Expert answer:Draw on the models and frameworks from class and b
Solved by verified expert:Assignment topic: Draw on the models and frameworks from class and beyond to developa “roadmap” for strategic growth that you could use to guide you infuture management roles.Assignment Criteria:The assignment provides the opportunity for you to take the concepts that we have covered in class and extend your knowledge in ways that will be useful for your future career direction. There will be a choice of topics so that you can focus on an area that is relevant. The assignment needs to be between 3,000 and 5,000 words in length. Details of topics will be provided early in the course so that you have time to do the necessary research. The assignment will be due in the last week of class. Assessment criteria 1. Quality of arguments – logic and integration Are the arguments logical? Are the conclusions or recommendations clearly linked to the analysis? Do the arguments support a consistent, coherent overall growth strategy? 2. Use of conceptual tools and frameworks to support analysis Does the analysis show that the writer has mastered the different conceptual tools and frameworks studied in the course? Does the essay selectively draw on the most relevant concepts for growth? Have the concepts been applied in a competent, insightful and compelling way? 3. Organisation and clarity of expression Is the essay well organised and structured? Can the reader easily understand the recommendation and arguments behind it? Is the essay written clearly? 4. Use the Concepts and framework in the attached files on most of the assignment and use a few new concepts and framework relevant for the assignment.
1.1_ge_growth_stratgy.pdf
1.2_ge___s_big_bet_on_data_and_analytics.pdf
1.3_growth_as_a_process.pdf
1.4_inside_ge___s_transformation.pdf
grow_from_your_strengths.pdf
Unformatted Attachment Preview
9-306-087
REV:
NOVEMBER 3, 2006
CHRISTOPHER A. BARTLETT
GE’s Growth Strategy: The Immelt Initiative
In February 2006, after four and a half years in the CEO role, Jeff Immelt felt General Electric (GE)
was finally poised for the double-digit growth for which he had been positioning it. Having just
announced an 11% increase in revenues for 2005 (including 8% organic growth), he was now
forecasting a further 10% revenue increase in 2006. And following 12% growth in earnings from
continuing operations in 2005 (with all six businesses delivering double-digit increases), he
committed to leveraging the 2006 revenues into an even greater 12% to 17% earnings increase. It was
a bold pledge for a $150 billion global company. (See Exhibit 1 for GE financial data, 2001–2004.)
Yet, for the past year GE’s share price had been stuck at around $35, implying a multiple of
around 20 times earnings, only half its price-to-earnings (P/E) ratio in the heady days of 2000. (See
Exhibit 2 for GE’s 10-year share price history.) It frustrated Immelt that the market did not seem to
share the belief that he and his management team had in his growth forecasts. “The stock is currently
trading at one of the lowest earnings multiples in a decade,” he said. “Investors decide the stock
price, but we love the way GE is positioned. We have good results and good governance. . . . What
will it take to move the stock?”1
Taking Charge: Setting the Agenda
On Friday, September 7, 2001, Immelt took over the reins of GE from Jack Welch, the nearlegendary CEO who preceded him. Four days later, two planes crashed into the World Trade Center
towers, and the world was thrown into turmoil. Not only did 9/11 destabilize an already fragile postInternet-bubble stock market, but it also triggered a downturn in an overheated economy, leading to
a fall in confidence that soon spread into other economies worldwide.
After the chaos of the first few post-9/11 days during which he checked on GE casualties,
authorized a $10 million donation to the families of rescue workers, and dispatched mobile
generators and medical equipment to the World Trade Center, on September 18 Immelt finally
focused on reassuring the financial markets by purchasing 25,000 GE shares on his personal account.
Three days later, he appeared before a group of financial analysts and promised that 2001 profits
would grow by 11% and by double digits again in 2002. As impressive as such a performance might
have appeared, it was less than Welch’s expansive suggestion in the heady days of 2000 that GE’s
profits could grow at 18% per annum in the future.2 The net result was that by the end of Immelt’s
first week as CEO, GE’s shares had dropped 20%, taking almost $80 billion off the company’s market
capitalization.
________________________________________________________________________________________________________________
Professor Christopher A. Bartlett prepared this case from published sources. HBS cases are developed solely as the basis for class discussion.
Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2006 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical,
photocopying, recording, or otherwise—without the permission of Harvard Business School.
This document is authorized for use only in AGSM Professor’s MNGT5395 Strategies for Growth S317 course at University of New South Wales, from September 2017 to March 2018.
