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GE’s Big Bet on Data and Analytics

Seeking opportunities in the internet of things, ge expands into industrial analytics., february 18, 2016, by: laura winig.

If software experts truly knew what Jeff Immelt and GE Digital were doing, there’s no other software company on the planet where they would rather be. –Bill Ruh, CEO of GE Digital and CDO for GE

In September 2015, multinational conglomerate General Electric (GE) launched an ad campaign featuring a recent college graduate, Owen, excitedly breaking the news to his parents and friends that he has just landed a computer programming job — with GE. Owen tries to tell them that he will be writing code to help machines communicate, but they’re puzzled; after all, GE isn’t exactly known for its software. In one ad, his friends feign excitement, while in another, his father implies Owen may not be macho enough to work at the storied industrial manufacturing company.

Owen's Hammer

Ge's ad campaign aimed at millennials emphasizes its new digital direction..

The campaign was designed to recruit Millennials to join GE as Industrial Internet developers and remind them — using GE’s new watchwords, “The digital company. That’s also an industrial company.” — of GE’s massive digital transformation effort. GE has bet big on the Industrial Internet — the convergence of industrial machines, data, and the Internet (also referred to as the Internet of Things) — committing $1 billion to put sensors on gas turbines, jet engines, and other machines; connect them to the cloud; and analyze the resulting flow of data to identify ways to improve machine productivity and reliability. “GE has made significant investment in the Industrial Internet,” says Matthias Heilmann, Chief Digital Officer of GE Oil & Gas Digital Solutions. “It signals this is real, this is our future.”

While many software companies like SAP, Oracle, and Microsoft have traditionally been focused on providing technology for the back office, GE is leading the development of a new breed of operational technology (OT) that literally sits on top of industrial machinery.

About the Author

Laura Winig is a contributing editor to MIT Sloan Management Review .

1. Predix is a trademark of General Electric Company.

2. M. LaWell, “Building the Industrial Internet With GE,” IndustryWeek, October 5, 2015.

3. D. Floyer, “Defining and Sizing the Industrial Internet,” June 27, 2013, http://wikibon.org.

i. S. Higginbotham, “BP Teams Up With GE to Make Its Oil Wells Smart,” Fortune, July 8, 2015.

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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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Home » Management Case Studies » Case Study: General Electric’s Two-Decade Transformation Under the Leadership of Jack Welch

Case Study: General Electric’s Two-Decade Transformation Under the Leadership of Jack Welch

When Jack Welch became CEO of GE in 1981, he set out to reenergize one of America’s largest companies. Through a revision of GE’s mission and values Jack Welch grew GE from a $24+ billion company to into a $74+ billion company, ready to face competitors and future challenges. Welch realigned goals and motivation , forcing managers to stretch to previously unknown limits. Any company not number one or two in their industry was divested or closed and though sometimes perceived to be a destroyer, he restructured GE into one of the world’s most staid corporations.

Jack Welch’s management and motivation approach included three main areas:

• Goal setting and preparing the company on a corporate level for its competitive challenges;
• Empowering employees at all levels of the organization; and
• Communicating his new goals and visions through the entire organization, using such tools as extensive training programs, newly formed teams and 3600 review processes. Different aspects of Jack Welch’s management tactics, in terms of motivating employees to bring about change.

When Welch took over GE, he had a vision of creating an organization where people at all levels could be held responsible for their own work, and in the end make decisions for the betterment of their job. The goal was not to control workers, but instead to liberate them. Welch characterized this as creating a boundaryless organization in which empowered employees were self directed and motivated to effectively reach their goals. When Welch became the CEO of GE he found that the company was still organized the way it had been when GE was founded near the turn of the century. Specifically, it was represented by an overwhelming nine layers of management between the shop floor and the CEO. This bureaucracy lead to an unresponsive, inward focused company whose employees found great difficulty in communicating with one another. In fact, if GE’s massive cost structure was not dramatically restructured, analysts projected that GE would become unprofitable by the end of 1982 Welch addressed this issue by eliminating whole layers of management (see appendix for 1981, 1992 &1993 organizational charts), consolidating overlapping jobs and business units, and forcing employees at every level to take more responsibility for their own work. If something was not absolutely necessary they eliminated it (very much like Xerox did in “Dining at the Quality Restaurant”). They stopped gathering unnecessary financial data and eliminated unnecessary reports. In the past, it had not been unusual for business managers to request daily reports that contained so much detail that the reports often produced a 12-foot high stack of paper. The sheer mass of detailed information made a mastery of the details impossible thereby rendering the information relatively useless.

In the plant equipment operators became responsible for the quality of their own work, reducing the need for inspectors. In effect, employees were given the ability to eliminate those aspects of their job that were unproductive and thus unnecessary. An important aspect of this has been the Work-Out, which has opened the communication channels necessary to help bring about innovative change (once again very much comparable to the training camps introduced by Xerox in its attempts to reinvent itself).

The Work-Out has been an empowerment concept greatly favored by Welch. Thousands of GE employees get an opportunity to get together and share their ideas, thoughts and know-how, while building and fostering a more creative and team oriented atmosphere. The Work-Out encourages communication and accountability with the ultimate goal being to drive above average team performance. By providing each team member with the opportunity to contribute his ideas to the decision making process, Jack Welch’s hoped to stimulate individuals to constructively challenge their bosses and promote a more motivated workplace. All Work- Outs included follow-up meetings where previous commitments were discussed and accountability was enforced. Empowerment has been a two-way street. Employees have received the satisfaction of being able to air their concerns, while the company has greatly benefited from insights shared in the Work-Out. Under Jack Welch, GE began to realize that human beings are not machines and that each person has the potential to enhance productivity. Knowing how to use this resource can not only give the company a competitive edge, it can make each employee feel more important in the production process and thus more motivated. Although it is difficult to measure the results of empowerment, GE believes that the success of the company in the future will prove that it was the right decision to make. The key question therefore is to find out how leaders like Welch decide that empowerment is the right strategy and how they in general decide if it is the right strategy to implement at their companies. “Boundaryless behavior” and the elimination of unnecessary communication filters are the key phrases to describe Jack Welch’s attitude towards communication. He encourages input from every employee7, from the factory floor to the executive suite8. To facilitate goal setting and empowerment within GE, Welch needed to establish clear lines of communication in the organization. He realized that employees come to GE with many different experiences and backgrounds. He did not want to take away from the benefit of those various backgrounds, as much as reshape them with GE philosophies. This is not to say that he wanted a workforce of robots. Just the opposite actually, he wants free thinkers. One of his objectives was to motivate people to think outside the box and challenge the status quo. Open communication channels between Welch and his employees have been an important tool in this regard. These channels work in both directions, giving employees the ability to air their concerns and work towards a consensus for action. They also help motivate employees, because once again employees feel that they are directly contributing to the success of the company.

