Sunday, June 11, 2017

GE's Strategic Initiatives

In the readings on GE this week, two of Immelt’s objectives stood out. The focus on industrial products and the technology initiatives to conduct data modeling on the products they sell. They complement each other and I believe represent good strategic initiatives.

The G.E. Goes With What It Knows: Making Stuff article noted that GE is turning attention to the areas where they have a competitive advantage. Such as jet engines, windmills, nuclear plants, and locomotives. Immelt points out that these are not easy industries to enter due to huge capital costs, so it makes sense for GE to continue to exploit their advantages here.

In the Business Insider interview, Immelt discussed how sensors are used to capture data, model it and improve performance. The expected outcome here is better productivity and presumably happier customers. Since GE has a host of home appliance products, in addition to the heavy equipment, this venture is a strategy that is aligned with GE “going with what it knows.” In fact, this could be so lucrative and impactful that he says “it’s going to transform GE.

Additionally, the articles discuss General Electric’s move away from the financing business and ultimately the sale of GE Capital. The sale was part of the strategy to focus on areas of competitive advantage and it was noted that GE Capital’s assets were sold more quickly and at higher prices than estimated. That was as good an outcome that could be expected under the circumstances.

When it comes to the "Industrial Internet" initiative I think Immelt is making the right call. The ability to collect and store data has never been at a lower cost. Utilizing sensors on products you are already manufacturing is a natural progression of a product lifecycle. So, in that sense, it is a low-risk initiative. As this is in the early stages, it is reasonable to conclude that growth will emerge in unforeseen ways. No matter the evolution in this space, GE is well positioned as they have a strategy, own the products, and the associated data. All of which are valuable when it comes to improving productivity or customer satisfaction.

I believe a key takeaway from these articles is to continue to enact strategic choices around your competitive advantages. Taking a critical eye to ventures such as GE Capital that are not part of “what you do best” is something that should be done regularly to avoid having to take drastic and reactionary approaches. At the same time, being nimble in the face of change as the sale of GE Capital showed is also a critical strategic capability. Finally, a good strategy is to build new ventures off of your core competencies.

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