Growth as a Process

Growth as a Process

General Electric is bending every waking effort to an audacious aim—to grow organically two to three times faster than world GDP. Pursuing that goal, the company has invented a whole new set of management methods.

An Interview with Jeffrey R. Immelt by Thomas A. Stewart

When Jeff Immelt became chairman and CEO of General Electric, he took the helm of a fine-tuned productivity machine. GE had long taken management innovation seriously—from the company’s famous blue book days in the 1950s to the development of its Crotonville training center into a management academy the equal of any on Earth. Under Jack Welch, GE’s managers applied their imaginations relentlessly to the task of making work more efficient. Over a series of high-profile initiatives, Welch created a formidable tool kit and mind-set to maintain bottom-line discipline, while he fueled top-line growth largely through geographical expansion and acquisitions.

Immelt succeeded Welch in September of 2001, just in time to see the world change. Blows to the global economy came from corporate scandals and, more dramatically, from terrorist attacks on American soil. Operating in a fundamentally altered context, Immelt knew GE could not cling to its status quo.

Coming up on Jeff Immelt’s fifth anniversary in office, Harvard Business Review offers the first deep look under the hood of Immelt’s GE. In conversation with editor Tom Stewart, Immelt was quick to point out that he is not leading a revolution. Rather, the challenge has been “to take this great operating company and not lose anything, but add to it.” The nature of the addition? A new and equally disciplined focus on organic growth.

Immelt put two of GE’s traditional strengths—process orientation and the ability to develop, test, and deploy management ideas—in service of a different goal. That meant designing a process that could reliably draw new revenue streams from existing businesses. As with past initiatives, GE has not been secretive about the elements of the process; they were spelled out in its 2005 annual report and are presented here as an exhibit. That’s because the payoff is not in the diagram but in the doing. All depends, in Immelt’s words, on “making it personal” for individual managers.

Read on, and decide for yourself whether this process, under Immelt’s leadership, will make the grade. The goal GE has set for sustained organic growth—two to three times the growth of global GDP—translates to about 8% today. No company has ever achieved the kind of growth GE is seeking, and certainly not on a revenue base of $150 billion. In January, Immelt told GE’s top managers at the annual meeting in Boca Raton, Florida, “The business book that can help you hasn’t been written yet.” For him though, there’s no other option. “Another decade of 4% growth, and GE will cease to be a great company,” he said. “But if we can spur our growth rate without losing our productivity edge, GE will keep being the most admired company into the next century.”

You are determined to move GE from a culture of productivity to a culture of growth—organic growth, that is, and not growth by acquisition. Why?

We’re now in a slow-growth world. Things were different 25 years ago. Oil was under $30 a barrel; most growth came from the developed world; we were a country at peace. After I came in as CEO, I looked at the world post-9/11 and realized that over the next ten or 20 years, there just was not going to be much tailwind. It would be a more global market, it would be more driven by innovation, and a premium would be placed on companies that could generate their own growth. We have to change the company—to become more innovation driven—in order to deal with this new environment. It’s the right thing for investors. Productivity is still very important, but if you look back at GE’s businesses over the past decade or so, those that have been managed for both productivity and growth have done the best.