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Glen Gyssler

Three Strategy Lessons from GE’s Decline

A case study in what can happen to a conglomerate that fails to adapt quickly when its success falters.

• By James E. Schrager
• August 14, 2019
• CBR - Strategy
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It may be too early to write an obituary for General Electric, but only just. In the past few years, the company has gone from iconic American corporate titan and darling of Wall Street to a humbled, awkward, oversized giant. In June 2018, GE was kicked out of the Dow Jones Industrial Average, the blue-chip club of the United States’ largest public companies. It had been a member since the stock gauge was launched in 1896. Some analysts have GE on bankruptcy watch.

To those who have been paying attention, this has been a long, slow decline. In fact, GE never had much of a chance once Jack Welch retired as chairman and CEO in 2001. That wasn’t because of bad luck or lackluster management. Instead, Welch’s perfectly brilliant growth strategy had simply run its course.

Welch’s great mistake was to fail to plan for the “end of history”—what happens when the golden goose stops laying. The story is worth revisiting not just because it explains the deterioration of GE. It also holds three powerful lessons about corporate strategy:

• All growth from any single market or technology will end. Companies that endure are those that plan for this reality.
• If you are successful, many will copy your success. Companies that continue to prosper update and adapt their strategies.
• Smart corporate strategies are flexible and nimble, enabling action rather than constraining it.

The Welch era

Upon taking over as CEO in 1981, Welch reorganized GE’s structure in the face of trenchant resistance from an overgrown and constraining bureaucracy at the company’s Boston headquarters. He shed excess corporate staff and pushed decision-making down into the field. This had wondrous effects but required keeping a scrupulously close eye on emerging trouble spots.

One positive outcome of this management realignment was that it helped spawn a well-rounded group of division presidents able to handle much more responsibility than in a typical large, heavily layered, diversified conglomerate. To train these newly empowered executives, GE created a series of management education programs. In its heyday, roughly 1985 to 2005, GE’s management academy was in many ways the equal of first-rate graduate schools of business in its ability to train management teams that were able to execute its plans.

But there was a downside to this management upheaval. Because managers were empowered to problem solve in their own divisions, less information flowed up to corporate headquarters. This was the trade-off of devolving decision-making down: Welch understood that much of the bureaucracy was tasked to uncover small problems out in the vast divisional expanses before these could fester into large headaches.

Admirers were justifiably impressed at what Welch had accomplished, especially given the raw ingredients he had started with: a sleepy mishmash of low-growth businesses.

Welch did not want to lose touch with what might become big issues. With so many communication ties broken, he instructed his division presidents that their jobs depended on ensuring that immediate assessments of potentially damaging issues found their way, posthaste, to the CEO’s desk.

Among other things, Welch wanted to avoid violating what became GE’s rule No. 1: don’t surprise the board with bad news. The consequences of ignoring this imperative would become evident during the relatively short tenure of John Flannery, who was fired unceremoniously in October 2018 after just over a year as CEO. In Flannery’s case, the bad news was a $23 billion write-down that blindsided the board, exactly the kind of incident Welch had worked hard to avoid. The board was correct to quickly sever ties with Flannery, who, in spite of having worked at GE since 1987, failed to warn of trouble brewing out in the hustings.

Growth through acquisitions

Welch understood that growth is the magic potion Wall Street requires, yet he also realized that most of the “industrial” businesses GE was operating had modest organic growth prospects. He therefore developed a strategy around increasing earnings through acquisitions.

Welch wouldn’t accept just any deal. Instead, he searched for businesses ranked first or second in industries with only three or four players. These acquisitions proffered a commanding seat at the table in his newly acquired industries. No turnarounds, no rollups, no startups here. He was interested in buying companies with dominant positions at or near the top of their markets.

Once a newly acquired company became a part of GE, Welch’s management structure was often a welcome relief for those working inside the companies he purchased. This allowed him to get a preferred position when large and attractive businesses were on the block. His successful growth strategy became well known. Admirers were justifiably impressed at what Welch had accomplished, especially given the raw ingredients he had started with: a sleepy mishmash of low-growth businesses.

Lesson 1: Plan the next big thing

Welch’s long view was the same as his short view. What he saw in GE’s future was an unlimited supply of large, interesting companies to buy at fair prices, delivering seemingly endless growth possibilities along with operational results. And Welch had a great run. We should take nothing away from him.

But by the time Welch handed over the reins to Jeff Immelt in 2001, the world was a much different place. Many in the business world had listened carefully to Welch’s widely told story of GE’s stellar results. Naturally, they wanted to inhale the wisdom and earn a piece of the action for themselves. Jack Welch was flattered to be imitated, but by making his approach well known to all, he hastened the time when GE’s strategy would lose its luster.

Welch got out before his lack of strategic, long-term planning was exposed, but his final act as CEO hinted at his awareness that without acquisitions, GE would be in trouble. Welch was supposed to retire, but he asked the board for time to undertake one more big acquisition. The target was Honeywell, and ultimately the takeover bid failed. It was a foretaste of the troubles that would befall GE.

The lesson here is clear. However big you are, however successful you are today, however thoroughly you dominate your sector, plan for a time when your current strategy no longer works. Change always happens, and this means that strategies must be renewed and revised. Corporate leaders need to ask themselves: What is the pipeline? What is driving growth? What are we going to run out of?

GE is not unique in having failed to pose and respond to these questions. Chrysler lost its minivan advantage to Honda over reliability and durability issues. Sears never updated its strategy to account for discount retail. The steel company Nucor never planned for the day when scrap steel would be more expensive than iron ore; but demand from China drove scrap prices to record levels, causing harm to Nucor’s prized status as a low-cost producer.

By contrast, Walmart had a strategic pipeline. Although it ran out of places to locate stores in the rural southern US, it expanded north to keep growing. Sam Walton was not short of ideas for what to try next. He tested drugstores, hardware stores, a warehouse club, and other retail formats. Walton moved Walmart into the high-volume grocery business to drive traffic into his stores. He pioneered expansion outside of the US as well, fully understanding that he needed growth to continue. He was able to do so because he knew he must think beyond the “end of history.”

Lesson 2: Expect competition

GE pioneered its particular approach to mergers and acquisitions, but it was imitated. In many ways, today’s private-equity industry, with billions of dollars on call and ready to deploy, is testament to Welch’s clever growth strategy. Other large public companies also became engaged with buying companies. This left Jeff Immelt looking at an entirely different chessboard.

In the days of building GE, the company was one of the few players big enough, fast enough, successful enough, and with enough access to capital to make the deals work. It earned a gold-plated level of acceptance at all levels of business, from being one of the best places to work and a company with among the highest stock market values to having the best growth record and the best trained management teams, and so on.

Immelt was serious about acquisitions. He had learned his lessons well, and spent about $175 billion buying more than 300 companies. He used the full set of GE-trained managers onboard, and deployed the principles honed in the Jack Welch era in order to make the acquisitions work. Immelt was the handpicked successor, the best of the best. But it wasn’t enough.

Strategies should not be straightjackets that constrain action so much as frameworks for decision-making.

Once private-equity firms became able in the 1990s to raise vast sums of capital, as well as to establish generous bank lines to fund their acquisitions, every juicy acquisition suddenly had too many bidders. This pushed prices ever higher, forcing increasingly risky bets. When the strategy of buying the right companies at fair prices no longer worked, applying GE’s superior management attributes did not have the same effect.

The lesson here is that no market stands still. Successful companies spawn competitors; rivals will replicate winning strategies and may do so cheaper, faster, or smarter. A robust strategist will expect this competition from the outset, identify its likely sources, and plan how to stay ahead.

Lesson 3: Be nimble

GE’s current CEO, Larry Culp, took over in October 2018, and came from a sort-of GE clone, Danaher Corporation. Danaher had followed many of GE’s management tenets except for one big difference, plucked from the private-equity playbook. Danaher was free to sell companies—as well as buy them—when that was the smart move. This open-minded approach brought the private-equity firms’ biggest profit weapon back to a publicly traded conglomerate: the ability to take advantage of frothy markets when appropriate to cash out, rather than always forcing a long-term hold position.

