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
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
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.
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.