Ge apr 2009_final03

Strategic Management

> Morgan DELASSUS, Humberto GARCIA, Rebecca SIGUIER, <> Fabien VACHER, Arnie VAN GROESEN. <

GE – Organizational History

Founded in 1878 by Thomson Edison

“regarded as the model of American management practices, GE was constantly undergoing change…”


In 1981, Welch faced a very difficult challenge…

Q1 > How difficult a challenge did Welch face in 1981?


Predecessor

Reg JonesA legendCollaborative management styleMade GE growComplex Structure

Recession

US economyHigh interest rateLow purchasing power

Competition

Japanese playersStrong dollar

… that he successfully achieved …

Change structure and culture

Change structure and culture

Recession is an opportunity

Recession is an opportunity

Internationalisation strategy

Internationalisation strategy

1961 1981 Growth

Sales 4,667 27,240 484%

Profit 432 2,447 467%Net earnings 238 1,652 593%

Cap Mkt 6283 13,073 108%

US 523 2’708 418%

Q1 > How effectively did he take charge?


ChangeChange

Source: Bartlett, C.A., and Wozny, M. (2005). GE’s Two-Decade Transformation: Jack Welch’s Leadership, Harvard Business Publishing.

Q2 > What is Welch's objective in the series of initiatives he launches in the late 80's and early 90's? What is he trying to

achieve in the round of changes he put in motion in that period?


Objective:

ADD Value&

Build Solid Ground for future growth

Objective:

ADD Value&

Build Solid Ground for future growth

• Restructuring– Keep cash available

• Rebuilding– Establishing foundations

• More growth– New opportunities

Q2 > Is there a logic or rationale supporting the change process?


• Portfolio management + Adding value

Q3 > How does such a large, complex diversified conglomerate defy the critics and continue to grow so profitably?


Low Fit (Profit) High

High

Fit between

BU & parent(Feel)

Low

Value trap

Ballast businesses Heartland

Alien

Value-adding activities:- Envisionning - Coaching and facilitating- Providing central services and resources- Intervening

& getting rid of the value-destroying activities & structures

Source: ASHRIDGE PORTFOLIO on Johnson, G., Scholes, K., and Whittington, R. Exploring Corporate Strategy, 8th ed. Prentice Hall: London.

• Initiatives adding value:

Culture:- Coevolving: meetings on a regular basis, boundarylessness, knowledge transfer. - "Better than the best"

People:- Building: A players & 4 E's, training. - Linking: Work-Out & Best Practices.

- Bonding: Stock options & reassessed bonuses.

Structure & fit:- Portfolio management: #1 or #2.- Flat, lean organisation.- Forward integration: service oriented.


Q3 > Have Welch's various initiatives added value? If so, how?

Strategy:- Going global.

- Service businesses.- Six Sigma.

(- e-business.)

Q4 > What is your evaluation of Welch's approach to leading change? How important is he to GE's success?


• Good Change Manager: - Strategy: Direction & Intervention- Practices: Education / Communication &

Collaboration / Participation

• Good strategist: - Build solid ground for growth- Long term vision- Recognized opportunities- Employee involvement- Got over tipping point obstacles

• 8 steps to transforming the organisation:

Q4 > What is your evaluation of Welch's approach to leading change? How important is he to GE's success?


Step

Sense of Urgency

Guiding Coalition

Create vision

Communicate vision

Empowerment

Short term wins

Consolidate

Institutionalise

Ex: #1 or #2

Ex: Varsity team

Better than the Best

Ex: Strategy playbook

Ex: 4 E’s & Passion

Ex: Work Out

Continuous improvements

Ex: Best PracticesSource: Kotter, J.P. (1995). Leading Change: Why transformation efforts fail. Harvard Business Review, Vol. 73, No. 2. Pp. 59-67, retrieved march 2009 on http://www.ebscohost.com/

• Requirements:- BEST “A Player” & 4E’s profile.- Knowledge & experience with GE.- Capable of building a new long-lasting vision.- People oriented.

• Challenges:- Very high expectations. - Keep the culture of change.

- Ingredients for successful change- Keep adding value.

Q4 > What are the implications for Welch’s successor?

1981 2000 Growth

Sales 27,240 129,853 377%

Profit 2,447 19,630 702%Net earnings 1,652 12,735 671%

Cap Mkt 13,073 389,443 2879%

US 2’708 9’276 243%

Welch DoneWelch Done

Source: Bartlett, C.A., and Wozny, M. (2005). GE’s Two-Decade Transformation: Jack Welch’s Leadership, Harvard Business Publishing.

…THANK YOU FOR YOUR ATTENTION…


- Bartlett, C.A., and Wozny, M. (2005). GE’s Two-Decade Transformation: Jack Welch’s Leadership, Harvard Business Publishing.

- Bartlett C. & Ghoshal, S. (2002) Building competitive advantage through people. MIT Sloan Management Review. Vol. 43. No. 2. retrieved March 2009 on http://www.ebscohost.com/

- Eisenhardt, K.M., and Gahmic, D.C. (2000) Coevolving: At last a way to Make Synergies Work. Harvard Business Review, Vol. 78, No. 1. Pp. 91-101. retrieved April 2009 on http://www.ebscohost.com/

- Johnson, G., Scholes, K., and Whittington, R. Exploring Corporate Strategy, 8th ed. Prentice Hall: London.

- Kotter, J.P. (1995). Leading Change: Why transformation efforts fail. Harvard Business Review, Vol. 73, No. 2. Pp. 59-67, retrieved march 2009 on http://www.ebscohost.com/

- Kim, W.C., and Maubourgne, R. Tipping Point Leadership. Leadership Excellence, Retrieved March 2009 on http://www.ebscohost.com/

- Pascale, R.T., and Sterning, J. (2005). Your Company’s secret change agents. Harvard Business Review. Vol. 83, No. 5. Pp. 72-81.

References