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CASE 22
Jeff Immelt and the New General Electric
TEACHING NOTE
■ SYNOPSIS ■
Jeff Immelt’s 14 years as Chairman and CEO of GE have been among the most turbulent in the
company’s history. Not only did Immelt have the daunting task of following Jack Welch (“living
legend”; “greatest CEO of the 20th century”), his tenure coincided with a sequence of adversity that
included the September 11, 2001 terrorist attacks, the financial crisis of 2008-9, and Wall Street’s
disenchantment with conglomerate companies.
To what extent is his emphasis on business development, innovation, and higher levels of
organizational integration consistent with the trends in GE’s business environment and with the
company’s resources and capabilities? Does GE possess the management systems and leadership
capabilities needed to make Immelt’s strategy work, or does the company need to look to more radical
strategic solutions—including breakup?
Immelt has targeted.
■ TEACHING OBJECTIVES ■
In some respects, GE can be regarded as a relic of a bygone era of American business—most other
large diversified corporations have either restructured around their core businesses or broken up
completely. At the same time, despite recent travails, GE has performed remarkably well compared
to most other large industrial corporations. Hence, the case calls upon students to address
firms that transact through markets for their inputs and are free of the costs and inertia of the
corporate infrastructure of the diversified firm. GE’s successful performance for most of the past two
decades forces students to re-evaluate this conventional wisdom and to consider more circumspectly
the potential for corporate management systems to contribute to business-level performance.
markets.
The central analytical challenge for students is identifying the potential for GE’s corporate HQ to
add value to the individual GE businesses. Within the terminology of Chapter 14 of Contemporary
Strategy Analysis, GE had created value primarily by “Managing the Corporate Portfolio” and
■ POSITION IN THE COURSE ■
This is a case in corporate strategy that focuses upon the strategic management of the multibusiness
firm. Hence, it belongs in the corporate strategy section of the strategic management course—
■ ASSIGNMENT QUESTIONS ■
1. In what ways has Jeff Immelt redirected the strategy of GE?
2. To what extent is this strategy well aligned (a) with the requirements of 21st century
business environment and (b) GE’s resources and capabilities?
■ READING ■
R.M. Grant Contemporary Strategy Analysis (9th edn.), Wiley, 2016, Chapter 14 “Implementing
Corporate Strategy: Managing the Multibusiness Firm,” especially the sections on “Managing the
Corporate Portfolio”, “Managing Linkages between Businesses”, “Managing Individual Businesses”
and “Managing Change in the Multibusiness Corporation” (pp. 363-381).
■ CLASS ANALYSIS AND DISCUSSION ■
April 2015
The entry point of the case is the GE annual shareholders’ meeting on April 22, 2015. GE has
recovered substantially from the financial crisis of 2007-9. While revenues and earnings in GE’s
industrial businesses remain under pressure, the risks from GE Capital are much reduced—the data
Immelt’s Redirection of GE’s Strategy
Under Jack Welch, GE achieved remarkable growth in profitability and shareholder value as a result
of a relentless pursuit of performance through tight financial controls, a direct and simplified
strategic planning system, and powerful managerial incentives. Welch withdrew from many of GE’s
slow growth, low margin businesses (consumer electronics, mining, small appliances) and invested
heavily in financial services.
Where to compete?—Changes in GE’s business portfolio
Return to GE’s industrial roots. Biggest shift in resources was from financial services to
industrial businesses. GE divested several financial services businesses—including most
How to compete?—New sources of competitive advantage
Redefining the basis of GE’s competitive advantage is probably the most fundamental feature of
Immelt's redirection of GE’s strategy. I typically begin with new approaches to competitive
advantage and value creation since this seems to be fundamental to Immelt’s approach.
Performance targets
Immelt’s key strategic commitment was to organic revenue growth—he initially targeted 8% each
year: an ambitious goal for a company as big and mature as GE. The “GE Growth Process” linked
Assessing the Strategy: Alignment with (a) the Business Environment and (b) GE’s
Resources and Capabilities
Alignment with changes in the business environment.
Increased global competition points to the need to for companies in the
advanced, industrialized world to exploit comparative advantages in
Alignment with GE’s resources and capabilities.
With regard to the new emphasis on technology, we can observe (a) that
GE was founded upon the technological breakthroughs of Edison and (b)
GE has a broad portfolio of technological strengths (from turbines to
Organizational Changes
These strategic changes inevitably require significant changes in GE’s structure and systems.
In terms of organizational structure, the principal changes in have been the amalgamation of GE’s
However, these changes refer only to the overall formal structure. Some of the most important and
interesting features of organizational change are those which permitted greater integration across the
business sectors. These include:
Strengthening certain functions—especially Marketing
Will GE be able to successfully execute the strategy?
Implementing these changes poses a number of challenges:
GE has been managed through a strong emphasis on decentralized profit targets. Cross-
business collaboration to bundle products and develop new business opportunities risks
compromising the effectiveness of GE’s performance management system.
As the case outlines, GE management systems are heavily based upon metrics which infuse
almost everything that GE does from quality management to employee appraisal. Metrics
Will Immelt’s Strategy Succeed? Are there Alternative Strategies GE should
Consider?
The strategy assessment (above) points to the consistency between Immelt’s strategy and, on one
hand, the emerging requirements of the global business environment and, on the other, GE’s
resources and capabilities.
However, as acknowledged in the discussion of the organizational requirements of the strategy—the
For several years, different analysts and commentators have toyed with the possibility of breaking up
GE. We do not have the data for estimating breakup value, but we can point to a few strategic
considerations. For a hundred years GE has developed as a single corporation. While the content of
The during 2008-9, arguments for breaking up GE were reinforced by the financial crisis and the
attractiveness of spinning off or dismembering GE Capital. However, the divestments announced in
■ KEY TAKEAWAYS FROM THE CASE DISCUSSION ■
A changing business environment necessitates changes in corporate strategy
Corporate strategy changes need to take account of two factors:
The requirements of the changing external environment. Increasing global
competition (especially from emerging market producers) means that firms
Integration across different businesses imposes heavy organizational demands—
particularly for a company that has a strong emphasis on financially-based performance
management. Strong business linkages greatly complicate the application of business unit
and divisional targets for growth and profitability.
I use the following slides in summing up some of the issues arising from the case discussion and to
link them to the material in Chapter 14 of the text:
