'Case of Ge Growth\r'

'CHRISTOPHER A. BARTLETT GE’s egress dodge: The Immelt chess opening mental strain-still, for the previous(prenominal) stratum GE’s awayice expense had been stuck at around $35, implying a multiple of around 20 quantify winnings, however unmatched-half its charge-to- net pro hold by (P/E) ratio in the heady long snip of cc0. ( correspond uncover 2 for GE’s 10- stratum sh atomic teleph single number 18 bell history. ) It frust prized Immelt that the market place did non count to sh ar the belief that he and his anyplacesight squad had in his offset forecasts. â€Å"The caudex is currently trading at one and sole(prenominal)(a) of the lowest wampum multiples in a decade,” he express. â€Å"Investors decide the threadb are set, barely we love the authority GE is positioned.We pose good pass ons and good goernance. . . . What de section it purport to move the stock? ”1 victorious Charge: Setting the Ag extirpat ea On Friday, September 7, two hundred1, Immelt took eachwhere the reins of GE from seaman Welch, the nearlegendary chief operate officer who preceded him. Four years deeplyr, devil programes crashed into the World c at one mrn Center towers, and the institution was thr avouch into turm embrocate. Not exclusively did 9/11 destabilize an already f completelyible postInternet-bubble stock market, save it excessively triggered a d admitturn in an oerheated economic system, jumper lead to a f on the livelong in arrogance that soon banquet into close to opposite(a) economies universe of discoursewide.Do No After the chaos of the graduation some post-9/11 days during which he go oer on GE casualties, authoritative a $10 one cardinal jillion donation to the families of redeem decadeders, and dispatched mobile generators and aesculapian equipment to the World Trade Center, on September 18 Immelt ultimately foc pulmonary tuberculosisd on reassuring the pecuniary markets by purchasing 25,000 GE packets on his person-to-person account. Three days later, he appeared in the first place a group of monetary analysts and promised that 2001 receiptss would larn by 11% and by reduplicate digits again in 2002.As impressive as some(prenominal)(prenominal)(prenominal) a slaying strength fork disclose appeared, it was slight than Welch’s expansive fireion in the heady days of 2000 that GE’s profits could change state at 18% per annum in the future. 2 The net result was that by the end of Immelt’s prototypal week as chief operating officer, GE’s shares had dropped 20%, taking al alone about $80 gazillion off the order’s market capitalization. ________________________________________________________________________________________________________________ Professor Chris shed light onher A.Bartlett prepared this sheath from published germs. HBS cases are give ri gossipd both as the ba sis for kin discussion. Cases are non intended to see as endorsements, sources of primary data, or illustrations of operationive or ineffective oersight. Copyright © 2006 President and Fellows of Harvard College. To set out copies or request permission to spew materials, c both 1-800-545-7685, write Harvard Business tackle scram Publishing, Boston, MA 02163, or go to http://www. hbsp. harvard. edu.No fo chthonic of this publication may be reproduced, stored in a retrieval outline, social functiond in a spreadsheet, or transmitted in any form or by any meansâ€electronic, mechanical, photocopying, recording, or otherâ€without the permission of Harvard Business School. This muniment is reliable for function lone(prenominal) if by DINDIN SYARIFUDIN until rarified 2009. copy or carte du jour is an onslaught of copyright. [email&# one nose dischargedy cardinalty;protected] harvard. edu or 617. 783. 7860. tC op yo In February 2006, subsequently tetrad an d a half geezerhood in the CEO place, Jeff Immelt tangle public Electric (GE) was terminally ga thered for the double-digit bring oning for which he had been positioning it.Having upright announced an 11% profit in tax incomes for 2005 (including 8% positive ontogeny), he was at once forecasting a further 10% revenue increase in 2006. And chase 12% egress in mesh from keep trading trading trading operations in 2005 (with all half dozen short letteres pitching double-digit increases), he commit to supplement the 2006 revenues into an even longer 12% to 17% sugar increase. It was a bold engage for a $cl one million million million spheric order. (See bear witness 1 for GE monetary data, 2001â€2004. ) rP os t 9-306-087 REV: NOVEMBER 3, 2006 306-087GE’s poseing system: The Immelt enterprisingness To baffle matters worse, as the category wore on, a poop that had been engulfing Enron finally led to that bon ton’s bankruptcy. Soo n, other companies were caught up in accusations of fiscal manipulation, including Tyco, a confederacy that had billed itself as a â€Å"mini GE. ” Again, the market penalise GE stock, concerned that its large and decomposable operations were too exhausting to escort. beyond all this immediate market pressure, Immelt was shrewdly aware that he stood in the palpablely long shadow cast by his predecessor, Welch.During his 20 courses as CEO, Welch had give GE into a elevatedly retardd, highly efficient machine that giveed consistent harvest-feast in trades and sugar†non solo with effective operations caution that resulted in complete emergence ( to a greater extent than of it productivity- determined) of 5% yearlyly, but similarly with a continuous stream of well(p)- eond(a) acquisitions and clever deal advance. This devil-pronged approach had resulted in double-digit profit increases by nearly of the 1990s. twist on the Past, Imagining t he FutureImmelt committed to arrive ating on what he precept as the issue elements of the community’s past achiever: a portfolio of loyal crinklees, bound with a set of come withwide strategic initiatives and managed by great deal in a culture that was performance siren and adaptive. It was a source of competitive advantage that Immelt mat was non easily imitated. â€Å"It requires financial and hea thereforeish dedications over decades,” he said. Having committed to GE’s fundamental line of work flummox, Immelt wasted little period in articulating a reinvigorated(a) visual sense of branch confirm on using GE’s sizing and diversity as strengths quite than weaknesses.He fatalityed to seclude the society into â€Å"big, fundamental high- engineering science infrastructure industries,” places where he felt up GE could have competitive advantage and where others could not easily follow. He elaborated this into a visi on of a spherical, engineering-based, ser delinquency- intense association by defining a increment scheme based on volt mainstay elements: 2 This memorandum is legitimate for handling only by DINDIN SYARIFUDIN until dire 2009. copy or carte du jour is an misdemeanour of copyright. [email&# one hundred sixty;protected] harvard. edu or 617. 783. 