GE's Growth Strategy

1

McGinsey & Company

IM551 IT Management & StrategyKAIST Business School

Information & Media Management

2

33

I. Corporate Overview

II. Success Factors

III. Business Process

IV. GE, for the next

V. Suggestion

McGinsey & Company

Agenda

4McGinsey & CompanyMcGinsey & Company

• GE’s Present • History of GE• Key Person of GE• Business Portfolio• Performance

McGinsey & Company

55

Jeff Immelt, Chairman & CEO

Keith S. Sherin,CFO

Gary M. Reiner, CIO

$173 billion USD (2007)

$22.5 billion USD (2007)

320,000 (2007)

$4,200 billion USD

The only company listed in the

Dow Jones Industrial Index today

that was also included in the

original index in 1896

KEY PEOPLE

REVENUE

NET INCOME

EMPLOYEES

Market Value

Characteristics

GE’s Present

66

History of GE

1876

1890 Thomas Edison opened a new laboratory in New Jersey

Edison had organized his various businesses into the Edison General Electric Co.

1896General Electric was one of the original 12 companies

listed on the newly-formed Dow Jones Industrial Average. GE is the only one that remains today. 1919

The Radio Corporation of America (RCA) was founded by GE and American Telephone & Telegraph (AT&T)1960s

General Electric was one of the eight major computer companies with IBM

1981Jack Welch inaugurate to CEO

1996Introduction of Six Sigma Quality 2001

Jeffrey Immelt inaugurate to CEO

2004NBC Universal, 3rd largest media company from

Vivendi Universal 2005GE reorganized its 11 businesses into 6 large units

77

Key Person

Reginald H. Jones CEO, 1972 – 1981

Managerial qualities Relationship between

business and government

Jack F. Welch Jr. CEO, 1981 – 2001

Customer-Focused Methodology to Improve Quality without Defect

Today…Rigorous Employee 6σ

Certification

Jeffrey R. ImmeltCEO, 2001 – Present

New Frontiers & Strategic Alliances for GE

Business Transformation

Tomas EdisonFounder, 1847 – 1931

Invent the phonograph and electric light bulb hold 1,093 U.S. patents

88

• Oil & Gas

• Transportation

• Aviation

• Water

• Medical Diagnostic

• Clinical Systems

• Life Sciences

• Capital Solution

• Real Estate

• Corp Finance SVC

• Healthcare Finance SVC

• Television Group

• Universal

• Digital Media

InfrastructureCommercial Finance

NBC Universal

Business Portfolio

6 Global Business Unit

Industrial

GE Money

• Europe

• Asia

• America

• Australia

• Customer & Industrial

• Enterprise Solution

• Security/Sensing

Healthcare

99

Performance

Earnings

2003 2004 2005 2006 2007

(in $ billions)

13.3 15.6

17.4

19.422.5

Revenue by Region

A

B

C

D

A. US 50%B. Europe 23%C. Pacific Basin 13%

D. Americas 7%E. Others 7%

Consolidated Revenues

2003 2004 2005 2006 2007

(in $ billions)

105124

137

152173

Revenue by Business

AC

E

A. Infrastructure 29%B. Industrial 23%C. NBCU 10%

D. Healthcare 10%E. Commercial

+ GE Money 28%

BC

D

Compound annual growth

rate of 13%

Compound annual growth

rate of 14%

E

10McGinsey & CompanyMcGinsey & Company

Executive for GrowthSummary of Success Factor

- Organic Growth- Biz Transformation - Globalization

Lessons from Jack Welch & Immelt

McGinsey & Company

1111

ImaginationBreakthroughs

CECOR frameworkExecute forGrowth

Lean Six SigmaNet Promoter Score

One GE:Enterprise Solutions

& Brand

GrowthLeadership Traits

EmergingMarkets

Growth LeadersInspire and

develop people that know how

to help customers and

GE grow

CustomersUse process excellence to

satisfy customers and

drive growth InnovationGenerate new

ideas and develop

capabilities to make them a

reality

Great TechnologyHave the best

products, content and

services

Commercial Excellence

Develop world-class sales and

marketing talent and demonstrate

the value of“one GE”