With this background, GE under Culp has belatedly moved to sell off its assets and focus its business. This new strategy has exposed the weaknesses of the traditional buy-and-hold mentality that saw GE cling to divisions that were more of a burden than a boon in the past.

One of these is GE Finance, which started as a captive bank to finance only purchases of industrial products made in house. From there, it grew wildly into all sorts of things and crashed hard in the 2008–09 financial crisis. In some ways, GE Finance was the tail wagging the dog, and unwinding it has proven to be costly for the parent company, as previously-hidden liabilities have emerged as GE shutters this division.

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Another example is GE’s growth in the Internet of Things sector with their Current Division, which never quite found its footing as an internal startup, and was sold to a private-equity group. The same is true of its Distributed Power Division, which resulted from the melding of two acquisitions that appeared not to meet their targets in the small, transportable power-generator industry.

There is a bigger lesson here than just knowing when to sell. Strategies should not be straightjackets that constrain action so much as frameworks for decision-making. The most successful corporate strategies are those that enable companies to be nimble and flexible, and to pivot when things are not working or when unexpected opportunities arise.

Will GE survive? Ironically, perhaps one of the few factors keeping GE out of bankruptcy is that, like the conglomerate itself, a good portion of its stock investors are unable and unwilling to bring themselves to sell. Perhaps they simply cannot believe that a former industrial behemoth could really be on its knees. It seems the shareholders, like GE itself, display difficulty thinking beyond the end of history.

James E. Schrager is clinical professor of entrepreneurship and strategic management at Chicago Booth.

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General Electric Change Management Case Study

General Electric (GE) is a multinational conglomerate that has undergone significant change management in recent years. 

Facing financial decline and a need for cultural transformation, GE has implemented a number of strategies to revitalize the company. 

This case study examines the change management efforts of GE, including the challenges faced, strategies implemented, and the resulting impact. 

By examining the success of GE’s change management, we can gain valuable insights into the importance of leadership, cultural transformation, and ongoing evaluation in managing change within an organization.

Brief Background on General Electric 

General Electric (GE) is a multinational conglomerate that was founded in 1892 by Thomas Edison. 

Originally focused on electrical power and lighting, GE has expanded over the years to become a leader in a variety of industries including aviation, healthcare, renewable energy, and more. 

With over 200,000 employees worldwide, GE has a significant impact on the global economy. 

However, in recent years, the company has faced a number of challenges including financial decline and a need for cultural transformation. 

These challenges have required significant change management efforts to revitalize the company and ensure its continued success.

Challenges faced by General Electric 

There are 03 major challenges faced by General Electric that pushed it to implement changes at organization level. 

1. Deteriorating financial performance 

One of the major challenges faced by General Electric was deteriorating financial performance. After years of success, the company began to experience declining revenues and profits in the late 2010s. 

This was due in part to a decline in demand for some of GE’s products, as well as increased competition in certain markets. In addition, GE faced significant debt and liquidity challenges, which further impacted its financial performance. 

These challenges necessitated significant changes in the company’s operations, including a focus on simplification and operational excellence, as well as divestitures of non-core businesses to improve cash flow. 

2. Need for cultural shift 

General Electric also faced a need for cultural shift. For many years, GE had a reputation for being a highly centralized and hierarchical organization, with a focus on efficiency and control. 

However, as the business landscape changed, GE recognized the need to shift its culture to be more innovative, agile, and customer-centric. 

This required a shift away from a “command and control” culture, towards one that valued collaboration, risk-taking, and continuous improvement. 

3. Leadership succession issues 

Another challenge faced by General Electric was leadership succession issues. GE had a long-standing tradition of grooming internal candidates for leadership positions, and had a history of successful CEO transitions. 

However, in the early 2010s, the company faced a number of high-profile leadership challenges, including the resignation of CEO Jeff Immelt in 2017, and the subsequent replacement of his successor, John Flannery, after just 14 months on the job. 

These leadership challenges created uncertainty and instability within the organization, and highlighted the need for better succession planning and talent development. 

Change management strategies implemented

Following are the key change management strategies implemented by General Electric to address the challenges it faced:

1. Reorganization of its business units

To address the financial challenges faced by the company, GE undertook a significant restructuring effort, which included the consolidation and divestiture of a number of non-core businesses. 

This allowed the company to focus on its core competencies and improve its overall operational efficiency. Specifically, GE reorganized its business units into three core segments: Aviation, Power, and Renewable Energy. 

Each segment was given more autonomy and responsibility for its own operations, which allowed for greater agility and innovation within the organization. 

The reorganization also included the sale of GE’s transportation, lighting, and healthcare businesses, which generated significant cash flow and allowed the company to focus on its core competencies.

2. Focus on simplification and operational excellence

GE recognized the need to streamline its operations and improve its overall efficiency. This required a focus on simplification and standardization, as well as a commitment to operational excellence across all areas of the organization. 

To achieve this, GE implemented a number of initiatives, including the use of lean principles, the adoption of digital technologies, and the development of new processes and procedures. 

These efforts allowed the company to reduce costs, improve quality, and enhance its overall competitiveness in the market. 

3. Cultural transformation through leadership development programs

To address the need for a cultural shift towards innovation, agility, and customer-centricity, GE recognized the importance of developing its leaders to embody these values. 

This required a focus on leadership development, which included the implementation of new leadership development programs, as well as the enhancement of existing programs. 

These efforts focused on developing leaders who were able to drive innovation, foster collaboration, and embrace risk-taking. In addition, GE also implemented a number of diversity and inclusion initiatives to foster a more inclusive and supportive culture. 

4. Succession planning and talent development

To address the leadership succession issues faced by the company, GE recognized the need to enhance its talent development efforts and improve its succession planning processes. 

This required a focus on identifying and developing high-potential employees, as well as enhancing the company’s recruitment and retention strategies. 

To achieve this, GE implemented a number of initiatives, including talent development programs, career development plans, and leadership development opportunities. These efforts allowed the company to develop a pipeline of talent to fill key leadership positions, and to ensure continuity in the company’s leadership over the long term.

Results and Impact of change 

The change management strategies implemented by General Electric had a significant impact on the organization, resulting in improved financial performance, employee engagement and culture, and reputation and stakeholder confidence.

Firstly, the reorganization of business units allowed the company to focus on its core competencies, leading to improved financial performance. This was evident in the company’s financial results, with GE reporting stronger earnings and cash flows following the implementation of the reorganization.

Secondly, the focus on simplification and operational excellence allowed GE to streamline its operations and reduce costs, which in turn led to greater employee engagement and culture. By enhancing its operational efficiency, GE was able to create a more collaborative and innovative work environment, which resulted in greater employee satisfaction and engagement.

Finally, the cultural transformation through leadership development programs and succession planning and talent development efforts enhanced GE’s reputation and stakeholder confidence. By building a stronger leadership bench and fostering a more innovative and customer-centric culture, GE was able to enhance its reputation as a leading industrial company and rebuild stakeholder confidence.

Final Words 

General Electric’s journey through change management provides a valuable case study for organizations facing similar challenges. The company’s successful implementation of change initiatives can be attributed to several key factors, including a clear vision and strategy, effective communication, and strong leadership support.

Through the reorganization of business units, a focus on simplification and operational excellence, and a cultural transformation through leadership development and talent management initiatives, GE was able to transform its business, enhance its capabilities, and rebuild its reputation and stakeholder confidence.

Furthermore, the role of leadership in driving and supporting the change effort cannot be overstated. The leadership team at GE played a critical role in setting the direction and vision for the company, communicating the need for change, and ensuring that the organization was aligned and committed to the change effort.

