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GE's Growth Strategy: The Immelt Initiative


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Course: IT Strategy & Management
Date: Jan 23, 2013

HBR Case – "GE's Growth Strategy: The Immelt Initiative"

Published in: Business

GE's Growth Strategy: The Immelt Initiative

  1. 1. GE’s Growth Strategy:The Immelt InitiativeIM551  –  IT  Strategy  &  Management  –  KAIST  Business  School  By:  조성택,  김정민,  박지우,  신지은,  Anggri  –  Jan  23,  2013  
  2. 2.   Question  #1 What  are  the  main  reasons    why  GE  has  sustained  so  long?  
  3. 3. GE’s  Sustainability  Systematic Management with Innovation and Investment - Ongoing Operation Systematic •  Six sigma, digitization, process efficiency and simplification Management - Growth Leaders, Develop 5 action-oriented leadership skills -  Investment through the down cycle for the future growth. Investment -  Increasing R&D budget. •  Building infrastructures, Developing new growth market. -  Disposal, Acquisition and Financial commitment. Rebalance •  Subtract low return, low growth, low technology business. The Portfolio •  Add new tech. new geographies, new growth platforms, capabilities 2003 became the biggest acquisition year in GE’s history
  4. 4. GE’s  Sustainability   Investment Systematic  Management Change & Innovation People Integrity Portfolio Service Core Business Business Technolo gy Cash Generators + Growth Engine = Sustainability
  5. 5.   Question  #2Do  you  think  GE  is  a  process  enterprise?    
  6. 6. GE  is  a  Process  Enterprise   Main  Concept   GE  Growth  Strategy   Traditional  vs  Process   A  Six-­‐Part  Process   Perspective Traditional Process Central  Axis Function Process Work  Unit Department Team Job  Description Limited Broad   Measures Narrow End-­‐to-­‐end Focus Boss Customer Compensation Activity  based Results  based Manager’s  role Supervisor Coach Functional     Key  figure Process  owner executive culture Conflict  oriented Collaborative
  7. 7. Examples  of  Process  Enterprise  in  GE   Growth  Leaders   Innovation   Great  technology   →  New  Generation →  Imagination  Breakthrough →  Lean  Six-­‐Sigma 1.  Purpose   1.  Purpose   1.  Purpose    -­‐  GE  need    People  with  3  things    -­‐  small  ideas    into  huge  business    -­‐  have  the  best  products,  contents,        1)  Market  depth    -­‐  To  drive    creating          and  services      2)  Customer  touch        growth  platform  &  Ideas    -­‐  reducing  working  capital,        3)  Technical  understanding        (projected  class  of  ideas)        improving  return  on  equity  2.  Specific  Process   2.  Specific  Process   2.  Specific  Process    -­‐  Developed  5  leadership  traits    1)  each  business  leader      1)  Define  problems      1)  external  focus            to  submit  at  least  3  proposal      2)  Indexing  Process      2)  think  clearly          a  year        (elimination  of  the  kinds  of      3)  imagination  and  courage    2)  Commercial  council  review   wastes)      4)  inclusiveness  and  connection      3)  Select  initiatives      3)  apply  the  new  Process                with  people    4)  Invest  money  for  ideas    ※  Combining  Six  Sigma        5)  expertise    ※  every  year    hundred  ideas            with  Lean  Speed:      -­‐  Became  the  Criteria            come  out  from  this  program          For  reducing  time,        1)  internal  training  programs          use  concept  of  Lean      2)  evaluation    
