DEVELOPING STAGES ANALYSIS Updated October 19 2015
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General Electric Public-company

FAIRFIELD, UNITED STATES OF AMERICA — General Electric is an advanced technology, services and financial company taking on the world's toughest challenges. Dedicated to innovation in energy, health, transportation and infrastructure, GE operates in more than 100 countries and employs about 300,000 people worldwide. ... more less

STATE BY TRANSITION

General Electric
Wheel position details:
Stage:
1
  • Revenue, GDP, Activity: Uncertain growth
  • Organizational focus: Explore/Discover
  • Main motivating force: Conviction
  • Ideal role of leader: Transformer
  • Source of inspiration: Inside
  • Cohesion trend: Fragmentation
  • Company attractiveness: Sentiment driven
  • Breakup risk:
Leader:
 
  • Role: Reformer
  • Reign: 2001 - Present
  • Fit:
    - Leader lags organization
Transition slider

STAGES OVER TIME

TIMELINE SUMMERY

STAGE TRANSITION PERIOD STAGE
Organizational focus to:Explore / Discover 2015 -  
1
Organizational focus to:Confront / Purify 2001 - 2015
4
Organizational focus to:Scale / Optimize 1985 - 2001
3
Organizational focus to:Innovate / Nurture 1972 - 1985
2
LEADERSHIP TRANSITION REIGN ROLE
Jeffrey R. Immelt 2001 -   Reformer
 
Jack Welch 1981 - 2001 Grower
 
Reginald H. Jones 1972 - 1981 Builder
 
Note: Consult Timeline with sources below for supporting material.

ESSAY

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Oct 7 2015 - Nelson Peltz's Trian takes billion dollar stake. Says he doesn't want to break up the company but share buy backs. It's either that or breaking the company up, of course. Peltz is investing to gain significantly. (See article below: GE... Great for dividends, ugly for growth)

Jeffrey Immelt has had to reform the business left by his predecessor, Jack Welch. Next to restoring the company's profitability such as by selling GE Plastics, he is forced to reduce GE's exposure to risk - the latter particularly incurred by its finance business, which Welch expanded.

In 2013, despite this sense of urgency, the finance business still makes up 45% of the company, that is, 12 years after Immelt takes over from Welch. Immelt now hopes to push this back to 25% in 2016 (or 2018, according to another source). 

What made Jack Welch foster/acquire GE's finance business in the first place? As Welch admits, he 'never had a great strategic vision'. Growth is what counted and 'growth in GE's finance arm was almost surreal'. 

Immelt deals with a formidable task but struggles to identify what should distinguish the business of GE in the future. One hunch is R&D. Another is software - sources report 'a graveyard filled with software acquisitions gone wrong.' Yet others might be 'infra structure' or 'energy storage technologies'. 
 

Clearly, GE has reached stage 4 of Natural Organization, a stage that requires a leader with another role. 


The need is for a transformer, a leader who focuses on re-inventing GE by identifying the core competences that will fuel its next cycle of growth. If such a leader does not take charge in time, the company may break up driven by shareholders who want to maximize their gains.
 

HISTORICAL NOTES

JEFFREY IMMELT - Reformer role

Immelt initially increases spending on research and fosters the development of environmentally friendly products. He moves GE away from finance. He also brings GE back to its inventive roots - Thomas Edison was one of its founders - by boosting R&D from 3% in 2008 to 5% in 2011. Immelt identifies the need to transform GE from 'a misfiring finance-heavy conglomerate into a more focused maker of industrial equipment'. While Jack Welch favored military officers, Immelt utters the need for 'dreamer types' at some point. Soon after Immelt becomes CEO, GE's share price collapses and has remained at lower levels no matter what his tactics. This is not uncommon when companies traverse a stage of declining growth. After all, share price is a reflection of the perceived growth-generating potential of a company. As Immelt purifies the business, he also reinvigorates globalization - not unlike Reginald Jones did. Reports confirm that Immelt was slow to stamp his authority on GE. In part, 'his grand strategy involves undoing mistakes made in the earlier part of his watch.'

Jack Welch - Grower role

When Welch is appointed in 1981, GE has 411,000 employees. At the end of 1985, it only has 299,000. According to Welch, a company should be either No. 1 or 2 in a particular industry. So, he acquires the fastest growers in the market. Following a ruthless approach, Welch annually fires the bottom 10% of his managers 'irrespective of absolute performance'. Relying on corporate culture, Welch is more known for the old GE way. 'Values rather than numbers are important'. Welch hires multiple military officers valuing their disciplined and predictable response to clearly defined challenges. 'He works to eradicate perceived inefficiencies by trimming inventories and dismantling GE's bureaucracy.' Welch commits GE to the biggest Six-Sigma quality program ever in corporate history. He shifts GE's business from manufacturing to financial services through some 600 acquisitions. Welch delays his retirement in an effort to complete the purchase of Honeywell, his intentions torpedoed by EU's antitrust regulators.

Reginald Jones - Builder role

Jones prepares a vision for the company to gauge the ideas and plans of possible successors. Vision is his motivating force. He develops a new strategic direction and creates one of the most diversified enterprises in the industry-equipment world. He fosters rising growth by R&D and proper strategic planning. On Jones' watch, sales more than double, from $10 billion to $22 billion. Earnings grow even faster, from $572 million to $1.4 billion. He is recognized for changing the relationship between business and government, which hints his focus on the world outside - not unlike Immelt does. In public life, Jones advances fresh ideas for the solution of the economic and social problems of his time.