About The Author

Tahir Abbas

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Case 20 Restructuring General Electric *

The appointment of Larry Culp as the chairman and CEO of the General Electric Company (GE) on October 1st, 2018 was a clear indication of the seriousness of the problems that had engulfed the company. Culp, the former CEO of the highly‐successful conglomerate, Danaher Corporation, had been appointed a GE director only six months previously and was the first outsider to lead GE—every one of GE’s previous CEOs had been a career manager at the company. On the same day as Culp’s appointment, GE abandoned its earning guidance for the year and announced a $23 billion accounting charge arising from a write‐down of goodwill at its troubled electrical power division. 1

Culp’s predecessor, John Flannery had been CEO for a mere 14 months—a sharp contrast to GE’s two previous CEOs: Jeff Immelt (16 years) and Jack Welch (20 years). Flannery’s tenure at GE has coincided with of the company’s most difficult periods in its entire 126‐year history. In November 2017, amidst deteriorating financial performance, Flannery announced a halving of GE's quarterly dividend, the proposed sale of its lighting and locomotive units—two of GE's oldest businesses—and the elimination of 12,000 jobs in the power division.

In 2018, the situation worsened. In January, GE announced that it would be paying $15 bn. to cover liabilities at insurance companies it had sold 12 years previously. In February, GE confirmed suspicions over its dubious accounting practices by restating ...

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General Electric 1981-2001

Waves of strategic change in the age of Jack Welch and Jeff Immelt pushes organic growth

The present case study uses the St Galler Management-Model to explore the corporate management of General Electric (GE). Empirically, the study draws on 33 letters to the shareholders from 1981 to 2013. The letters were coded along the 10 value drivers of the St Galler Management-Model. In this part (part A) of the case study the CEO Jack Welch and his three waves of strategic change – a time of intense restructuring – were explored. These are the waves of restructuring and a new positioning (1981-1988), the mobilization of collective energy (1988-1995) and the third wave in that GE has been transformed into a service orientated organization (1995-2001). The case study highlights the excellent capability of GE to constant strategic change and progress.

The present case study uses the St Galler Management-Model to explore the corporate management of General Electric (GE). Empirically, the study draws on 33 letters to the shareholders from 1981 to 2013. The letters were coded along the 10 value drivers of the St Galler Management-Model. In this part (part B) of the case study the data were used to describe the corporate management under the new CEO Jeff Immelt. His term of office was characterized by an uncertain environment. J Immelt responded to it through four strategic fields of actions (active portfolio management, organic growth and innovation, internationalization, synergy management, and customer focus and marketing expertise) in order to steer GE into the future.

At The Case Centre you can either order or download the Case Study and Teaching Note as inspection copy:

Bibliographic Data

GENERAL ELECTRIC 1981-2001 (PART A): WAVES OF STRATEGIC CHANGE IN THE AGE OF JACK WELCH

GENERAL ELECTRIC 2001-2012 (PART B): JEFF IMMELT PUSHES ORGANIC GROWTH

PART A: Case – Reference no. 314-366-1

Authors: Mueller-Stewens, G. (University of St. Gallen); Glatzel, C. (University of St. Gallen) Published in: 2014 Length: 17 pages Data source: Field research

PART B: CASE – Reference no. 314-368-1

Authors: Mueller-Stewens, G. (University of St. Gallen); Glatzel, C. (University of St. Gallen) Published in: 2014 Length: 22 pages Data source: Field research

Teaching Note – Reference no. D314-366-8 (German version)

Authors: Mueller-Stewens, G. (University of St. Gallen); Glatzel, C. (University of St. Gallen) Published in: 2014 Length: 43 pages Data source: Published sources

Contact person

If the case study is not available at The Case Centre, or if you have any questions about additional material or application of the case study, please contact the author.

Günter Müller-Stewens

Prof. em. dr., professor em. of management.

+41 71 224 27 61

[email protected]

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• Performance development at GE: Shaping a fit-for-purpose performance management system (A)

In 2013, GE implemented the FastWorks program, an initiative that utilized tools and methods adapted from start-up methodologies to make the company more customer centric, lean and agile. With the spread of FastWorks within GE, a startling conclusion became evident – the existing performance management system might no longer be fit for the company’s new direction. This case series follows the journey of GE’s new performance management system, Performance Development, and its PD@GE app. By utilizing FastWorks in its development process, the HR team was able to leverage customer feedback and rapid prototyping to build a new system with unique features, such as instantaneous feedback, upward feedback and removal of employee ratings.

• Identify the need to align appraisals and incentives to complement company strategy
• discover success factors for working in an agile manner in a complex organization
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• adapt HR processes for the next generation of workers

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General Electric’s (GE) Generic Competitive Strategy & Growth Strategies

General Electric Company (GE) has a generic competitive strategy that, along with intensive growth strategies, ensures business growth in global markets. Michael Porter’s generic strategies are used to develop and maintain firms’ competitive advantages. In this case, GE uses its generic strategy for competitive advantage in the aerospace/aviation industry. On the other hand, based on the Ansoff Matrix, a company’s intensive growth strategies are employed to support and sustain business growth. General Electric relies on product development as a major growth factor through the years. The combination of intensive growth strategies used in GE’s business facilitates continued growth despite changing economic conditions and challenges involving competitors, like Rolls-Royce and Siemens. These strategies boost business resilience to reach the strategic goals of General Electric’s mission statement and vision statement . For long-term growth and competitiveness, General Electric’s generic competitive strategy and intensive growth strategies must remain relevant to industry conditions.

General Electric’s management uses the company’s generic competitive strategy and intensive growth strategies to determine business tactics and operational approaches. For example, GE’s operations management approaches are evaluated based on how they contribute to the competitive advantage and growth of the business. The managerial aim is to address the external forces coming from General Electric’s competitors.

General Electric’s Generic Competitive Strategy (Porter Model)

General Electric’s main generic strategy for competitive advantage is differentiation . In this strategy, the company’s goal is to attract target customers to products that are special and unique. These products are made through research and development that GE is known for. For example, the company has advanced research and development processes for products in the aviation industry. Because of its focus on research and development, General Electric Company has one of the biggest portfolios of company-owned patents in the United States. Also, this generic competitive strategy involves offering products to many market segments. GE maximizes sales based on a larger customer base. This generic competitive strategy influences other strategies and tactics in the business, such as General Electric’s marketing mix or 4Ps . GE aligns its intensive growth strategies with the competitive advantage targets based on strategic differentiation objectives.

One of the strategic objectives in using the differentiation generic competitive strategy is to intensify General Electric’s research and development programs. This objective supports product uniqueness necessary to capture and retain customers in GE’s target markets. Another strategic objective based on this generic strategy is to strengthen the company’s presence in market segments. For example, General Electric can utilize its competitive advantage to maximize customer loyalty to the GE brand in the avionics market. Moreover, an additional strategic objective is to implement intensive growth strategies that contribute to General Electric’s business growth while enabling the successful application of the differentiation generic competitive strategy.

General Electric’s Intensive Growth Strategies

Product Development (Primary) . Product development is the primary intensive growth strategy in General Electric’s business. Growth is achieved through new products that increase the company’s sales revenues. For example, under this intensive strategy, GE maintains high-productivity research and development processes. These processes ensure a leading edge against competitors in the aerospace industry, thereby contributing to the strengths identified in the SWOT analysis of General Electric . The differentiation generic competitive strategy requires that product development must focus on product uniqueness. In this regard, a strategic objective based on product development is to integrate cutting-edge technologies in every new product that General Electric develops.

Market Penetration (Secondary) . General Electric Company implements market penetration as its secondary intensive growth strategy. In market penetration, the company grows by increasing its customer base in current markets. For example, General Electric applies this intensive strategy through marketing campaigns that aim to add new customers and corresponding accounts. In this way, GE grows its revenue base despite competitive forces. The generic competitive strategy of differentiation enables General Electric to succeed in implementing market penetration. For instance, through competitive advantages based on product uniqueness and advanced features, GE penetrates the market for jet engines. A strategic objective based on market penetration is to increase General Electric’s aggressiveness in marketing its products against the products of competitors, like Rolls-Royce, 3M, and Siemens.

