a human system. I think it is as fair as a system like this can be. I think we generally got it right,
but there were a few exceptions. This was the culture and this was the way it was done. There were
always a few people who believed that the system was against them. As a manager, Session C is not
taken lightly because I am getting judged on this.

The Session C process concluded with the CEO going into the field to each of GE’s businesses to personally review the performance and development plans for GE’s top managers. At the conclusion of Session C
discussions, the CEO and senior executives agreed and signed off on developmental actions for each individual.
In doing so, the corporate headquarters at GE “owned” the top 500 leaders and “rented them out” to the firm’s
businesses.13 Managers who tried to hold on to top people and not share could receive negative evaluations.
According to Susan Peters, GE’s Senior VP Human Resources, the goal of leadership development:
is [to] find the best people, put them in the top, recognize, reward them, grow them, ensure that the
people who are really carrying the company are getting the right feedback and support and training and development. Those who are not moving apace too get feedback in development as their
first course of action, but if they cannot make it then we help them leave with respect and dignity.
We always believe in differentiation. We are more about guidelines than specific numbers. We don’t
want people to put 10% in this box. We want people to use judgment in the process. There might be
teams in GE who have no people that are on that list; there are others who have 15%. You have to
talk about it and you have to be fair and give people time.14

Succession planning was another critical HR process. GE managers in operational roles moved frequently,
usually within a business unit but sometimes across businesses. Finance, legal, and HR managers would be frequently moved across businesses as a means of sharing ideas and transferring best practices.
Once a year we had to do succession planning using a formal system. For my direct reports, I had
to identify 2-3 people per position who could take over the management positions. I did it with my
organization from the bottom up, and I had had a lot of debates with my staff. I had to defend my plan
to my boss who had to defend it to his boss. Managers would get feedback as part of the appraisal
process on where you fit in the organization and where your career would be going.
Part of the success of the company was the ability to move people around. Without this system, GE
would not be as successful. There was a time in my career where I got three job offers in a week. My
boss thought I was getting a bit stale in my job, so he put the word out to HR that I might be interested
in a move. HR is the dealmaker and they know all the top talents. They make a list for all the jobs. I
was offered two jobs that would have required an international move and I turned them down. The
third job I took. Can you turn jobs down? Yes, but it needs to be done quickly and gracefully.
We had to sell ourselves as well as our products. Every year you are getting judged. Once you change
jobs a few times, you start to believe that you have the set of skills to be transferable to other jobs.
You look forward to new jobs because there is a network of people behind you who can help.

Growth and Change
The culture at GE revolved around change. The Change Acceleration Process (Table 4) was an initiative introduced specifically to help GE managers manage the change process. Several decades ago, Jack Welch described
change at GE:15
You’ve got to be on the cutting edge of change. You can’t simply maintain the status quo, because
somebody’s always coming from another country with another product, or consumer tastes change,

TB0383    11
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

or the cost structure does, or there’s a technology breakthrough. If you’re not fast and adaptable,
you’re vulnerable. This is true for every segment of every business in every country in the world.
People always ask, “Is the change over? Can we stop now?” You’ve got to tell them, “No, it’s just
begun.” They must come to understand that it is never ending. Leaders must create an atmosphere
where people understand that change is a continuing process, not an event.
The changes are always bigger than you initially sense. In the beginning of something like the defense industry downsizing, people are in denial—they can’t get themselves to believe how big the
change will be.
How do you bring people into the change process? Start with reality. Get all the facts out. Give people
the rationale for change, laying it out in the clearest, most dramatic terms. When everybody gets the
same facts, they’ll generally come to the same conclusion. Only after everyone agrees on the reality
and resistance is lowered can you begin to get buy-in to the needed change.
GE recognized that to drive change you need to stick with it. You drive everyone by using the tools.
You need to get scale so that the tool gets better. You don’t allow for variation on the tools and initiatives because you need to build scale.

Another executive stated:
Change is in the GE DNA. The initiatives were always changing. Session C was a bit different every
year. We were always hearing from Jack Welch about the need for change. If you are not comfortable
with change, GE is not the place to be.
We were always looking for new ideas and we wanted to share ideas with each other. We looked
outside our business—Jack used to say don’t look at competitors; they probably have the same challenges. We looked outside the business for ideas we could use. People were encouraged to look at
best practices at other companies.

Conclusion
To conclude, some comments by Jeff Immelt:
Investors often ask how we can execute in a company with such diverse businesses. We do it by running the Company with common initiatives around growth and financial discipline….I want investors
to see that GE is truly more than the “sum of the parts.” The strength of GE is in the “totality.” It is
the ability to deliver in good times and bad.16
Our ability to create our future is why GE can win any environment. It starts with a culture—the
foundation for any successful enterprise—culture that inspires our people to improve every day.
Our team is mission-based: We build, move, power, and cure the world. We believe in a better way;
we constantly learn from our customers, our competition, and each other. We seek solutions for our
customers and society. And we are “We Company.” We know that strong teams with great people
outperform individuals. That is why GE works.17
We like the way GE is positioned in the environment: a great portfolio of world-class, technologyleading businesses; a strong position in fast-growth global markets; leading-edge service technologies that achieve customer productivity; high visibility with a backlog of $210 billion; and a strong
financial position. We want investors to see GE as a safe, long-term investment. One with a great
dividend that is delivering long-term growth.

