Inverting the Paradox of Excellence

241

8

General Electric (GE)

GE currently ranks among the top three American companies as measured by market value. Very

few rms can match GE over so prolonged a period of time. Owing to its long history, GE provides

an unparalleled opportunity to assess our variation-based managerial paradigm. It is one of the best

illustrations of the secrets of sustained vitality—variations.

GE is a highly diversied company. Its various businesses—medical systems, major appliances,

aircraft engine, plastics, nancial services, NBC, etc.—have very little in common. While highly

diversied, its CEOs have sought to maximize the value of the portfolio by leveraging one business

to help another and by exploiting common systems and shared values. They have insisted upon an

active role in

1. Allocating nancial, technical, and human resources

2. Helping shape business strategy

3. Prodding businesses to remain competitive and adaptive

One of the key reasons for the company’s astonishing long-term achievements has been its ability to

recognize when even seemingly successful strategies need to be adapted and changed. GE’s man-

agement has anticipated and responded successfully to major market shifts. Drawing on its inher-

ent strengths and resources, the company transformed from being a leading electrical systems and

products company to being a highly diversied, multi-industry global corporation, and it instituted

unique management systems and human resource programs to make it work.

A good part of how GE has renewed itself over successive generations can be perceived from

tracing its history and noting the compensatory actions that corrected its excesses—overtime. The

overall pattern of GE’s pendulum swings can be fully understood only when viewed in a historical

context. The majority of GE’s seven CEOs swung the pendulum to extremes. And while, as sug-

gested earlier, there are costs along with benets in employing this technique, GE’s vitality appears

to have been served by these reinvigorating shifts in emphasis. Perhaps, in a very large, highly

diversied rm, one must send very strong signals to ensure the employees many levels down get

the message that change is necessary. While the pendulum swings have at times done violence to the

organization, perhaps such violence is necessary to provoke the change that is necessary, though the

pain inicted at times threatens to overshadow the gains realized. Yet if we look at the net effect

of the pendulum swings across a long period of time, a more tolerant perspective emerges. GE’s

genius has been in its choice of successive CEOs, each of whom tended to counter the extremes of

his predecessors.

We would like to highlight that this case history is meant to highlight the variations

during the life span of the company rather than to illustrate either effective or

ineffective handling of an administrative situation.

GE’s history begins in 1877. Thomas Edison’s inventive contributions to the telephone, pho-

nograph, and electric light bulb were secured with strong patent protection. Like a modern-day

Silicon Valley entrepreneur, he sought to create a company in each of these technologies. To nance

these start-ups, he assembled investors. Charles Cofn, who was part of the group that underwrote