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GE’s Imagination Breakthroughs: The Evo Project

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  1. 1. GE’s Imagination Breakthroughs: The Evo Project What is your evaluation of Immelt’s new organic growth strategy? Why change GE’s existing successful strategy? Is it reasonable to expect that a $125 billion global giant can significantly and consistently outperform the underlying economic growth rate?  Technical Leadership – Immelt identified technology as a key driver of GE’s future growth and emphasized the need to speed up the diffusion of new technologies within GE and turn the corporate R&D into an intellectual house.  Internationalization – GE’s major opportunities for organic growth would be in its overseas operations-particularly in China, India and Europe.  Services Acceleration – Take more of the back room resources and put them in the front room-more sales people, more engineers, and more product designers.  Commercial Excellence – Shifting focus from GE’s internal processes to external customer requirements.  Growth Strategy – Build new businesses based on high-growth and high-margin areas that will provide “unstoppable” opportunities and expand GE’s base.  Governing new technology and enter into market where is least competition. Immelt inherited a GE that was highly focused on cost and operational efficiencies coupled with acquisitions to drive growth. But at the time Immelt took over the world economy was facing a downswing and oil prices were rising with the USA attacking Afghanistan post 9/11 followed by Iraq a few years later. The Internet bubble had burst with a number of internet companies going bust. Simultaneously the World was witnessing a number of start-up developing new technologies and selling off to larger companies for huge sums of money. Immelt realized that focusing only on the acquisition route for new technology or chasing new trends could lead to GE paying huge sums of money hurting their already weakening top line and bottom line. He was sure that GE could succeed in the new world only if it was a technology leader. Thus by being the first to innovate or introduce new technology they could extract a premium from the customers and beat the underlying economic growth rate. Also the trend which began in 1960s wherein organisations started becoming more customers focused culminated in the customer service and finally customer relationships in 2000s. GE had become too internally focused during this same time. Thus a change was needed. Immelt being a salesman himself correctly identified that GE needed to go to the customers to understand their needs and develop products that were ahead of time. Thus, there are an increase in focusing on marketing, creating and recruitment and transfer of talent to marketing. Is Immelt betting on the right things to drive growth in GE? Can he hope to change a company whose growth was driven by acquisitions and productivity improvement into an organic growth company dependent on innovation, entrepreneurship, and risk-taking – particularly in such a large and complex organization? Immelt has grown through the ranks mentored personally by Jack Welch. Jack Welch the legendary CEO of GE who helped GE earn returns of 23% per year over 2 decades personally selected Jeff Immelt to take over the reign of GE from him over several contenders. Jeff was groomed in several of GE businesses and repeatedly proved himself to be an able contender for CEO Through his prior experience he saw the importance of marketing to the organization. Immelt also had to think
  2. 2. on his feet as 4 days after assuming office as CEO the World Trade Centre attacks took place. He was also witnessed to the dotcom bubble and the rapid improvement in technology over the past few years. He thus must have realized that the methodology adopted by his predecessor Jack Welch in which he focused on efficiency and productivity could not be continued. With the growing ease at which information was available and the spread of internet the company needed a more outward focus on customer needs rather than the inner focus which the company currently had as a result of Jack Welch’s strategy He was witness to a World in which a technology was introduced hit its peak and then crumbled (internet bubble) in a few years. Thus if GE needed to repeat the 23% growth figures it needed to be a technology leader by identifying the customer’s needs and developing suitable products and cashing in on these before competition(especially from China) replicated these innovations. GE should be spending on its own R&D and entering businesses rather than buying out start up at a much higher cost and then suffering due to the decline of technology due to the shortened technology lifecycle. To drive this new organic growth strategy he made several organizational changes such as creating a post of CMO, shifting several senior level executives to marketing roles, introducing VP level marketing officers in each of GE businesses, recruiting engineers, setting up of Global Research Centre in Shanghai to focus on emerging economies with China estimated to be the largest and a similar GRC in Munich to focus on European customers to make GE a truly international organization. Also after decades the courses at GE executive training centre at Croton Ville were change to inculcate imagination and external customer focus in GE executives. He also introduced imagination breakthroughs (IB) in which he looked in to personally to ensure that his organic growth strategy was a success. The session 1 was also renamed growth playbook to highlight the desire for organic growth and to internalize the thinking in the organization. All these changes had begun to bear fruit with the GE transportation EVO project and subsequent iterations gaining widespread customer acceptance. In fact out of 83 IB’s approved 35 were launched and converted into $2 billion sales proving the success of Immelt’s strategy. How have the Locomotive IBs been able to survive in the wake of the failure of the AC 6000, the initial difficulty in obtaining orders for Evo, the continual redefinition of the global Evo product, and the failure to make Hybrid commercially viable? The locomotive IB’s in a very stable and mature industry that locomotive is caught the attention of Jeff Immelt the CEO. The focus on customers’ needs and thorough analysis of the future market coupled with innovative offers such as leasing engines to the railroads to garner customer confidence helped with initial orders. Understanding the future trends in advance and favourable environment such as the rising fuel prices, emission norms and growth in rail traffic put GE with the right product at the right time and offered to the right customer lead to the success of EVO after the AC 6000 debacle. For the GML project recruiting a member Gokhan Bayhan who had worked in Kazakhstan for a GE project helped in gaining insight on the customers’ needs and thereby influenced suggestions of the Tiger team and the modification of GML to the more adept GMF engines. GE also sensed an opportunity to sell other products while selling the engines and so started bundling the Signal and servicing options along with the engine sales negotiations thereby increasing revenue to GE from a single customer.
  3. 3. What action should the Transportation business take regarding the Hybrid locomotive? Post the AC 6000s disaster the company successfully introduced and sold the EVO engine at a premium price by gaining the customers confidence. Its thorough market analysis and product analysis in the growth playbook sessions clearly for and EVO type engine. Even though there were very few orders in the start the sales started to boom. However looking at the issues faced with the Global Modular concept for which GE received orders from China government. A technical team evaluated the feasibility of the project for widespread implementation around the world and suggested tinkering with the concept to form Global Modular family. Similarly for Hybrid project the concept is ahead of time but as Comte suggested that the long term trend was away from fossil to Hybrid and government was also ready to fund the project. This proves that Hybrid technology was the future. So GE transport should not shelve the project. They should take government funding and transfer responsibility of developing the battery technology to Global research centre as the same tech may be needed in other GE businesses. If taking funds from the government can be avoided as other GE businesses contribute to the battery technology development that would be in line with GE policy of avoiding government funding and eliminate future arm twisting from the government. GE transportation can with the remaining funds available pursue development of the other engines till Hybrid is ready for launch. Thus GE transportation can reduce their own opportunity cost while simultaneously contributing to development of Hybrid.

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