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* Wakeup Call For GE: Mr. Immelt, Pull That Ad!
* From Outputs To Outcomes: Part 5: Measuring Customer Delight in Real Time: Social Media * Leadership: Style Vs Substance
March 01, 2011
Don’t Blame Green For GE’s Problems
A fellow contributor on Forbes, Aman Singh, has an insightful spotting of some Jack Welch pronouncements, starting with the startling headline, “GE May Be Going Too Green”. Her article interprets Welch’s latest message delivered at The Tulsa Business Forum hosted by Oklahoma State University’s Spears School of Business as: “The main social responsibility for a company is to win.” Apparently, Welch is not impressed with the bevy of new alternative-energy products offered by GE [GE], which have generated some $18 billion in annual revenue. As reported by the Tulsa World, Welch said, “If it doesn’t turn green into green, it doesn’t turn out to be a helluva good business. The whole idea is to grow jobs,” adding, “The main social responsibility for a company is to win.” “We played business like it was a sport,” Welch said of his philosophy heading up GE from 1981 to 2001. “You make a game of it; you field the best team and weed out the weakest. The weeds you’ve got to pull out if you’re going to build a beautiful garden.” The clear implication from Welch’s talk is that if he was still running GE, the Ecomagination projects that CEO Jeff Immelt vaunts, and President Obama praises, would be high on his list of “weeds” to be pulled, because they don’t make money fast enough. Does this make any sense?
GE has a problem
First, let’s face it. GE has a problem. Its share value is now roughly 50% of what it was ten years ago, when Jack Welch retired. He is right to point this out, even obliquely. He is also right to imply that it’s misguided to argue (like Michael Porter) that “going green” is a panacea that will by itself save either GE or the entire US economy. When one compares GE’s performance to companies like Apple [AAPL] or Amazon [AMZN] whose share prices are now more than ten times what they were a decade ago, one can see that GE has a management problem of some kind. The question is: what kind? GE’s problem is not in going green
Second, as Aman Singh points out, other businesses like Seventh Generation, Timberland, and Tom Shoes, are proving every day that green can be highly profitable. The question is how to achieve that kind of profitability. Part of GE’s problem is Jack Welch’s legacy
Whatever else Jack Welch was, he was lucky. He left GE the day before September 11, 2001, thus leaving his predecessor to cope with the impact of September 11 on its business, parts of which were severely affected, e.g. its aircraft engine business. He was also able to appear as the master of the universe by steadily growing GE’s earnings, in part through arrangements with GE Finance, which didn’t unravel until the financial crisis of 2008. Jack Welch’s management regime looked good at the time, in part because the legacy of problems that he bequeathed to his successor didn’t appear until after he left. GE’s main problem today is 20th Century management
GE’s main problem today is however something else: another Jack Welch legacy: 20th Century management. This is a view of the world that sees organizations as pushing products and services at customers, of tweaking the supply chain, of parsing and manufacturing demand, with the goal of making money of shareholders. It has been called shareholder capitalism and Jack Welch was its sponsor. It was a way of managing that worked reasonably well, decades ago, when the marketplace was dominated by a few oligopolies (customers lacked both options and information about the options) and most...