GE's Growth Strategy

IM551 IT Management & Strategy KAIST Business School Information & Media Management McGinsey & Company 1

Agenda I. Corporate Overview II. Success Factors III. Business Process IV. GE, for the next V. Suggestion McGinsey & Company 3

• GE’s Present • History of GE • Key Person of GE • Business Portfolio • Performance McGinsey & Company 4

GE’s Present KEY PEOPLE Jeff Immelt, Chairman & CEO Keith S. Sherin,CFO Gary M. Reiner, CIO REVENUE $173 billion USD (2007) NET INCOME $22.5 billion USD (2007) EMPLOYEES 320,000 (2007) Market Value $4,200 billion USD Characteristics The only company listed in the Dow Jones Industrial Index today that was also included in the original index in 1896 5

History of GE 1876 Thomas Edison opened a new laboratory in New Jersey 1890 1896 Edison had organized his various businesses into the General Electric was one of the original 12 companies Edison General Electric Co. listed on the newly-formed Dow Jones Industrial Average. GE is the only one that remains today. 1919 The Radio Corporation of America (RCA) was founded by 1960s GE and American Telephone & Telegraph (AT&T) General Electric was one of the eight major computer companies with IBM 1981 Jack Welch inaugurate to CEO 1996 Introduction of Six Sigma Quality 2001 Jeffrey Immelt inaugurate to CEO 2004 NBC Universal, 3rd largest media company from Vivendi Universal 2005 GE reorganized its 11 businesses into 6 large units 6

Key Person Tomas Edison Reginald H. Jones Founder, 1847 – 1931 CEO, 1972 – 1981  Invent the phonograph  Managerial qualities and electric light bulb  Relationship between  hold 1,093 U.S. patents business and government Jack F. Welch Jr. CEO, 1981 – 2001 Jeffrey R. Immelt  Customer-Focused CEO, 2001 – Present Methodology to Improve  New Frontiers & Strategic Alliances Quality without Defect for GE  Today…Rigorous Employee 6σ  Business Transformation Certification 7

Business Portfolio 6 Global Business Unit Healthcare • Medical Diagnostic • Clinical Systems • Life Sciences Infrastructure Commercial Finance • Oil & Gas • Capital Solution • Transportation • Real Estate • Aviation • Corp Finance SVC • Water • Healthcare Finance SVC Industrial NBC Universal • Customer & Industrial • Television Group • Enterprise Solution • Universal • Security/Sensing • Digital Media • Europe • Asia • America • Australia GE Money 8

Performance Consolidated Revenues Earnings 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 (in $ billions) (in $ billions) 173 22.5 152 19.4 137 17.4 Compound 124 Compound 13.3 15.6 105 annual growth annual growth rate of 13% rate of 14% Revenue by Business Revenue by Region A. Infrastructure 29% D. Healthcare 10% A. US 50% D. Americas 7% B. Industrial 23% E. Commercial B. Europe 23% E. Others 7% C. NBCU 10% + GE Money 28% C. Pacific Basin 13% E E A D C C A D C B B 9

Executive for Growth Summary of Success Factor - Organic Growth - Biz Transformation - Globalization Lessons from Jack Welch & Immelt McGinsey & Company 10

Lean Six Sigma Growth Customers Net Promoter Score Use process Leadership Traits excellence to satisfy customers and Growth drive growth Innovation Leaders Generate new Inspire and ideas and develop people develop that know how capabilities to to help make them a customers and reality GE grow Imagination Breakthroughs Execute for CECOR framework Emerging Markets Growth Globalization Great Create opportunities Technology everywhere and Have the best expand in products, developing global Commercial content and markets Excellence services Develop world- New Product class sales and Introduction marketing talent and demonstrate One GE: the value of Enterprise Solutions “one GE” & Brand 11

Work-out CAP (Change Acceleration Process) Six sigma Performance Ranking System (Vital Curve) Crotonvill Performance Execution 12

How we fit into GE’s strategy Help sustain a healthy portfolio filled with “great businesses” Strategic Acquisit Analysis ions Add Substract + New technologies - Low return + New geographies - Low growth JVs and Disposit Sustain Partner + New growth platforms - Low tech ions Growth ships + Scale / cost reduction + Capabilities Integrat Portfolio ion and assessm “de- ent integrat Help strengthen the competitive ion” position of our businesses 13

GE is continuously evolving Strong portfolio 14

Global revenue 13% Developing counties-growth 100 60 80 50 40 60 30 40 81 87 75 50 20 20 21 29 10 0 0 05' 06' 07' 05' 06' 10' $ in billions $ in billions - In 2005, global revenue : 75$ billion, 21$ billon from developing countries - In 2004, impressive 37% increase on the previous year. - Over the next decade, 60% of GE’s growth : developing countries (predict) - China, India, Russia, Europe, Southeast Asia, Middle East, South America. 15

Biz Portfolio Restructuring - No.1 or No.2 : Fix, Sell, or Close - 3-Circle concept : 12 Division, Finance/ Service Reorganization - Downsizing - Delayering - Empowerment Cultural revolution - Crotonville Core Business : Power Systems, Appliances, - Work-out Lighting, Transportation Technology : Aircraft Engine, Aerospace, - CAP Materials, Medical Systems - Performance Ranking System Service Business : Finance Service, Communications, Information Service, Broadcasting 16