12    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Endnotes
1

D. Roberts and J. Authers, “The Harder They Fall,” www.FT.com, October 27, 2005.

K. Kranhold, “For GE, No Lack of Ideas; As Frustrated Investors Identify Units to Sell, Others Back Status Quo,” Wall
Street Journal, May 9, 2007, p. C1.
3
http://www.forbes.com/sites/georgebradt/2011/09/07/ge-ceo-jeff-immelts-long-term-view-10-years-in/.
4
T. A. Stewart, “Growth as a Process: An Interview with Jeffrey R. Immelt,” Harvard Business Review, June 2006, pp. 60-70.
5
http://sloanreview.mit.edu/article/ge-talent-management-aligning-hiring-with-strategy/.
6
2012 GE Annual Report.
7
K. Brown, “Will GE Be Enjoying the Movie? As it Jumps Into the Vivendi Deal, Conglomerate is Buying Low, But
Investors Question the Fit,” Wall Street Journal, September 3, 2003, p. C.1.
8
http://www.cbs.com/shows/60_minutes/video/2150575024/why-immelt-sold-nbc-universal.
9
http://sloanreview.mit.edu/article/ge-talent-management-aligning-hiring-with-strategy/.
10
D. Dammerman, Executive Speeches. October/November, 1998, 13, No. 2, pp. 1-6.
11
http://www.businessweek.com/stories/2005-03-27/the-immelt-revolution.
12
http://blogs.hbr.org/2011/06/you-get-what-you-expect-from-p/.
13
R. Fulmer, P. A. Gibbs, M. Goldsmith, 2000. “Developing Leaders: How Winning Companies Keep on Winning,” Sloan
Management Review, October, pp. 49-59.
14
http://articles.economictimes.indiatimes.com/2013-11-15/news/44113596_1_leadership-development-developmenttheory-things.
15
S. Stratford, “A Master Class in Radical Change,” Fortune, December 13, 1993, pp. 82-86.
16
2007 GE Annual Report.
17
Ibid.
2

TB0383    13
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Exhibit 1. Summary of GE Businesses
•     GE Aviation
2012 Revenue: $20 billion; 2012 Profit: 18.7%; Number of Employees: 25,000
Aviation Services, Aviation Systems, Business and General Aviation, Commercial Engines, GE Capital Aviation Services
(GECAS), Marine Engines, Military Engines
•     GE Capital
2012 Revenue: $46 billion; 2012 Profit: 3.9%; Number of Employees: 60,000;
Commercial Lending and Leasing, Consumer, Real Estate, Energy Financial Services, Aviation Financial Services
•     GE Energy Management
2012 Revenue: $7.4 billion; 2012 Profit: 1.8%; Number of Employees: 30,000
Automation & Process Control, Controls, Critical Power, Drives, Electrical Distribution, Geospatial Systems, High
Voltage Equipment, Industrial Communications, Monitoring And Diagnostics, Motors And Generators, Power Conversion, Protection And Control, Smart Metering, Substation Automation, Utility Operation Systems
•     GE Healthcare
2012 Revenue: $18.3 billion; 2012 Profit: 15.9%; Number of Employees: 46,000
GE Blueprint for Low Dose, GE Healthcare, GE Healthcare Education, GE Healthcare Life Services, GE Healthcare
News, GE Healthcare Products, GE Healthcare Services, GE Healthcare Specialties
•     GE Home and Business Solutions
2012 Revenue: $7.9 billion; 2012 Profit: 3.9%; Number of Employees: 28,000
Avantapure, Homespring, Home Standby Generator Systems, Pro Elite, Sealants
•     GE Oil and Gas
2012 Revenue: $15.2 billion; 2012 Profit: 12.6%; Number of Employees: 37,000
Products: air filtration, air-cooled heat exchanges, artificial lift controls, blowers, capital drilling equipment, centrifugal
pumps, chemical injection pumps, compressors, controls—generator, drilling measurements, gasification, generators,
nuclear energy, oil and gas reducing and metering systems, petroleum reactors and steam condensers, pipeline solutions,
radiation measurement, solar power, solar turbines, subsea wellheads, surface flow control, surface pumping systems,
turboexpanders, utility operations software, wind turbines
•     GE Power and Water
2012 Revenue: $28.3 billion; 2012 Profit: 19%; Number of Employees: 37,000
Products: gas turbines, gas engines, generators, nuclear energy, solar power, steam turbines, water, process and treatment
equipment, wind turbines
•     GE Transportation
2012 Revenue: $5.6 billion; 2012 Profit: 18.4%; Number of Employees: 12,000
Diesel marine power, diesel stationary power, drilling motors, energy storage, locomotives, railway signaling and communication, railway traffic control and dispatch, software
Source: Various GE sources.