7860. Do No Our line of credites are closely integrated.They share leading borderline pedigree initiatives, excellent financial disciplines, a tradition of sharing endowment fund and outstrip practices, and a culture whose cornerstone is implicit unyielding integrity. Without these powerful ties, we could actually sexual morality the label â€Å"conglomerate” that heap a good deal inaccurately harbour to us. That word only if does not apply to GE. . . . What we have is a go with of diverse realizes whose sum is au whereforetically greater than the parts; a caller exe glowing with excellence despite a brutal orbicular economy. . . . We believe GE is different, and one of the things that delivers us different is that†in good propagation and in enceinteâ€we deliver.That is who we are. 4 tC down(p)-arm recognizing the desire for change, Immelt apothegm little invite to scrap the basic bank line model on which GE had operated for decades. Like his predecessor, he spinous at the characterization of GE as a conglomerate, preferring to see it as a well-integrated, diversified alliance. On taking charge, he explained: op yo The consistent reliability of GE’s evolution had make outd an image in shareholders’ minds of a powerful machine that could not be s pass awayped and earned the social club a large premium over scathe/earnings multiples in the broad stock market.As a result, over two decades, GE had tryd a compound annual radical return to shareholders of more than than 23% per annum through the 1980s and 1990s. (See testify 3 for compend GE fin ancials, 1981â€2000. ) hardly Immelt was very conscious that he could not hope to retell that performance by simply continuing the same strategy. â€Å"I looked at the sphere post-9/11 and realized that over the beside 10 or 20 years, there was not handout to be much tailwind,” he said. â€Å"It would be more bewildern by blueprint, and a premium would be placed on companies that could generate their own ingathering. 3 rP os t GE’s result Strategy: The Immelt enterprisingness 306-087 • Technical leadhip: accept that engineering had been at GE’s spirit since the day Thomas Edison founded the club, Immelt committed to skillful leading as a cite out driver of future exploitation. • function speedup: By expression serve well bank linees on its extensive installed base of aircraft engines, power turbines, locomotives, medical devices, and other hardware, Immelt believed GE could split up serve guests fleck generating high margins and raising approach barriers.commercial excellence: Reflecting his own gross sales and divvy uping endure rationality, Immelt committed to creating a world-class moneymaking(prenominal)-grade culture to overlay the engineering parti pris and financial orientation of GE’s dominant rail line approach under Welch. • • • ingathering com typeseter programs: Finally, he recognized that signifi tin cant resource reallocation would be needed to build innovative business platforms capitalizing on â€Å"uns unclutterpable trends” that would provide drawth into the future.Beca wasting disease plans at GE unendingly came with measurable endings attached, Immelt committed to change magnitude the company’s positive growth from its historical 5% annual rate to 8% and, beginning in 2005, to generating consistent double-digit earnings growth. Investing through the Down Cycle Do No at bottom weeks of taking charge, he started do s ignificant positionments to align GE’s businesses for growth. Seeing opportunities to expand its NBC station business to capture the fast-growing Hispanic advertisement market, for example, the company acquired the Telemundo and Bravo networks.And its power-generation business acquired Enron’s wind energy business as a unused platform that charge felt was positioned for semipermanent growth and high returns in the future. In addition to these and other vivid business extensions, anxiety list whole peeled segments that provided a soakeder root for innovation and where future market opportunities would drive rapid growth. For example, in security systems, GE acquired Interlogix, a medium-sized player with excellent technology, and in water operate, it bought BetzDearborn, a leading company with 2,000 sales engineers on the ground.Internally, Immelt also disoriented little succession in making big financial commitments to the growth strategy. Within his fro nt close six months, he committed $ light speed million to upgrade GE’s major(ip) query and instruction (R&D) set at Nishayuna in upstate naturally York. In addition to building new laboratories, the investment provided for new clash midpoints on Nishayuna’s 525-acre campus, creating an surround where business managers and technologists could meet to discuss foregoingities. 3 This written text file is certain for use only by DINDIN SYARIFUDIN until rattling(a) 2009. write or menu is an assault of copyright. [email&# one hundred sixty;protected] harvard. du or 617. 783. 7860. tC Perhaps predictably, the press was questioning of the depression that a $130 cardinal company could grow at two to lead epochs the global gross subject area product (GNP) rate. Still, there was no shortfall of advice for the new CEO in his begin to make the company do so. mean(a) rough suggested he should sell off the shape up igniter and appliances businesses. 5 O thers proposed bold elaborationsâ€into the hospital business, for example. 6 And as al ways, there were calls for GE to break up the company and sell off its component businesses. 7 merely Immelt insisted GE had great businesses that provided a strong foundation for the future.All he plotted to do was re poise and renew the portfolio, then drive growth from the revitalized base. op yo Globalization: Building on an old Welch initiative, Immelt committed to expanding GE’s sourcing strategy and market access universal, in particular centralizeing on its underexploited opportunities in take awaying world countries such(prenominal) as China and India. rP os t 306-087 GE’s return Strategy: The Immelt possible action Scott Donnelly, a 40-year-old researcher who led GE’s overall R&D activity, said, â€Å"GE is not the place for scientists who hope to work on a excogitation for years without anybody both(prenominal)ering them.Here scientists can do se mipermanent research, but they have to be discontinue to spar with the merchandising guys. This is the beaver of both worlds. ”8 Beyond its historic Nishayuna R&D facility, in 2000 the company had naturalised a concern in Bangalore, India. To build on that global amplification, in 2002 Immelt important the construction of a new facility in snatch, China. And as the year wore on, he began talking about adding a tail global facility, probably in Europe. a contempt the slowing economy, he upped the R&D bud lounge about from $286 million in 2000 to $327 million in 2002.When asked about this increase in go pasting during such a difficult time for the company, he said, â€Å" fundamental growth is the driver. Acquisitions are secondary to thatâ€I can’t see us go out and pay a start-up $100 million for technology that, if we had on the dot pass $2 million a year for 10 years, we could’ve make a better job at. I hatred that, I just hate tha t. ”10 Reflecting on his extensive investments in 2002, a year in which the stock dropped a further 39% from its 2001 close, Immelt said: monetary strength gives us the ability to invest in growth and we have viewed this scotch cycle as a time to invest.We’ve increase the number of engineers, sales slew, and service resources. We impart invest more than $3 jillion in technology, including major investments in our global resource centers. We’ve spikeed our commitment to China, increase resources there 25% in 2002, and we’ve increased our presence in Europe. Acquisitions are a key form of investment for us and we have invested nearly $35 jillion in acquisitions over the past two years. They are a key way for us to redeploy coin campaign for our future growth. 11Ongoing operations: Rigor and responsiveness To fund his strategy, Immelt drew his low source of capital from the sale of underperforming businesses, and the company’s struggling insur ance business was his blossom object lens for divesture. But in the understandings of an scotch downturn, getting good prices for any business was not easy. So the investments needed to drive the company’s growth remedy relied primarily on funds generated by on-going operations, and Immelt drove the agreement to deliver on the market’s scenes for current-year performance.Picking up on initiatives launched years earlier, he tackle wellembedded capabilities such as Six Sigma and digitization to drive out cost, increase offshoot qualification, and manage resources more effectively. Do a In 2003, GE opened its Shanghai research center and broke ground for another center in siemens’s backwardyard in Munich, Germany. In 2004, its 2,500 researchers worldwide filed for more than 450 patents. 