306-087
GE’s Growth Strategy: The Immelt Initiative
To make matters worse, as the year wore on, a scandal that had been engulfing Enron finally led
to that company’s bankruptcy. Soon, other companies were caught up in accusations of financial
manipulation, including Tyco, a company that had billed itself as a “mini GE.” Again, the market
punished GE stock, concerned that its large and complex operations were too difficult to understand.
Beyond all this immediate market pressure, Immelt was acutely aware that he stood in the very
long shadow cast by his predecessor, Welch. During his 20 years as CEO, Welch had built GE into a
highly disciplined, extremely efficient machine that delivered consistent growth in sales and
earnings—not only through effective operations management that resulted in organic growth (much
of it productivity-driven) of 5% annually, but also through a continuous stream of timely acquisitions
and clever deal making. This two-pronged approach had resulted in double-digit profit increases
through most of the 1990s.
The consistent reliability of GE’s growth had created an image in shareholders’ minds of a
powerful machine that could not be stopped and earned the company a significant premium over
price/earnings multiples in the broad stock market. As a result, over two decades, GE had generated
a compound annual total return to shareholders of more than 23% per annum through the 1980s and
1990s. (See Exhibit 3 for summary GE financials, 1981–2000.) But Immelt was very conscious that he
could not hope to replicate that performance by simply continuing the same strategy. “I looked at the
world post-9/11 and realized that over the next 10 or 20 years, there was not going to be much
tailwind,” he said. “It would be more driven by innovation, and a premium would be placed on
companies that could generate their own growth.”3
Building on the Past, Imagining the Future
While recognizing the need for change, Immelt saw little need to challenge the basic business
model on which GE had operated for decades. Like his predecessor, he bristled at the
characterization of GE as a conglomerate, preferring to see it as a well-integrated, diversified
company. On taking charge, he explained:
Our businesses are closely integrated. They share leading edge business initiatives,
excellent financial disciplines, a tradition of sharing talent and best practices, and a culture
whose cornerstone is absolute unyielding integrity. Without these powerful ties, we could
actually merit the label “conglomerate” that people often inaccurately apply to us. That word
just does not apply to GE. . . . What we have is a company of diverse benefits whose sum is
truly greater than the parts; a company executing with excellence despite a brutal global
economy. . . . We believe GE is different, and one of the things that makes us different is that—
in good times and in bad—we deliver. That is who we are. 4
Immelt committed to building on what he saw as the core elements of the company’s past success:
a portfolio of strong businesses, bound through a set of companywide strategic initiatives and
managed by great people in a culture that was performance driven and adaptive. It was a source of
competitive advantage that Immelt felt was not easily imitated. “It requires financial and cultural
commitments over decades,” he said.
Having committed to GE’s fundamental business model, Immelt wasted little time in articulating
a new vision of growth based on using GE’s size and diversity as strengths rather than weaknesses.
He wanted to take the company into “big, fundamental high-technology infrastructure industries,”
places where he felt GE could have competitive advantage and where others could not easily follow.
He elaborated this into a vision of a global, technology-based, service-intensive company by defining
a growth strategy based on five key elements:
2
This document is authorized for use only in AGSM Professor’s MNGT5395 Strategies for Growth S317 course at University of New South Wales, from September 2017 to March 2018.
GE’s Growth Strategy: The Immelt Initiative
306-087
•
Technical leadership: Believing that technology had been at GE’s core since the day Thomas
Edison founded the company, Immelt committed to technical leadership as a key driver of
future growth.
•
Services acceleration: By building service businesses on its massive installed base of aircraft
engines, power turbines, locomotives, medical devices, and other hardware, Immelt believed
GE could better serve customers while generating high margins and raising entry barriers.
•
Commercial excellence: Reflecting his own sales and marketing background, Immelt
committed to creating a world-class commercial culture to overlay the engineering bias and
financial orientation of GE’s dominant business approach under Welch.
•
Globalization: Building on an old Welch initiative, Immelt committed to expanding GE’s
sourcing strategy and market access worldwide, in particular focusing on its underexploited
opportunities in developing world countries such as China and India.
•
Growth platforms: Finally, he recognized that significant resource reallocation would be
necessary to build new business platforms capitalizing on “unstoppable trends” that would
provide growth into the future.
Because plans at GE always came with measurable goals attached, Immelt committed to
increasing the company’s organic growth from its historical 5% annual rate to 8% and, beginning in
2005, to generating consistent double-digit earnings growth.
