Introduction
The competition raised by the globalisation in global markets has led the organisations to look for improving their products and services via innovation constantly. For successful innovation, creativity plays the vital and leadership role. But this surely does not imply that every new idea leads to success. Some think that the personnel is employed and working on the innovative ideas should be credited for this creativity, whereas other believes that leadership plays the vital role. There are various reasons due to which some companies get success in implementing innovative ideas while others fail to do so.
General Electric is one of the companies which are credited to be the symbol of continuous innovation throughout its operational years. They have found solutions for power, home, health, finance, and transportation. The company General Electric makes sure of investing enough in its personnel, their work environment to bring out creativity and innovation. The company General Electric analyses in this paper for its innovation strategy, reasons, challenges, and results (Ngoie, 2014).
Background of the Company General Electric
The company, General Electric from its earliest days, has been using tools for research. Combining this with inspiration to create a new future, the innovation at the company General Electric could be understood. For over 130 years, the company has been drawing on creating the future which others only imagine. It has been all on the back of innovation. However, the credit for creativity and innovation can be given to the network of leadership, and subordinates (Ngoie, 2014).
The Business Case for Innovation
From the 12 companies that formed the Dow Jones Industrial Average in the year 1896, the company General Electric is the only remaining one in the list. It’s been over a century that this company has remained successful and being admired for its culture, executives, and products. From its inception in 1892, the word innovation was first used in 1949 formally for all the past work done through the following of the concept of innovation.
The success of the company General Electric can be attributed to huge constant investments in research and development with the focus on continuous and repeated innovation. It was not only good times when these investments were made. The company made investments in bad times as well. The investments after globalisation have also spread into new geographical locations including Brazil, Germany, India, and China (Koller et al., 2015).
Research-Driven Innovation
The company General Electric’s success in this respect can be attributed to the constant commitment of the leadership to product innovation. Leader after leader the company has enforced the same vision of speed, quality, and execution of innovation. The involvement of the chief executives had always been beyond investment; they went into detail attention to the development of new ideas, services, and products. It is evident from the leadership of Charles Coffin, who until 1922 followed a rapid growth strategy by inventions and patent protection. He was the one who opened the company General Electric’s first Research and development lab. The company at that time succeeded in defending its primary asset; incandescent light via innovation (GE Lighting, 2018). It led to the development of the tungsten filament. It made the position of the company General Electric leadership in technology safe and secure from competitors. It also led the company to believe in research-driven innovation and on their ability to bring it to the market. The table for research and development in the years 2015, 2016, and 2017 shows the amount of investment by General Electric (General Electric, 2017). The table can be viewed in Appendix.
Product Differentiation
After this period, the company General Electric started developing the strategy for product differentiation. It used its core technology to create new business moving eventually into jet engines and power turbines. The research and development were now one of the essentials of the company innovation strategy. The company understood that basic, as well as applied research is vital for the company if it wants to explore. Its belief in research-driven innovation can be witnessed by the fact that it even strived to fund its research department during the World War II through its General Electric Credit Corporation (BsuinessWire.com, 2017).
Diversification
After the World War II, the company General Electric decentralised its operations and started adopting the strategy for diversification of its services. Through economies of scale, the company was able to sell these products cheaper than its competitors. It can also be credited to the knowledge and efficiency gained by the company General Electric through its decades of research (Tidd & Bessant, 2014).
Expansion
After 1950’s the company again refocused on innovating its products as well as services by offering them as combined capable of fulfilling the customer demands. Under the leadership of Cordiner, the portfolio of the company began to expand which continued for decades, taking it to areas like electronics, space, nuclear technology, computers, automation, chemicals, power plants, and plastics (GE News Room, 2018).
Mergers & Alliance-Fast route to Innovative Products
The company also used short-term progress in the market as well as in innovation through mergers and alliances. It was the time of Jack Welch when it looked for faster ways for innovation and market capture. Companies like GE often use incremental innovation rather than disruptive innovation. General Electric created innovation structures to override the structural bias towards incremental innovation (Thota & Munir, 2011).
Targeting Emerging Markets
By 2000, the company started looking to capture emerging markets. For this aim, they needed to innovate and produce products as per the tailored needs of the emerging markets. The company again invested heavily in Research and development in 2012 in reverse innovation, and open innovation to prime its future growth (Downie & McMurray, 2013).
