- What is your evaluation of Immelt’s new organic growth strategy?
This new strategy may threaten the existence of the company because they have to stop funding some critical projects to be able to finance the new project. The implementation of new technology may be the only way to make GE remain the leader and open up new markets for their products. This strategy will save the company extra costs involved in acquisitions of technology which is expensive to acquire.
- Why change GE’s existing successful strategy?
The new trends in the market have necessitated the change. There is a niche for battery technology, and the board has accepted to invest in the new project. The company even though doing well now, has to find more projects which will ensure the company is running even after ten years. They need to implement in developing new technology to be the market leaders and increase their growth rate.
- Is it reasonable to expect that a $125 billion global giant can significantly and consistently outperform the underlying economic growth rate?
The company can outgrow the economic growth rate in the industry. The reason for this is that Pierre, after committing resources to the project, sees great potential in it. By investing in new technology, the company will reduce the costs involved in acquisitions and concentrate on being the technology leader and hence the company will grow. By producing products that were not yet there in the market, they would increase customer confidence as well as industry margins.
- Is Immelt betting on the right things to drive growth in GE?
Immelt is not mistaken in seeking to invest in this project as he has a background in the Jack Welch strategy. He has been able to prove himself as the CEO of GE. The best companies are those that identify the business gaps and act on them before competitors, and that’s precisely what Immelt is doing here. They have identified the business opportunity, and they are now innovating technology that will make them satisfy their customer needs. Therefore, this bet is viable, and it will go through. He is focused on developing their engines and move away from the business of purchasing already made engines which may prove to be expensive.
- Can he hope to change a company whose growth was driven by acquisitions and productivity improvement into an organic growth company dependent on innovation, entrepreneurship, and risk-taking – particularly in such a large, complex, performance-driven corporation?
Immelt noticed that the route of acquisitions was doomed as it would make the company pay more money. The startup companies were seen to have been developing technology and selling it a higher price to large companies, so he had to avoid this route at all costs. He understands that GE was only going to survive if it became a leader technology. By developing new technology, the company would sell at premium prices and hence increase their growth rate.
- How have the Locomotive IBs been able to survive in the wake of the failure of the AC 6000, the initial difficulty in obtaining orders for Evo, the continual redefinition of the global Evo product, and the failure to make Hybrid commercially viable?
The Locomotive IBs have managed to survive in the industry because they focused on customer needs. They have also analyzed future markets and coming up with new ideas of survival—for example, the leasing out of engines. The understanding of the trends to come in the future like rising in prices of fuel as well as rail traffic growth also helped in the success.
- What action should the Transportation business take regarding the Hybrid locomotive?
The company should sell the EVO engine at reduced prices to gain customer confidence. More market analysis needs to be done to identify the growth of the EVO engines. The GE transport should not dispose of their project but instead, ask for the government to fund the project and let the Global research to develop the battery. In case they do not wish for the government to hinder them in future they may seek alternative funding to inject into the project and use the remaining funds to develop other types of engines as they await the launch of the hybrid Locomotive.