General Electric
How does a company become successful and stay successful? Certainly not by playing it safe
and following the traditional ways of doing business! Taking a strategic risk is what General
Electric (GE) did when it launched its Ecomagination strategic initiative in 2005. According to
Jeffrey Immelt, Chairman and CEO: Ecomagination is GE’s commitment to address challenges,
such as the need for cleaner, more efficient sources of energy, reduced emissions, and abundant
sources of clean water. And we plan to make money doing it. Increasingly for business, “green”
is green.
Immelt announced in a May 9, 2005, conference call that the company planned to more than
double its spending on research and development from $700 million in 2004 to $1.5 billion by
2010 for cleaner products ranging from power generation to locomotives to water processing.
The company intended to introduce 30 to 40 new products, including more efficient lighting and
appliances, over the next two years. It also expected to double revenues from businesses that
made wind turbines, treat water, and reduce greenhouse-emitting gases to at least $20 billion by
2010. In addition to working with customers to develop more efficient power generators, the
company planned to reduce its own emission of greenhouse gases by 1% by 2012 and reduce the
intensity of those gases 30% by 2008. In 2006, GE’s top management informed the many
managers of its global business units that in the future they would be judged not only by the
usual measures, such as return on capital, but that they would also be accountable for achieving
corporate environmental objectives.
Ecomagination was a strategic change for GE, a company that had previously been condemned
by environmentalists for its emphasis on coal and nuclear power and for polluting the Hudson
and Housatonic rivers with polychlorinated biphenyls (PCBs) in the 1980s. Over the years, GE
had been criticized for its lack of social responsibility and for its emphasis on profitability and
financial performance over social and environmental objectives. What caused GE’s management
to make this strategic change?
In the 18 months before launching its new environmental strategy, GE invited managers from
companies in various industries to participate in two-day “dreaming sessions” during which they
were asked to imagine life in 2015—and the products they, as customers, would need from GE.
The consensus was a future of rising fuel costs, restrictive environmental regulations, and
growing consumer expectations for cleaner technologies, especially in the energy industry.
Based on this conclusion, GE’s management made the strategic decision to move in a new
direction. According to Vice Chairman David Calhoun, “We decided that if this is what our
customers want, let’s stop putting our heads in the sand, dodging environmental interests, and go
from defense to offense.”
Following GE’s announcement of its new strategic initiative, analysts raised questions regarding
the company’s ability to make Ecomagination successful. They not only questioned CEO
Immelt’s claim that green could be profitable as well as socially responsible, but they also
wondered if Immelt could transform GE’s incremental approach to innovation to one of pursuing
riskier technologies, such as fuel cells, solar energy, hydrogen storage, and nanotechnology.
Other companies had made announcements of green initiatives. For example, FedEx had
announced in 2003 that it would soon be deploying clean-burning hybrid trucks at a rate of 3,000
per year, eventually cutting emissions by 250,000 tons of greenhouse gases. Four years later,
FedEx had purchased fewer than 100 hybrid vehicles, less than 1% of its fleet!
Questions :
1. Which theory of organizational adaptation is applied at GE? Discuss.
2. Explain the business practices used at GE to manage the triple bottom line of
sustainability.
3. Which Mintzberg’s mode of strategic decision making is adopted in the case of GE?
Elaborate.
4. Discuss any 2 strategies that might be used or implemented at GE. Elaborate.