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SME 710 – Service Strategy and Design

Case Study 1: GE’s Growth Strategy – The Immelt Initiative

Name: Ping Lei Student ID: 10320346

Please prepare an analysis of this case. Your write-up should be 4 to 7 pages. Questions
that should be addressed are:

1. How difficult was the task facing Immelt assuming the CEO role in 2001? What
imperatives where there to change? What incentives to maintain the past?

2. What do you think of the broad objectives Immelt has set for GE? Can a giant global
Conglomerate hope to outperform the overall market growth? Can size and diversity be
made an asset rather than a liability?

3. What is your evaluation of the growth strategy (a strategy for a giant global
conglomerate with a portfolio of mature industrial businesses) Immelt has articulated? Is
he betting on the right things to drive growth?

4. How does this case illustrate how strategic intent needs to be matched by both
organizational capability and managerial competence; and show how such assets were
developed?

5. Examine how broad strategic objectives can be translated into a program of implement
able actions.

6. Demonstrate how Immelt’s strategy went beyond optimization to innovation.

7. Show how this new strategy focused on customers.

8. Analyzes how this new strategy emphased services. Was enough done to balance the
portfolio of products and services?

9. After 4 ½ years, did Immelt succeed in his objectives? How well is he implementing
his strategy? What are his greatest achievements? What is most worrying to you?

10. Beyond this case: We have the benefit of being 4 years beyond this case. What has
happened to GE in that timeframe? How has it changed its strategy? It is currently having
trouble with GE Capital and outstanding loans and is divesting itself of NBC to Comcast.
What do these situations say about the overall strategy?

11. What advice would you offer to Immelt as he faces the next stage of his leadership of
GE?
GE's Growth Strategy: The Immelt Initiative
-Challenge as the CEO role in 2001

• On Friday, September 7, 2001, Jeff Immelt filled in for Jack Welchc as CEO of GE.
• The global economics is faced with turndowns, and four days after his taking office, the
9/11 attacks occurred and the world was thrown into chaos
• Organizational innovation and management system was closely linked with Welch’s
personality, but Immelt’s personality and style were totally different from Welch’s.
• By the end of Immelt’s first week on the job, GE’s stock had dropped 20%.
• Later that year, GE’s stock dropped again on suspicions from the Enron scandal.
• Looking back on 2002, it was a horrible year for GE. Revenues were flat, corporate
scandals were all over the news, the economy was struggling, and GE’s stock continued
to slide, now 60% off of its all-time high from 2001.

- Strategy for the future of GE

• Between 2001 and May 2002, Immelt had devoted himself primarily to shoring up
confidence among customers and investors and within the company in the aftermath of
the various shocks to the USA and to business opinion.
• Immelt constantly went out of his way to emphasize that GE was not an over-grown,
slow to move, slow to react conglomerate.
• He instead viewed the company as a collection of highly correlated businesses made up
of world-class people, processes, and strategic initiatives.
• Acting on this, Immelt created a growth strategy made up of 5 key elements as follows:
1. Technical Leadership – Immelt identified technology as a key driver of GE’s future
growth and emphasized the need to speed up the diffusion of new technologies within GE
and turn the corporate R&D into an intellectual hothouse.
2. Internationalization – GE’s major opportunities for organic growth would be in its
overseas operations-particularly in China, India and Europe.
3. Services Acceleration – Take more of the back room resources and put them in the
front room-more sales people, more engineers, and more product designers.
3. Commercial Excellence – Shifting focus from GE’s internal processes to external
customer requirements.
5. Growth Strategy – Build new businesses based on high-growth and high-margin areas
that will provide “unstoppable” opportunities and expand GE’s base.

- Ongoing Operations of Strategy

• Immelt identified cash flow as GE’s number one financial focus. He used tools like Six
Sigma to realign the business around this objective. It was through improved cash flow
that Immelt would continue to invest in the business.
• Immelt hoped to adjust organizational structure of GE from the cold, results-oriented
focus of Jack Welch, to a more open and less hard-edged architecture. He believed that
the major changes that he would initiate at GE would be a result of the changing
environment that GE faced and the shifting priorities that it faced.
- Rebalancing the Business Portfolio

• Immelt believed that GE needed to reposition itself to maximize growth opportunities


and to achieve growth targets through sound acquisitions.
• As 2003 began, GE finalized plans to acquire Vivendi-Universal Entertainment. Immelt
felt that this acquisition was crucial to growing the NBC business within GE as the deal
would provide them with important content, production facilities, cable distribution and a
strong management team.
• Shortly after the Vivendi deal, GE announced plans to acquire a British life-science
company, Amersham. Immelt felt that Biotechnology would be very important part of
GE’s future growth.
• There were many concerns about this second merger, particularly the idea that GE’s
corporate culture would stifle the innovation and creativity that had made Amersham
successful in the first place. Immelt vowed to not allow this to happen.

