A lengthy article in Business Week addresses CEO Jeff Immelt's efforts to grow GE through innovation. This is new. Up to now, the company has focused on operational excellence (in the form of its highly successful Six Sigma program), and savvy acquisitions to drive its legendary growth.
But Immelt no longer believes these methods will be good enough. He's now trying to add "risk-taking" or "courage" to the list of competencies that will make GE managers successful. Here's a quote from the article:
"This is a big fundamental structural change, and that can be tough," says Paul T. Bossidy, CEO of GE Commercial Equipment Financing, who is reorganizing his sales force so that each person represents all of GE to particular customers. Susan P. Peters, GE's vice-president for executive development, even talks about the need for employees to "reconceptualize" themselves. "What you have been to date isn't good enough for tomorrow," she says. Ouch.
When's the last time you "reconceptualized" yourself? Wasn't easy, was it?
Re-making a culture that has focused on operational excellence into one that also values innovative thinking is no easy task. Another quote:
"This is about unlocking the curiosity, yet having the rigor stay intact," says Comstock.
In my experience, companies find it hard to have innovators work side-by-side with those responsible for day-to-day profitability. So, they often wall off the innovators in "skunkworks" organizations, so that they can be free of both the pressures to produce quarter-over-quarter results, and of the stultifying affects of operations-focused nay-sayers. While those arrangements might produce lots of innovative ideas, the challenge then becomes quickly getting those ideas into the product pipeline. It's certainly not impossible (I've seen it work first hand) but it's hard as hell.
To up the complexity ante even more, Immelt obviously realized that developing innovative product requires deeper, richer connections with customers than ever before. This means re-inventing marketing. To do that, three years ago he brought in Beth Comstock, a new senior marketing executive to begin that task. So now marketing has a new power that it's never had before in the company. Another huge change.
And, as Comstock's arrival made clear, this whole thing was going to require new thinking brought in by people from outside GE. Over 1,700 new marketing and sales people have been hired in the last three years, many in very senior roles. This demands still another huge culture shift: GE's internal talent bench has been one of its great strengths over the last two decades. Now, outsiders are beginning to arrive in heady positions, undoubtedly to the chagrin of many long-tenured people.
Can this whole change process work? GE has built one of the most powerful organizations in history by defining goals clearly, sharply focusing on them, and executing almost flawlessly.
But innovation is a funny goal. It's more serendipitous, more illusive, more fragile. It can be pursued systematically, but room must be left for intuition. It is both science and art. It can be managed, but it requires a deft touch. In other words, it will demand flexibility, which has never been touted as one of GE's greatest strength.
This is one of the things that makes business so fascinating to me. Here's a leader committing to take an organization to a new, alien place while it is still highly successful. High stakes. In public. Real time.
I hope he can do it. It'd be a great story. Looks really tough, though.
Innovation and creativity require different values than "operational" skills.
Posted by: Connie Sartain | March 24, 2005 at 10:00 AM
Do they ever! But companies can't afford to be "either/or" places anymore. They must be "both/and" kind of places. This is hard, but it's the work of the leader today.
Posted by: Tom Guarriello | March 24, 2005 at 10:23 AM
The real challenge is to make the necessary changes without destroying the culture that made the company successful.
Corporate culture can be defined as the series of informal agreements that actually get work done in spite of omissions in policy or orders. It is the framework by which something is judged worthwhile and commendable.
Cultures can be changed over time, but the process must be skillfully done, because you are essentially asking employees to abandon one set of agreements and agree to a new set.
The new agreements must appear more rational than the earlier set or there will be continuing resistance to the imposition of a new culture and the most skilled workers will abandon the company for other opportunities.
New outsiders in high positions invararibly shatter existing corporate cultures. In a failing company, that's good. In GE's case, I don't know. I would expect to see several years of confusion and lower earnings as a result. Multiple corporate blogs at GE might help smooth the transistion.
Posted by: David St Lawrence | March 26, 2005 at 04:58 AM
I concur with your thinking about cultures, David. Changing one is so much more complicated than people in high places believe (witness Carly's failed attempt at HP) because of the tacit agreements that serve as a culture's infrastructure. Immelt's innovation initiative can be seen by veterans as a frontal assault on Six Sigma thinking, which will doom it. Or it might be framed as enveloping Six Sigma and applying it to new ideas. Either way, it will be a major challenge to GE's culture.
Posted by: Tom Guarriello | March 27, 2005 at 08:32 AM