Tuesday, April 19, 2011

Maintain Your Advantage

Steve Lohrs's G.E Goes With What It Knows: Making Stuff, shows G.E's struggles during the financial crisis of the late 2000's. G.E's issues could be summed up to be because of an over-reliance on its increasingly large financial arm, GE Capital. While the financial arm increased its reach, GE's traditional strategy of "building stuff" took a backseat role. This makes GE a microcosm of the United States, as our country as a whole has fell far from the manufacturing giant it once was.

One thing that we have learned is that competitive advantage is a integral part of a company's strategy. GE quickly realized that their movement away from their traditional competitive advantage in the area of "technology based manufacturing," was a slippery slope. David J. Collis and Michel G. Rukstad would be able to agree with this proclamation as they emphasized the importance of "Defining the Advantage" in Can You Say What Your Strategy Is?. Collis and Rukstad would say that GE's prowess in the areas of "industrial innovation" would define their "strategic sweet spot." This strategic sweet spot should be exploited at all times.

GE quickly realized the need to get back to their "roots" when their leadership spurred initiatives in the area of "ecomagination." This was GE's way of adapting to the rapid and unforeseen changes with what they knew. GE has turned these energy efficient products into a souce of $20 billion in sales. When GE went from conglomerate powerhouse to a company without its tripe-A-credit rating, it was obvious that losing sight of your strategic advantage(s) can be a dangerous move. Luckily for GE, their leadership was quick to realize this and stabilized the company.

What company's focused on an area other than that where their strategic sweet spot was, and succeeded? I wonder if there are several, or if those company's are in the minority.

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