Jack Welch was the CEO of General Electric (GE) from 1981 until 2001. He is regarded as one of the most successful CEOs of the 20th century. This essay intends to analyze Jack Welch's two-decade leadership by answering the question of what made him the "Manager of the Century" and GE the "Most Respected Company in the World". Jack Welch took on leadership in April 1981, taking over from "management legend" Reginald Jones who had managed GE very successfully. However, at the beginning of the 1980s the U.S. economy found itself in a recession. The growth rate of the GDP even dropped to -6.4% in the first quarter of 1982. Coupled with this was the highest unemployment rate since the Great Depression in 1929, as well as high interest rates. Moreover, Japanese high-tech companies had emerged, swiftly becoming main competitors for GE in the global market. Internally, Welch had to face a highly bureaucratic company, a disadvantage that was soon about to change.
[...] Globalisation counts as one of the five key areas that drive GE business growth.[ix] The globalisation process started in 1987 with an exchange of businesses with the large French electronic company Thomson A.S. This strategy was pursued during the following years by entering into deals like joint ventures (e.g. Robert Bosch), partnerships (e.g. Toshiba) and a number of acquisitions (e.g. Sovac). GE invested worldwide across Europe, Asia, and countries like Mexico. Besides increasing revenues by selling goods and services in global markets, globalisation meant globalising every activity of the company, including the sourcing of raw materials, components or products and finding and attracting the intellectual capital world-wide. [...]
[...] His motivation for that was his vision of GE; he wanted the company to be “perceived as a unique, high-spirited, entrepreneurial enterprise . the most profitable, highly diversified company on earth, with world quality leadership in every one of its product lines.” Following his vision and the sell or close” concept, GE sold more than 200 businesses, invested over $21 bn in acquisition, and took over more than 370 businesses. Another change in GE structure was the destaffing process. Welch reduced the strategic planning and the corporate planning staff and replaced it with the “real time planning”. [...]
[...] The head of the business unit decided on the spot to implement a select set of proposals. An “open collaborative workplace” was created “that changed forever the way people behaved at the company”[vii]. Moreover, the Workout program was a way to reduce bureaucracy, which became an important part of GE's shared values that were expected from all employees. Bureaucracy means waste, slow decision-making and unnecessary approvals that kill a company's competitive spirit easily. With the key benefits of Work-Out GE could increase its productivity from an average annual rate of between 1981 and 1987 to p.a. [...]
[...] The DYB view was based on the study of all elements that can erode a business model. With the rise of e-businesses, Welch perceived all these small “dot.com” companies as serious competitors, able to identify GE's weaknesses, and thus, destroy its business model. To identify these threats, the DYB was put into place, and was seen as the fourth GE initiative, after globalisation, service development, and Six Sigma implementation.[x] The goal was to “quantify the vulnerability” of each business model[xi], by benchmarking online competitors, realised by a cross functional team. [...]
[...] The result of the study showed that threatening e-business models would provide a “product catalogue, discussion forums and a strong transaction capability on its website”.[xiv] At that time, even the biggest online competitor Plasticnet did not have these important features, and no competitor had created an innovative website, which could become the standard. By looking at the auto manufacturers' websites, the team achieved a competitive advantage for GE, providing customisation and support for purchasing decisions. For the general manager of e-business in GE Plastics, this innovation was a clear value-add providing service, not only a manufactured product”.[xv] By looking at other examples[xvi] in other business units, we can draw the conclusion that GE was not particularly prepared to face the rise of the Internet and e-business. [...]
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