 

​If you'd like to share, follow or like this analysis, login first.

Oct 7 2015 - Nelson Peltz's Trian takes billion dollar stake. Says he doesn't want to break up the company but share buy backs. It's either that or breaking the company up, of course. Peltz is investing to gain significantly. (See article below: GE... Great for dividends, ugly for growth)

Jeffrey Immelt has had to reform the business left by his predecessor, Jack Welch. Next to restoring the company's profitability such as by selling GE Plastics, he is forced to reduce GE's exposure to risk - the latter particularly incurred by its finance business, which Welch expanded.

In 2013, despite this sense of urgency, the finance business still makes up 45% of the company, that is, 12 years after Immelt takes over from Welch. Immelt now hopes to push this back to 25% in 2016 (or 2018, according to another source). 

What made Jack Welch foster/acquire GE's finance business in the first place? As Welch admits, he 'never had a great strategic vision'. Growth is what counted and 'growth in GE's finance arm was almost surreal'. 

Immelt deals with a formidable task but struggles to identify what should distinguish the business of GE in the future. One hunch is R&D. Another is software - sources report 'a graveyard filled with software acquisitions gone wrong.' Yet others might be 'infra structure' or 'energy storage technologies'. 
 

Clearly, GE has reached stage 4 of Natural Organization, a stage that requires a leader with another role. 


The need is for a transformer, a leader who focuses on re-inventing GE by identifying the core competences that will fuel its next cycle of growth. If such a leader does not take charge in time, the company may break up driven by shareholders who want to maximize their gains.
 

HISTORICAL NOTES

JEFFREY IMMELT - Reformer role

Immelt initially increases spending on research and fosters the development of environmentally friendly products. He moves GE away from finance. He also brings GE back to its inventive roots - Thomas Edison was one of its founders - by boosting R&D from 3% in 2008 to 5% in 2011. Immelt identifies the need to transform GE from 'a misfiring finance-heavy conglomerate into a more focused maker of industrial equipment'. While Jack Welch favored military officers, Immelt utters the need for 'dreamer types' at some point. Soon after Immelt becomes CEO, GE's share price collapses and has remained at lower levels no matter what his tactics. This is not uncommon when companies traverse a stage of declining growth. After all, share price is a reflection of the perceived growth-generating potential of a company. As Immelt purifies the business, he also reinvigorates globalization - not unlike Reginald Jones did. Reports confirm that Immelt was slow to stamp his authority on GE. In part, 'his grand strategy involves undoing mistakes made in the earlier part of his watch.'

Jack Welch - Grower role

When Welch is appointed in 1981, GE has 411,000 employees. At the end of 1985, it only has 299,000. According to Welch, a company should be either No. 1 or 2 in a particular industry. So, he acquires the fastest growers in the market. Following a ruthless approach, Welch annually fires the bottom 10% of his managers 'irrespective of absolute performance'. Relying on corporate culture, Welch is more known for the old GE way. 'Values rather than numbers are important'. Welch hires multiple military officers valuing their disciplined and predictable response to clearly defined challenges. 'He works to eradicate perceived inefficiencies by trimming inventories and dismantling GE's bureaucracy.' Welch commits GE to the biggest Six-Sigma quality program ever in corporate history. He shifts GE's business from manufacturing to financial services through some 600 acquisitions. Welch delays his retirement in an effort to complete the purchase of Honeywell, his intentions torpedoed by EU's antitrust regulators.

Reginald Jones - Builder role

Jones prepares a vision for the company to gauge the ideas and plans of possible successors. Vision is his motivating force. He develops a new strategic direction and creates one of the most diversified enterprises in the industry-equipment world. He fosters rising growth by R&D and proper strategic planning. On Jones' watch, sales more than double, from $10 billion to $22 billion. Earnings grow even faster, from $572 million to $1.4 billion. He is recognized for changing the relationship between business and government, which hints his focus on the world outside - not unlike Immelt does. In public life, Jones advances fresh ideas for the solution of the economic and social problems of his time.

 

TIMELINE

END OF ANALYSIS

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  • Revenue, GDP, Activity: Uncertain growth
  • Organizational focus: Explore/Discover
  • Main motivating force: Conviction
  • Ideal role of leader: Transformer
  • Source of inspiration: Inside
  • Cohesion trend: Fragmentation
  • Company attractiveness: Sentiment driven
  • Breakup risk:
  • Revenue, GDP, Activity: Rising growth
  • Organizational focus: Innovate/Nurture
  • Main motivating force: Vision
  • Ideal role of leader: Builder
  • Source of inspiration: Outside
  • Cohesion trend: Integration
  • Company attractiveness: Buy/hold
  • Breakup risk:
  • Revenue, GDP, Activity: Stable growth
  • Organizational focus: Scale/Optimize
  • Main motivating force: Culture
  • Ideal role of leader: Grower
  • Source of inspiration: Inside
  • Cohesion trend: Integration
  • Company attractiveness: Buy/hold
  • Breakup risk:
  • Revenue, GDP, Activity: Declining growth
  • Organizational focus: Confront/Purify
  • Main motivating force: Openness
  • Ideal role of leader: Reformer
  • Source of inspiration: Outside
  • Cohesion trend: Fragmentation
  • Company attractiveness: Sentiment driven
  • Breakup risk: Partial or total