14    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Exhibit 2. Select GE Divestitures

Business Sold
Aparatebau A.G. Goldach
Monogram Electric Housewares
KOA-AM and KOAQ-FM
Utah International and Utah-Marcona
Houseware operations
Electro-Chemical Energy Conversion Programs
Simplex-GE
Coronet
RCA Global Communications
NBC radio network operations and stations
Nuclear waste services assets
Software International Corporation
Instrument products operations
Ladd Petroleum
Domestic compressor motor business
Ruffin Village
Disaster Recovery Services Unit
Edison Life Insurance plus home and auto insurance businesses
Water Technologies’ transportation coolant aftermarket business
Nuovo Pignone and retail fueling business
Commercial AC motor unit
Dione PLC
Storage USA
GE Life
Plastics business
U.S. mortgage business
NBC Universal
Mexican Assets (GE Capital)

Value (where available)
$22M
$300M
$4.7M
$160M
$5.5M
$24M
$110M
$542M
$120M
$3.5M
$2.15B
$203.8M
$72.5M
$113M
$2.3B
$910M
$11.6B
$117M
$2.0 B

TB0383    15
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

For the exclusive use of W. Li, 2015.

Exhibit 3. Select GE Acquisitions

Company Acquired
Metropolitan Television
Benerson
Intersil
Employers Reinsurance
RCA
Kidder, Peabody, & Co.
Gelco Payment Systems
D&K Financial
MNC Financial
Burton Group
Travelers Mortgage Services
ELLCO Leasing Corporation
Tungsram
Businessland Rents
GNA Corporation
United Pacific Life Insurance
Lockheed Martin Medical Imaging Systems
Imp Leas
Unilec Corporation
Syprotec
Energy and Environmental Research
Harmon Industries
Young Generators
Smallworld Plc.
sofion AG
Heller Financial
Unison Industries
Time Retail Finance
Interlogix
Druck Holdings
Bravo (through NBC)
Enron Wind
PII
International Fiber Systems
Universal
Transamerica Finance
Mountain Systems
Monitoring Automation Systems
OSi Specialties
M.J. Harden Associates
Triple G Systems Group
CitiCapital Fleet Services
Instrumentarium
HPSC
Benchmark Group
BHA Group
Dillard National Bank
DeltaBank (Russia)
Ionics
Invision Technologies
IDX
Edwards Systems Technology
Recreational Vehicle and Marine Financing (from E-trade)
Arden Realty
SBS Technologies
Biacore International AB
Trustreet Properties
Smiths Aerospace
Vetco Gray
Vital Signs Inc.
Dresser Inc.
British Wellstream Holding Plc.
Johnwood Plc.
Lufkin Industries
Alstom

Industry
TV Broadcasting
Manufacturing
Integrated Circuits
Insurance
Consumer Electronics
Investment Banking
Payment Processing
Financial Services
Banking
IT Consulting
Mortgage
Equipment Leasing
Lighting
Rental/leasing
Annuity Sales
Life Insurance
Medical Imaging
Automobile Leasing
Electrical Distribution
Substation monitoring
Nitrogen Oxide Control
Train Crossing Signals
Electrical Generators
GIS/mapping Software
IT Services
Commercial Banking
Aircraft Engines
Consumer Credit
Security Systems
Sensor Technology
Cable Channel
Wind Power
Pipeline Inspection
Fiber Optics
Entertainment
Commercial Lending
Manufacturing Systems
Security Systems
Chemicals
GIS/mapping
Medical Info Systems
Fleet Management
Medical Equipment
Medical Financing
Real Estate
Air Pollution Control
Commercial Banking
Commercial Banking
Water Treatment
Airport Screening
Medical Info Systems
Fire Detection
Online Brokerage
Real Estate
Embedded Computing
Life Sciences
Financial Services
Aviation
Oil and Gas
Health care
Oil and Gas
Oil and Gas
Oil and Gas
Oil and Gas
Engineering

Value
$235M
$1.1B
$6.4B
$600,000
$414M
$329M
$150M
$577M
$550M

$386M
$210M
$5.3B
$210M
$777M
$335M
$1.25B
$325M
$446M
$14B
$5.4B

$72M
$78M
$1.2B
$2.3B
$72.4M
$502M
$239M
$700M
$1B
$885M
$1.4B
$1.4B
$60M
$4.8B
$260M
$439M
$1.2B
$2.4B
$1.9B
$860M
$3.0B
$1.3B
$2.8B
$2.98B
$17B

16    TB0383
This document is authorized for use only by Wing Yiu Li in Seminar in Business Policy and Strategic Management-1 taught by Maria Radoslavova, San Francisco State University from July
2015 to August 2015.

Case 5: General Electric (Notes)

1.    Describe the scope of GE based on the three dimensions of corporate strategy.
2.    Describe four principles that have been guiding the acquisitions and restructuring that GE has made.
3.    Describe how Session C—the evaluation of the GE employees—is affected by the following factors:
a.    The strategic goals of GE
b.    GE’s Value Card