Diversification . Diversification is a minor intensive growth strategy in General Electric’s operations. In diversification, growth occurs through new businesses. For example, through this intensive strategy, General Electric entered multiple industries throughout its business history, with operations in the energy, aerospace/aviation, healthcare, electric lighting, oil and gas, and transportation industries. However, the company is currently in a spin-off process. Diversification has only a minor role in contributing to GE’s growth because it is applied only infrequently, as it entails major investment and organizational change, among other challenges. General Electric’s differentiation generic competitive strategy is applied every time diversification happens, such as when the company develops new products upon adding a new industry to its portfolio. A strategic objective based on diversification is to spread risk across various industries and markets to minimize market-specific risk exposure. The PESTEL/PESTLE analysis of General Electric shows that various industries develop business opportunities based on technological advancement. In diversification, GE continuously searches for such opportunities in industries where it currently does not operate.

Market Development . General Electric Company implements market development as a minor intensive growth strategy. In this strategy, the company grows by establishing new applications, new markets, or new market segments for its current products. For example, this intensive strategy is applied whenever GE introduces its aviation technologies into the transportation industry and creates a new market or market segment, accordingly. However, market development has a minor role in the business because General Electric focuses on advancing products in its current industries of operations. The generic competitive strategy of differentiation helps facilitate market development for GE products. Differentiation creates competitive advantages that General Electric uses to successfully enter new markets or market segments. A strategic objective based on market development is to create new revenue streams by developing hybrid or new applications of General Electric’s current products.

• Ali, B. J., & Anwar, G. (2021). Porter’s Generic Competitive Strategies and its influence on the Competitive Advantage. International Journal of Advanced Engineering, Management and Science, 7 (6), 42-51.
• General Electric Company – Form 10-K .
• General Electric Company – Our Innovation .
• López, D., & Oliver, M. (2023). Integrating innovation into business strategy: Perspectives from innovation managers. Sustainability, 15 (8), 6503.
• U.S. Department of Commerce – International Trade Administration – Aerospace Industry .
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• This article may not be reproduced, distributed, or mirrored without written permission from Panmore Institute and its author/s.
• Educators, Researchers, and Students: You are permitted to quote or paraphrase parts of this article (not the entire article) for educational or research purposes, as long as the article is properly cited and referenced together with its URL/link.

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GE McKinsey Matrix: A Multifactorial Portfolio Analysis in Corporate Strategy

The GE-McKinsey Matrix (a.k.a. GE Matrix, General Electric Matrix, Nine-box matrix) is just like the BCG Matrix a portfolio analysis tool used in corporate strategy  to analyse strategic business units or product lines based on two variables: industry attractiveness and the competitive strength of a business unit. By combining these two variables into a matrix, a corporation can plot their business units accordingly and determine where to invest, where to hold their position, and where to harvest or divest. However, different from the BCG Matrix, the GE-McKinsey Matrix uses multiple  factors that are combined to determine the measure of the two variables industry attractiveness and competitive strength. This is an important distinction, since the BCG Matrix has been criticized a lot on its use of only one single (and perhaps outdated) variable for each axis.

The name of the framework stems from the year 1970 in which General Electric (GE) hired the strategy consulting firm McKinsey&Company to consult GE in managing their large and complex portfolio of strategic business units. Therefore, it is McKinsey (not GE) that created the framework as a means to help GE cope with its strategic decisions on a corporate level. 

Figure 1: GE McKinsey Nine Box Matrix

Industry Attractiveness

On the vertical axis of the GE Mckinsey Matrix, we find the variable Industry Attractiveness which can be divided into High, Medium and Low. Industry attractiveness is demonstrated by how beneficial it is for a company to enter and compete within a certain industry based on the profit potential of that specific industry. The higher the profit potential of an industry is, the more attractive it becomes. An industry’s profitability in turn is affected by the current level of competition and potential future changes in the competitive landscape. When evaluating industry attractiveness, you should look at how an industry will change in the long run rather than in the near future, because the investments needed for a business usually require long lasting commitment. Industry attractiveness consists of many factors that collectively determine the level of competition and thus its profit potential. The most common factors to look at are:

• Industry size
• Long-run growth rate
• Industry structure (use Porter’s Five Forces or Structure-Conduct-Performance model)
• Industry life cycle (use Product Life Cycle )
• Macro environment (use PESTEL Analysis )
• Market segmentation

Competitive  Strength

On the horizontal axis we find the Competitive Strength of a business unit which can also be divided into High, Medium and Low. This variable measures how strong or competent a particular company is against its rivals: it is an indicator of its ability to compete within a certain industry. A company’s strengths are its characteristics that give it an advantage over others (competitions/rivals). These strengths are often referred to as unique selling points (USP’s), firm-specific advantages (FSA’s) or more widely known as sustainable competitive advantages. Apart from a company’s competitive position right now, it is also very important to look at how sustainable its position is in the long run. So where Industry Attractiveness is about the level of competition in the entire industry, Competitive Strength is about the (future) ability to compete of one single company within that specific industry. Competitive strength also consists of multiple factors that together make up a company’s total score. The most common factors to look at are: 

• Profitability
• Market share
• Business growth
• Brand equity
• Level of differentiation (use the Value Disciplines or Porter’s Generic Strategies )
• Firm resources (use the VRIO Framework )
• Efficiency and effectiveness of internal linkages (use the Value Chain Analysis )
• Customer loyalty (use the Net Promoter Score )

Figure 2: GE McKInsey Matrix Strategies

Strategic implications

Based on the 3 degrees (High, Medium and Low) of both Industry Attractiveness and Competitive Strength, the matrix can be crafted consisting of 9 different boxes with 9 different scenarios and corresponding strategic actions. The strategic actions to choose from are: Invest/Grow strategy, Selectivity/Earnings strategy (sometimes referred to as Hold strategy), and the Harvest/Divest strategy. 

Invest/Grow strategy

The best section for a company or business unit to be in is the Invest/Grow section. A company can reach this scenario if it is operating in a moderate to highly attractive industry while having a moderate to highly competitive position within that industry. In such a situation there is a massive potential for growth. However, in order to be able to grow, a company needs resources such as assets and capital. These investments are necessary to increase capacity, to reach new customers through more advertisements or to improve products through Research & Development. Companies can also choose to grow externally via Mergers & Acquisitions apart from growing organically. Again, a company will need investments in order to realize such an endavour. The most notable challenge for companies in these sections are resource constraints that block them from growing bigger and becoming/maintaining market leadership.

Selectivity/Earnings strategy

Companies or business units in the Selectivity/Earnings sections are a bit more tricky. They are either companies with a low to moderate competitive position in an attractive industry or companies with an extremely high competition position in a less attractive industry. Deciding on whether to invest or not to invest largely depends on the outlook that is expected of either the improvement in competitive position or the potential to shift to more interesting industries. These decisions have to be made very carefully, since you want to use most of the investments available to the companies in the Invest/Grow section. The “left-over” investments should be used for the companies in the Selectivity/Earnings section with the highest potential for improvements, while being monitored closely to measure its progress on the way.

Harvest/Divest strategy

Finally we are left with companies or business units that either have a low competitive position, are active in an unattractive industry or a combination of the two. These companies have no promising outlooks anymore and should not be invested in. Corporate strategists have two main options to consider: 1. They divest the business units by selling it to an interested buyer for a reasonable price. This also known as a carve-out. Selling the business unit to another player in the industry that has a better competitive position is not a strange idea at all. The buyer might have better competences to make it a success or they can create value by combining activities (synergies). The cash that results from selling the business unit can consequently be used in Invest/Grow business units elsewhere in the portfolio. 2. Or corporate strategists can choose a harvest strategy. This basically means that the business unit gets just enough investments (or non at all) to keep the business running, while reaping the few fruits that may be left. This is a very short-term perspective action that allows corporate strategists to subtract as much remaining cash as possible, but is likely to result in the liquidation of the business unit eventually.

GE McKinsey Matrix In Sum

The GE McKinsey Matrix is a good alternative for the BCG Matrix and has the advantage that the two variables used consist of multiple factors combined. It may be quite a task however to quantify factors such as brand equity and industry structure,F and combine them all into a single number that can be plotted on the nine-box matrix. For corporate strategist in portfolio management, the model functions as a great starting point to base investment decisions on.

Further Reading:

• McKinsey & Company (2008). Enduring Ideas: The GE–McKinsey Nine-box Matrix. McKinsey Quarterly.