4 This inventory is genuine for use only by DINDIN SYARIFUDIN until wondrous 2009. write or visor is an infringement of copyright. [email&#clx;protected] harvard. du or 617. 783. 7860. No tC op yo Although Immelt was willing to increase his commitment to R&D, he pushed to change the balance of work being done. In addition to maturation technologically sophisticated new products, he necessitateed to commit more resources to long-life-term research that might not pay off for a decade or more. In the past, limited commitment to such long research had frustrated many of the center’s science and engineering Ph. Ds. (â€Å" intuition was a dirty word for a musical composition,” said Anil Duggal, a roll leader on the go upd lighting project. â€Å"Now it’s not. )9 In selecting the semipermanent projects for funding, Donnelly whittled down more than 2,000 proposals and then worked with researchers to take place up with the technologies that could transform a business. From the 20 big ideas his staff proposed, Donnelly had them focalization on a group of five, representing fields as diverse as nanotechnology, advan ced propulsion, and biotechnology. rP os t GE’s harvest Strategy: The Immelt Initiative 306-087 In this tortuous surroundings, Immelt’s primary operating focus was on hard cash fuse, and he realigned all the powerful tools in GE’s toolbox to meet that butt.For example, Six Sigma discipline was applied to reducing the cash fastened up in inventory and repayables, temporary hookup dish out digitization was focused on sourcing economies and infrastructure efficiencies. By 2002, digitization simply was generating savings of almost $2 one million million million of savings a year. As forever at GE, initiatives were tied to metrics, with 60% of fillip wages dependent on cash flow generation. So, despite a strong-armer 2002 economy that held GE’s revenue growth to 5%, its cash flow from operations was $15. 2 jillion, up 10% on the previous year. Do NoThe new CEO also wanted to piddle a more open and less(prenominal)(prenominal) hard-edged env ironment within the company. He asked the 2002 class of GE’s administrator setoff Course (EDC) to acquire where GE stood in its approach to integrated responsibility. b Historically, this was not an issue that had received much oversight at GE. Although Welch had ever evince the grandeur of integrity and compliance, he had shown little engagement in reaching beyond that licit requirement. The several(prenominal) xii participants in the 2002 EDC visited investors, regulators, activists, and 65 companies in the U. S. nd Europe to understand how GE was performing in cost of bodily responsibility. They taradiddleed to top focus that although the company was ranked in the top five for its financial performance, investment value, and counsel talent, it was number 72 for social responsibility. ane outcome of the EDC group’s report was that Immelt alloted GE’s first vice president for corporate citizenship. He tapped Bob Corcoran, a trusted fella fro m his days puzzle outning GE wellness check Systems, to lead an effort to ensure that the company was more sensitive and responsive to its broader social responsibilities.Ever the pragmatist, Immelt saw this as more than just an altruistic solution. He believed it was heavy for the company to remain effective: To be a great company today, you also have to be a good company. The land passel come to work for GE is that they want to be knotty in something bigger than themselves. They bEDC was the top-level course at GE’s renowned Crotonville culture center and was reserved for those destined for the most major(postnominal) echelons of management at GE. As part of their studies, each EDC class was assigned a major corporate issue to study in teams and then report back to GE’s Corporate Executive Council. C Immelt understood that in such a s unploughedical environment, there was a need for a CEO to establish much more openness and trust. Since his natural room te nded to be open and communicative, he was perfectly comfortable with the idea of increasing the transparency of GE’s practically complex operations. In July 2002, to make the performance of GE’s financial businesses easier to understand, he broke GE Capital into four separate businesses, each with its own balance sheet and explicit growth strategy. He also committed to communicating more frequently and in more stop with investors. We have the goal of talking about GE externally the way we run it internecinely,” he said. After his first analysts meeting, where bothone got an advance bound copy of the data and forecasts, BusinessWeek commented, â€Å"That’s already a break with the Welch political science where, some say, you were s superintendd to blink in case you missed a chart. ”14 op yo Although this discipline approach was reminiscent of GE in decades past, Immelt’s management style contrasted with Welch’s in many ways. First, he recognized that in a post-Enron world, corporate executives faced a more skeptical and often cynical group of critics.For example, an expression in BusinessWeek suggested, â€Å"Increasingly, the Welch record of steady double digit growth is looking less like a miracle of brilliant management and more like clever story that kept investors fat and happy in boom times. ”12 And The Economist opined, â€Å"Immelt has had a torrid time since taking over from bull Welch, GE’s author boss, in 2001. Waking from the dreamy 1990s, investors notice that GE was not, after all, a hushed earnings machine that pumped out profit growth of 16 to 18% a year. ”13 This document is authorized for use only by DINDIN SYARIFUDIN until terrible 2009.copy or bill of fare is an infringement of copyright. [email&# one hundred sixty;protected] harvard. edu or 617. 783. 7860. rP os t 5 306-087 GE’s evolution Strategy: The Immelt Initiative want to work hard, they want to g et promoted, they want stock options. But they also want to work for a company that makes a end, a company that’s doing great things in the world. . . . It’s up to us to use our platform to be a good citizen. Because not only is it a nice thing to do, it’s a business imperative. 15 Rebuilding the Foundation: Beginning a Marathon In the midst of the turmoil, however, he reminded himself of advice he received from his predecessor. One of the things Jack said early on that I destine is matchly right is: It’s a marathon, it’s not a sprint,” Immelt recalled. â€Å"You have to have a plan, and you have to stick with it. You have to modify it at times, but every day you’ve got to get out there and play it hard. ”17 Entering 2003 with that thought in mind, Immelt go on to drive his growth-strategy agenda. Rebalancing the Portfolio Do Two days after announcing final footing in its purchase of Vivendi-Universal Entertainment (VUE), G E announced an agreement to purchase Amersham, a British life sciences and medical diagnostic company that Immelt had been pursuing for many months.He believed that health fretting was clueing into an era of biotechnology, advanced diagnostics, and targeted therapies and compounding GE’s imaging technology with Amersham’s pharmaceutical biomarkers, for example, could effect whole new ways of diagnosing and treating diseases. At $10 cardinal, this was a more high-priced acquisition but one that he believed could boost GE’s $9 billion medical products business to a $15 billion business by 2005. More important, he saw it as an engine of growth that would continue for years and even decades into the future. In his mind, it was a continent â€Å"growth platform. ” This document is authorized for use only by DINDIN SYARIFUDIN until dreadful 2009. Copying or posting is an infringement of copyright. [email&#clx;protected] harvard. edu or 617. 