How GE Became a Giant

General Electric

Genius is largely the result of hard work, rather than an inspired flash of insight. Genius is one percent inspiration, ninety-nine percent perspiration

– Thomas Edison

For more than 120 years, General Electric, whose practices never reflected it’s founder’s words, has been a leader in the business world.

GENERAL ELECTRIC

General Electric (GE) a giant technology corporation based in the United States, was founded in 1878 in Menlo Park, New Jersey by Thomas Edison, the inventor of the light bulb. GE, which has become one of the strongest and most dynamic companies in the recent past, became the 9th largest company in the world market in the first quarter of 2012. Seen by many business authorities as the most successful company in history, GE became a global giant at the beginning of the 1960s

As of year-end 2014, the number of GE employees working around the globe exceeded 300,000 and its net profit for that year was over $130 billion. (1) Thomas Edison has been considered a genius both as an inventor and as a business man. His views shaped General Electric’s infrastructure.

Edison opened his first shop in Menlo Park in 1876. As a result of the opening of this shop, one of the most important inventions of the modern age appeared: the electric lamp.

In 1890, Edison began acquiring various businesses, forming a single company and called the Edison General Electric Company. Two years later, it merged with its biggest competitor, the Thomas-Houston Company to form a new company. This company was called the General Electric Company. This merger made it possible for the two companies to bring together patents they had in a variety of fields thus leading to the creation of large-scale projects.

Over the years, GE continued to grow and produced different product options for a wide range of applications. To this day, Edison‘s discoveries and ideas continue to guide General Electric’s business culture.

Edison established several small companies in the electric and mechanical fields, holding almost all patents in lighting, energy transmission, medical equipment and transportation. Today, General Electric is the world’s largest conglomerate of small companies in these fields.

Over the years, General Electric has continued to develop innovative technology in a wide range of fields and has even opened a department specializing in the production of planetary electric fans made entirely from plastic. In the early 20th century, General Electric made the world’s first radio broadcast and brought the first electric toaster to the market. In the same period, GE started work on the vacuum tube (an electronic device consisting of diodes placed in a glass tube which is taken out of the air – the primitive state of the transistors).

In the years 1910 and 1920, General Electric continued to bring the world many innovations and helped break the record for the highest altitude recorded by an airplane. In the same period, it started production of the refrigerator, an indispensible electrical appliance, and built the world’s largest electricity plant on the Panama Canal.

Great Depression

During the Great Depression, General Electric continued to innovate in other ways, focusing especially on different sales methods. The Consumer Finance System, which allowed small-income consumers to buy electrical appliances that they needed for their homes, was created in this period. During the Second World War, GE developed new radar systems and produced the world’s first jet engine to support the war effort.

 

Jack Welch

In the history of GE, the legendary CEO of the company, Jack Welch, who increased the company’s value from $ 12 Billion to $ 280 Billion, holds a place of enormous significance. (2) Jack Welch was one of the first managers to enact the ‘lean management principle’ and also developed and was the first to practice the method known as ‘total quality.’ At the beginning of the 1980s, Jack Welch described GE as a ‘bulky company’ that was not as strong as it was thought to be. According to Welch, it was big enough to sink, but not big enough to grow.

Neutron Jack!

Welch’s initial restructuring efforts were strongly criticized by GE’s board and the media, where they were often described as a ‘neutron bomb’ and a ‘Neutron Jack’, which destroys people and leaves buildings in place. (3) According to Welch’s management philosophy, if you are not 1st or 2nd in a sector, you have to get out of that sector. (4)

Jack Welch

Welch’s first job at GE was to sell unprofitable companies and to keep only those businesses that could dominate the market. During the CEO’s 20 years at GE, about 130,000 people lost their jobs and about 73 production facilities were closed.

The second radical step in Welch’s management concerns corporate marriages. Prior to Welch’s arrival, GE’s policy was decidedly opposed to company marriages, preferring to build its own business from the outside. Welch did away with this tradition and introduced the ‘company marriage’ policy. It would be correct to say that this policy has played a large role in GE’s success today.

Total Quality Management

Jack Welch’s restructuring initiative of the early 1980s continued until the mid-1990s, when it was replaced by the policy of ‘total quality application.’ The “Total Quality Management Revolution,” which started at GE in early 1990s, aimed at producing excellent products and services. Welch’s uncompromising attitude on quality is really what made GE more powerful than all its competitors in the market. “By 2000, we want to be an even better company, a company not just better in quality than its competitors we are that today but a company 10,000 times better than its competitors” said Welch. (5)

Bureaucracy Disabled in Internationalization “The bureaucracy falls in dismay at the speed and hates simplicity,” says Welch. (6) Between 1980 and 1990, Welch removed middle management, creating a leaner staff. As a result, GE has a fast and effective decision-making mechanism, especially in international operations. This is one of the main reasons for GE’s success.

Why is Democracy Necessary?

One of the most important factors contributing to Jack Welch’s – and therefore General Electric’s – success, is the democratic environment created at GE. Welch always argued that not only white-collar workers, but also blue-collar workers must be in an atmosphere where they can speak freely. Welch always believed that those who actually do the work are the ones who have the best ideas about how things can be done better. During Welch’s tenure as CEO, a platform was created at GE where all employees can present their ideas.

Globalism

Another reason that GE is the pioneer of globalization is that it sees globalization as both a new reality and a great opportunity. GE was one of the first companies to take advantage of the rapidly expanding vision of the global economy. GE management realized that by the mid-1980s, its competitors were outsourcing to American companies. While globalization was a foreign concept for many businessmen in the early 1980s, Jack Welch had already identified and implemented his global strategy. Because GE had successfully met America’s demands for innovation, it was now ready and able to meet those of the rest of the world. “If you do not have a solid base at home, it’s hard to jump into the arena of the world,” says Welch.

Between 1985 and 1995, GE increased its revenues from outside the United States from 20 percent to 38 percent. By the end of 1997, this figure had climbed to 42 percent.

Today

Continuing to grow from 1950 until today, GE is entering emerging markets and is pushing all the boundaries of technology by making major resource investments in every sector. While GE continues to be the largest investor in funding R & D activities in the world today, it continues to shape the world’s policies with the resources and power of the company. GE is the world’s 26th largest company in terms of gross income with its long history of innovations. It is also the 12th most profitable company in the world. (7) In 1999, 2000, 2001, 2002, 2003, and 2004 GE was named the world’s most respected company by the Financial Times. GE is also among the top 100 companies for working mothers. It’s Slogan: “Our most important product is our progress.” A 2-point Nobel Prize was awarded for GE’s projects. (8)

References

1- “General Electric Co 2013 Annual Report Form (10 K)” of the United States Securities and Exchange Commission. February 27, 2014

2- Betsy Morris, ‘Tearing up the Jack Welch playbook’ (11.7.2006) Fortune at CNNmoney.com 3- “Neutron Jack”. Business Week. Retrieved 2 October2014.

4- “Jack Welch – Manager of the Century”. Anti Essays. Retrieved 29 September 2014.

5- https://theachiever2011.wordpress.com/2011/10/04/when-jack-welch-set-out-ge%E2%80%99s-quality-vision-2000/

6- https://www.safaribooksonline.com/library/view/29-leadership-secrets/9780071409377/ch15.html

7- “Fortune 500: GE”. Fortune. 2011. December 17th, 2010. 8- Heritage of Research. General Electric. Retrieved April 2015.

Author: Ahmet Bhattacharji Avsar

Posts created 28

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