GlobalizationCreate

opportunities everywhere and

expand in developing global

marketsNew Product

Introduction

1212

Work-out

CAP (Change Acceleration Process)

Six sigma

Performance Ranking System (Vital Curve)

Crotonvill

ExecutionPerformance

1313

How we fit into GE’s strategy

Help sustain a healthy portfolio

filled with “great businesses”

Help strengthen the competitive

position of our businesses

Add Substract

+ New technologies - Low return

+ New geographies - Low growth

+ New growth platforms - Low tech

+ Scale / cost reduction

+ Capabilities

Strategic Analysis

JVs and Partner

ships

Dispositions

Acquisitions

Portfolio assessm

ent

Integration and “de-

integration”

Sustain Growth

1414

GE is continuously evolving

Strong portfolio

1515

13%

75 81 87

0

20

40

60

80

100

05' 06' 07'

Global revenue

$ in billions

- In 2005, global revenue : 75$ billion, 21$ billon from developing countries- In 2004, impressive 37% increase on the previous year.- Over the next decade, 60% of GE’s growth : developing countries (predict)- China, India, Russia, Europe, Southeast Asia, Middle East, South America.

2129

50

0

10

20

30

40

50

60

05' 06' 10'

Developing counties-growth

$ in billions

1616

Biz Portfolio Restructuring

- No.1 or No.2 : Fix, Sell, or Close

- 3-Circle concept :

12 Division, Finance/ Service

Reorganization

- Downsizing

- Delayering

- Empowerment

Cultural revolution

- Crotonville

- Work-out

- CAP

- Performance Ranking System

Core Business : Power Systems, Appliances,

Lighting, Transportation

Technology : Aircraft Engine, Aerospace,

Materials, Medical Systems

Service Business : Finance Service, Communications,

Information Service, Broadcasting

1717

Establish much more openness and trust

Rebalancing the portfolio

Marketing-oriented

“ At the customer, For the customer (ACFC)”

Growth :New platforms, New process

New people profile

Infrastructure for developing countries

1818

Jack Welch Jeff Immelt

Paradigm

Efficiency Oriented

• Strong business and down-sizing

• 1.2 or sell

Effectiveness Oriented

• Growth engines for the future

Methodology

6 Sigma

• Quality and costs

• Finance

Growth

• External growth

• Marketing

Target Market

EU, USA Developing countries

PortfolioCash Generator

• finance, Service

Growth engine

• Infrastructure

Responsibility Within the law Social responsibility

19McGinsey & CompanyMcGinsey & Company

Why Process is ImportantBusiness Process in GETools for ChangeMethodologies

- Work Out- Six Sigma- CAP

McGinsey & Company

2020

Strategy

ProcessExecute

Monitor & Feedback

Process Improvement

Plan

KPI / Action Item

Process Control

Improve

Strategy-Process

Alignment- Align to changing external

factors (market, competition,

technology and customers)

Continuous

Process Improvement-Standardization

-Optimization

Str

ate

gic

Op

era

tio

na

l

2121

2222

Small Large

QualityTechnical Strategy

Work-Out

“Expert-driven”

Six Sigma

“Data-driven”

AcceptanceCultural Strategy

Leadership Development

• Corp. Entry Programs

• Crotonville Courses

GE Values & 360° Reviews

Learning Organization

Change Acceleration

Process(CAP)

Cultural Integration

Scopes of Changes

Co

mp

on

en

t o

f C

ha

ng

e

2323

• Improvement and implementation of a new “Open Culture”

- Building Trust : Tear down barriers within the organization

- Empowering Employees : Leverage individual creativity and potential

- Elimination of Unnecessary Work : Remove bureaucracy

- A new paradigm for GE : Participation through a sense of accomplishment and ownership