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Organization Design Case Study

A look inside general electric.

General Electric (GE) Opens in new window has a glorious heritage. Founded by Thomas Edison in 1878 to generate and distribute electric power, GE became a world leader as a diversified industrial company.

For decades, GE had a reputation for excellent and innovative management practices that other companies copied. As a model industrial company, General Electric’s stock had been part of the Dow Jones Industrial Average since 1907.

Since the late 1800s, GE moved in and out of multiple businesses as a key part of its strategy and success. In 2019, GE was still a diversified worldwide conglomerate Opens in new window . Its industrial businesses included the power segment (gas and steam power systems), renewable energy (wind turbines), oil and gas (drilling systems), aviation (jet engines), healthcare (MRI machines), transportation (locomotives), and capital (loans to buy equipment).

However, by 2019 GE’s value had fallen precipitously from its earlier prosperity, hitting a low of about 10 percent of its former value.

How could a company that rose to fame as the best managed company in the world fall on such hard times?

The answer to GE’s ups and downs lies partly with how its leaders used organization design Opens in new window . Reginald Jones was CEO from 1972 to 1981 and helped build GE’s sophisticated strategic planning system.

The GE conglomerate was composed of 43 autonomous businesses, within which it had 10 groups, 46 divisions, and 190 departments that participated in strategic planning.

To help manage the massive amounts of paperwork and information required from 43 strategic plans, GE added a management layer to its structure to oversee sectors or groupings of businesses and reduce the load on top management.

GE was a respected and highly successful company, and paperwork and bureaucracy seemed to increase along with organization size and complexity.

The Jack Welch Era 1981–2001

When he was hired as an engineer at GE in the early 1960s, Jack Welch hated the company’s bureaucracy Opens in new window so much that he submitted his resignation after only six months on the job.

Fortunately for GE , Welch’s boss convinced him to stay and make a difference. After rising to CEO, Welch was quick to begin busting the ever-growing GE bureaucracy.

Near the end of his two-decade run as CEO, in 2001, Fortune magazine named Welch “Manager of the Century” Opens in new window to recognize his astonishing record at GE and also named GE the “ Most Admired Company in the United States Opens in new window .”

What changes did Welch and GE managers make to achieve these accolades?

• Strategy Changes

GE had begun using the advertising slogan “We bring good things to life” in the late 1970s and it continued in the Welch era, with Welch maintaining the strategy of being a conglomerate of divers businesses.

But Welch added a new key objective: each business must become the No. 1 or No. 2 competitor in its industry or risk being cut. GE’s new strategy was to be a leader in each of its industries.

• Changes in Structure

Welch attacked the bureaucratic layers within GE by first eliminating the sector level of management hierarchy that Reginald Jones created.

He continued to fight the over-managed hierarchy until the number of levels was reduced from nine to as few as four. In many cases, department managers, sub-sector managers, unit managers, and sometimes supervisors were eliminated along with the sector managers.

Now the CEO and top managers could deal directly with each business without going through multiple layers of hierarchy. Moreover, Welch stretched senior managers’ span of control to 15 or more direct reports to force more delegation and autonomy downward.

Welch’s assault on the bureaucracy also involved cutting down the number of employees. GE eliminated tens of thousands of managers and employees through delayering and de-staffing and even more through divestitures.

The number of GE employees declined from about 404,000 in 1982 to 292,000 by 1989. Welch was given the nickname “Neutron Jack” because a neutron bomb killed people and left buildings intact.

The nickname was reinforced by the CEO’s replacement of 12 of his 14 business heads. During this period, Welch was named “toughest boss in America.”

• A New Culture

Welch wanted a corporate culture based on direct conversations of openness and candor, eyeball to eyeball, between managers and direct reports rather than via formal meetings and bureaucratic paperwork.

A practice called Work-Out was one answer. Groups of up to 100 employees from a business unit would gather in a town meeting-style atmosphere. The business unit boss presented a challenge and left the room.

Employees divided into teams and attacked problems and bureaucratic inefficiencies in their business unit with new, often dramatic, solutions.

On the third day, bosses returned and listened to the teams’ presentations. Bosses had about one minute to decide whether to accept or reject each proposal. One boss from an aircraft engine factory accepted 100 of 108 proposals, enabling a transformation in factory operations. Bosses often lost their jobs if they were unable to accept the dramatic change proposals from subordinates. Over 10 years, about 200,000 GE members participated in Work-Out.

• Going Global

Welch also focused GE on global expansion. The U.S. market was not big enough. Welch encouraged international expansion by increasing the standard for business unit performance from being the “No.1 or No.2” business in your industry to being the No. 1 or No. 2 business in the world!

To support each company’s global effort, he hired a senior manager of International Operations to facilitate each business’s overseas expansion. GE managers had to learn to think and act globally.

• Performance Management, Stretch Goals, and Control

Welch and his most senior executives were responsible for the progress of GE’s top 3,000 executives. They visited each company to review progress toward stated targets, often including “stretch” goals, another concept Welch introduced. Stretch goals used managers’ “dreams” as targets that might be impossible to reach but would motivate exceptional accomplishment.

In another move, Welch installed a manager evaluation system on a “vitality curve”. This annual review process became known as “rank and yank,” because the top 20 percent received generous rewards, the vital 70 percent were largely left alone, and the bottom 10 percent were encouraged to leave the company.

About two years from retirement, Welch saw the potential of the Internet as “the biggest change I have ever seen.” He thought a big, traditional company like GE might be afraid of the new technology, so he required each business unit to establish a full-time team charged with including strategic opportunities for the Internet. Digitizing the company was Welch’s final major initiative.

To summarize, the Jack Welch era at GE was the most phenomenal in company history. Welch and GE earned prestigious awards, such as Financial Times naming GE the “Most Admired Company in the World.”

Moreover, Jack Welch became an icon for brilliant management and his name became known in popular culture. GE’s market value increased an astonishing 27 times from $18 billion to $500 billion under Welch’s guidance. In the year 2000, GE was the most valuable company in the world.

The Jeff Immelt Era 2001–2017

Welch personally chose Jeff Immelt to become GE’s new CEO, Immelt had broad experience at GE, changing jobs often across GE Appliance, GE Plastics, and GE Healthcare, eventually running the healthcare unit.

• The External Environment

Immelt and GE faced major environmental challenges almost from Day 1—starting with the September 11, 2001 terrorist attacks that stunned the world.

GE also endured the 2002 stock market crash, an oil price collapse, and the 2008 collapse of Wall Street and the long global recession that followed.

Immelt shifted GE toward an industrial business focus consistent with GE’s industrial roots while simultaneously learning to thrive in the Internet age. He added software capability to GE and predicated GE would become a major software company. Immelt also placed special emphasis on globalization and on more innovations via greater investments in research and development.

Under Immelt’s watch, GE developed a new concept called “reverse innovation.” GE’s innovation strategy for decades had been to develop high-end products in the United States and then sell the products internationally with modest adaptations to fit local conditions.

Reverse innovation means to develop low-end products in poor countries and then sell those products in wealthy, well-developed countries.

One example was the development of a cheap, portable ultrasound machine in China that was also sold successfully in the United States and Europe.

• Sustainability

At GE, sustainability means aligning business strategy to meet societal needs, while minimizing environmental impact and advancing social development. Immelt pushed GE to embed sustainability at every level.

Organization Design in Action

Welcome to the real world of organization design. The shifting fortunes of GE illustrate organization design in action. GE managers were deeply involved in organization design each day of their working lives—but many never realized it. Company managers didn’t fully understand how the organization related to the environment Opens in new window or how it should function internally.

Organization design Opens in new window gives us the tools to evaluate and understand how and why some organizations grow and succeed while others do not. It helps us explain what happened in the past, as well as what might happen in the future, so that we can manage organizations more effectively.

Organization design concepts can help Larry Culp Opens in new window and other GE managers analyze and diagnose what is happening and the changes that will help GE keep pace with a fast-changing world. Organization design gives people the tools to explain the decline of GE and recognize the steps managers might take to keep the company competitive.