Cultural Change Processes

GE’s Work-Out process was created in 1988 as part of the ongoing drive for better productivity and efficiency. Initially, Work-Out was intended to identify and eliminate unneeded processes and tasks that were left over from previous years, when management had more layers. After restructuring, many groups did more work with fewer people, rather than making comprehensive operational changes. The aptly named Work-Out process involves identifying an area in need of improvement and bringing people together from all sides of the process (design, marketing, production, sales, etc.) to identify a better method. The Work-Out team meets outside of its normal work environment to discuss the issues and develop recommendations. Team recommendations are presented to the responsible managers, who must accept or reject proposals on the spot. Ideas that require further study are reviewed for a period of time agreed on by the team (usually less than a month) before a final decision is made. The process encourages responsive leadership and greater employee participation, which increases the rate of change throughout the organization. When Work-Out began, groups initially attacked the obvious things that didn’t made sense in the new GE, known as “low-hanging fruit”. As Work-Out evolved, customers and supplier-partners were introduced to the process. The Work-Out process is now part of everyday life at GE. In General Electric Jack Welch was the OD practitioner. He brought so many changes like:

• Merger & acquisition – Jack Welch made more than 200 merger & acquisition.his first acquisition with Hungary lighting in 1989.Later on they merge.the reason behind the success of merger & acquisition was its integration model.There was some policy which was followed by GE before making any acquisition.These acquisition accelerate the future of GE.
• Delayering – When Welch assumed the position of CEO, he saw the extent of GE’s vast bureaucracy. There were more than 500 senior managers, more than 100 vice presidents, andsome 25,000 managers. There were strategic planners who hired vice presidents, and vice presidents who hired strategic planners. Removing entire layers of managementwas a defining aspect of Welch’s hardware revolution. Not only did he eliminate layers of management, he also dis-mantled the walls that had separated key functions (for example,marketing and manufacturing) within the company.
• E-initiative – Welch used to refer to GE’s Internet initiative. As part of GE’s e-Initiative,Welch recommended that every process be digitized. The GE CEO sees this as yet another important step in making the company faster and more agile. In 2000, digitization helped the company sell more than $8 billion of products and services via the Internet.Welch calculates that GE’s digitization of its processes will save the company in excess of $1.5 billion in operating margin in 2001 . GE calculates that e-Business will save over $1 billion in operating margin in 2001 and have $1.5 billion in cost savings. Welch also predicts that in 2001 GE will buy about $12 billionin materials over the Internet and rack up online sales of about $20 billion. He now calls the Internet “the thing of the future” and sees it as a productivity tool to “make the old young and the slow fast.” E-Business has Welch talking speed again, and he is throwing himself into this, his final major company-wide initiative, with the same fervor as his other three crusades.
• Globalization – Welch understood that unless the company moved onto the world stage, it would not become a global competitor. Starting in the mid- to late 1980s, GE launched a three phase revolution that ensured the company’s place in world markets . Welch’s first key growth initiative, globalization played an important role in helping GE grow at double digit rates throughout his tenure. Today globalization is an indelible part of the GE fabric. So much so that the company says it is “less an ‘initiative’ and more a reflex.” That brand of thinking represents a vast departure from where GE was only two decades ago.Before CEO Welch took the reins, GE derived only 20 percent of its revenues from non-U.S. markets. In 2001 more than 40 percent of GE’s sales will come from outside the United States.

GE Six Sigma Quality Coach: An Internet-based mentoring program (or Web-based performance support system)that helps train GE personnel on the quality initiative.This is an important tool in helping GE achieve Six Sigma quality . It was developed after GE performed 55,000 Six Sigma projects involving 4000 quality leaders, and consists of more than 50 tools used in implementing the steps of Six Sigma.

The Product Services initiative. Welch knew that GE’s manufacturing business would take the company only so far,as the market for huge-ticket items like jet engines was limited.In 1995,Welch made product services a top priority, helping to double GE’s product service business to $17 billion by 2000.

Work-Out: Welch’s second major company wide initiative (after Globalization) turned hierarchy on its head. Of the five company wide initiatives,Work-Out was Welch’s only cultural initiative and the one most responsible for changing attitudes and behaviors within GE.Work-Out ensured that managers listened to workers, giving employees a voice in decision making.Welch credited Work-Out with establishing the boundary-less culture that helped create GE’s “learning engine.”Work-Out was a seminal program that helped to bring an end to the type of scientific management methods that had ruled GE and other large companies for decades.Welch said that “Work-Out was nothing more complicated than bringing people of all ranks and functions–managers, secretaries,engineers, line workers, and sometimes customers and suppliers–together in a room to focus on a problem … and then act rapidly and decisively on the best ideas developed, regardless their source.”

Barriers during the changes

Anything that hampered performance or open communication was to be torn down.Welch’s initiatives were designed to erase the barriers that proliferate in large organizations: horizontal barriers, vertical barriers, and external barriers.Welch urged employees to “blow up” bureaucracy and knock down every boundary.Much of what he did in the 1980s, from delayering to Work-Out, was explicitly designed to remove debilitating barriers.Welch was fiercely committed to removing any speed bump that slowed the company down. His strategy of boundarylessness was specifically designed to remove the boundaries that separated GE workers from new ideas, customers, and each other.

There are two type of barriers.one is horizontal barrier & vertical barriers.

• Horizontal barriers: These are the debilitating boundaries that isolate separate groups within the company, such as sales and manufacturing. Horizontal barriers also refers to geographic walls that exist, such as between Seoul and Sidney. With programs like Work-Out and Globalization,Welch tore down these unnecessary barriers.
• Vertical barriers:: Barriers had no place in Welch’s boundaryless organization.Vertical barriers are those layers that added bureaucracy and put more distance between executives and employees.When Welch became CEO, there were nearly a dozen layers between CEO and the factory floor. He delayered, chopping the wedding cake hierarchy down to only four or five layers.

Re-shaping GE for the Future

While others are worrying about the next quarter, Jeff Immelt is planning years of explosive growth. He’s trying to recast GE for decades to come, spending big bucks to create the new infrastructure of innovation, beefing up GE’s global research facilities, overhauling the GE research center in Niskayuna, NY, investing in new, cutting-edge R&D centers in Bangalore, India, Shanghai, China and Munich, Germany.

The simple fact is that most of GE’s growth will come from outside the US. Jeff Immelt predicts that developing countries will account for 60% of the company’s growth in the next 10 years, vs. about 20% for the past decade.

To Jeff Immelt, the best managers are great marketers and not just great operators. Marketing is not just a matter of producing better commercials or catchy slogans – it means getting outside the company to understand markets and customers. Managers must look to lead industries rather than merely follow demand. And they must be leaders who are experts in their business and intensely passionate about what they’re doing.

Jack Welch’s attitude towards management boils down to a few very simple ideas: breaking down hierarchies, ensuring free information flows throughout the organization, and encouraging people to talk, listen and be open to new ideas. When he first became a GE vice president at the age of 36, he “stalked out on the plant floor, or picked up the telephone to deal directly with anyone at any level when a problem came up” and that is the organization Jack Welch has attempted to build in terms of communication. Welch succeeded in transforming a complacent behemoth into an energized company ready to face world competition. By flattening the organization and by removing unnecessary layers of bureaucracy, he liberated employees and empowered them to make decisions and effect their jobs, as well as the company as a whole. At the same time, he relied on stretch goals and the slope of satisfaction (as previously discussed) to further push the company to new levels of achievement. An additional sense of empowerment was relayed through various communication, training and motivation mediums, such as the “Work-Out”, “the Pit”, “the Corporate Executive Council” and other special project teams. Foremost he underlined his words with accompanying actions and an exemplary attitude, avoiding the well known saying that words by themselves are empty. Through the use of 360- degree review processes , appropriate bonus schemes and structural organizational changes , Welch created and opened communication channels at GE, allowing for unprecedented networking, teamwork, and openness to take place at GE. All of these factors combined to form a motivating force for the employees of GE. This motivation in turn has lead to a decade of outstanding performance by Jack Welch and General Electric Corporation.

External Links:

• Jack Welch  (Reference For Business)
• Management Strategies From A Top CEO  (Investopedia)

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One thought on “ Case Study: General Electric’s Two-Decade Transformation Under the Leadership of Jack Welch ”

hi. can you answer this question for me? explain the barriers during the change in GE? what do you see as the most important barrier to employee empowerment? thanks.

