Effective Strategies in the Transformation of Ge

Effective Strategies in the Transformation of GE

No one can argue that General Electric has been one of the greatest and most successful companies the world has ever known.  Being the company that gave us the invention of the light bulb, they were certainly destined for greatness.  And throughout the years they have introduced some of the most innovative products ever to hit the marketplace.  But that doesn’t mean they haven’t faced their share of problems over the years.  And in the early 1980s it took the work of a great leader and businessman to bring this company back to its former glory. 

In the Beginning

General Electric got its start 137 years ago when Thomas Edison, with the help of Grosvenor Lowry established the Edison Electric Light Company. (General Electric, n.d.).  Since electric lighting was a completely new concept, it was up to Thomas Edison to not only invent the light bulb, but to also invent the devices that would light the light bulbs.  (General Electric, n.d.).  So this got the Edison Electric Light Company off to a great start towards being one of the most innovative companies the world has ever known.  Edison first used his new invention in 1880 on the steamship Columbia, and following that the demand grew quickly. (General Electric, n.d.).  A few years later The Thomas-Houston Company developed a lighting system that was superior to Edison’s direct current bulb and generator.  Their development of the AC current system could travel much farther distances than Edison’s original system and after years of conflict over technologies and patents the two companies decided to join forces and merge the two companies together.  Although this merger was the true beginning of the General Electric Company, it was also the end of Edison’s time with the company.  He resigned and moved on to other ventures although he still collected royalties for his patents. (General Electric, n.d.).

Through the years General Electric continued to grow not only in the field of electricity, but in many other areas as well.  As years came and went, they expanded into the area of small appliances, radio, large appliances, plastics, finance, x-ray technology, broadcasting and turbine motors.  Companies were bought and sold, until they felt the need to diversify.  It seemed that everything they touched turned to gold.  They had so many successful businesses under the umbrella of the main company, that over the years they have owned more patents than any other company in the U.S. (General Electric, n.d.).  But as General Electric grew, so did the complications with owning so many companies.  There were several problems with antitrust issues, and a failed attempt on entering the computer industry.  GE took a loss and sold their computer business to Honeywell. (General Electric, n.d.).  They had also invested heavily in nuclear power, and it did not take off in the way that they had hoped. (General Electric, n.d.).  Through all of this the company continued to grow and continued to make money, however, their stock was not doing so well.  They had become too big and involved in too many activities.  It was time for a change.  

The Jack Welch Years 

When Jack Welch joined the company in 1981, his first order of business involved organizing the company and categorizing all of its businesses into three categories …core manufacturing units, technology-intensive businesses, and services. (Tichy & Charan, 1989)  Along with this reorganization, over the next few years Welch bought 338 businesses to add to GE’s catalog of businesses, and sold 232. (General Electric, n.d.)  His next order of business involved changing the workforce of the business.  His plan involved, “a company-wide drive to identify and eliminate unproductive work in order to energize GE’s employees”, (Tichy & Charan, 1989, p. 2) and “leading a transformation of attitudes at GE – struggling, in his words, to release “emotional energy” at all levels of the organization and encourage creativity and feelings of ownership and self-worth.” (Tichy & Charan, 1989, p. 2)  He made a point of hiring good “business leaders” as he calls them to manage the companies.  (Tichy & Charan, 1989).   He went about finding business leaders that shared a passion for the business and never got bored with their job, that were candid, up-front, and not afraid to reach out to the people in the their organization.  He believed the company needed more communication eyeball to eyeball.  (Tichy & Charan, 1989).  And those that were not willing to change, they had to go.