Thus, it can be said that from its inception, the company General Electric has focused primarily on product innovation as their competitive advantage in producing countless improvements and breakthroughs. The company General Electric has been successful in keeping the competitors at par by investing in research and making the barrier to entry in its market higher. The business case for innovation, whether it is reverse innovation or open innovation (Mascioni, 2012) has always been to beat the competitors, serve the market better, and to create everything that can be imagined. It is evident from the General Electric which waited about 20 years until making a breakthrough (Someren & Someren-Wang, 2016).
Leadership Challenges for General Electric
Some people would think that creative individuals are most important for an innovation-driven company, while others argue that the key role is played by leadership. Both of the views can be considered to some extent. However, the support of leaders is crucial to the success of an innovation-based company like the General Electric. Leaders tend to be more relevant for the organisations. It is depicted from their huge investment in the development of their leaders to ensure the development of innovative ideas and skills. Moreover, leadership not only contributes in providing with innovative ideas it also aids in the motivation and development of the team and employee’s innovative and creative skills (Bruzzese, 2015).
The General Electric is one of the most innovation-based companies of its time (Kellner, 2016). It believes in imagination equals the innovation. The company is committed to solving problems of the world through its innovative ideas and their collective imagination. The last CEO of the company Jeff Immelt considered the building of strong leaders crucial for strategic advantage. The General Electric leaders have built the innovative culture of the company to provide a workplace for the creation of ideas. Its culture is one of the combining and unifying forces around its various business units (Morgan, 2017).
The company General Electric from its inception has seen much turmoil’s and went past various crises. At all these times, the leadership has played a vital role. The greatest challenge at the company General Electric and relatively at every company today is the leadership of the companies striving to stay relevant (Kokalitcheva, 2015). During the time of Immelt, the company invested billions of dollars a year in training and education. They have invested in developing innovative talent and helping them learn new ways of creativity. As per Immelt, leadership has a very short shelf life. The company is always on the lookout for new talented leaders from across the world. They want to stay updated on what their competitions are learning and making their leaders learn. They heavily invest in people and then demand performance. At the company General Electric, they teach them what is required of them. The leaders in the company General Electric are always trying to stay relevant and at the cutting edge. They make their people move through experiences by which they can learn and improve their skills through learning and development programs (GE Sustainability, 2017). The company believes that in the end, the success of the company General Electric depends on these people (GE.com, 2018).
Another challenge which the leaders of the company General Electric have to face is to how to balance risk and reward. As per the Ex-CEO Immelt, discussed this challenge and advised on being transparent of the risks and reward from a specific project and keep a balanced approach backed by good enough research in that area (Wharton, 2013).
Immelt had many destitute subsidiaries, including financial services and appliance division (Noble, 2017) to convert the giant conglomerate into a digital industrial company (LaWell, 2017). The current CEO, Mr Flannery is facing the challenge of converting the company into a stabilised digital industrial conglomerate. The new CEO is focused on resetting the largest industrial group by redefining its culture and reduces its complexity (Financial Times, 2017).
The company General Electric has faced many leadership challenges while being in finical crisis 2008 or being hit by the 9/11 incident. The challenge faced by Immed; the Ex-CEO of General Electric had been immense. But after starting the much-disliked venture of divesting the financial services and appliances ventures of the company, the main work is going to be led by the new CEO Flannery. He is committed to reviving the culture and redefines the company to be recognised as a digital industrial based company (Scott, 2017). The new CEO will be facing the challenge of keeping the expectations of the shareholders at par while depending on the future innovation in these fields (Clough, 2017).
Innovation Challenges for General Electric
The company General Electric has followed its strategy for changing its conglomerate status and starting to be identified as a digital industry company by divesting its financial services and appliances arms. As per the ritual, in December 2016, the then-CEO Immelt discussed the transformation of the company General Electric into a world largest digital industrial company. He showed his plans to lead the company to digitisation and revolutionise the way things are made at General Electric by using 3D printing and all the other additive technologies. Other than going on to the Oil and Gas subsidiary, the company is envisioning its future in the expansion of the digital and manufacturing capabilities for unlocking new ways of satisfying customers as well as suppliers (Timothy, 2017).