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How I Remade GE

• Jeffrey R. Immelt

During his 16 years as CEO, Jeffrey Immelt led a team of 300,000 people through recessions, bubbles, and geopolitical risk and engineered a radical makeover of GE, repositioning the firm as a digital industrial company looking to define the future of the internet of things.

Writing on the eve of his announcement to step down from the company’s helm, Immelt shares what he learned about leading a giant organization through massive changes. He outlines several lessons: • Be disciplined. This means nesting initiatives within one another and staying away from new ideas that don’t fit. • Soak. Effective leaders don’t react instantly to emerging trends; they read, contemplate, and listen until they believe to their cores that the world is profoundly changing. • Make it existential. Every time Immelt drove a big change, he treated it as if it were life or death. • Be all in. You can’t regard a transformation as an experiment—“You won’t get there if you’re a wuss,” Immelt says. • Be resilient. Transformation requires staying power, and leaders need a thick skin to see it through. • Be willing to pivot. Even as you’re making a major commitment of resources, you need to accept that you’re unlikely to get the strategy perfect out of the gate. • Embrace new kinds of talent. GE now has more senior people from outside the company than at any time in its history and has increased its employment of women, minorities, and workers from outside the U.S. It has transformed its culture and operating rhythm, choosing speed over bureaucracy.

Immelt’s legacy at GE will be a complicated one. During his tenure earnings tripled and market share reached record highs, yet the P/E ratio plummeted and the stock price underperformed—no doubt in part because the payoff from some of his bets won’t be clear for a long time to come.

GE’s Global Growth Experiment

Like many other companies, GE under Immelt had to figure out how to balance serving local needs with the economies of worldwide scale. Harvard Business School’s Ranjay Gulati looks at how it tackled the challenge. He identifies several important takeaways for other multinationals: Give the local organizations clout, embrace creative abrasion, build strong functions, and eliminate strategic blind spots.

Reinventing Talent Management

As GE has changed its mix of businesses and strategies, the profile of its workforce has changed, too: The company has hired thousands of digerati. These workers have little tolerance for the bureaucracy of a conventional multinational, posing new challenges to the company’s talent management. This article, by HBR senior editor Steven Prokesch, looks at how GE is using analytics to augment its core HR processes, with applications launched or in the works to address career and succession planning, training, identifying high potentials, helping employees form networks, talent retention, and cultural change.

The complete spotlight package is available in a single reprint.

And what I learned along the way

A CEO has different tasks in different cycles. Some CEOs are founders and builders. Others have the luxury of managing momentum through a stable economy or a period when business models aren’t being disrupted. My task was different: remaking a historic and iconic company during an extremely volatile time.

The company pushed cross-business collaboration.

• JI Jeffrey R. Immelt will be the chairman of General Electric until the end of 2017. He served as its CEO and chairman from September 2001 to August 2017.

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Six Sigma Case Study: General Electric

May 22nd, 2017

Thanks to ex-CEO of General Electric Jack Welch, the companies throughout the business sector know Six Sigma as a staple of good business practice. In fact, more than half of all Fortune 500 companies use Six Sigma to improve and streamline their own processes. However, Six Sigma wasn’t always around. In fact, it took a long time since its earliest inception for companies to start using it effectively.

Manufacturers like Motorola pioneered modern Six Sigma in the 1980s, although earlier versions of the methodology existed as far back as the 1920s. Henry Ford’s business model and manufacturing techniques all reflect some of Six Sigma’s core principles. But Six Sigma’s relationship with General Electric is something special. After Jack Welch brought Six Sigma into the General Electric fold, those same principles would go on to generate enormous interest. And not just in the US, but around the world. Before Six Sigma, there was little else like it, and nothing else more effective.

General Electric’s adoption of Six Sigma methodology marks a turning point in the history of process improvement. Jack Welch is also important for helping to build Six Sigma’s reputation, which carries on into the present day. But what difference did Six Sigma make to General Electric? And when did it first begin? In this article, we look at the history of Six Sigma at General Electric, how they have used it, and how they benefited.

Six Sigma Before General Electric

Before we can answer the above questions, we first need to understand what the conditions were that made it necessary for General Electric to adopt Six Sigma practices. What set them on that course? Motorola pioneered Six Sigma was in 1981. Their lead engineers concluded that their mandatory method for measuring defects per thousands of opportunities did not provide enough fine detail. As such, they decided to switch to measuring in millions, to provide more granular data. One of the most prominent benefits of doing so was the staggering increase in savings the company experienced.

Learn More About Our  Six Sigma Training and Certification Six Sigma’s early success here led to Six Sigma methodology becoming a permanent fixture of Motorola’s operations during the mid-80s. Furthermore, outside companies had noticed Six Sigma’s successes, which sparked interest in how they could utilize it themselves. While the interest was great during this period, there were still few companies who managed to implement Six Sigma successfully. Least of all on the same scale as Motorola. However, it was only a decade later when General Electric began using Six Sigma. This was the beginning of an exciting new renaissance for process improvement.

Jack Welch and General Electric

In the late 1980s, General Electric turned their focus towards ensuring excellent quality. They did so through their use of the Work-Out program, which exposed GE to a world of new ideas. The groundwork laid here by GE’s Work-Out would be important for the onset of Six Sigma shortly afterward. Jack Welch, the former CEO of GE, is, of course, responsible for Six Sigma’s implementation here. He instigated a new corporate policy for GE that pledged to acquire Six Sigma goals by the millennium. Welch took a lot of inspiration from companies like Motorola, using Six Sigma concepts in much the same way.

Implementing Six Sigma

It was in 1995 when General Electric’s implementation of Six Sigma began. Welch was the driving force behind this implementation, acting as a figurehead for the rest of the company to rally behind. Under his watch, he strove to ensure the company fully integrated Six Sigma into their operations. This change in operations began when Welch became aware of GE’s many setbacks, the company often falling short of its potential. Welch recognized that GE required a complete overhaul of all its fundamental operations.

Working with engineers and consultants, Welch detected a great deal of defect that had previously gone unnoticed. This build-up of waste was holding the company back, losing them money, and slowing down their production. Welch knew what to do. He had seen it in action and knew it could save General Electric from itself. He knew Six Sigma could help streamline the company, make it more efficient and productive, eliminate waste, and change it for the better. It did.

Timeline of Implementation

General Electric’s implantation of Six Sigma took five years, and the end-result was a reported twelve billion dollars in savings. The enormity of Six Sigma’s success here cannot be understated. Welch would go on to become a lifelong advocate of the Six Sigma methodology, championing its effectiveness in businesses, large and small, all over the world. Six Sigma’s present day success is rooted in that of Jack Welch and General Electric. Following its unprecedented achievement at General Electric, many more companies started using Six Sigma. By the late 90s, some of the biggest corporations, such as Samsung, Ford, Boeing, Amazon, and GlaxoSmithKline were all using Six Sigma. Many of these companies, including a huge number of multi-nationals, experienced immediate and continuous success through Six Sigma implementation. This snowball effect cemented Six Sigma’s reputation in the business world, ensuring that it continues to succeed even today.

