If you stay abreast of the news, you may recall the recent headline: “GE opens first Asian digital operations centre”. General Electric (GE) will be partnering with the SP Group here in Singapore to develop capabilities in the Industrial Internet of Things (IIoT), IT application and connectivity using GE’s proprietary Operating System Predix. This will touch on appliances such as electric generators, jet engines and oil-refinery gear, so they would function better in addition to generating cost savings. GE CEO Jeff Immelt was in Singapore for the launch of this partnership (12 April 2017).
Before Jeff Immelt took the helm, the legendary Jack Welch was the CEO of GE. Jack’s ambition was to make GE a learning organisation. Implementing Six Sigma aggressively, he introduced numbers-driven quality control methods. He also trained every manager so they could run any business unit, from an industrial division to a television station.
A hallmark of Jack’s reign was that managers would debate the future aggressively down in their training centre by the Hudson River in New York and have martinis afterwards to chill down. Welch’s ferocity towards his staff was common folklore.
When Jeff Immelt took over in 2001, he instituted major changes in the company culture. Instead of aggressive group therapy, he instituted yoga and meditation classes. Instead of drinks at the bar, they would practice the Japanese art of painting on still water and sip artisanal coffee. Instead of firing managers as Jack would have done, he would have them train with more senior managers.
Jef instituted the changes because he set out to create a more open environment where people would feel free to share with one another instead of fearing one another. He was out to create an environment that would be conducive to creativity and innovation. Staff were encouraged to come up with “imagination breakthroughs” and “idea’s jam” sessions were held to encourage creativity. And that’s because he could see the future coming – that the Internet and IT technology that will take over industry. GE was primarily in traditional engineering and manufacturing and it must move in the new direction in order to survive. He wanted GE to move into software.
A new software division was created and located in Silicon Valley. He approached an experienced IT professional, William Ruh (previously Vice President of Cisco) to head the unit with the task of creating an operating system for the “Industrial Internet of Things” for industrial and machine systems. IT professionals at Silicon Valley were incredulous at GE’s attempt to enter the software domain, where other companies such as Microsoft and Google reign supreme.
At that time, few thought that GE could make it. Jeff had to sell off $200 billion worth of problematic assets weighing down the balance sheets, units that were manufacturing refrigerators and microwave ovens for example. Facing problems in recruiting IT professionals, he located his new software unit at Silicon Valley and initiated the move of his business from traditional location in Fairfax to Boston, the Athens of America, in order to have an environment conducive to the new regime he was introducing.
During the financial crisis of 2008, GE was badly mauled. Jeff was forced to ask for bankruptcy protection because of a $60 billion debt. Soon after GE missed its quarterly earnings projections. Share prices of GE dropped from a height of $60 to a mere $6. Nothing that Jeff introduced so far appeared to be working. A Financial Times leader in 2012 called Immelt’s term of CEO, the lost decade for GE. It was the worse of times for GE.
Jeff realised he needed a cultural revolution in GE. He then hired Eric Ries, author of The Lean Startup, to speak to his senior executives and to conduct workshops for them to help them use Silicon Valley compliant lingo. Essentially, GE executives learned how to try out things, roll out early versions for customer feedback, then improve on them or pivot it out to customers. Immelt further distributed thousands of copies of the book, The Lean Startup to his many managers and staff. He further invited Ries to help GE to come out with an adaptation of Ries’ methods of working for GE to innovate and improvise.
By now, GE felt that the annual performance review and the forced ranking system of the past had to be ditched in favour of a more gentler system where employees are coached by seniors. The efforts of Jeff helped by Ries were taking effect and by 2015, sales of the new operation system that GE had developed hit $5 billion. Something was working at last.
This story of how a giant like GE had transformed itself from a 124-year-old dinosaur to a lean startup is a story of adaptation and innovation. The transformation included the change from a rigid structure and culture to a more gentler one, one suited for innovation, creativity and adaptation. Without this change, GE would probably be broken up.
We are reminded of Kodak whose attempts at adaptation was sabotaged at all levels by managers and staff who saw the change as threatening their rice bowls and hence worked against it. It is a reminder that change is often difficult and resisted by the very people who needed them most.
So, whether you are a small SME or a corporate giant, the same forces that affect others will have an impact on you. Adapt and change, you will flourish with new ways of thinking and working. Fail to adapt and you go the way of the dinosaur. If GE needed to be a startup all over again to survive, how much must you do to be around for the coming years?