- Focusing on Customers, Emphasizing Services

• Immelt named Beth Comstock as GE’s first Chief Marketing Officer in 2001. This
move was meant to stress GE’s new focus on their customers and less on their internal
processes.
• Acting on the momentum created by the new marketing emphasis, Immelt formed
Commercial Council in 2003 to bring together GE’s top sales and marketing leaders.
Immelt chaired that council himself.
• GE began to work very closely with their customers to improve their customer’s
business (focus on providing service for GE). In 2002, GE completed 6,000 Six Sigma
projects with their health-care providers alone.
• Immelt wanted GE service to be a critical part of their customer’s operations.

- Driving for Growth: New Platforms, New Processes


• GE’s top leaders identified 6 business growth platforms that would lead to way for GE’s
growth opportunities over the next few years:
1. Health-care information systems, security and sensors, water technology and services,
oil and gas technology, Hispanic broadcasting, and consumer finance.
2. These businesses were averaging a 15% annual organic growth rate.

- Aligning Management: New People Profiles

• As GE’s growth strategy began to take hold, Immelt worried that some of GE’s
traditional managers may not have the skills to be able to succeed in the more
entrepreneurial environment that he was trying to create.
• Acting on this, HR developed new career paths for managers, focusing on more in-
depth job experience as opposed to job rotations.
• HR also developed 5 action-oriented leadership traits that they would require all leaders
to possess:
1. External (customer) focus
2. Think Clearly
3. Imagination and Courage to take risks
4. Inclusiveness and Connection with People
5. Expertise in a function
• To develop these skills, 20-30 “pillar jobs” were created within each organization which
required the continual use and development of these 5 skills.

- Funding the Growth: Operating Excellence

• Throughout GE’s re-investment itself, Immelt insisted that the company’s ongoing
operations fund the growth. To accomplish this, Immelt enacted tools such as Lean Six
Sigma
• These efforts, as well as an overall simplification and consolidation of the business,
allowed GE to save a considerable amount of money by the time 2004 rolled around.
- Preparing for Liftoff: Innovation and Internationalization
• By 2004, the world economy was turning around. By year’s end, 11 of GE’s businesses
had turned in double-digit earnings growth compared to 2003 numbers.
• Immelt felt that this was only the beginning and that GE’s focus on growth and re-
investing would soon start to pay off.

- Imagination Breakthroughs

• Imagination Breakthroughs (IBs) were identified as large projects or business


opportunities that had the potential to generate at least $100 million in earnings within 3
years.
• Within 1 year of launching an initiative to develop IBs, over 80 had been identified
within GE. By 2005, 25 of these were generating revenue.

- Town Halls Meeting and Dreaming of future

• Immelt started holding Town Hall Meetings with customers to get a better idea of what
they wanted out of GE and how he could serve them better.
• He also created another type of forum known as “Dream Sessions” in which he would
meet with major CEOs from major industries to discuss roadmaps, implications for GE,
and future opportunities for GE.
- Infrastructure for Developing Countries: A New Growth Market
• In 2004, revenues from outside of the US including China, India, grew by 18%.
• Leading the way was a massive increase from developing countries – an area that
Immelt was particularly focused on for long-term growth

- Reorganizing the Company structure for Efficiency

• In 2005, Immelt reorganized the company into 6 major groups:


1. GE Industrial
2. GE Commercial Financial Services
3. NBC Universal
4. GE Health Care
5. GE Consumer Finance
6. GE Infrastructure
• Each group was to focus highly on coaching, developing and supporting younger
managers within the group.

- Going Forward: Immelt’s Next Challenges

• Immelt’s main challenge moving forward is to maintain the momentum that his moves
have produced to date.
• “GE thrives because we use our size to help us grow.”
• “Our goal is not just to be big, but to use our size to be great.”
• Ecomagination challenge
• With new situation of the developing countries like China, how can GE Healthcare lead
the healthcare markets?