Investing through the Down Cycle
Perhaps predictably, the press was skeptical of the notion that a $130 billion company could grow
at two to three times the global gross national product (GNP) rate. Still, there was no shortage of
advice for the new CEO in his attempt to make the company do so. Some suggested he should sell off
the mature lighting and appliances businesses.5 Others proposed bold expansions—into the hospital
business, for example.6 And as always, there were calls for GE to break up the company and sell off
its component businesses.7 But Immelt insisted GE had great businesses that provided a strong
foundation for the future. All he planned to do was rebalance and renew the portfolio, then drive
growth from the revitalized base.
Within weeks of taking charge, he started making significant investments to align GE’s businesses
for growth. Seeing opportunities to expand its NBC broadcast business to capture the fast-growing
Hispanic advertising market, for example, the company acquired the Telemundo and Bravo
networks. And its power-generation business acquired Enron’s wind energy business as a new
platform that management felt was positioned for long-term growth and high returns in the future.
In addition to these and other natural business extensions, management identified whole new
segments that provided a stronger foundation for innovation and where future market opportunities
would drive rapid growth. For example, in security systems, GE acquired Interlogix, a medium-sized
player with excellent technology, and in water services, it bought BetzDearborn, a leading company
with 2,000 sales engineers on the ground.
Internally, Immelt also lost little time in making big financial commitments to the growth strategy.
Within his first six months, he committed $100 million to upgrade GE’s major research and
development (R&D) facility at Nishayuna in upstate New York. In addition to building new
laboratories, the investment provided for new meeting centers on Nishayuna’s 525-acre campus,
creating an environment where business managers and technologists could meet to discuss priorities.
3
This document is authorized for use only in AGSM Professor’s MNGT5395 Strategies for Growth S317 course at University of New South Wales, from September 2017 to March 2018.
306-087
GE’s Growth Strategy: The Immelt Initiative
Scott Donnelly, a 40-year-old researcher who led GE’s overall R&D activity, said, “GE is not the place
for scientists who want to work on a concept for years without anybody bothering them. Here
scientists can do long-term research, but they have to be willing to spar with the marketing guys. This
is the best of both worlds.”8
Although Immelt was willing to increase his commitment to R&D, he pushed to change the
balance of work being done. In addition to developing technologically sophisticated new products,
he wanted to commit more resources to longer-term research that might not pay off for a decade or
more. In the past, limited commitment to such long-term research had frustrated many of the center’s
science and engineering Ph.Ds. (“Science was a dirty word for a while,” said Anil Duggal, a project
leader on the advanced lighting project. “Now it’s not.”)9 In selecting the long-term projects for
funding, Donnelly whittled down more than 2,000 proposals and then worked with researchers to
come up with the technologies that could transform a business. From the 20 big ideas his staff
proposed, Donnelly had them focus on a group of five, representing fields as diverse as
nanotechnology, advanced propulsion, and biotechnology.
Beyond its historic Nishayuna R&D facility, in 2000 the company had established a center in
Bangalore, India. To build on that global expansion, in 2002 Immelt authorized the construction of a
new facility in Shanghai, China. And as the year wore on, he began talking about adding a fourth
global facility, probably in Europe.a Despite the slowing economy, he upped the R&D budget from
$286 million in 2000 to $327 million in 2002. When asked about this increase in spending during such
a difficult time for the company, he said, “Organic growth is the driver. Acquisitions are secondary to
that—I can’t see us go out and pay a start-up $100 million for technology that, if we had just spent $2
million a year for 10 years, we could’ve done a better job at. I hate that, I just hate that.”10
Reflecting on his extensive investments in 2002, a year in which the stock dropped a further 39%
from its 2001 close, Immelt said:
Financial strength gives us the ability to invest in growth and we have viewed this
economic cycle as a time to invest. We’ve increased the number of engineers, salespeople, and
service resources. We will invest more than $3 billion in technology, including major
investments in our global resource centers. We’ve strengthened our commitment to China,
increasing resources there 25% in 2002, and we’ve increased our presence in Europe.