How Did They Do It? – Training

General Electric began their Six Sigma implementation through a strong emphasis on the importance of training. By training their employees in data-based problem analysis, they overcame many obstacles for which they had previously been unprepared. All GE employees were required to take a training program in using Six Sigma methodologies in the workplace. The course lasted for thirteen days or 100 hours and required them to complete a Six Sigma project before the year 1999. Their training covered a variety of areas, including how to use DMAIC . Employees would learn how to define and identify processes, as well as to measure process output. Additionally, they would analyze criticality of process inputs, while devising improvements through modifying the inputs. Finally, they would learn how to control processes by controlling the relevant inputs. Upon completion of the course, employees would then undergo follow-up training to bolster their new skills and utilize them.

Six Sigma Mentoring

Mentoring was another important aspect of General Electric’s Six Sigma training and implementation. They would hire full-time Six Sigma Master Black Belts (MBB) to help implement Six Sigma, driving process changes, as well as training other staff. Each MBB mentored employees involved with GE’s core processes for Black Belt level training. This involved a four-month training program in which they learned to apply Six Sigma techniques in their work, while mentored by their MBBs. This dedication to training and mentoring allowed GE to quickly generate a team of full-time Black Belts to implement projects. Furthermore, GE also provided part-time project leaders and employees with Six Sigma Green Belt training to support their Black Belts’ work.

Strong Leadership

Finally, Six Sigma demands effective leadership if it is to be successful. Without a strong leader to direct and support your Six Sigma Belts, any attempts at implementing Six Sigma will likely fail. General Electric, however, is a prime example of the importance and success of strong leadership, training, and mentoring. Without these three key factors, much of what GE did may not have been successful. Furthermore, Jack Welch supported GE’s Six Sigma implementation through ensuring fundamental commitment from both his senior executives and employee population. He linked opportunities for promotion and bonuses with quality improvement, aligning employee incentives with Six Sigma goals.

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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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GE: A New Way Forward?

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David J. Collis

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• Shell's Balancing Act: Resource Allocation and the Green Transition  By: David Collis and Haisley Wert
• More than Optics: Olympus's Vision to Become a Leading Global MedTech Company  By: David J. Collis and Haisley Wert
• To Fizzle Out or Heat Up? PepsiCo and Coca-Cola’s SodaStream and Costa Coffee Acquisitions  By: David Collis and Haisley Wert

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Case Study : General Electric (GE) and Six Sigma

Companies globally choose to implement the Six Sigma business improvement methodology into their businesses for a multitude of reasons. From improving production efficiency, decreasing byproduct waste, and increasing revenue, executives look to Six Sigma to better their business practices. As a methodology that follows a strictly disciplined approach with aspirations to achieving perfection, it’s no surprise Six Sigma has proven to be successful in corporate restructure, organization, and process improvement.

In 1995, CEO Jack Welch made it his priority to turn General Electrics into a Six Sigma practicing corporation within five years. Like most executives, Welch’s motivation behind implementing the methodology was to improve the quality of the company’s products to be better than their competitors. Six Sigma aims at achieving a certain degree of production defects. Specifically, 3.4 defects for every million products produced. Likewise, this degree of defects insured near-perfection in all production processes.

The Implementation of Six Sigma in General Electric (GE)

The success of Six Sigma depends almost solely on its implementation into the company. Without strict discipline, training, and project management , your company will not reap the magnitude of benefits you might expect. For General Electric, Welch began implementation by requiring nearly every employee to partake in a 2-week, 100 hour Six Sigma training program . Additionally, every employee was expected to complete a certified Six Sigma project by 1998. Like other successful Six Sigma companies, such as Motorola, Welch also required employees to complete follow-up training courses to perfect their current skill sets.  

However, Welch alone did not implement Six Sigma across the entire corporation. Just as you will see with other companies, mentoring was a major variable for General Electric’s success. Master Black Belt Six Sigma certified professionals were hired for full-time mentor roles who trained and managed fellow employees. Likewise, the trained employees would then qualify as Black Belts and could manage other Six Sigma projects throughout the company. Additionally, lower certification levels, such as Green Belts, assisted in numerous projects as team members and the workforce.

In conjunction with thorough, routine training for most employees, Welch gained the support of upper level management and executives by linking their bonuses to quality improvement. Immediately, senior executives had a motive to encourage their employees to perfect their Six Sigma skill sets and improve their production quality. Furthermore, any employee seeking a promotion would have to be Six Sigma Green Belt certified.

Specific Approaches

One key aspect to General Electric’s success was their three specific approaches. The first, “Show Me the Money”, brought focus to cutting costs in specific price-sensitive markets. This included removing workplace production defects, while also improving quality and productivity. The second, “Everybody Plays”, sought to bring Six Sigma business improvement processes to all product line components. From the suppliers to the assembly line personnel, everyone integrated the methodology into their roles. Last, “Specific Techniques”, ranked projects by aligning them to specific business goals the company had.  This was done by using Six Sigma tools , such as process mapping.  

The Results of General Electric implementing Six Sigma

Through revolutionizing their corporate culture, improving the quality of their products, and reducing their production costs, General Electric greatly benefited from the Six Sigma methodology. By 1997, General Electric experienced a nearly $700 million in corporate benefits, and over $2.5 billion by 2000. Increasing product reliability and improving production efficiency lead to enhanced customer relations and thus, greater revenue generation.

Without the strict, disciplined integration executed by Welch, General Electric would not be the successful Six Sigma corporation it is today!

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Case Study: How General Electric Saved 80% in Development Costs

Think your organisation is too big, bureaucratic and over-regulated to apply lean startup ?

Think again.

Introducing the General Electric Case Study:

General Electric , with its $493B in assets and 200,000 employees worldwide, is doing exactly that. And it’s exactly this kind of progressive thinking, entrenched in GE’s DNA, that sees the company enter its 125th year in a commanding position, ranking eighth in the 2015 Fortune 500 list .

With one third of listed companies facing de-listing in the next five years , it’s no wonder that GE is looking to change the way it thinks, makes decisions and delivers outcomes, in order to keep up with the rapid pace of change disrupting every industry.

GE is fast becoming a model of how to implement lean startup in a large organisation.

Eric Ries, author of the Lean Startup , a new solution development methodology that has radically transformed the way startups get products to market, approached GE with a simple question, after introducing a group of stakeholders to the philosophy that was rooted in software development.

“Is this something you can use to make things like turbines and jet engines, as well?”

Rather than simply shoot down Eric’s question, GE got testing. They put together several new product introduction (NPI) teams at Crotonville, the company’s leadership institute. Eric was brought in and taught the teams how to apply the methodology.

When asked whether this was something that was applicable to their respective businesses, the resounding response was “yes”.

As soon as team members returned to their respective business units, their ideas and new ways of working were quickly squashed. They realised that applying lean startup would not only require training but a cultural shift in the organisation.

GE promptly created its Fastworks program - geared towards the successful adoption and use of lean startup philosophy across GE.

Step one? Get senior leaders, “the top 5,000”, trained and educated in lean startup. This formed part of a roadshow that Fastworks’ co-founders and partners Viv Goldstein (Business Innovation) and Janice Semper (Human Resources) embarked upon, together with Eric Ries and David Kidder (author of The Startup Playbook ). You’ll note that the partners together represent methodology and culture, not just one or the other.

The Fastworks team spent 2 days with senior leaders teaching them all about lean startup and this was not without its challenges. Many senior leaders have spent years at GE and most grew up with Six Sigma and as such were process driven, perfectionist and anti-variation. The lean startup sessions were as much as about challenging them to think in a different way as much as they were about lean startup methodology.

Getting Buy-In from Senior Management

Because of the structural hierarchy of GE, getting senior stakeholder buy in was critical to the success of the program. Getting support at purely a grassroots level wouldn’t be enough to get traction.