  8. 8. Question  #3.1  What  is  your  opinion  about     GE’s  recent  difficulties?  
  9. 9. GE’s  Recent  Difficulties  —  Actually,  about  half  of  GEs   2001~Now Immelt’s Stock Performance profits  came  from  GE  Capital  →   Big  problem  when  financial  crisis   happened  in  2008  —  Accounting  fraud  in  2009  →  Bad   9.11 Terror Financial Crisis corporate  image  for  GE  —  GE’  stock  didn’t  perform  well   under  Immelt    →  leadership   GE Stock Performance Comparison problem?   Jack  Welch   Jeff  Immelt  —  Pressure  of  delivering  increased   CAGR:     CAGR:     EPS  to  share  holders  →  23%   +53.4% -­‐0.6% growth  (1981-­‐2000),  7%  growth   (2001-­‐2009)  
  10. 10.   Question  #3.2What  would  you  recommend  to  GE     for  its  future  sustainability?  
  11. 11. Our  Recommendation     for  Future  Sustainability   GOAL:  Excellence  in  these    3  dimensions   Profit   People   Economic Social“I  find  out  what  the  world  needs,     Planet      then  I  proceed  to  invent  it.” Environment – Thomas Edison
  12. 12. Create  Big  Challenges  to  win  back  the     Leadership  +  Company  Brand  +  Sustainable  Growth   ENVIRONMENT   HEALTH  —  1.4  B  PEOPLE   —  2.6  B  PEOPLE   STILL  DO  NOT  HAVE  ACCESS  TO  MODERN  ENERGY   LACK  ACCESS  TO  BASIC  SANITATION  —  DOUBLE  THE  CARS   —  2  B  PEOPLE   EXPECTED  ON  THE  ROAD  BY  2030   DO  NOT  HAVE  ACCESS  TO  PRIMARY  HEALTHCARE  OR   CLINICS  —  80%  DECREASE   IN  CARBON  EMISSIONS  NEEDED  BY  2050  TO  STABILIZE   —  90%  INCREASE   THE  CLIMATE   IN  AGRICULTURAL  PRODUCTION  NEEDED   —  800  MAJOR  NATURAL  DISASTERS   EACH  YEAR   —  60%  OF  DEATHS   DUE  TO  CHRONIC  DISEASE   ..for  a  better  planet   ..for  a  healthier  population  
  13. 13. Q  &  A  
  14. 14. “The most important thing Ive learned since becoming CEO is context. Its how your company fits in with the world and how you respond to it.” – Jeffrey Immelt, CEO of GE
  15. 15. Appendix  
  16. 16. Product  Management  &  Sales  team  under  pressure  SEC  filing  of  “Inappropriate  Accounting”  –  (Aug  2009)  
  17. 17. Divestment  of  assets  to  cover  losses:  Sale  of  Home  Appliances    (NYTimes,  May  2008)   NBC  Universal  to  Comcast  (,  Nov  2009)  
  18. 18. GE  Capital  became  liability  
  19. 19. Decoupling  need  and  technology  is  the  key   Global  Energy  Related  Emissions  (Gt  CO2/  yr)   Energy  Efficiency  Entitlement  60   Sector Global Efficiency Opportunity (-Q BTU / yr, 2020)*50   Industrial -­‐53.0  40   Residential 2012   -­‐34.5  30   -­‐13.5   Commercial20   Total  Entitlement:   Transport -­‐13.0   ~130%  of  US  Energy  Use**    10   Supply Power -­‐21.0   0  1990 2000 2010 2020 2030 2040 2050 *At  >10%  IRR,  McKinsey   **  ’06  Usage:  100  Q  BTU,  EIA   IEA  Reference  Scenario   80%  reduction  path  
  20. 20. As  people  age,  they  become  more  chronically     Almost  75%  of  the  elderly  (>  65)  in  the  U.S.   have  at  least  one  chronic  disease.1   About  50%  in  the  U.S.  have  at  least  two   chronic  disease.   This  is  not  just  a  U.S.  concern   Almost  72%  in  Hong  Kong  have  at   least  one  chronic  disease.   Almost  80%  in  Turkey  have  at  least   one  chronic  disease.  Worldwide shift to a larger elderly population is occurring.•  Source: Statistics Bureau, MIC, Government of Japan; United Nations; The Japanese Ministry of Health, Labor and Welfare•