The General Electric Opened Predix- the operating system which is used for the industrial internet of things has more than 20,000 developers working for it. The company was expected to grow this figure to 35,000 developers in 2017. The company General Electric has also acquired major software companies like Wise.io, Meridium and Service Max for bringing together cloud-based algorithms, and sensors transforming the way coders and engineers used to work (Cheng, 2016). The major challenge facing GE is to bring out disruptive, innovative ideas in this area to make it successful (Someren & Someren-Wang, 2016, p.178).
There is a lot of hype about the transformation to be brought by the industrial internet. The concept is based on the fusion of software-enabled intelligence, machines, and sensors. The combination is being tested to bring innovative ideas to market with the promise to elevate manufacturing in areas like productivity, faster innovation cycles, and quality, low costs responsive and flexible supply chains (Chesbrough, 2012).
The significant innovation challenges to be faced by the company General Electric in this area includes; working of the robots in imperfect environments; making robots smarter; using advanced analytics for innovation; working for stopping the replacement of humans by robots and encouraging working of humans with robots. Robots have not been successful in practicality because of the reason that they need a perfect environment around them, which functions as per these robots to function properly. General Electric is focusing on making more general-purpose robots which can work with our world’s imperfect environments as well. Secondly, General Electric is also investing in bringing innovation to develop a smart robot. The company is expecting breakthroughs in this area. The company is advancing in physical as well as cognitive tasks for the robots, including the machine and deep learning (Denning, 2017).
Then there is the challenge of using advanced analytics not to replace, but aid the humans by bringing innovation in robotics (Lawton, 2016). The company is facing challenges to innovate in building a robot accustomed to the imperfect environment and going ahead in the direction of innovation in robotics which does not replace humans but works with it.
A Framework for Innovation
The company General Electric evidently transforms its size, industry, culture, and leadership. As Immelt said the change is most needed, but always is unpopular (Chandler, 2010). The company General Electric needs to assess its priorities regarding leading to a digital industrial company. The potential for operating and reaping profits as a digital industrial company is huge, but I can only be realised with continuous innovation and strategic leadership (Tidd & Bessant, 2014).
The company business overview yields that the renewable energy is now one of the mainstream business and is expected to compete with other sources of power. Considering this factor, along with the incentives and promotions provided by governments, renewable energy is going to compete with fossil fuel at all levels of quality, to cost. The pressure exerted by wind turbine producers’ demands for innovation in the wind market. The company General Electric is working on this by investing in the renewable energy-based wind turbines (General Electric, 2017). The framework of innovation for General Electric can be built and is built in the past by considering the development of strong leaders through talent hunt and development programs, and catering with innovation challenges through open innovation if needed.
Recommendations for Overcoming Challenges for General Electric
- For catering with the challenge of entering into the new market of digitisation, the company needs to assess its portfolio regarding risk and reward framework. It can also use the DCF analysis in this respect for better predicting the cash flows and rate of return on investment (Koller et al., 2015).
- Since becoming a digital industrial company General Electric needs to focus on bringing about the innovation pipeline in robotics, internet of things and data analytics that it envisions, For this purpose, the company needs to have the best pool of talents in terms of programmers, developers, coders, engineers, and managers.
- The company needs to develop innovation networks, and build strong talent development programs.
- It can also use open innovation strategy as it used for its Ecomagination program for innovative ideas for those areas which need a more diverse knowledge base.
- They need to have a start-up mindset to build, grow, and innovate.
Conclusion
It is evident that companies need to have a long commitment to innovation to reap success. It is depicted in the history of General Electric, from time to time, because of various reasons; General Electric has remained committed to innovating through research-driven strategies. The business case for innovation has always been to stay ahead by barring the entrants with the high cost of entrance. The company has constantly been driven by innovation-driven leaders who profoundly believe in expanding by innovation to beat the competitors. The new CEO will be facing the challenge of balancing shareholder expectations with results through innovation. The challenges faced by General Electric in innovation are largely directly linked to its survival in the constantly changing global market. The company has gone to make necessary changes in its structure to make the structure less unambiguous and clearer for bringing out focus on innovation. The company General Electric is focused on transforming into a digital industrial giant by following pursuits in combining of sensors, artificial intelligence, and engineering. These challenges can be catered by considering the development of strong leaders through talent hunt and development programs, and catering with innovation challenges through open innovation if needed. They evidently need to have a start-up mindset to build, grow, and innovate.
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Appendix:
Source: (General Electric, 2017)
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