Acquisitions are a key form of investment for us and we have invested nearly $35 billion in
acquisitions over the past two years. They are a key way for us to redeploy cash flow for our
future growth.11
Ongoing Operations: Rigor and Responsiveness
To fund his strategy, Immelt drew his first source of capital from the sale of underperforming
businesses, and the company’s struggling insurance business was his prime target for divesture. But
in the depths of an economic downturn, getting good prices for any business was not easy. So the
investments needed to drive the company’s growth still relied primarily on funds generated by
ongoing operations, and Immelt drove the organization to deliver on the market’s expectations for
current-year performance. Picking up on initiatives launched years earlier, he harnessed wellembedded capabilities such as Six Sigma and digitization to drive out costs, increase process
efficiency, and manage resources more effectively.
a In 2003, GE opened its Shanghai research center and broke ground for another center in Siemens’s backyard in Munich,
Germany. In 2004, its 2,500 researchers worldwide filed for more than 450 patents.
4
This document is authorized for use only in AGSM Professor’s MNGT5395 Strategies for Growth S317 course at University of New South Wales, from September 2017 to March 2018.
GE’s Growth Strategy: The Immelt Initiative
306-087
In this tough environment, Immelt’s primary operating focus was on cash flow, and he realigned
all the powerful tools in GE’s toolbox to meet that objective. For example, Six Sigma discipline was
applied to reducing the cash tied up in inventory and receivables, while process digitization was
focused on sourcing economies and infrastructure efficiencies. By 2002, digitization alone was
generating savings of almost $2 billion of savings a year. As always at GE, initiatives were tied to
metrics, with 60% of incentive compensation dependent on cash flow generation. So, despite a tough
2002 economy that held GE’s revenue growth to 5%, its cash flow from operations was $15.2 billion,
up 10% on the previous year.
Although this disciplined approach was reminiscent of GE in decades past, Immelt’s management
style contrasted with Welch’s in many ways. First, he recognized that in a post-Enron world,
corporate executives faced a more skeptical and often cynical group of critics. For example, an article
in BusinessWeek suggested, “Increasingly, the Welch record of steady double digit growth is looking
less like a miracle of brilliant management and more like clever accounting that kept investors fat and
happy in boom times.”12 And The Economist opined, “Immelt has had a torrid time since taking over
from Jack Welch, GE’s former boss, in 2001. Waking from the dreamy 1990s, investors discovered that
GE was not, after all, a smooth earnings machine that pumped out profit growth of 16 to 18% a
year.”13
Immelt understood that in such a skeptical environment, there was a need for a CEO to establish
much more openness and trust. Since his natural style tended to be open and communicative, he was
perfectly comfortable with the idea of increasing the transparency of GE’s often complex operations.
In July 2002, to make the performance of GE’s financial businesses easier to understand, he broke GE
Capital into four separate businesses, each with its own balance sheet and explicit growth strategy.
He also committed to communicating more frequently and in more detail with investors. “We have
the goal of talking about GE externally the way we run it internally,” he said. After his first analysts
meeting, where everyone got an advance bound copy of the data and forecasts, BusinessWeek
commented, “That’s already a break with the Welch regime where, some say, you were scared to
blink in case you missed a chart.”14
The new CEO also wanted to create a more open and less hard-edged environment within the
company. He asked the 2002 class of GE’s Executive Development Course (EDC) to study where GE
stood in its approach to corporate responsibility.b Historically, this was not an issue that had received
much attention at GE. Although Welch had always emphasized the importance of integrity and
compliance, he had shown little interest in reaching beyond that legal requirement. The several dozen
participants in the 2002 EDC visited investors, regulators, activists, and 65 companies in the U.S. and
Europe to understand how GE was performing in terms of corporate responsibility. They reported to
top management that although the company was ranked in the top five for its financial performance,
investment value, and management talent, it was number 72 for social responsibility.
One outcome of the EDC group’s report was that Immelt appointed GE’s first vice president for
corporate citizenship. He tapped Bob Corcoran, a trusted colleague from his days running GE
Medical Systems, to lead an effort to ensure that the company was more sensitive and responsive to
its broader societal responsibilities. Ever the pragmatist, Immelt saw this as more than just an
altruistic response. He believed it was important for the company to remain effective:
To be a great company today, you also have to be a good company. The reason people come
to work for GE is that they want to be involved in something bigger than themselves. They
bEDC was the top-level course at GE’s renowned Crotonville training center and was re …
Purchase answer to see full
attachment
How it works
- Paste your instructions in the instructions box. You can also attach an instructions file
- Select the writer category, deadline, education level and review the instructions
- Make a payment for the order to be assignment to a writer
- Download the paper after the writer uploads it
Will the writer plagiarize my essay?
You will get a plagiarism-free paper and you can get an originality report upon request.
Is this service safe?
All the personal information is confidential and we have 100% safe payment methods. We also guarantee good grades