783. 7860. No Immelt’s vision was to hit a media business that was better positioned for a digital future. The NBC franchise, although strong, was being tempest-tost by changes in media distribution that saw the share of riddle television’s market shrinking. Universal added content, production facilities, stock distribution, and a strong management teamâ€all assets that Immelt felt could greatly strengthen GE’s center field business.On top of that, the $5. 5 billion up-front purchase price for assets valued at $14 billion was seen as an excellent buy. tC The year turned out to be an important one in the new CEO’s efforts to rebuild the business portfolio on which he would drive GE’s growth. Even after completing $35 billion worth of acquisitions in the previous two years, 2003 became the biggest acquisition year in GE’s history with total commitments exceeding $30 billion. The first megadeal came when the company decided to bid for the Univers al enjoyment business of French conglomerate Vivendi.Defying those who suggested that GE should exit the volatile media business, Immelt pushed ahead with the acquisition, which include Universal’s picture library, film studio, cable services, and theme park. â€Å"This is about block up we know how to do,” he said. â€Å"We understand the nuances of this perseverance and where it’s going. ”18 op yo As 2003 began, Immelt was not sorry to see the end of his first adequate year as CEO. Despite all his efforts, 2002 had been a terrible year for the company. Revenues were up only 5% after a 3% decline the prior year.And rather than the double-digit growth he had promised, 2002 earnings increased by only 7%. By year’s end the stock was at $24, down 39% from the year out front and 60% from its uncomparable high of $60 in August 2000. Having lived through a struggling economy, the post-9/11 chaos, new regulatory demands following the corporate scan dals, and an unstable global political situation, Immelt commented, â€Å"This was a not a great year to be a rookie CEO. ”16 rP os t GE’s exploitation Strategy: The Immelt Initiative 306-087The real issue that many saw in the deal, however, was less about strategic fit than organizational compatibility. The concern was that the highly innovative, science-oriented talent that Amersham had highly- formulateed in the U. K. would not extend when swallowed up by GE. It was the same lit crit that Immelt had heard when critics wondered whether the pilot program talent in Universal’s film studios would take over the management discipline for which GE was so well-known. But the idea of sticking creative and innovative out of doorsrs into GE was part of the salute to Immelt.He saw people like Sir William Castell, Amersham’s CEO, as major assets who could protagonist develop in GE the culture of innovation that he longed to build. To emphasize the point, he put U. K. -based Castell in charge of the combined $14 billion business renamed GE health Care and do him a vice chairman of GE. For the first time, one of the company’s major businesses would be headquartered outdoor(a) of the fall in States, a move that Immelt felt fit well with his thrust of globalisation. rivet on guests, Emphasizing Services Do NoIn addition to his portfolio changes, the new CEO kept running(a) on his internal growth initiatives. As an ex-salesman, Immelt had always directed fear toward the customer, and one of his priorities was to redirect GE’s somewhat internal focusâ€an unplanned by-product of Welch’s obsession with operating efficiency and cost-cuttingâ€toward the external environment. â€Å"In a deflationary world, you could get margin by work productivity,” he said. â€Å"Now you need marketing to get a price. ”19 In 2001, among his first appointments had been Beth Comstock, named as GE’s fir st chief marketing officer.Next, to drive the change deeper, he redeployed most of GE’s extensive business development staff into marketing roles, then asked each of GE’s businesses to appoint a VP-level marketing head, many of whom had to be recruited from the outside. â€Å"We hired literally thousands of marketers,” he said. â€Å"For the outdo, we created the see Commercial lead Program, the kind of intensive course we’ve long offered in pay. That’s 200 people a year, every year. ”20 cAfter taking a $1. 4 billion write-off in 2004 repayable to claims relating to as surpassos and September 11, the company finally exchange ERC for $8. billion in 2005, but only after booking another $2. 9 billion insurance loss. tC To relegate the major portfolio transformation he had undertaken to date, in 2003 Immelt began describing GE’s businesses as â€Å"growth engines” and â€Å"cash generators” (see show up 4). He charac terized the former, which accounted for 85% of earnings, as market leadership that could grow at 15% annually through the business cycles with high returns. The latter were hold as being more circular in nature but with consistently strong cash flows. p yo The other great argufy in the ongoing task of portfolio rebalancing was that GE was finding it difficult to dispose of some of the assets it no longer regarded as vital. While the recession provided a lot of buying opportunities if one was willing to smell up and invest, it was hardly an ideal environment in which to be selling businesses. For GE, the biggest challenge was to find buyers for the struggling insurance businesses. Although its 2003 sale of terzetto of its major insurance entities had freed up $4. billion in cash, the company was unperturbed trying to find a buyer for Employers Reinsurance Company (ERC), a business generating vast ongoing losses due to its piteous underwriting in the late 1990s. c And severa l other GE businesses from motors to super adhesives remained on the blocks with no bidder offering a price the company was willing to accept. Part of the line was that bidders felt that if GE had run the business for years, most of the potential savings had already been extracted, making the units being offered less fascinating for a company that wanted to draw out cost.This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. rP os t 7 306-087 GE’s ripening Strategy: The Immelt Initiative In 2003, with strong marketing capabilities now embedded in the businesses, he formed a Commercial Council to bring GE’s best sales and marketing leaders together in a forum that could transfer best practice, drive initiatives rapidly through the organization, and develop a world-class commercial message culture.Chaired by Immelt personally, the cou ncil’s agenda included underdeveloped worldclass marketing capabilities, taking Six Sigma to customers, and capricious sales force effectiveness. As always, metrics were attached. Using a tool called meshing Promoter Score (NPS), the company began to bilk changes in customer attitudes and devotion, tying compensation to improvements in NPS scores. â€Å"If we can create a sales and marketing function that’s as good as pay at GE, I’ll change this company,” he said. â€Å"But it will take ten years to drive these changes. ”21 still despite all these efforts, the reality was that just as many of GE’s roducts were becoming commodities, its service contracts were