Jack Welch : General Electrics Revolutionary Strategic Management_Fajar Ramadhan IPMI Reguler July 2010

Company History: Founded to exploit Thomas Edisons patents, start business in distribution and use of electric power. Expand basic business in: Generators, transformers, wire and cable, lighting and home appliances. Later highly diversified in: aircraft engines, engineering plastics, nuclear power and computers.

Problem Identification: How can most complex company like GE can be lean & agile and perform like growth company? Is it fluke of personality or generalizable principles than turn GE like it is?

Revolution: 1. Cordiner In the 1930s, developed a powerful financial staff to control diversity. In the 1950s, CEO Ralph Cordiner introduced diversification, profit centers, group staff and postwar divisionalization and develop entrepreneurial culture to support the strategies. Cordiners organizational arrangements for managing diversity became a role model and were widely copied 2. Borch In the 1960s, to deal with the stagnant profits that resulted from the consequent dispersion of resources, CEO Fred Borch develop : PIMS Portfolio strategic planning Borchs consultants recommended to reorganize GE into Strategic Business Units (SBUs) : Where there had been profit centers for ranges, refrigerators and dishwashers, there would be now be only a home appliance SBU Enabled unique set of integrated strategic plans and the ability for the unit manager to call the shots (GE innovations were widely imitated by companies around the world) 3. Jones As a CEO in 1972, Reg Jones organized the business into 43 SBUs, consist from 10 groups, 46 divisions, and 190 departments, for better planning and investment By the mid 1970s GE appeared to be moving in the direction of becoming a holding company Corporate review of SBU plans also suffered from overload In 1977, Jones announced a sector organization structure as a new level of management that represent a macrobusiness or industry area Spread the review load and added more value at the corporate level

4. Welch Jack Welchs Vision : To be the most profitable, highly diversified company on earth, with world-quality leadership in every one of its product lines Initial Strategy Plans Restructuring Removing bureaucracy Downsizing Implement a cultural change Implement business improvement strategy: Good reward System Work-Out Best practice (Six Sigma) Boundaryless Integrated Diversity Cultural Change - People Changing attitude starts at the top Real Communication : more listening than talking Facing reality : try to take advantage of the opportunities change that usually offers Speed, Simplicity, Self-confidence Speed flows from simplicity Simplicity : clean and clear, avoid complexity Self-confidence : grow by giving people an opportunity to win, to contribute Cultural Change Organization Change the entire company Get a rid a lot of reports, meeting, endless paper See people come to life, face to face, making decisions in minutes Re-structuring organizational Downsizing the businesses from 9 to 4 layers from the top to the bottom Overburdened, overstreched executives Result : Executive doesnt have a time to meddle A leader can focus only on the big important issues with 10 or 15 reports Reduce corporate staff Simplicity in the field with a small staff at headquarter Eliminate staff functions were driven by control rather than adding value Conclusion GE perform a highly diversified business strategy by developing new products to serve new market Among the diversified business there are related diversification and unrelated diversification, but mostly unrelated (conglomerate diversification) Best Practice (benchmarking) strategy implementation doesnt mean to imitate, but to innovate better process GE success because their leaders (CEO) always committed to their basic principles: Focus on people Always innovate implement Best Practice strategy Committed to every business every business is core business