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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 companys 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 GEs seven CEOs swung the pendulum to extremes. And while, as sug-
gested earlier, there are costs along with benets in employing this technique, GEs 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. GEs
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 Edisons 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

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