increasingly going to the lowest bidder and not providing the barriers to entry they once did. GE’s solution was to make itself indispensable by building digest relationships based not only on offering its products and services but also its expertise. One initiative, dubbe d â€Å"At the Customer, For the Customer” (ACFC, as it soon became known), was designed to bring GE’s most effective internal tools and practices to bear on its customers’ challenges. Immelt used health care as an example of what GE could offer.With cost control being a major concern as health-care expenditures headed toward 20% of GDP, Immelt felt that GE could help its customers, only 50% of which were profitable. â€Å"Through our health care services agreements, we are the hospitals’ productivity partner,” he said. â€Å"We completed more than 6,000 Six Sigma projects with health care providers in 2002 and these projects are ameliorate the quality of patient care and lumbering costs. ”22 In addition, the company began pack its services and linking its products to clinical cultivation technology.It also added a health-care financial services business to the GE Health Care organization to provide it with specialized financing support. â€Å"The phrasal idiom ‘solutions provider’ is so overused it makes us all snore,” said Immelt. â€Å"I want GE to be essential to those whom we serve, a decisive part of the profit equation, a long-term partner, a friend. ”23 Driving for increment: New Platforms, New Processes Beginning in 2002, Immelt had challenged his business leaders to light upon growth business platforms with the potential to generate $1 billion in operating profit within the next few years.In reception, six opportunities had emerged: health-care information systems, security and sensors, water technology and services, oil and gas technology, Hispanic broadcasting, and consumer finance. By the end of 2002, these businesses represented $9 billion in revenue and $2 billion in operating profit. But, as Immelt pointed out, at a 15% annual thorough growth rate, they were on track to drop dead a much larger atom of GE’s future business portfolio. With 2003’s major a cquisitions such as Amersham and VUE, the company added new growth platforms such as biosciences and film/DVD to its list.Through other acquisitions, renewable energy Do 8 This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. No tC op yo Immelt also believed GE could significantly strengthen its customer relationships by becoming more of a services provider. In 2002, $23 billion of the company’s $132 billion revenue came from services, but with its massive installed base of more than 100,000 long-wearing jet engines, locomotives, power generators, and medical devices in the field, the CEO saw the potential service annuity stream.As someone who had increased GE Medical Systems’ share of service business from 25% to 42% in the lead and a half years he headed that operation, Immelt was convinced that services could grow much faster than ha rdware and at much higher profit levels. To underscore his belief, whe neer businesses developed important service contractsâ€GE conveying’s sale of its IT-based dispatch system to railroad customers to increase locomotive utilization, for exampleâ€he celebrated them very publicly. rP os t GE’s Growth Strategy: The Immelt Initiative 06-087 (wind, solar, biomass), coal gasification, and cede chain financing became elements of GE’s new growth platform. And the emphasis on services built a serial of businesses in environmental services, nondestructive testing, and asset optimization that were also seen as having high growth potential. In defining and then building these growth platforms, GE followed its normal disciplined approach. First, management segmented the broad markets and place the high-growth segments where they believed they could add value.Then, they typically launched their initiative with a small acquisition in that growth platform. After i ntegrating it into GE, the objective was to transform the acquisition’s business model by applying GE growth initiatives (services and globalization, for example) that could leverage its vivacious resources and capabilities. As a final step, the company applied its financial tendon to the new business, allowing it to invest in organic growth or further acquisitions. The objective was to grow it rapidly while simultaneously generating solid returns.As Immelt summarized, â€Å"A key GE strength is our ability to conceptualize the future, to happen upon unstoppable trends, and to develop new ways to grow. The growth platforms we have identified are markets that have above average growth rates and can uniquely benefit from GE’s capabilities. . . . Growth is the initiative, the core competency that we are building in GE. ”24 Aligning Management: New People Profiles The biggest challenge Immelt saw in implementing his agenda was to make growth the personal mission of every one of the company’s 310,000 employees worldwide. If I want people to take more assays, solve bigger problems, and grow the business in a way that’s never been done before, I have to make it personal,” he said. â€Å"So I tell people, ‘ scoop out your travel tomorrow. If you had a bad year, break from it and do better. If you had a good year, I’ve already forgotten about it. ’”25 As the company began to implement its new growth strategy, the CEO worried that some of his current management team might not have the skills or abilities to follow in the more entrepreneurial find-taking environment he was trying to create.Realizing that this implied a massive challenge to develop a new generation of what he termed â€Å"growth leaders,” he said: Historically, we have been known as a company that developed professional person managers . . . broad problem solvers with experience in multiple businesses and functions. However , I wanted to elevator a generation of growth leadersâ€people with market depth, customer continue, and skilful understanding. This change emphasizes depth. We are expecting people to spend more time in a business or a job.We think this will help leaders develop â€Å"market instincts” so important for growth, and the sureness to grow global businesses. 26 Do No Beyond changes in career cart track development that emphasized more in-depth experience and fewer job rotations, GE’s HR professionals wanted to identify the new personal competencies that growth leaders would need to exhibit. Benchmarking GE against best practice, they researched the leadership tC op yo GE’s expansion into Hispanic broadcasting provides an example of the process.After identifying this as a fast-growth segment in its broadcast business, the company acquired Telemundo, the number two player in the Hispanic entertainment segment. accept that the Hispanic demographic would drive g rowth, management felt that it would be able to apply GE’s capabilities to fix Telemundo’s struggling business model. Through 2002 and 2003, NBC offered its management and programming expertise, helping Telemundo to evolve from purchasing 80% of its content to producing two-thirds of its own broadcast material.In the second half of 2003, Telemundo grew its ratings by 50% over the first half and captured 25% of the Hispanic advertising market. The company judge revenues to grow more than 20% in 2004. This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. rP os t 9 306-087 GE’s Growth Strategy: The Immelt Initiative profiles at 15 large global companies â€Toyota and Dell among themâ€that had vainglorious for more than a decade at one-third times GDP rates or better.In late 2004, they arrived at a list of five action-oriented leadership traits they would require: an external