Tuesday, April 19, 2011

Corporate DNA- NOT Born This Way


In “G.E. Goes with What It Knows: Making Stuff", Steve Lohr addressed how G.E. Capital almost dragged the whole enterprise during the economic downturn and learning the harsh lesson, G.E. decided to go back to basics. “The underlying DNA of G.E., going back a century, has been to invest for growth in its technology base.”

G.E.’s story marks my interest in investigating into corporate DNA, a concept that explains the characteristics of companies who have been able to innovate and maintain a competitive advantage over a long period of time. The conveyance of this advantage includes a clear company statement—mission, values, vision, strategy and balanced scorecard and solid execution as are addressed in this week’s readings. Almost every company is trying to do one ultimate thing, which is convincing people to buy in why they exist, what they believe in and how they will behave, what they want to be, what their game plan will be and etc. However, what companies forget to mention is what they will not do.

Just as we believe that our DNA determines to a large extent what type of person we will be, corporate DNA determines what a company can do and cannot do. G.E.’s expertise lies in manufacturing basics; therefore, the company should focus on investing in R&D and manufacturing. Obviously G.E. and Morgan Stanley are built in different DNA and what Morgan Stanley is good at does not represent G.E.’s advantage in the capital market.

Google is an exception. As is reflected in the philosophy of Google—“Don’t be evil”, Google proved itself from retreating from mainland China’s search engine market. The retreat manifests Google’s DNA that it is not born to be evil. Though China is a lucrative market, Google would not support the government to supervise its people’s online activities by disclosing its users’ information and could barely handle the cyber attack that stole intellectual property rights from Google.

In the NY Times article, Mr. Immelt has expressed the same frustration about the difficulties of doing business in China, especially when G.E. is in the industries that the government declares to set top priorities on to the nation’s economic development.

To conclude my blog, I would like to state my suggestion for companies’ strategic direction and that is to take its corporate DNA into consideration, not only traits that are embedded in its expertise armory but also characteristics that make it not fit for a market, for a business line, just to name a few. After all, not every company can be a successful manufacturer like G.E. or an I.T. mogul like Google.

Further reading:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8jW1HKPXfDw&pos=7

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