GE’s Rotary Compressor Case Solution:

Question 1: What factors in the product development process caused this disaster?
Answer:

Development Phase Factors which caused disaster

Customer  Usage difference: GE failed to understand the difference in the
requirements requirements of rotary compressor for air conditioner and refrigerator
 Misjudging needs: GE took decision completely on their own without
involving customers, hence misjudged the needs of consumers
Design  Ignorance: GE management ignored the fact that rotary motor will run
hotter immediately and hence not suitable for refrigerator
 Noise: The new design will be making much noise, this fact was not
considered
 No learning from mistakes: They overlooked the recent failure
Implementation  Avoided Outsourcing: They didn’t evaluated option of outsourcing
against the option of in house manufacturing
 Over Confidence: They avoided the offer of consulting from ex
supervisor
Testing  Lack of established testing process: There was no established process
to test the working of the designed rotary compressors
 Lack of supervision: Supervisor in place avoided the finding from the
testing process which were showing the fault in rotary compressor

Question 2: Which individuals were responsible for this disaster and why?
Answer:

Individuals who Reason

were responsible
Manufacturing Nothing had been mass-produced with such precision of a tolerance of only 50
Engineers millionths of an inch before, but manufacturing engineers felt sure they could do
it. Which they failed to achieve.
Design Engineers Powdered metal had been tried a decade earlier on air conditioners but did not
work. The design engineers who were new to designing compressors did not
consider the earlier failure important.
Management A consultant suggested that GE should consider a joint venture with a Japanese
company that had a rotary refrigerator compressor already on the market. This
idea was rejected by management. In addition to this the original designer of the
air conditioner rotary compressor, who had left GE, offered his services as a
consultant. GE management also declined this offer.
Supervisors The technician who disassembled and inspected the parts thought they did not
look right. The technician’s supervisors discounted these findings and did not
relay them to upper levels of management.
Testing Staff About 600 compressors were tested in 1983 without a single failure. This
statistics suggests that there must have been a conceptual fault in the testing
precedure
Question 3: How might this disaster have been prevented? What lessons do you think GE learned
from the future?
Answer:

Prevention:
Cost Benefit Analysis:
They should have done cost benefit analysis of both the options available to them to get a deeper
perspective of which one to implement.

Quality System:
There should be quality system in place to check quality of product being designed at every phase i.e.
from product requirements, design to implementation

Design for test market (Product Screening):

They should have designed only few products first to test them against the customer requirements,
working and reliability

Outsourcing:
This was the best option available to them. They were an established player in this product line. They
would have easily prevented this by outsourcing manufacturing of rotary compressors

Lessons from failure:

1. Continuously improve the manufacturing operations according to the customer requirements and
changes in technology and other external environment to compete with competitors
2. Role of management in particular operation’s management is centre to the product success and a
small overlook can cause a great damage
3. Evaluate all the available options thoroughly before implementing
4. Evaluate selected option at every stage of product manufacturing and not in the end only
5. Notice all the small suggestions from the people involved in the operations of product development

Question 4: On what basis was GE attempting to achieve a competitive advantage? How did it fail?
Answer:

GE tried to achieve competitive advantage through product differentiation by improving current

process of manufacturing. They analyzed that their product is not matching on many parameters
provided by their competitors. E.g. making refrigerator compressors required 65 minutes of labor in
comparison to 25 minutes for competitors in Japan and Italy. Moreover, GE’s labor costs were higher.

They planned following improvements in current operations:

 to build a new rotary compressor in-house
 A rotary compressor weighs less,
 One which has one-third fewer parts,
 The one which is more energy-efficient than the current reciprocating compressors.
  The rotary compressor which also takes up less space, thus providing more room inside the
refrigerator and better meeting customer requirements.

Reason for failure:

 They did not evaluate the option of outsourcing against the option of in house manufacturing
correctly.
 While considering the option of making is weight less they overlooked the noise made by
current design and the heat generated by current design
 They did not learn from their previous mistake and continued with the suggested process and
design
 Management overlooked the doubt by consultant regarding the testing results showing zero
failure rates, management also didn’t involve the person who designed rotary processor and
showed overconfidence on its technical staff