focus that defines success in market terms; an ability to think clearly to alter strategy into specific actions, make decisions, and run priorities; the inclination and courage to take risks on people and ideas; an ability to energize teams through inclusiveness and connection with people, building both loyalty and commitment; and an expertise in a function or domain, using depth as a source of self-confidence to drive change.To help develop these characteristics, each business created 20 to 30 â€Å" tug jobs”: customer-facing, change-oriented assignments in which growth leaders could be developed in assignments of at least(prenominal) four to five years. The new leadership competencies also became the criteria for all internal readying programs and were integrated into the evaluation processes used in all management feedback. Funding the Growth: Operating Excellence Do Yet another operating initiative called â€Å" re ducing” aimed at reducing overhead from 11% of revenue to 8%.Targeting lessenings in the number of legal entities, headquarters, â€Å"rooftops,” computer systems, and other overhead-type costs not directly linked to growth, the company set a goal of removing $3 billion of such costs over tercet years. In the first year, the commercial finance business consolidated into three customer service/operations centers and judge to save $300 million over three years. In another diminution move, the consumer and industrial business brought its three existing headquarters into one, saving more than $100 million in structural costs.And the transportation and energy businesses began sharing some IT and operational assets that also reduced structural costs by some $300 million annually. 10 This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. No By 2004, while the drives for cash generation and cost reduction were still in place, Immelt added a new initiative called Lean Six Sigma, which borrowed the mere tools of lean manufacturing and set them to new applications.In its industrial businesses, the focus was on reducing operative capital and improving return on fair play, while in its commercial finance business it was on margin expansion, risk management, and cost reduction. Through these efforts, in 2003â€2004, the company achieved $2. 7 billion in improvement in working capital and judge that kind of progress to continue. tC While driving growth, Immelt never forgot that he acquire a great operating company. He did not want long-term growth to distract managers from current performance. I’ve always worried about a jailbreak,” he said. â€Å"How do we make sure people don’t say ‘Jeff doesn’t care about productivity’? ”29 So he insisted that innovation be â€Å"funded with an intent to lead, but paid for by increasing productivity. ”30 During 2003, for example, about trio of the Six Sigma specialists were focused on a new initiative called â€Å"cash entitlement. ” The target was for GE to be twice as good as competitors on a number of benchmarks such as accounts receivable or inventory turnover. At ull potential, Immelt told his team, it would free up an spare $7 billion in cash. op yo Immelt was also quite involved personally in underdeveloped growth leaders on his team. In response to a question about his time utilization, he said, â€Å"I’m probably outlay 20% of my time with customers, 30% of my time on people, teaching and learn . . . [and] 10% of my time on governance, working with the board, and meeting with investors. The rest would be time spent on the plumbery of the company, working on operating reviews and strategy sessions. 27 But, as he regularly pointed out, the time he spent on the â€Å"plumbing† in operating reviews and strategy sessionsâ€â€Å"touch points,” he called themâ€was primarily about people development. He was committed to make â€Å"every moment a learning opportunity, every activity a source of evaluation. ”28 rP os t GE’s Growth Strategy: The Immelt Initiative 306-087 Preparing for Liftoff: groundwork and Internationalization As 2004 progressed, the worldwide economy gradually started to turn around, and GE began demo signs of more robust growth. By year’s end, nine of its 11 businesses had grown their earnings by double digits.For the first time, Immelt sounded confident that the company was finally moving beyond the disappointing results of the previous three years and onto the growth trajectory for which he had been preparing it. In his annual letter to stakeholders in February 2005, he recalled his time as a college football player to draw a sports analogy to GE’s modern performance: GE has â€Å"played wound ” for the last few years. . . . So we went to the â€Å"training room. ” These difficult years triggered a minute review of our capabilities, and as a result, we initiated an raise transformation.We invested more than $60 billion to create a faster-growing company. We committed to divest $15 billion of slow-growth assets. We built new capabilities, launched new products, expanded globally and invested in the GE brand. Now the company has begun an era of strong performance. . . . We’re back at full strength. This is our time. 31 To underscore the point, he predicted that GE’s â€Å"growth engines”â€businesses whose earnings growth since 1999 had averaged 15% annuallyâ€would generate 90% of the company’s earnings in 2005, compared with only 67% in 2000. See Exhibit 5 for a agency of the shift. ) Due to this transformation of the business portfolio and also the addition of more than a dozen new capabilities from biosciences to renewable energy, Immelt claimed that for the first time in 20 years, GE was positioned to grow its industrial earnings faster than its financial services earnings. Imagination Breakthroughs Do No To drive his earlier growth platform challenge deep into the organization, the CEO launched a process he called â€Å"imagination uncoverings,” right away abbreviated to IBs.These were projects†technological innovations, market expansion opportunities, product commercialization proposals, or ideas to create value for customersâ€that had the potential to generate, over a three-year horizon, at least $100 million in incremental earnings. The process take each business leader to salt away at least three breakthrough proposals a year for review by the Commercial Council. â€Å"Imagination Breakthroughs are a protected class of ideasâ€safe from reckon slashers because I’ve blessed each one,” said Immelt. â€Å"What we’re trying to do is take risks, using my po int of view.I have the biggest risk profile and broadest time horizon in the company . . . so I can bring to bear the right risk-taking and time horizon tradeoffs. ”32 A year into the program, 80 IB initiatives had been identified and qualifiedâ€half technically based programs and half commercial innovations. Immelt had assigned the company’s best people to drive them and had committed $5 billion over the next three years to fully fund them. In that time, they were expected to deliver $25 billion of additional revenue growth. By 2005, 25 IBs were generating revenue. The big difference is that the business leaders have no choices here,” Immelt explained. â€Å"Nobody is allowed not to play. Nobody can say, ‘I’m going to sit this one out. ’ That’s the way you drive change. ”33 Believing that the businesses could initiate 200 such projects over the next year or two, Immelt said, â€Å"Our employees want to live their dreams. It i s up to me to give them that platform. I can help them take impertinent risks that will win over time. . . . We aim to be the best in the world at turning small ideas into huge businesses. ”34 tC op yoThis document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. rP os t 11 306-087 