However, recognising the benefits that grassroots employees could bring by way of testing projects and gathering proof points, they could take these validated learnings as ‘money in the bank’, so to speak, and say “here is the impact, here is the evidence” to obtain real and ongoing support from senior stakeholders.

They quickly realised that Eric Ries is just one person and that they needed to bring the expertise in-house. As such, GE created a community of coaches and trained them to build the expertise internally.

Was there a specific plan to train ‘X’ amount of teams and coaches? No, GE essentially applied the lean startup principles to its rollout of this program.

“Let’s start small, learn and build it up from there” says Semper.

GE’s different businesses own Fastworks, as opposed to it being a top down corporate initiative, which supports buy in. They are given a framework but are allowed to determine how many coaches, who becomes a coach, whether it’s a part time or full-time role and so on.

“Here’s the framework - it’s up to you how you want to own it.”

While this was initially uncomfortable for a lot of people because it requires judgment, it also gives them ownership, critical to buy-in.

They’ve found that both part time and full time coaches can work in varying degrees.

What about non-tech companies?

“This absolutely works outside of technology and software and GE is a great proof point for that”, having applied the philosophy in areas such as transportation, energy and finance.

It’s not just about training people “What we learned at Crotonville early on is that as soon as people went back to their business they struggled to use the methodology”, says Semper. “You need to think more broadly about your organisation and the ability to make sure that behaviours and culture can support the application of a lean startup approach.”

Questions to ask:

• will lean startup behaviours be permissible and rewarded?
• does performance management support lean startup?
• what are your expectations of your leaders in supporting lean startup?
• what competencies do you need to develop ?
• like health and fitness, a holistic approach is required to successfully implement lean startup - a personal trainer is pointless if your house is full of high carb, sugary temptations

Everything must be aligned with this way of working

At GE, limiting characteristics that embody the values of its people are failure not being an option, an addiction to being right and a lack of customer-centricity and empathy when developing new products. Why engage customers when you have all the answers right?

Semper zeroed in on these cultural challenges and started to attack them by creating a new belief system that aligned with the Fastworks and lean startup principles.

This belief system was summarised by the following:

• empower and inspire each other
• customers determine our success
• stay lean to go fast
• learn and adapt to win
• deliver results in an uncertain world

This was supported by senior management projecting to their people that “this is what we believe”.

New beliefs underpin new behaviours and these new behaviours are critical to the success of lean startup in a large organisation.

Performance management system was out of synch

GE’s performance management system was representative of your standard run of the mill linear system. The type where goals are set and reviewed once a year. In order to support the very experimentation and adaptability that lean startup advocates, the performance system had to also embody these values. GE is currently moving towards a more adaptable system where ongoing management is stressed over once a year check-ins.

Still, there are challenges as one would expect of a company the size and scale of GE - 200,000 diverse employees across 175 countries.

But the results speak for themselves...

ADVERTISEMENT

Transport: Using lean startup, GE developed and commercialised a new engine based on regulatory changes brought on by the EPA. It got to market 2 years before its competition not only resulting in significant cost savings, but bettering the EPA’s requirements. This positioned them extremely well with customers, gave them first mover advantage.

Energy: GE developed a gas turbine which enabled it to deliver the most efficient, low cost energy solution it could to customers and it decreased development costs by 60% by doing so!

In its Industrial business GE:

• reduced time of NPI by two thirds
• reduced time to customer validation by 80%

The latter not only represents a significant cost saving but also frees up NPI funds to reinvest into new ventures, rather than over-invest building the wrong thing and scrambling to find budget for new projects. This snowball effect enables GE to explore a much higher number of new innovations and products in a much shorter time-frame with much lower expense.

Positive Impact on Employee Morale

In a time when customer churn can cost organisations more than $50,000 per person , improving employee engagement and therefore retention is also top of the agenda for most HR managers. Implementing lean startup means that employees are engaged on projects that are delivered quicker and actually realise benefits. This is light years away from traditional, waterfall based ‘transformational’ projects.

Funding Process

The Fastworks process has been embedded into operations.

If an employee has an idea they add it to a growth board and seek seed funding to validate their idea. If validated, then the employee qualifies for additional funding. If invalidated, then things simply stop (stopping anything at GE is also something that was counter-cultural before lean startup reared its head). Now, if a customer says that a new product or feature wouldn’t create value for them, the project isn’t pursued. Makes sense, in retrospect.

On Regulation

I often hear leaders from regulated organisations say that “it’s impossible for us to implement lean startup - it’s too risky, we’re so regulated.”

The fact is that lean startup is a de-risker.

The cost to go to market with a regulated product is higher than normal, given the compliance requirements and checks that need to take place.

“Using lean startup allows us to mitigate risk before putting things to market - it is a risk mitigant that applies across our healthcare, transportation, finance businesses (and so on)”.

By testing quickly, we are taking lots of small bets rather than few large ones and only going to the regulator with products that we know our customers have an appetite for.

Australian health insurer Medibank tested appetite for its Gym Better product by sending employees out to a busy shopping strip in plain clothes with iPads trying to sell a fictional product under the guise of a fictional company to passerbyers and gym goers, purely to gauge customer interest. If somebody wanted to buy on the spot they were simply reminded that “sorry, this doesn’t actually exist but thanks for your cooperation - here’s two movie tickets!”

This approach cost much less than jumping through regulatory hoops and putting a product to market that there is not enough appetite for.

“Look at the level of disruption that’s happening in our industry. It’s unprecedented and it’s happening today. If we don’t change we run the risk of becoming obsolete in less than a decade.” This is the reality that’s communicated to influencers at GE to inspire their jumping on board the good ship lean startup.

We make it clear that “this is not an initiative, this is a fundamental way we are changing how we make decisions, how we work together, how we align with customers, how we hold eachother accountable”, says Semper.

On Collaboration

Remote teams are a nature of the beast that is GE.

The company created a Fastworks site within GE where methodology, proof points, stories, tools and coaching resources are available. Digital training is also being rolled out to move this way of thinking beyond just project team.s.

On Startups

On startup culture, Semper says that GE has learned two fundamental things:

• Startups are extremely purpose driven and have a strong connection to the company
• Dedicated co-located teams achieve amazing things

She has been exploring ways to replicate these startup traits within GE.

The underlying message is clear - if an organisation the size of GE can implement lean startup, then chances that your organisation can too .

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General Electric Company: Strategic Planning and Mission Case Study

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Strategic Planning

Strategic alternatives, works cited, current performance and mission.

The case study at hand covers a period of the company’s performance up to the beginning of 2013. In 2012, General Electric managed to increase its segment profits to $22.9 billion (by 11%), $17.8 billion of which were generated from its operating activities. GE also returned $12.4 billion to investors paying dividends and stock buybacks thereby increasing stakeholder returns by 21%. The market cap of the organization grew by more than $30 billion. Thus, having over $100 billion of revenue at the beginning of 2013, the company had become the hugest and most prosperous infrastructure organization globally.

As far as the percentage of profit increase per business unit is concerned, it was distributed as follows (Hoffman 726-729):

• Power and Water: The volume increased by 8%. Deflection effects were offset due to stronger dollar and lower prices.
• Oil and Gas: 16% higher volume.
• Energy Management: 68% growth owing to increased prices.
• Aviation: 7% increase as a result of higher prices.
• Healthcare: 4% due to increased productivity.
• Transportation: 36% owing to higher prices and volume.
• Home and Business Solutions: 31% increase due to the offset of higher prices as a result of inflation.
• Capital: 12% growth owing to higher tax benefits and lower impairments.