Similar problems have challenged numerous organizations. Toyota Motor Corporation Opens in new window , for example, had the best manufacturing system in the world and was the unchallenged auto quality leader for decades. But when top managers started implementing high-pressure goals for extensive global growth, the famous quality system was strained to a breaking point.

By 2009, Toyota found itself in the middle of a crisis that culminated in the recall of more than 9 million cars due to quality problems. Sales at Papa John’s pizza chain dropped after a highly-publicized incident of founder John Schnatter using a racial slur led to the exposure of a corporate culture that belittled women and minorities. Schnatter resigned. The Board of Directors asked an outside firm to oversee an audit of the corporate culture, and the company began holding workshops on delivery and inclusion to try to fix the dysfunctional culture. Or consider Kodak, the company that once ruled the photographic film business. Kodak invented one of the first digital cameras and spent hundreds of millions of dollars developing digital technology, but the fear of cannibalizing their lucrative film business paralyzed managers when the time came to go to market. Kodak filed for bankruptcy in 2012 and is now a shell of the company it was prior to the digital camera revolution.

Kodak Opens in new window , and Papa John’s Opens in new window are continually faced with a number of challenges. For example:

• How can the organization adapt to or control such external elements as competitors, customers, government, and creditors in a fast-paced environment?
• What strategic and structural changes are needed to help the organization attain effectiveness?
• How can the organization avoid management ethical lapses that could threaten its viability?
• What changes are needed to address the growing demand for organizations to pay attention to sustainability issues?
• How can managers cope with the problems of large size and bureaucracy?
• What is the appropriate use of power and politics among managers?
• How should internal conflict and coordination between work units be managed?
• What kind of corporate culture is needed and how can managers shape that culture?
• How much and what type of innovation and change is needed?

These are the issues with which organization theory and design is concerned. Organization design concepts apply to all types of organizations in all industries.

More From Forbes

Boeing's starliner: a cautionary investor's tale.

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The United Launch Alliance (ULA) Atlas V rocket with Boeing's CST-100 Starliner spacecraft launches ... [+] from Space Launch Complex 41 at Cape Canaveral Space Force Station in Florida on June 5, 2024. Boeing launched its very first astronauts bound for the International Space Station aboard a Starliner capsule, which joins a select club of spacecraft to carry humans beyond Earth. (Photo by Miguel J. Rodriguez Carrillo / AFP) (Photo by MIGUEL J. RODRIGUEZ CARRILLO/AFP via Getty Images)

In the complex tapestry of aerospace and aviation, Boeing has long been threaded with both innovation and challenge. The latest in its series of hurdles involved a concerning decision related to its Starliner spacecraft, where despite NASA’s awareness of a helium leak, the mission proceeded under the belief that the issue was too minor to affect the overall mission's safety, according to the New York Post. This incident is part of a broader pattern of missteps that raises questions about Boeing’s current strategic direction and managerial decisions, underscoring a period of critical reflection for investors.

Recent Struggles And Strategic Missteps

Boeing’s aerospace sector has faced significant scrutiny after a series of high-profile setbacks:

• 2019: The 737 MAX Crisis Two catastrophic 737 MAX crashes resulted in worldwide grounding and heavy regulatory investigation. In addition to damaging Boeing's name, this exposed grave safety concerns and resulted in billions in fines and pay-back.
• 2021: Starliner Setbacks The Starliner program suffered from repeated technical delays, pushing back its schedule significantly and allowing competitors like SpaceX to consolidate their positions in the burgeoning space transportation market.
• 2023: Leadership And Liability With the backdrop of ongoing technical issues, including the latest helium leak incident, Boeing’s leadership has been under a microscope. The departure of CEO Dave Calhoun marked a turbulent phase for the company, suggesting deep-seated issues in corporate governance and strategic alignment.

CEO Transition

As was already mentioned , the resignation of Boeing CEO Dave Calhoun marked a turning point for the business. Calhoun's departure highlighted the need for a transforming leader able to guide the business through its several difficulties. Not one person has volunteered yet. The recommendation of hiring Larry Culp, recognized for his turnaround experience at GE, as Boeing's next CEO underlines the need for strong, experienced leadership to negotiate the company's difficult issues, but apparently he is not interested in the aftermath of political uncertainty.

Google Pixel Deadline—10 Days To Update Or Stop Using Your Phone

Samsung makes surprise free offer for galaxy s24 ultra buyers, apple confirms iphone upgrade with 2 key new features is here in days, activist investors and corporate governance.

Just prior to this, activist investors were biting the heels of Boeing to change the leadership, with mounting investor discontent and a desire for strategic clarity and responsibility.

Parallels With GE’s Struggles

The contrast between Boeing's current difficulties and GE's previous ones reveals a pattern of industrial giants going through existential crises as a result of poor management and strategic mistakes, pointing to the need for significant structural reforms.

Boeing's trip across choppy skies provides a case study in the difficulties of running a major aircraft manufacturer. Determining the company's course will depend heavily on its capacity to negotiate technical hurdles, market pressures, and the current leadership vacuum. For investors, the developing narrative of Boeing calls for a balanced approach that balances the reality of major present-day risks with the possibility of long-term benefits. The larger lesson is still obvious: in investing, as in aerospace, caution and flexibility are critical as Boeing works to restore stability.

The author is short Boeing (BA) shares.

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Strategic Initiatives

Continuity in russian strategic culture: a case study of moscow’s syrian campaign.

Moscow’s modus operandi during the military campaign in Syria

Dmitry (Dima) Adamsky

Executive Summary

• The paper argues that Russian strategic-operational conduct in Syria demonstrates more continuity than change in the traditional Russian approach to military operations and strategy.
• The paper claims that this continuity presents itself in the following cultural traits: (1) a holistic approach to strategy and operations; (2) recklessness and disconnect between words and deeds; (3) a mix of messianic–pragmatic considerations; (4) an integral strategic management style; and (5) operational creativeness.
• The paper also suggests that change might be evolving on the tactical-operational level with the emergence of a mission command culture.

Introduction

In this paper, we explore the extent to which Moscow’s modus operandi during the military campaign in Syria demonstrates continuity in Russian strategic culture. Moscow’s intensive and years-long Syria campaign makes it possible to categorize Russian strategic behavior and to compare and contrast it with the conventional wisdom about Russian strategic culture and traits of operational behavior. Illustrating the cultural drivers behind Russian policy and operations in Syria, this paper adds an additional layer to the existing knowledge about Moscow’s conduct in the Middle East, and about ideational factors that shape Moscow’s strategic behavior elsewhere. This expands the toolbox for policy experts contemplating diagnosis and prognosis of Russian geostrategic assertiveness in the region and beyond.

The paper distills five main characteristics of Russian strategic-operational conduct in Syria. We claim that the Russian operation in Syrian demonstrated (1) a holistic approach to strategy and operations, (2) recklessness and disconnect between words and deeds, (3) a mix of messianic–pragmatic considerations, (4) an “integral” management style, and (5) operational creativeness. We argue that these traits demonstrate more continuity than change in the traditional Russian approach to military operations and strategy. However, we also suggest that change might be evolving on the tactical-operational level with the emergence of a mission command culture.

Following this introduction, the paper is divided into five sections. Each section describes a specific characteristic of Moscow’s Syria campaign and shows how it corresponds with or deviates from earlier Russian strategic tradition. The conclusion summarizes the findings and outlines the implications for policymakers.