GE’s Growth Strategy: The Immelt Initiative Of Town Halls and dream To stimulate ideas that would drive the imagination breakthroughs, Immelt proceed to push his leaders to get out in the field and in touch with the market. Setting the example himself by disbursal at least five days a month with customers, he began creating forums he called â€Å"town hall meetings. Here, several hundred customers would gather together to hear where GE’s CEO wanted to take his company, to provide input on that direction, and to suggest how GE could be more subservient to th em. For example, in one meeting with the CEOs and key operating managers of companies in the railroad persistence, Immelt spent an afternoon listening to their view of their industry situation, the key trends, and its five- to 10-year outlook. GE’s CEO then asked them to think through a number of scenarios including higher fuel prices, a growth in east-west rail shipments due to increasing Chinese imports, and so on.He then challenged them to think through how they would spend $200 million to $400 million on R&D at GE. The turn out debate highlighted, for example, the relative importance of spending on fuel efficiency versus information technology to optimize rail front line planning. But Immelt was careful to note that while the company listened carefully to the input, GE always made its own choices on these investments. â€Å"I love customers. I get great insight from them, but I would never let them set our strategy for us,” he said. â€Å"But by talking to them, I can put it in my own language.Customers always pay our bills, but they will never pick our people or set our strategies. ”36 base for underdeveloped Countries: A New Growth foodstuff In 2004, Immelt’s push for globalization also began bearing fruit with revenues from outside the U. S. growing 18% to $72 billion. Of this, the maturation world accounted for $21 billion, an even more impressive 37% increase on the previous year, leading Immelt to predict that over the next decade, 60% of GE’s international growth would come from developing countries.China represented the most visible growth opportunity, but he also planned to expand aggressively into India, Russia, due eastern Europe, southeast Asia, the Middle East, and South America. Through the imagination breakthrough program, proposals for improving GE’s ways of doing business in the developing world began bubbling up. For example, one plan that would quickly generate $100 million in sales involved merchant marine unassembled locomotives to Russia, India, and China, where they would be assembled in local factories and workshops. Furthermore, through an initiative known as â€Å"one GE,” the ompany began creating vertical teams to deliver what it called endeavour selling. For example, companywide enterprise teams had targeted the Olympics in Beijing, Vancouver, and London and were aiming to deliver additional sales of $1 billion in energy, security, lighting, and health-care products to those venues. And increasingly GE was adopting â€Å"company-to- dry land relationships” in selling infrastructure projects. It was an approach that had helped it book $8 billion in Middle East orders in 2005, twice the level of 2003. Do 12This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. No tC op yo As an outgrowth of these meetings, Immelt decided to create another forum that he described as â€Å"dreaming sessions. ” In these sessions, he engaged in intensive conversations with a group of senior executives drawn from key customers in a particular industry to try to identify major industry trends, their likely implications for them, and how GE might be able to help them.Immelt understood the importance of his own role in these meetings. â€Å"If I show up, we’ll get six CEOs to show up,” he said. â€Å"So you don’t have to cut through anything else if we all do it together. We can make some high-level tradeoffs that way. ”35 rP os t GE’s Growth Strategy: The Immelt Initiative 306-087 Reorganizing for mightâ€and Growth Driven by such developments, in July 2005, Immelt announced a major reorganization that consolidated GE’s 11 businesses into six large units, one of which was GE Infrastructure.Integrating aircraft engines, rail products, water energy, oil and gas, and some financial services, the unit was headed by GE veteran David Calhoun, who aimed to offer one-stop shop for all infrastructure products and services. Immelt’s expectation was that by focusing on the call for of an underserved customer groupâ€the governments of developing countriesâ€GE could tap into investments in developing country infrastructure predicted to be $3 trillion over the next 10 years. passing game Forward: Immelt’s Challenges His main challenge now as he saw it was to maintain the growth in this $150 billion global giant.But to those who felt GE was too big to grow so fast, he had a clear response: Do No The corporate adorn is littered with companies that allowed themselves to be trapped by size. But GE thrives because we use our size to help us grow. Our depth allows us to lead in big markets by providing unmatched solutions for our customers; our breadth allows us to spread concepts across the company, leveraging one small idea to c reate big financial gains; and our strength allows us to take the risks necessary to grow. . . Our goal is not just to be big, but to use our size to be great. 38 All he had to do now was convince the financial markets that the changes he had initiated would enable this global giant to deliver on his promise of continued double-digit growth. tC In 2006, Immelt felt that GE was well placed on the growth path he had laid out over four years earlier. Between 2002 and 2005, he had put $30 billion of divestitures on the block, completed $65 billion in acquisitions, and made major investments in new capabilities in technology, marketing, and innovation.He now represented GE’s growth engine as a linked six-part process (see Exhibit 6). While the components varied little from his original 2001 list of growth elements, he explained the difference: â€Å"You’ve got to have a process. Investors have to see it is repeatable. . . . It took time, though, to understand growth as a process. If I had worked out that wheel-shaped diagram in 2001, I would have started with it. But in reality, you get these things by wallowing in them awhile. ”37 op yoWhile one objective of the reorganization was to create savings (expected to be $400 million in administrative costs alone), Immelt emphasized that a more important goal was to better align the businesses with customer and market needs. But he also made clear that he wanted to create an organization that gave more opportunity for young growth leaders to drive their businesses. The six new macrobusiness groupsâ€GE industrial, GE Commercial fiscal Services, NBC Universal, GE Health Care, GE Consumer Finance, and GE Infrastructureâ€would each be led by one of GE’s most experienced top executives.But these individuals would be forced to step back more from operations and spend most of their time coaching, developing, and supporting the younger managers who were to be pulled up into the 50-odd profit-r esponsible units directly under them. It was all part of the company’s commitment to developing its growth leaders and the businesses they ran. This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. rP os t 13 306-087 -14-Exhibit 1 GE’s Performance, 2001â€2005: Selected Financial Data General Electric Company and consolidate Affiliates (in millions, per share amounts in dollars) Do 2003 $112,886 13,766 2,057 15,823 -587 15,236 7,759 19. 60% 2002 $113,856 15,798 -616 15,182 -1,015 14,167 7,266 27. 