As for the mission, GE does not provide any official mission statements on its website. Yet, in the “about” section, one can read that the company employs the best people and uses the best technologies to meet the hardest challenges looking for solutions in finance, health and home, and transportation.

Each website devoted to GE’s separate business units provides its mission statement (Hoffman 726-731):

• Power & Water: The unit claims that all employees work in collaboration with customers trying to foster progress, predict the energy needs of the future, and power a cleaner world through the use of advanced generation and delivery technologies.
• Oil & Gas: The unit positions itself as an unquestionable leader in advanced technologies in all industry segments and branches.
• Energy Management: The unit emphasizes the implementation of global team solutions to transmit, manage, distribute, converse, and optimize electrical power.
• Aviation: The unit claims to be the global leader in the production of jet engines of all sizes for both military and commercial aircraft as well as aircraft-derived engines for marine usage.
• Healthcare: The unit provides medical technologies of the new age, including medical diagnostics, information technologies, patient monitoring systems, etc.
• Transportation: The unit’s mission is to solve the toughest challenges in transportation across the globe by building equipment moving mining, marine, and rail industries.
• Home & Business Solutions: The unit sees its goal in delivering comfort, electrical protection, and convenience through the application of innovative technologies.
• GE Capital: The unit’s mission is to ensure the growth of customers’ capital by providing smart financial solutions.

EFAS Matrix

Table 3. EFAS Matrix.

IFAS Matrix

Table 4. IFAS Matrix.

Key Strategic Factors (SWOT Analysis)

Porter’s 5 forces analysis.

5 Forces analysis reveals the following position of GE (Hoffman 723-732).:

• Industry rivalry or competition is medium since GE dominates numerous industries due to its diversification strategy, having only Siemens as a strong competitor.
• The threat of new entrants is low as the reputation, size, and position of GE makes it practically impossible for a new company to penetrate the market.
• The threat of substitute products is medium since customers always have a great number of options to choose from. GE must concentrate on its pricing policy and product features.
• The bargaining power of buyers is low as GE produces quality products at fair prices.
• The bargaining power of suppliers is low since GE buys huge volumes of products bringing their ability to bargain to a minimum.

GE can opt for several strategic alternatives. First and foremost, it can focus on customers in developing economies in all sectors, which will give it a competitive advantage. For gaining a competitive edge, it can also develop new technologies. Another option is to invest in process improvement in all its units (especially in emerging markets) to save money. Among all modern technologies, it would be reasonable to develop solar equipment, wind turbines, aircraft, communication, and other technologies. Yet, at the same time, GE should be ready for customers’ decreasing interest in this sector. GE can also rely on stockholders to widen profit margins, yet, their participation largely depends on the economic situation in the country.

GE can become the leader of the market of environmentally friendly technologies to be able to outperform competitors when the popularity of such equipment grows. However, it must take into account that this tendency is far from being steady.

The company can also pay down all pension obligations; yet, the results are unpredictable.

It would be effective to stick to the differentiation strategy and inventing products that are new and unique in all segments where GE currently operates.

The company can form partnerships with other organizations to combine strengths but it has no guarantee that it will not be let down.

It would be rather profitable to sell businesses that show poor performance and investing the obtained capital to core, successful units and acquire companies in the supply sector to ensure protections of delivery and mitigation of risks. At the same time, GE can invest in businesses with high growth rates and good potential/

“ General Electric Co. ” Stock Analysis on Net. Web.

Hoffman, Alan. General Electric, GE Capital and the Financial Crisis of 2008: The Best of the Worst in the Financial Sector? 2013. Web.

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The Turnaround of General Electric

By: Kathryn Harrigan

For almost forty years, the General Electric Company (GE) was considered to be one of the world's best-managed global firms. But by 2017, GE was in the rifle sights of shareholder activists, like…

• Length: 42 page(s)
• Publication Date: Apr 26, 2018
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For almost forty years, the General Electric Company (GE) was considered to be one of the world's best-managed global firms. But by 2017, GE was in the rifle sights of shareholder activists, like Nelson Peltz, because it had become the lowest-performing company in the Dow Jones Industrial Index. Investors wanted a turnaround. Turning GE around could mean the abandonment of GE's traditional conglomerate strategy of organic growth and astute acquisitions, as well as an end to many of the elements of organizational structure, managerial systems, and decision-making processes that had defined how GE implemented its corporate strategy. CEO John Flannery hinted that GE was considering breaking itself up into smaller pieces, possibly going as far as to spin off its three "core" businesses. But since GE had owned some of the businesses on its short list for divestiture for many years, it would face huge tax liabilities in an outright sale of assets instead of doing a spin-off to shareholders. Ripping apart the GE family also had implications for the value of the corporate office's contributions to each respective line of business and its ability to renew itself organically.

Learning Objectives

Turnaround strategies for a long standing global conglomerate. Balancing divestitures strategies with long term corporate growth. Maintaining control of organizations at risk for activist takeovers.

Apr 26, 2018 (Revised: Oct 21, 2019)

Discipline:

Geographies:

United States

Industries:

Aerospace sector, Banking and investment industry, Electric power, Energy and natural resources sector, Household goods, Medical equipment and devices, Transportation and distribution

Columbia Business School

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Benchmarking: An International Journal

ISSN : 1463-5771

Article publication date: 1 October 2000

The Six Sigma phenomenon has followed the TQM movement as the latest thrust for many companies seeking to improve their performance and effectiveness. The purpose of this paper is to review the basic concepts of Six Sigma, its benefits, and successful approaches for implementation. In particular, we benchmark the practices of the General Electric Company, one of the leaders and innovators in implementing the process. We conclude that keys for successful implementation include upper management support and involvement, organizational infrastructure, training, tools, and links to human resources‐based actions.

• Electronics industry
• Benchmarking

Henderson, K.M. and Evans, J.R. (2000), "Successful implementation of Six Sigma: benchmarking General Electric Company", Benchmarking: An International Journal , Vol. 7 No. 4, pp. 260-282. https://doi.org/10.1108/14635770010378909

Copyright © 2000, MCB UP Limited

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General Electric’s (GE) Organizational Culture: An Analysis

General Electric Company (GE) has an organizational culture that ensures business relevance to the conditions of the aerospace/aviation industry. A company’s organizational culture or corporate culture establishes the customs, traditions, and core values that influence employee behaviors, especially in managerial decision-making processes. GE’s company culture is a factor that affects success in managing strategic change in all aspects of the business. For example, General Electric occasionally adjusts its cultural characteristics to suit current business needs and industry trends. The resulting organizational culture facilitates business agility in responding to challenges in the market, such as external forces from competitors, like Rolls-Royce, Siemens, and 3M, as shown in the Five Forces analysis of General Electric Company . This cultural situation promotes the company’s competitive advantages and organizational capabilities for withstanding rapid changes and disruptions in industries. As one of the leading companies in the global market, General Electric is an example of the significance of work culture as a supporting factor for long-term success.

Employees use General Electric’s corporate culture as a decision-making factor. For example, in addressing on-the-job problems, management personnel in GE’s aviation operations consider how potential solutions align with the company’s work culture. This cultural alignment determines the success rate of implementing business solutions. In this regard, General Electric’s organizational culture must consider external business conditions, while supporting decision-making processes.