Holistic Approach

Russian conduct in Syria exemplified the so-called holistic or systemic approach to strategy, dubbed in Russian as kompleksnyi or sistemnyi podhod. This applies to both the political-strategic and the operational-tactical aspects of the Syria campaign. A holistic or systemic approach stands for an all-embracing view that “grasps a big picture and describes every element of reality as being in constant interplay with others in frames of a meta-system. It views issues in different dimensions as interconnected within one generalized frame.” 1 A predilection for holism is prominent throughout Russian intellectual tradition and cognitive style in literature, religious philosophy, and the sciences. 2 It has also been projected on the culture of war, strategic style, and military thought. 3 

There are three examples that illustrate the continuity of this holistic trait in the Russian Syrian campaign. First, the goals of the intervention reflect the holistic nature of the Russian approach on the strategic-political level. The campaign has promoted, in parallel, several interconnected global, regional, domestic, and organizational logics ( sistemo-obrazuischiaia logika ), which have shaped the essence of Russian conduct. 4

Second, the campaign design on the military-operational level was equally holistic or systemic. The holistic-thinking tradition envisions war as a clash of two competing systems. Within such a paradigm, operational design does not aim at the annihilation of the enemy by methodical destruction of its forces, but seeks its dismantlement and disintegration through fragmentation strikes ( drobiaschii/raschleniaiuschii udar ), decomposition ( razlozhenie ), systemic paralysis, and neutralization. 5 The Russian campaign design and its operational execution demonstrated exactly that. Moscow sought to mount not just a large-scale operation, but a comprehensive one that would reverse strategic trends, deny the initiative to the anti-Syrian government forces, demonstrate the strength of the regime, fragment the opposition forces with their subsequent localization and neutralization, and facilitate conditions for a political process by convincing the main actors and their proxies of the futility of further fighting. The air campaign took the form of strikes on the systems that hold opposition forces together: the command and control (C2) systems, material supply chains, and economic centers of gravity. In conjunction with the air strikes, ground operations sought first to control the main transportation infrastructure; lift the blockade of encircled cities and garrisons of the Syrian army; and then localize, isolate, and dismantle pockets of resistance while, in parallel, systematically destroying hardware and fighters all over the country from the air. 6

Finally, contemporary Russian military-strategic thought, which informed the campaign’s design, illustrates holistic threat perception and a holistic conceptualization of the countermeasures. Combining hard and soft instruments of power across military and nonmilitary domains—which is so evident in the current Russian approach to strategy—is a manifestation of the same systemic tradition. Asymmetry, which has also been part of this paradigm, can also be seen as a manifestation of strategic holism. 7 In sum, the holistic approach demonstrates a clear continuity of the strategic tradition.

Recklessness and Disconnect Between Theory and Practice

Russian strategic tradition often manifests a disconnect between the words of theoreticians and the deeds of the practitioners implementing them. Military and nonmilitary theoreticians can be very advanced in their conceptualizations, but the system, as a whole, can be pathologically bad at implementing them. This trait, the other side of the holistic coin, has manifested itself throughout Russian history. 8   The gap between the theoretical and the feasible, however, has never stopped Russian decision-makers. Russian and Soviet military thinking has been future-oriented and could be described as wishful thinking that ignores current realities and neglects problems. The Soviets were traditionally good at theorizing innovative concepts, but often limited themselves to abstract considerations and remained prisoners of their futuristic visions; sophisticated doctrines were incompatible with the country’s operational capacity to implement them. 9  Frequently, an accompanying cultural trait has been an inclination to stage events for show ( pokazukha ) and efforts to appear rather than to be. Thus, despite leaders’ holistic approaches to strategic theory and operational planning, in reality we often observe systemic breakdowns ( sistemnii sboi ) on the operational level. This could be due to what various authors perceive as traditional Russian recklessness ( razgildiastvo ) and carelessness ( bezolarabenrnost’ ), resulting in an overall mess and chaos ( bardak ) in both planning and execution. 10

Russian conduct in Syria could be attributed to these traits. Unquestionably, the limited order of battle sustained a very high rate of bombing sorties and combat missions with a historically low number of combat losses—both in personnel and in platforms—and of mechanical accidents, unparalleled in comparison with all previous Russian combat experiences. 11 However, the longer the campaign, the more accidents, combat and noncombat casualties, and systemic breakdowns occurred. Despite announcements of victory and the withdrawal of forces, the promotion of the victory narrative, and the conduct of victory parades, the political process has been moving more slowly than expected. Presumably, the episodes—at Dir-a-Zor in February 2018, when Russian mercenaries initiated an attack and were eventually destroyed by U.S. fire strikes; and in September 2018, when Syrian Air Defense forces shot down a Russian signals intelligence (ELINT) plane—illustrate the phenomenon of the abovementioned bardak . Apparently, the Syrian campaign exhibited less recklessness and bardak than was reported during the Soviet operations in Afghanistan, the Russian operations in Chechnya and in Georgia in 2008, and even less than in the 2014 war in Ukraine, but eventually, there were still more of these traits displayed in the aforementioned 2018 episodes than at the beginning of the operation. Thus, overall, despite relative improvements, this general cultural trait remained intact.

A Mix of Pragmatic and Messianic Considerations

Messianism has long been a tradition in Russian foreign policy. 12 It emanates from a religious-political-public conviction about the predestination of Russia in the world. Informed by the religious philosophy of the Holy Rus’ and Third Rome which defines Russia and its people as a God chosen country and nation, this concept places Russia at the spiritual center responsible for the salvation of Christian civilization and of the world. 13 The balance between pragmatism and messianism in the Tsarist and Soviet regional policies varied, but it was always a synthesis of both considerations. The tide of religious metaphysics as a driver of political considerations has ebbed and flowed over history, with varying impact on policy. 14 Messianic considerations and self-attribution of the civilizational mission were always traits in Russian strategic mentality and national narrative and have varied in intensity according to the centrality to the leadership. The Arab Spring coincided with an increase in the roles of religion and messianism in Russian ideology and politics. 15

The Syrian campaign has been the Russian diplomatic-military enterprise most significantly touched by religion in the post-Soviet era. During the operation, the ecclesiastical diplomacy (1) provided the Kremlin with a messianic raison d’être, enabling the leadership to justify the mission in their own eyes and operate from a position of moral-psychological comfort; (2) engaged foreign political leaders, international organizations, and the main Christian denominations worldwide to legitimize Moscow’s policy, mainly focusing on the EU and the United States; and (3) sustained domestic support for the operation and maintained combat effectiveness within the Russian military on the ground, which multiplied motivation, morale, and unit cohesion. Thus, the operation has been a clear extension of the messianic imprint on strategy, which expressed itself during the Tsarist and Soviet eras. 16

Integral Management Style

The Syrian operation demonstrated rapid decision-making and decision execution and a flexible approach to strategy, which owed a lot to the notion of “integral strategist” ( ingtegral’nii polkovodets ) and the C2 architecture supporting it that ensures uninterrupted political control over war . The Russian notion of integral strategist refers to the highest strategic authority, which ties together, at the national level all types of considerations (political, economic, ideological) and forms of power (military and civilian, private and public) into a single integrated effort. It can be translated as “grand strategist,” one who operates within the Stavka , or wartime supreme command. In different historical periods it has taken different shapes and forms, but the logic stays the same. Integration of military and nonmilitary sources of power is an old Russian managerial tradition, codified in both Soviet and post-Soviet times and supported by theoretical writings, mostly works by the Soviet military theoretician Svechin that have become somewhat popular within the Russian supreme command today. 17

One of the main desired outcomes of integral management style, at least in theory, is uninterrupted political control over the military operation from the grand strategic level to the tactical level. This leads to a calibrated use of force, ensuring the utility of violence. This “intervention” of the political authority in military affairs, and the familiarity of the military with grand strategic considerations, enable productive discourse within the strategic community, especially during uncertain and unstable situations that demand what Svechin called a “flexible plan of war” ( gibkii plan voiny ). 18  The notion is epitomized by the unique three-echelon C2 architecture that exists in Syria—from the National Defense Management Center (NDMC) in the General Staff (GS), the highest level of command, via the command post in Khmeimim; to the C2 centers giving the operational directions in the field, the lowest level of command. The NDMC—as part of the GS, but reporting directly to the Ministry of Defense (MoD)—tailored the processes from the strategic to the tactical level, and coordinated staff work on the combat, diplomatic, and humanitarian activities, synchronizing them with other armed segments of the coalition. 19

Moreover, the NDMC configuration, even if it is only a ritualistic façade, illustrates the canonic role of the GS—the brain of the military and meta-operator of war—in direct continuity with the Russian strategic tradition, when the GS functions as the main staff organ supporting the decision-making process of the supreme command. The location and roles of the NDMC as part of the GS reflect the intentional organizational design based, among other, on the lessons learned from the Great Patriotic War (GPW) about strategic management architecture and its implementation. 20