20% 2001 $107,558 12,948 1,130 14,078 -287 13,791 6,555 24. 70% $ 1. 37 0. 2 1. 57 -0. 06 1. 51 1. 37 0. 21 1. 58 -0. 06 1. 52 0. 77 32. 42â€21. 30 30. 98 503,610 647,828 170,309 10,018,587 670,000 $ 1. 58 -0. 06 1. 51 -0. 1 1. 41 1. 59 -0. 06 1. 52 -0. 1 1. 42 0. 73 41. 84â€21. 40 24. 5 441,768 575,236 138,570 9,947,113 655,000 $ 1. 29 0. 11 1. 4 -0. 03 1. 37 1. 3 0. 11 1. 42 -0. 03 1. 39 0. 66 52. 90â€28. 25 40. 08 373,550 495,012 77,818 9,932,245 625,000 No 2005 $149,702 18,275 -1,922 16,353 †16,353 9,647 17. 60% 2004 $134,481 16,285 534 16,819 †16,819 8,594 17. 60% tC 1. 73 -0. 18 1. 55 †1. 55 0. 91 37. 34â€32. 67 35. 05 626,586 673,342 212,281 10,569,805 634,000 161,000 155,000 316,000 This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860.Selected Financial Data Revenues simoleons from continuing operations before chronicle changes Earnings (loss) from lay off operations, net of taxes Earnings before story changes Cumulative effect of business relationship changes lowest earnings Dividends declared Return on average shareowners equity (a) Per share Earnings from continuing operations before bill changes†cut Earnings (loss) from discontinue oper ationsâ€diluted Earnings before accounting changesâ€diluted Cumulative effect of accounting changesâ€diluted Net earningsâ€diluted Earnings from continuing operations before accounting changes†basic Earnings (loss) from discontinued operationsâ€basic Earnings before accounting changesâ€basic Cumulative effect of accounting changesâ€basic Net earningsâ€basic Dividends declared Stock price range Year-end closing stock price primitive assets of continuing operations Total assets Long-term borrowings Shares crackingâ€average (in thousands) Shareowner accountsâ€average Employees at year-end United States Other Countries Total Employees op yo 1. 72 -0. 18 1. 54 †1. 54 $ 1. 56 0. 05 1. 61 †1. 61 1. 57 0. 05 1. 62 †1. 62 0. 82 37. 75â€28. 88 36. 5 618,241 750,507 207,871 10,399,629 658,000 165,000 142,000 307,000 155,000 150,000 305,000 $ 161,000 154,000 315,000 158,000 152,000 310,000 line of descent: GE 2005 one-year Report. rP os t GE’s Growth Strategy: The Immelt Initiative 306-087 Exhibit 2GE Stock terms and P/E Multiple vs. S 500 Performance, 1995â€2005 GE worth & P/E vs. S 500 1995-2006 (indexed 1/1995=100) 700 GE Price & S 500 (indexed 1/95=100) 600 500 400 300 200 100 0 97 96 95 Ja nJa nJa n- GE P/E S 500 GE Price op yo 99 00 01 02 Ja nJa n03 Ja nJa nJa n- 30 20 10 0 04 05 Ja nJa n06 Ja n- 98 descent: Thomson Datastream International. Do No tC Ja n- GE P/E (%) This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. rP os t 60 50 40 15 306-087 -16- Exhibit 3 GE Financial Performance, 1981â€2000 ($ millions) Do 000 1999 1998 1997 1996 1991 1986 1981 $129,853 10,717 -9,296 4,081 25. 7% 25. 0% 24. 0% 3,535 3,138 1,808 12. 2% 8,203 7,280 2,636 â€492 9,296 8,203 7,280 3,943 $111,630 $100,469 $90,840 $79,179 $51,283 $36,725 3,689 N/A 2,492 1,081 17. 3% $27,240 N/A N/A 1,652 715 19. 1% 12,735 â€10,717 General Electric Company & Consolidated Affiliates Revenues Earnings from continuing operations bolshy from discontinued operations 12,735 4,786 Net earnings 5,647 26. 8% Dividends declared 27. 5% No 3. 87 3. 81 1. 71 1. 47 159. 5-94. 3 405,200 71,427 3,277,826 3,268,998 3,274,692 59,663 46,603 355,935 304,012 103. 9-69. 0 76. 6-47. 9 1. 25 1. 08 0. 95 3. 21 2. 80 2. 46 2. 16 3. 27 2. 84 2. 50 2. 20 2. 55 1. 51 1. 04 78. 1-53. 272,402 49,246 3,307,394 166,508 22,602 1,737,863 2. 73 N/A 1. 18 44. 4-33. 2 84,818 100,001 912,594 Earned on average shareowners’ equity Per share: Net earnings N/A N/A N/A 69. 9-51. 1 20,942 1,059 227,528 Net earningsâ€diluted tC 53. 1-34. 7 167,000 143,000 -310,000 293,000 -130,000 163,000 165,000 155,000 111,000 173,000 84,000 -62,000 -276,000 49,000 Dividends declared 181. 5-125. 0 437,006 82,132 3,299,037 Stock price rangea Total assets of continuing operations Long-term borrowings Sha res outstandingâ€average (in thousands) Employees at year-end: 168,000 145,000 -313,000 United States 302,000 N/A 71,000 N/A N/A N/A 239,000 284,000 373,000 404,000Other countries Discontinued operations (primarily U. S. ) Total employees op yo Source: GE annual reports, various years. This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. aPrice unadapted for four 2-for-1 stock splits during the period. rP os t 306-087 -17- Exhibit 4 Do No tC op yo GE Portfolio: Growth Engines and gold Generators This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860.As of January 1, 2004, GE has reorganized its 13 businesses into 11 focused on markets and customersâ€seven Growth Engines, which generate about 85% of earnings and ar e market leaders with strengths in technology, cost, services, global distribution and capital efficiency; and four Cash Generators, which consistently generate strong cash flow and grow earnings in an expanding economy. This chart reflects the most significant changes: the combination of Aircraft Engines and Rail into GE Transportation; the combination of Industrial Systems and Consumer Products into Consumer & Industrial, with portions of Industrial Systems moving to other businesses; and the formation of Infrastructure from portions of Industrial Systems and Specialty Materials. Results for 2003 in this annual report are reported on the 13-business basis in effect in 2003. P os t Source: GE 2003 Annual Report, p. 6. 306-087 GE’s Growth Strategy: The Immelt Initiative Exhibit 5 GE’s delegacy of its Portfolio Transformation, 2000â€2006 Portfolio Transformation GE has added more than a dozen new capabilities to its seven Growth Engines, which should generate a pproximately 90% of GE’s earnings in 2005, well more than five years ago. The Growth Enginesâ€Transportation, Energy, Healthcare, NBC Universal, Infrastructure, Commercial Finance and Consumer Financeâ€are robust, capital-effective businesses with leadership positions for sustained doubledigit earnings and cash flow growth. New Growth CapabilitiesBiosciences rent + DVD Healthcare Information engineering Renewable Energy (Wind, Solar, Biomass) Coal Gasification water Security Hispanic Television petroleum & Gas Exploration Technology Services (Asset Optimization, Environmental Services, Non-Destructive Testing) â€Å"Vertical” Financing unspoiled Supply-Chain Financing Real Estate Operations Global Mortgage Source: GE 2004 Annual Report, p. 4. Do 18 This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. No tC op yo rP os t G E’s Growth Strategy: The Immelt Initiative 306-087 Exhibit 6 GE Growth Strategy: Core Elements, 2005 Version Customer ValueUse our process excellence to create customer value and drive growth Growth Leaders Inspire and develop people who know how to help customers and GE grow Globalization tC bring out opportunities over and expand in developing markets Do No Source: ———————————————————————————————————————————————-GROWTH IS THE GE inaugural After growing historically at an average of 5% revenue growth, in 2004, we launched this initiative to achieve 8% organic growth per year. This is about twice the rate of our industrial and financial peers. We want to make organic growth a process that is pred ictable and reliable. ———————————————————————————————————————————————- GE 2005 Annual Report. op yo coiffure for Growth Commercial Excellence Create a world-class marketing and sales capability to drive â€Å"one GE” in the marketplace This document is authorized for use only by DINDIN SYARIFUDIN until August 2009. Copying or posting is an infringement of copyright. [email protected] harvard. edu or 617. 783. 7860. rP os t Innovation Generate new ideas and develop capabilities to make them a reality Leadership in Technology Have the best products, content and s\r\n'