Establish much more openness and trust Rebalancing the portfolio Marketing-oriented “ At the customer, For the customer (ACFC)” Growth :New platforms, New process New people profile Infrastructure for developing countries 17

Jack Welch Jeff Immelt Efficiency Oriented • Strong business and down- Effectiveness Oriented Paradigm sizing • Growth engines for the future • 1.2 or sell 6 Sigma Growth Methodology • Quality and costs • External growth • Finance • Marketing Target EU, USA Developing countries Market Cash Generator Growth engine Portfolio • finance, Service • Infrastructure Responsibility Within the law Social responsibility 18

Why Process is Important Business Process in GE Tools for Change Methodologies - Work Out - Six Sigma - CAP McGinsey & Company 19

Strategy Strategy-Process Strategic Alignment - Align to changing external KPI / Action Monitor & factors (market, competition, Item Feedback technology and customers) Process Execute Operational Process Process Continuous Improvement Control Plan Process Improvement -Standardization -Optimization Improve 20

Scopes of Changes Small Large Component of Change Quality Work-Out Six Sigma Technical Strategy “Expert-driven” “Data-driven” Leadership Development Change Acceleration • Corp. Entry Programs Acceptance Process(CAP) • Crotonville Courses Cultural Strategy GE Values & 360° Reviews Cultural Integration Learning Organization 22

• Improvement and implementation of a new “Open Culture” - Building Trust : Tear down barriers within the organization Goal - Empowering Employees : Leverage individual creativity and potential - Elimination of Unnecessary Work : Remove bureaucracy - A new paradigm for GE : Participation through a sense of accomplishment and ownership Work-out Process Typical Org. Structure • Derive Issue Sponsor Pre-Meeting • Clarification of Driving Body • Employee Empowerment & (D-4Weeks) • Compose Participants Speedy Decision Making • Set Concrete Goal • Participation of Sponsors • Oversee & Support Follow-Up Work-Out • Team start-up • Problem Solving How Session Champion • Execution Plan (D) • Presentation / Decision Making Facilitator Admin. Office • Accurate Understanding • Regular/Occasional • Measure Current Status Follow-up about Issue at Hand Monitoring & Data Collection Meeting • Develop Facilitation Skill • Continuous Monitoring • Share Success Story • Maintain Comm. With (D+12Weeks) • Select & Train Facilitator • Reward Admin. Office 23

•To maintain its position of advantage, Six Sigma targets a 6 sigma level of quality for all business processes in SVC, product, sales, etc. Goal - Targets this level of optimization not only product and SVCs, but all across its business operations - Achieve superior management quality and cost competitiveness by eliminating loss due to faults or mistakes by management systems Six Sigma Process DMAIC Six Sigma Org. Structure Define high-level project goals Champion Responsible to represent the needs and to improve the operational effectiveness Definition and the current process Master Black Ensure that quality objectives and targets are set, plans are determined, progress is Belt tracked, and education is provided Measure key aspects of the Black Belt Heart and soul of the Six Sigma quality initiative. Lead quality projects and work full Measurement current process and collect time until they are complete. relevant data Green Belt Employees trained in Six Sigma How Analyze the data to verify Success Factors Analysis cause-and-effect relationships.  Strong Top-level Leadership  Systematic Nurturing of Six Sigma Experts  Formation of Organizational Structure committed Improvement Improve or optimize the process to Innovation based upon data analysis  Support management in consulting, training, finance issues Set up control mechanisms  Link to Reward/Promotion Structure Control and continuously monitor the  Regular sharing of Know-How process  Sharing of Success Cases/Best Practices 24

•Achieve change acceleration by Key Strategy Initiatives increasing employee acceptance regarding changes Goal - Built an competitive organization through Work-Out tools continuous cultural revolution - Remove bureaucratic elements within the org. structure Change Acceleration Process 7 Stages of Change CAP Session Leading Change Leading a change Secure Champion to drive changes Creating a Share necessary changes & persuade with Creating A Shared Shared Need diagnostics & analysis Need Share a visionary image of what this change Shaping A Vision Shaping a vision can achieve Mobilizing Find and support committed employees to How Commitment Mobilizing Commitment put changes into practice and spread its realization Monitoring Control and monitor goals, actions and Making Change Last Process achievement levels of change activities Monitoring Progress Making change Make changes last by training all employees Current State Transition State Improved State last across the organization Changing system Set up systems and structures to support, Changing Systems & Structures and structure drive and complete changes 25

• Pressure on GE customers • Enabling sustainable growth • GE’s commitments • GE's Next McGinsey & Company 26

Increasing Population Climate Change Emerging Debate Markets Growth Customer Carbon Emissions Constraints Standards 27

Energy • Solar, Wind, Biogas, IGCC, Gas turbines Water • Reuse, Desalination, Industrial, Cooling Transportation • Aviation, Rail, Automotive, Marine, Fleet Industrial • Lighting, Appliance, Motor, Finance 29

Year 2100 Year 2020 Year 2010 Year 2000 • Adaptive and challenging attitudes Before 1990s • R&D investment + Customer focused • R&D investment + Customer focused • Process Management for growth + Organization development • Product Diversifications + Organization Restructuring + Productivity 30

Suggestion McGinsey & Company 31

Questions McGinsey&Company 32

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GE's Growth Strategy

by Eric Moon on Dec 15, 2009

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GE’s Growth Strategy — Presentation Transcript