General Electric’s Organizational Culture Type & Traits

General Electric has a customer-centric  organizational culture. This work culture is based on changes in the aerospace business and its environment. GE’s customer-centric cultural approach is based on changing customer needs and preferences associated with disruptive technologies and corresponding industry trends. General Electric has human resource management programs that facilitate organizational adaptation to such changes. This company culture makes the business more efficient and responsive to market changes and new business opportunities. The following are the main characteristics of General Electric Company’s organizational culture:

• Customer centricity (highest priority)
• Learning and adaptation
• Empowerment and inspiration
• Results orientation

Customer Centricity . This characteristic of General Electric’s organizational culture addresses customer satisfaction as a critical success factor. The company emphasizes better outcomes for customers through this cultural trait. For example, customer centricity supports GE in ensuring accuracy and precision in outcomes delivered to customers in the avionics market. The company has human resource management programs that train employees in identifying customers’ expectations and in developing solutions to satisfy such expectations. This feature of the corporate culture contributes to the effectiveness of General Electric’s generic competitive strategy and intensive growth strategies . For instance, customer centricity encourages personnel in GE’s digital industrial services segment to integrate differentiation in product development.

Leanness . General Electric Company maintains cultural support for lean processes, with the objective of rapidly responding to business needs and simplifying processes. This characteristic of the organizational culture addresses the company’s need for operational excellence and simplification for effective management. For example, through lean management, GE minimizes costs and maximizes operational efficiency. This cultural feature increases the company’s strengths against major competitors, such as 3M and Siemens. Leanness affects General Electric’s operations management approach in process and capacity design, supply chain management, and inventory management. The company implements this trait in the corporate culture through HR programs that promote efficiency in employee behavior. For instance, performance evaluations recognize and reward high efficiency among individuals and teams in General Electric’s human resources.

Learning and Adaptation . This cultural trait is based on the HR management objective of enabling employees to constantly improve their capabilities to remain competitive. In this regard, General Electric’s company culture promotes flexibility. For example, as employees learn and adapt to new transportation technologies, GE ensures its flexibility in responding to changes in the transportation industry. This characteristic of the organizational culture contributes to the fulfillment of General Electric’s vision statement and mission statement . Learning and adaptation enable GE to develop capabilities to achieve the envisioned target of becoming the world’s premier digital industrial company.

Empowerment and Inspiration . This feature of the corporate culture focuses on mutually beneficial empowerment and inspiration among employees. For example, General Electric’s managers empower employees to become enablers of their colleagues. In addition, GE provides considerable flexibility and autonomy to promote inspirational initiatives among workers. This cultural trait also extends beyond the company. For instance, General Electric’s corporate social responsibility strategy involves employees to inspire and empower communities. In this way, the organizational culture promotes the GE brand to target markets around the world.

Results Orientation . High effectiveness in satisfying business needs and customer expectations is a criterion that managers use in evaluating business performance at General Electric Company. In this regard, GE’s organizational culture is results oriented, with emphasis on programs for developing the company’s human resources. For example, this cultural characteristic prompts and rewards General Electric’s employees for satisfying customers’ needs, such as the needs identified through research in the aviation industry. Also, this feature of the business culture ensures that GE remains competitive in retaining customers. This benefit of the organizational culture is significant in highly competitive markets. Results orientation helps General Electric withstand the competitive forces of other firms.

General Electric’s Corporate Culture: Advantages & Disadvantages, Recommendations

An advantage of General Electric’s organizational culture is the emphasis on customer satisfaction. This cultural feature helps attract and retain customers and maintains the company’s customer base. In addition, an advantage of GE’s work culture is its support for flexibility through learning and adaptation. This cultural trait is essential in today’s business environment. Learning and adaptation contributes to the business strengths shown in the SWOT analysis of General Electric Company , and business responsiveness to the rise of disruptive technologies in industries, such as the advancement of digital technologies in the aviation and transportation industries.

A disadvantage of General Electric’s corporate culture is its low prioritization of results orientation. It is understandable that the other cultural characteristics are significant in supporting GE’s business competitive advantages. However, results orientation is also a major factor that determines the company’s ability to fulfill business requirements and customers’ needs. For example, a results-oriented management approach can optimize General Electric’s competitiveness in the aviation industry, where speed and effectiveness are crucial to customers’ satisfaction. It is recommended that GE enhance its organizational culture by combining customer orientation with results orientation. This recommendation requires General Electric to implement human resource management programs that support a customer-centric approach to achieving better results.

• Assoratgoon, W., & Kantabutra, S. (2023). Toward a sustainability organizational culture model. Journal of Cleaner Production, 400 , 136666.
• GE Careers – Inclusion & Diversity .
• GE Careers – Working at GE .
• Herget, J. (2023). Challenges to Corporate Culture: Today and Tomorrow. In Shaping Corporate Culture: For Sustainable Business Success (pp. 149-157). Berlin, Heidelberg: Springer Berlin Heidelberg.
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The state of AI in early 2024: Gen AI adoption spikes and starts to generate value

If 2023 was the year the world discovered generative AI (gen AI) , 2024 is the year organizations truly began using—and deriving business value from—this new technology. In the latest McKinsey Global Survey  on AI, 65 percent of respondents report that their organizations are regularly using gen AI, nearly double the percentage from our previous survey just ten months ago. Respondents’ expectations for gen AI’s impact remain as high as they were last year , with three-quarters predicting that gen AI will lead to significant or disruptive change in their industries in the years ahead.

About the authors

This article is a collaborative effort by Alex Singla , Alexander Sukharevsky , Lareina Yee , and Michael Chui , with Bryce Hall , representing views from QuantumBlack, AI by McKinsey, and McKinsey Digital.

Organizations are already seeing material benefits from gen AI use, reporting both cost decreases and revenue jumps in the business units deploying the technology. The survey also provides insights into the kinds of risks presented by gen AI—most notably, inaccuracy—as well as the emerging practices of top performers to mitigate those challenges and capture value.

AI adoption surges

Interest in generative AI has also brightened the spotlight on a broader set of AI capabilities. For the past six years, AI adoption by respondents’ organizations has hovered at about 50 percent. This year, the survey finds that adoption has jumped to 72 percent (Exhibit 1). And the interest is truly global in scope. Our 2023 survey found that AI adoption did not reach 66 percent in any region; however, this year more than two-thirds of respondents in nearly every region say their organizations are using AI. 1 Organizations based in Central and South America are the exception, with 58 percent of respondents working for organizations based in Central and South America reporting AI adoption. Looking by industry, the biggest increase in adoption can be found in professional services. 2 Includes respondents working for organizations focused on human resources, legal services, management consulting, market research, R&D, tax preparation, and training.

Also, responses suggest that companies are now using AI in more parts of the business. Half of respondents say their organizations have adopted AI in two or more business functions, up from less than a third of respondents in 2023 (Exhibit 2).

Gen AI adoption is most common in the functions where it can create the most value

Most respondents now report that their organizations—and they as individuals—are using gen AI. Sixty-five percent of respondents say their organizations are regularly using gen AI in at least one business function, up from one-third last year. The average organization using gen AI is doing so in two functions, most often in marketing and sales and in product and service development—two functions in which previous research  determined that gen AI adoption could generate the most value 3 “ The economic potential of generative AI: The next productivity frontier ,” McKinsey, June 14, 2023. —as well as in IT (Exhibit 3). The biggest increase from 2023 is found in marketing and sales, where reported adoption has more than doubled. Yet across functions, only two use cases, both within marketing and sales, are reported by 15 percent or more of respondents.

Gen AI also is weaving its way into respondents’ personal lives. Compared with 2023, respondents are much more likely to be using gen AI at work and even more likely to be using gen AI both at work and in their personal lives (Exhibit 4). The survey finds upticks in gen AI use across all regions, with the largest increases in Asia–Pacific and Greater China. Respondents at the highest seniority levels, meanwhile, show larger jumps in the use of gen Al tools for work and outside of work compared with their midlevel-management peers. Looking at specific industries, respondents working in energy and materials and in professional services report the largest increase in gen AI use.

