Wednesday, December 7, 2011

Strategy development and implementation inside GE

The article profiling GE and Jeffrey Immelt illustrates key strategy considerations we’ve discussed in the past weeks. After the banking sector failures of the past few years, GE is turning back to their original purpose: innovation in products, and less so in services. GE leadership attempted to make a decision about what they do do, and what they don’t do. These decisions reflect Porter-like trade off thinking, meaning the ability to accept that strategy requires making tradeoffs because some activities are just incompatible. Although their byline company information still emphasizes their existence as a “global infrastructure, finance, and media company” The New York Times profile suggests that internally, the emphasis has been placed back on the infrastructure part. Lohr reports “Unless a deal is in a business where G.E. has distinctive skills, Mr. Immelt says he won’t let GE Capital dive in. “We’re not going to do it, whether there are supernormal returns or not,” he says.”

In this decision of what GE won’t do, Immelt has shown that the “operational agility strategy” GE has chosen is that of “portfolio agility.” In order to have portfolio agility, leaders must be honest with themselves about where they failed. Immelt himself recognizes “that G.E. was seduced by GE Capital’s financial promise — the lure of rapid-fire money-making unencumbered by the long-range planning, costs and headaches that go into producing heavy-duty material goods.” He also has come to believe that where finances offer quick money, the heavy industrial innovations offer greater payoffs over time “It doesn’t happen every quarter or every year,” he says. “But over a 10- or 20-year time period, the businesses that are hard to do had the best returns. So the arithmetic works over time.”

As we’ve discussed in class, one of the key indicators of whether an organization’s strategy is just marketing or represents true direction is whether the money follows. With GE’s ecomagination campaign, even insiders thought at first that it was just marketing fluff. But Immelt threw his energy and the company’s resources into it. Now, “products that qualify for the ecomagination label total $20 billion in sales.”

As far as implementation, the profile of GE’s new Batesville, Mississippi factory epitomizes the analysis from “The Secrets to Succesful Strategy Execution.” The limitation to hierarchy in the plant, the grouping of employees in teams, and the respect implied by the decent salaries suggest that “everyone in the company knows which decision and actions they’re responsible for,” GE as “encouraged higher level managers to delegate operation decisions” and that “field and line employees understand how their day to day choices affect the company’s bottom line.”

Since their recent hardships, GE has demonstrated an ability to change up, choose a strategy, accept tradeoffs and put the money where their mouth is. According to Immelt “Strategies are useful…but only if they can quickly adjust to nasty real-world surprises. “In the words of the great philosopher Mike Tyson,” Mr. Immelt says, smiling, “everybody has a plan till they get punched in the mouth.””

In what other ways does GE exemplify or not exemplify strategic planning and implementation?

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