“No Sacred Cows”: GE’s Bold Journey to Three Core Businesses

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GE chairman and CEO John Flannery on CNBC - June 2018

For a company launched in 1892, with founders including Thomas Edison and J.P. Morgan, GE continues to transform its brand to stay a step ahead of the times.

As Chairman and CEO John Flannery commented as part of the company’s transformation plan announced in June, “GE’s mission and technology change the lives of billions of people around the world. We will now move forward with purpose to make our company simpler and stronger and accelerate growth across our businesses.”

In a bold—yet difficult—series of moves to streamline its focus and strengthen its business and build its future success, GE announced on June 26 that following an extensive review it is transforming itself by shedding non-core businesses and focusing on a trio of core businesses.

To that end, GE will focus on three business units—Aviation, Power and Renewable Energy—while it will spin off GE Healthcare into a standalone company, shrinking its corporate structure (and global workforce) while substantially reducing debt.

As GE tweeted in late June, it’s “The shape of things to come. As a high-tech industrial we are taking advantage of the common capabilities across our three businesses and using them to deliver results.”

Flannery elaborated in an extensive CNBC interview, “Today marks an important milestone in GE’s history. We are aggressively driving forward as an aviation, power and renewable energy company—three highly complementary businesses poised for future growth. We will continue to improve our operations and balance sheet as we make GE simpler and stronger.”

The changes are dramatic. Having already shed its entertainment, finance, appliance and lighting units, GE this year alone:
• sold off GE Transportation, its 111-year-old rail business
• sold its industrial gas engine business
• announced that it’s spinning off GE Healthcare
• plans to sell its Baker Hughes oil and gas stake
• put its GE Digital unit on the block.

Since Flannery, who was previously president and CEO of GE Healthcare, was promoted to Chairman and CEO last year, he has been clear in this goal to refashion one of America’s iconic corporate giants into an innovative and nimble company that’s poised to not only survive turbulent times, but thrive. To do so, he’s not only making tough decisions—in consultation with internal and external stakeholders—but needs to communicate why with brave, clear and confident language.

As Carmine Gallo commented on his leadership style in Forbes, “When GE announced a major strategic change (spinning off its healthcare unit and selling its stake in Baker Hughes), Flannery had to reassure employees, shareholders and the financial media that he was doing the right thing by streamlining GE into a company that focuses on power, aviation, and renewable energy.”

Gallo continued: “Flannery is a seasoned leader and communicator. He needed to call upon those skills to pass this week’s round of interviews. Flannery had to be clear, concise and confident. His interviews offer valuable lessons for any leader who has to get buy-in for major decisions…. including Flannery’s interview with The Wall Street Journal.

For example, among Flannery’s comments to WSJ, he acknowledged that “This is a dramatic change in the company. It’s a dramatic change in the portfolio, it is a dramatic change in the way we run the company. The third thing is we really looked at what is the best way for the businesses to flourish… Everything’s on the table, with no preconceptions and no sacred cows.”

The New GE

GE has determined that its future lies in three areas: aviation, power and renewable energy. On the aviation front, for example, its technology powers two out of every three commercial departures worldwide and an install base of more than 65,000 engines.

GE Power and GE Renewable Energy, meanwhile, power more than one-third of the world’s electricity with an install base of approximately 7,000 gas turbines.

As for making tough decision such as getting out of the Healthcare business, GE has won the support of none other than the president and CEO of GE Healthcare, who said that “As an independent global healthcare business, we will have greater flexibility to pursue future growth opportunities, react quickly to changes in the industry and invest in innovation. We will build on strong customer demand for integrated precision health solutions and great technology with digital and analytics capabilities as we enter our next chapter.”

GE isn’t making change for change’s sake, but disrupting itself by making brave and bold changes before it gets disrupted—in short, making tough decisions itself, rather than having them forced upon the company by external forces.

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