About the Author

Dmitry (Dima) Adamsky is a professor at the School of Government, Diplomacy and Strategy at the IDC Herzliya University, Israel. His research interests include international security; cultural approaches to international relations; and American, Russian, and Israeli national security policy. He has published on these topics in  Foreign Affairs ,  Security Studies ,  Journal of Strategic Studies ,  Problems of Post-Communism ,  Intelligence and National Security ,  Studies in Conflict and Terrorism , and  Cold War History . He is the author of Operation Kavkaz (2006), The Culture of Military Innovation  (Stanford University Press, 2010), and, with Kjell Inge Bjerga, Contemporary Military Innovation (Routledge, 2013). His latest book, Russian Nuclear Orthodoxy  (Stanford University Press, 2019), is about religion, politics, and strategy in Russia. This paper is based on Dmitry (Dima) Adamsky, “Russian Campaign in Syria — Change and Continuity in Strategic Culture,” Journal of Strategic Studies , Vol. 43, No. 2, 2020, pp.104–125.

Russia Strategic Initiative

Russia Strategic Initiative (RSI):  This program of research, led by the GCMC and funded by RSI ( U.S. Department of Defense effort to enhance understanding of the Russian way of war in order to inform strategy and planning), employs in-depth case studies to better understand Russian strategic behavior in order to mitigate miscalculation in relations.

The Marshall Center Security Insights

The George C. Marshall European Center for Security Studies in Garmisch-Partenkirchen, Germany, a German-American partnership, is committed to creating and enhancing worldwide networks to address global and regional security challenges. The Marshall Center offers fifteen resident programs designed to promote peaceful, whole of government approaches to address today’s most pressing security challenges. Since its creation in 1992, the Marshall Center’s alumni network has grown to include over 13,985 professionals from 157 countries. More information on the Marshall Center can be found online at www.marshallcenter.org . 

The articles in the Security Insights series reflect the views of the authors and are not necessarily the official policy of the United States, Germany, or any other governments.

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How Retailers Became Ad Platforms

• Sebastian Gabel,
• Duncan Simester,
• Artem Timoshenko

It’s a major growth opportunity — if companies can navigate the strategic challenges.

Major retailers are today, most notably Amazon, are creating and operating their own advertising platforms — and they’re making millions doing it. McKinsey estimates that by 2026, retail media will add $1.3 trillion to enterprise values in the U.S. alone, with profit margins between 50% and 70%. In this article, the authors introduce readers to the main kinds of retail media, discuss three strategic challenges that they present, and provide guidance for effectively managing those challenges.

A rapidly growing number of major retailers are today creating and operating their own advertising platforms — a phenomenon widely referred to as retail media.  Nobody has had more success in the space than Amazon, which in 2023 earned $46.9 billion from advertising, comprised primarily of sponsored ads on its site. This figure exceeds the annual global revenue of Coca-Cola and makes Amazon the third-largest advertising platform in the United States, behind only Google and Facebook.

• SG Sebastian Gabel is an assistant professor of marketing at Erasmus University. His research focuses on developing deep learning for targeting applications in retailing. Prior to his academic career, Sebastian co-founded a retail-media services company that was sold to the Schwarz global retail group.
• DS Duncan Simester is the NTU Professor of Marketing at the MIT Sloan School of Management. His research focuses on marketing strategy, go-to-market strategies, and the use of artificial intelligence and experiments to improve business decisions. He regularly consults with companies on these topics.
• AT Artem Timoshenko is an assistant professor of marketing at the Kellogg School of Management, at Northwestern University. His research focuses on applications of AI to marketing analytics and customer insights.

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Putin and Kim Jong-un sign strategic agreement including mutual defense pact

The leaders of russia and north korea finalized a comprehensive partnership document in pyongyang, which does ‘not exclude developing military-technical cooperation’.

Vladimir Putin and North Korean dictator Kim Jong-un signed a “strategic partnership agreement” in Pyongyang Wednesday, which includes a pact on mutual defense “in case of aggression,” the Russian president himself said after the meeting. The treaty will raise the interaction between the two countries “to a new level” and touches on all kinds of sectors, from trade to security. The pact will also heighten Western concerns about the growing partnership between two countries with nuclear arsenals and aligned over the war in Ukraine. Putin, in fact, has linked Moscow’s rapprochement with Pyongyang to Western support for Ukraine in the face of the Russian invasion. After underlining that the United States already supplies high-precision weapons and F-16 planes to Kyiv to strike targets on Russian territory, he added that Moscow does “not exclude developing military-technical cooperation” with North Korea, as reported by Reuters . Kim stated that the pact is “thoroughly peaceful and defensive " in nature.

The clocks of Moscow and Pyongyang, two countries isolated by a large part of the international community, have been aligning out of necessity. Firstly, because of the invasion of Ukraine; secondly, because of North Korea’s nuclear program . In his first visit to the neighboring country in 24 years, the Russian president took advantage of his appearance at the end of the face-to-face with Kim to call for a review of the system of restrictions imposed by the United Nations Security Council on Pyongyang. “We will continue to oppose the practice of sanctions strangulation as a tool that the West is accustomed to using to maintain its hegemony in politics, economy and other spheres,” Putin said .

The formal meeting between the two delegations began Wednesday morning (local time) in Pyongyang with anti-Western sophistry. “We highly appreciate your consistent and unwavering support for Russian policy, including in the Ukrainian direction,” the Russian president told Kim at the beginning of the face-to-face meeting, before alluding to a “struggle against the hegemonic policy imposed for decades, the imperialist policy on the part of the United States and its satellites towards the Russian Federation.”

Kim said that the relations between North Korea and Russia are entering a period of “new great prosperity,” and expressed his country’s “full support and solidarity to the Russian government, army and people in carrying out a special military operation on Ukraine.”

Concern in West over Moscow-Pyongyang deal

Washington, which suspects North Korea of supplying ammunition to Russia , sees Putin’s trip as a sign of Moscow’s “desperation” — a term used Tuesday by U.S. Secretary of State Antony Blinken — to secure arms supplies. South Korean intelligence services estimate that Pyongyang has managed to secretly send Russia almost five million projectiles and dozens of ballistic missiles. The U.S. estimates that 11,000 containers have been used to transport this ammunition. The supply line, vital for a Russian war industry that is losing steam after more than two years of war, allegedly began after Kim’s visit to Russia last September .

There are also concerns about what Moscow will be handing over in return to a country isolated by the world and hit by international sanctions due to its nuclear program. Washington has denounced the increase of Russian refined oil exports above the limits set by the United Nations, and NATO expressed Tuesday, through its Secretary General Jens Stoltenberg, its fear of “potential” Russian support for the North Korean atomic and missile programs.

South Korean Defense Minister Shin Wonsik has assured that Russia has supplied North Korea with technology to aid it in its plans to deploy a series of spy satellites, as well as conventional weapons such as tanks and aircraft, according to Bloomberg.

Before making the strategic partnership public, Putin stated it was “a new fundamental document which will lay the foundation for our relations for a long-term perspective.” Artyom Luki, an analyst at the Far Eastern Federal University quoted by Reuters, said that, depending on the literal text of the pact, which was not immediately made public, the agreement could signal a profound change in the strategic situation in Northeast Asia.

After the signing of the new agreement, the two leaders went for a spin in a limousine produced the Russian luxury brand Aurus, with Putin at the wheel and Kim as passenger. The Russian president recently gifted the North Korean leader one of these vehicles .

Before landing in Pyongyang, Putin said that he intends to create with his neighboring country a system of exchanges of his own with which to circumvent the increasingly suffocating knot of sanctions. Putin’s proposal is to “develop alternative trade and mutual settlements mechanisms not controlled by the West, jointly oppose illegitimate unilateral restrictions, and shape the architecture of equal and indivisible security in Eurasia,” he wrote Tuesday in an article published by the North Korean state press.

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