Ge Strategy
To first defined GE’s business strategy, the real focus was Japan. The entire organization had to understand that GE was in a tougher, more competitive world, with Japan as the cutting edge of the new competition.
In terms of GE’s strategic response, “you can’t set an overall theme or a single strategy for a corporation so diverse as GE.” Instead, Welch determined that the goal was to be number one or number two in every business the company was in. Achieving this required a common concern for quality and excellence. “To me, quality and excellence mean being better than the best. . . . If we aren’t, we should ask ourselves What will it take?’ then quantify the energy and resources to get there. If the economics, the environment, or our abilities determine that we can’t get there, we must take the same spirited action to disengage ourselves from that which we can’t make better than the best.
As GE built and exited businesses, Welch found that he needed a concise way to give strategic meaning to his actions. In 1983, he developed the “three circle concept” as it came to be called. All businesses were divided into (1) core, (2) high technology, or (3) service areas.
Only the thirteen businesses that dominated their markets would be placed in a circle.
Aerospace
Aircraft Engines
Appliances
Capital Services
Capital Services
Lighting
Medical Systems
Plastics
Information Services
Electrical Distribution and Control
Motors
Transportation Systems
Welch decreed that core businesses were to focus on “reinvestment in productivity and quality,” and the high-tech businesses were to “stay on the leading edge” through acquisitions and large R&D investments, the services were to grow by “adding outstanding people who create new ventures and by making contiguous acquisitions.”
From 1980 to 1984, the total workforce was reduced from 402,000 to 330,000, Welch was convinced that a company the size of GE needed to stay “lean and agile” to be competitive. Welch believed that the planning system had evolved from being fresh, idea- oriented and effective to becoming bureaucratic and inhibiting.
Rather than focusing on comprehensive strategic documentation or planning concepts, Welch directed the review around the key issues for each business. His objective was to get “general managers talking to general managers about