Goal

How

Typical Org. Structure

Sponsor

• Employee Empowerment &

Speedy Decision Making

• Set Concrete Goal

• Oversee & Support Follow-Up

Champion

Admin. Office

• Measure Current Status

& Data Collection

• Continuous Monitoring

• Select & Train Facilitator

Facilitator

• Accurate Understanding

about Issue at Hand

• Develop Facilitation Skill

• Maintain Comm. With

Admin. Office

Work-out Process

Pre-Meeting(D-4Weeks)

• Derive Issue • Clarification of Driving Body• Compose Participants

Work-OutSession

(D)

• Participation of Sponsors• Team start-up• Problem Solving• Execution Plan• Presentation / Decision

Making

Follow-up

Meeting(D+12Weeks)

• Regular/Occasional Monitoring

• Share Success Story• Reward

2424

Goal

How

•To maintain its position of advantage, Six Sigma targets a 6 sigma level of quality for all business processes in SVC, product, sales, etc.

- Targets this level of optimization not only product and SVCs, but all across its business operations

- Achieve superior management quality and cost competitiveness by eliminating loss due to faults or mistakes by management systems

Define high-level project goals and the current process

Set up control mechanisms and continuously monitor the process

Measure key aspects of the current process and collect relevant data

Analyze the data to verify cause-and-effect relationships.

Improve or optimize the process based upon data analysis

Six Sigma Process DMAIC

Success Factors

Six Sigma Org. Structure

Champion Responsible to represent the needs and to improve the operational effectiveness

Master Black Belt

Ensure that quality objectives and targets are set, plans are determined, progress is tracked, and education is provided

Black BeltHeart and soul of the Six Sigma quality initiative. Lead quality projects and work full time until they are complete.

Green Belt Employees trained in Six Sigma

Definition

Measurement

Analysis

Improvement

Control

Strong Top-level Leadership Systematic Nurturing of Six Sigma Experts Formation of Organizational Structure committed

to Innovation Support management in consulting, training,

finance issues Link to Reward/Promotion Structure Regular sharing of Know-How Sharing of Success Cases/Best Practices

2525

Goal

How

•Achieve change acceleration by increasing employee acceptance regarding changes

- Built an competitive organization through continuous cultural revolution

- Remove bureaucratic elements within the org. structure

Work-Out tools

Key Strategy Initiatives

Change Acceleration Process

Creating A Shared Need

Shaping A Vision

Mobilizing Commitment

Improved State

Making Change Last

Monitoring Progress

Current State Transition State

Changing Systems & Structures

Leading Change Leading a change Secure Champion to drive changes

Creating a

Shared Need

Share necessary changes & persuade with

diagnostics & analysis

Shaping a visionShare a visionary image of what this change

can achieve

Mobilizing

Commitment

Find and support committed employees to

put changes into practice and spread its

realization

Monitoring

Process

Control and monitor goals, actions and

achievement levels of change activities

Making change

last

Make changes last by training all employees

across the organization

Changing system

and structure

Set up systems and structures to support,

drive and complete changes

7 Stages of Change CAP Session

26McGinsey & CompanyMcGinsey & Company

• Pressure on GE customers• Enabling sustainable growth• GE’s commitments• GE's Next

McGinsey & Company

2727

CarbonConstraints

EmergingMarkets Growth

EmissionsStandards

Climate Change Debate

IncreasingPopulation

Customer

2828

2929

Energy

• Solar, Wind, Biogas, IGCC, Gas turbines

Water

• Reuse, Desalination, Industrial, Cooling

Transportation

• Aviation, Rail, Automotive, Marine, Fleet

Industrial

• Lighting, Appliance, Motor, Finance

3030

Year 2100

Year 2020

Year 2010

Year 2000

Before 1990s

• Product Diversifications + Organization Restructuring + Productivity

• Process Management for growth + Organization development

• R&D investment + Customer focused

• R&D investment + Customer focused

• Adaptive and challenging attitudes

31McGinsey & CompanyMcGinsey & Company

Suggestion

McGinsey & Company

3232

Questions

McGinsey&Company