Investments in gen AI and analytical AI are beginning to create value

The latest survey also shows how different industries are budgeting for gen AI. Responses suggest that, in many industries, organizations are about equally as likely to be investing more than 5 percent of their digital budgets in gen AI as they are in nongenerative, analytical-AI solutions (Exhibit 5). Yet in most industries, larger shares of respondents report that their organizations spend more than 20 percent on analytical AI than on gen AI. Looking ahead, most respondents—67 percent—expect their organizations to invest more in AI over the next three years.

Where are those investments paying off? For the first time, our latest survey explored the value created by gen AI use by business function. The function in which the largest share of respondents report seeing cost decreases is human resources. Respondents most commonly report meaningful revenue increases (of more than 5 percent) in supply chain and inventory management (Exhibit 6). For analytical AI, respondents most often report seeing cost benefits in service operations—in line with what we found last year —as well as meaningful revenue increases from AI use in marketing and sales.

Inaccuracy: The most recognized and experienced risk of gen AI use

As businesses begin to see the benefits of gen AI, they’re also recognizing the diverse risks associated with the technology. These can range from data management risks such as data privacy, bias, or intellectual property (IP) infringement to model management risks, which tend to focus on inaccurate output or lack of explainability. A third big risk category is security and incorrect use.

Respondents to the latest survey are more likely than they were last year to say their organizations consider inaccuracy and IP infringement to be relevant to their use of gen AI, and about half continue to view cybersecurity as a risk (Exhibit 7).

Conversely, respondents are less likely than they were last year to say their organizations consider workforce and labor displacement to be relevant risks and are not increasing efforts to mitigate them.

In fact, inaccuracy— which can affect use cases across the gen AI value chain , ranging from customer journeys and summarization to coding and creative content—is the only risk that respondents are significantly more likely than last year to say their organizations are actively working to mitigate.

Some organizations have already experienced negative consequences from the use of gen AI, with 44 percent of respondents saying their organizations have experienced at least one consequence (Exhibit 8). Respondents most often report inaccuracy as a risk that has affected their organizations, followed by cybersecurity and explainability.

Our previous research has found that there are several elements of governance that can help in scaling gen AI use responsibly, yet few respondents report having these risk-related practices in place. 4 “ Implementing generative AI with speed and safety ,” McKinsey Quarterly , March 13, 2024. For example, just 18 percent say their organizations have an enterprise-wide council or board with the authority to make decisions involving responsible AI governance, and only one-third say gen AI risk awareness and risk mitigation controls are required skill sets for technical talent.

Bringing gen AI capabilities to bear

The latest survey also sought to understand how, and how quickly, organizations are deploying these new gen AI tools. We have found three archetypes for implementing gen AI solutions : takers use off-the-shelf, publicly available solutions; shapers customize those tools with proprietary data and systems; and makers develop their own foundation models from scratch. 5 “ Technology’s generational moment with generative AI: A CIO and CTO guide ,” McKinsey, July 11, 2023. Across most industries, the survey results suggest that organizations are finding off-the-shelf offerings applicable to their business needs—though many are pursuing opportunities to customize models or even develop their own (Exhibit 9). About half of reported gen AI uses within respondents’ business functions are utilizing off-the-shelf, publicly available models or tools, with little or no customization. Respondents in energy and materials, technology, and media and telecommunications are more likely to report significant customization or tuning of publicly available models or developing their own proprietary models to address specific business needs.

Respondents most often report that their organizations required one to four months from the start of a project to put gen AI into production, though the time it takes varies by business function (Exhibit 10). It also depends upon the approach for acquiring those capabilities. Not surprisingly, reported uses of highly customized or proprietary models are 1.5 times more likely than off-the-shelf, publicly available models to take five months or more to implement.

Gen AI high performers are excelling despite facing challenges

Gen AI is a new technology, and organizations are still early in the journey of pursuing its opportunities and scaling it across functions. So it’s little surprise that only a small subset of respondents (46 out of 876) report that a meaningful share of their organizations’ EBIT can be attributed to their deployment of gen AI. Still, these gen AI leaders are worth examining closely. These, after all, are the early movers, who already attribute more than 10 percent of their organizations’ EBIT to their use of gen AI. Forty-two percent of these high performers say more than 20 percent of their EBIT is attributable to their use of nongenerative, analytical AI, and they span industries and regions—though most are at organizations with less than $1 billion in annual revenue. The AI-related practices at these organizations can offer guidance to those looking to create value from gen AI adoption at their own organizations.

To start, gen AI high performers are using gen AI in more business functions—an average of three functions, while others average two. They, like other organizations, are most likely to use gen AI in marketing and sales and product or service development, but they’re much more likely than others to use gen AI solutions in risk, legal, and compliance; in strategy and corporate finance; and in supply chain and inventory management. They’re more than three times as likely as others to be using gen AI in activities ranging from processing of accounting documents and risk assessment to R&D testing and pricing and promotions. While, overall, about half of reported gen AI applications within business functions are utilizing publicly available models or tools, gen AI high performers are less likely to use those off-the-shelf options than to either implement significantly customized versions of those tools or to develop their own proprietary foundation models.

What else are these high performers doing differently? For one thing, they are paying more attention to gen-AI-related risks. Perhaps because they are further along on their journeys, they are more likely than others to say their organizations have experienced every negative consequence from gen AI we asked about, from cybersecurity and personal privacy to explainability and IP infringement. Given that, they are more likely than others to report that their organizations consider those risks, as well as regulatory compliance, environmental impacts, and political stability, to be relevant to their gen AI use, and they say they take steps to mitigate more risks than others do.

Gen AI high performers are also much more likely to say their organizations follow a set of risk-related best practices (Exhibit 11). For example, they are nearly twice as likely as others to involve the legal function and embed risk reviews early on in the development of gen AI solutions—that is, to “ shift left .” They’re also much more likely than others to employ a wide range of other best practices, from strategy-related practices to those related to scaling.

In addition to experiencing the risks of gen AI adoption, high performers have encountered other challenges that can serve as warnings to others (Exhibit 12). Seventy percent say they have experienced difficulties with data, including defining processes for data governance, developing the ability to quickly integrate data into AI models, and an insufficient amount of training data, highlighting the essential role that data play in capturing value. High performers are also more likely than others to report experiencing challenges with their operating models, such as implementing agile ways of working and effective sprint performance management.

About the research

The online survey was in the field from February 22 to March 5, 2024, and garnered responses from 1,363 participants representing the full range of regions, industries, company sizes, functional specialties, and tenures. Of those respondents, 981 said their organizations had adopted AI in at least one business function, and 878 said their organizations were regularly using gen AI in at least one function. To adjust for differences in response rates, the data are weighted by the contribution of each respondent’s nation to global GDP.

Alex Singla and Alexander Sukharevsky  are global coleaders of QuantumBlack, AI by McKinsey, and senior partners in McKinsey’s Chicago and London offices, respectively; Lareina Yee  is a senior partner in the Bay Area office, where Michael Chui , a McKinsey Global Institute partner, is a partner; and Bryce Hall  is an associate partner in the Washington, DC, office.

They wish to thank Kaitlin Noe, Larry Kanter, Mallika Jhamb, and Shinjini Srivastava for their contributions to this work.

This article was edited by Heather Hanselman, a senior editor in McKinsey’s Atlanta office.

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