“Every CEO talks about making his or her company more innovative, but for GE it’s a matter of survival. GE is a corporate mainstay, the only original stock left in the Dow Jones industrial index, which began tracking the performance of large public companies in 1896. It must succeed now in a world in which the only constant is change”.
– Boston Globe, April 17. 2017
As reported in this recent article by the Boston Globe, GE has successfully operated for over 120 years. But how have they managed to do this? The answer lies in the performance of a number of best practices and a willingness to change.
GE has long been an industrial exemplar in terms of technical and managerial best practices. It should not be surprising then that in this era of ever-quickening change they have continued to lead in this way. GE has long been distinguished for its internal employee development programs whether it’s helping employees continue their technical education with graduate work or placing them in leadership training programs to become more effective managers. This in itself is a best practice. Three more best practices, as identified by the Harvard Business Review, are “(1) resource allocation that nurtures future businesses, (2) faster-cycle product development, and (3) partnering with start-ups.” In terms of resource allocation, it can be tempting to funnel too much money to expand the current cash cow business, and while these must be adequately supported, it is equally if not more important to invest in future businesses that are just emerging. Today’s emerging ventures will be tomorrow’s cash cows. Related to this is achieving a fast product development cycle; that is, not only does GE invest in future businesses, but they consciously move quickly to develop them. For example, GE has worked extensively with Silicon Valley entrepreneur Eric Ries to implement “Agile” and “Lean” methodologies. Finally, GE is partnering with startups as part of an “open innovation” strategy in which startups provide novel business opportunities and capabilities and GE provides capital as well as 120 years’ worth of experience in launching new businesses.
One particular area where GE has invested for the future is in digital capabilities through the creation of its new GE Digital division in 2015. This story started with the emergence of big data analytics and the Internet of Things (IoT) as new, high potential technologies. GE recognized the implications for its business and the importance of leading this wave of technology. In fact, it is changing GE’s entire business model. Rather than its traditional “transactional” relationship with customers – in which GE sells a physical product and may provide some maintenance service – GE is shifting to an “expanded customer outcome” relationships in which IoT product integration can provide improved asset management for customers. In essence, GE has moved from selling hardware to selling a platform as a service (PaaS). This is a truly inspiring example of GE’s willing to change with the times; not only did they create product innovation and develop an entire new digital competency, but they innovated at the business model level, a huge shift for the company.
GE has spent the last 120 years continually growing by continually innovating. They have learned and now model a number of best practices, especially the ability and willingness to constantly change.
Sources and further reading: