Ge Growth Playbook Process

8/11/2019 Ge Growth Playbook Process

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Strategic planning makes success repeatable

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External observers were convinced we could not pursue all

three aircraft makers, but through our strategic planning

process, the idea kept returning. China could not be ignored.

It was expected to become the largest aviation market

in the world. We also believed that fuel price volatility,

continued margin pressure on airlines, and environmental

requirements would create a huge opportunity for engines

that provided lower fuel burn while maintaining the

relatively simple designs that reduce maintenance costs.

Noise and emissions reductions in particular were expected

to require a major advance in technology.

If we could develop such an engine, we thought we could

potentially create a significant increase in market share.

This strategy led us to design the LEAP-X engine from

scratch, which is now the most fuel-efficient engine in its

thrust class. In the last two years, it was selected as the

sole Western engine for COMACs new C919 single-aisle

airliner, as one of two engines available for the Airbus

A320neo, and as the only engine for Boeings reengined

narrow-body 737.

Strategic planning makes success repeatable

Strategic planning helps take the luck out of success.

The process that created the strategy for the LEAP-X

engine has produced repeated successes over many

years at GE, and it involves three main elements: a clear

vision from GEs leadership, a yearly operating rhythm

that helps ingrain strategic thinking into our business,

and a culture of growth that fosters innovation and clear

thinking about performance.

The early 2000s were a critical time in GEs strategy for narrow-body aircraft engines. A wave of contract renewals was

on the horizon, which could have changed the competitive dynamics of the market for decades. The Commercial Aircraft

Corporation of China (COMAC) was a growing force in the market, yet traditional giants Boeing and Airbus remained.

The market for new engines was expected to be as large as $50 billion. The question for GE was where to place our bet .

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A clear vision from the top

In recent annual reports, our CEO, Jeffrey Immelt,

describes six strategic themes that will propel our

growth for decades. Since we first envisioned them,

there have been adjustments, for example, to meet the

challenges of the global financial crisis. But, overall, the

themes have remained a remarkably stable signpost for

all our strategic decisions.

They are united by a single question: How does GE

continue to grow? The first answer to that question

is: by creating market solutions for tough societalproblems. Rising costs, for example, are a major concern

for health systems around the world and particularly

in the United States. The key question for the leadership

of GE Healthcare is how we can improve efficiency in

delivery without sacrificing quality or access.

In addition to solving problems for customers and

society, we believe that launching great new products

through technical leadership drives growth. That belief

translates into sustained technical investments, people

development, and the constant refining of our process

for innovation.

A third priority is growing services and software.This priority helps to coordinate multiple GE businesses

around what we believe is a $100 billion potential in

infrastructure software segments, such as healthcare

information technology, Smart Grid, rail movement

planners, engine monitoring, and factory productivity.

The remaining three strategic priorities are leadership in

growth markets such as China, India and Latin America;

expansion from core markets into adjacent markets; and

creating value in specialty finance.

Each business within GE considers how it can drivethe six strategic priorities. In aerospace, for example,

the focus on growth markets and technical leadership

became the major strategic decision, discussed in the

opening summary, which led GE to become the sole

provider of narrow-body engines to COMAC.

The ability to execute quickly and broadly

We believe that one of our strengths is being a fast, big

company. To maintain this agility, we develop processes

aimed at making our size a facilitator of growth, not

bureaucracy. Our planning process creates an operating

rhythm that is designed to repeatedly test ideas and

then quickly turn decisions into reality.

We develop processes aimed

at making our size a facilitator

of growth, not bureaucracy.

Exhibit 1. Six strategic themes that guide GE (Source: GE 2010Annual Report)

Our strategic plans are known as growth playbooks,

developed in the first six months of every calendar year.Starting in January, we consider how we have performed

against the previous years goals. Then, we conduct

two months of analysis that considers the present and

future of our market and our strengths and weaknesses.

In some cases we may forecast 10 to 15 years ahead,

but in businesses with long product cycles, such as

aerospace, we will look ahead 20 years or more. We call

in external experts to test our assumptions and help

minimize groupthink.

Towards the end of our market analysis, we start

dreaming about new growth ideas, and then we createa vision for the changes we want to make to the business

and how we will make them, i.e., the strategy. This requires

further thinking about tactics, specifically the critical

actions we need to take to realize our strategy, how we will

measure and maintain progress, and how we will address

major potential downsides. Finally, we consider the three-

year financial implications and measures of our plan. All of

our conclusions and assumptions are tested again at our

annual strategy session at the end of May.


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One month later, the heads of all businesses present their final playbooks to senior management. Based on the feedback

from GEs senior management and board, we move quickly in two annual sessions at the end of July and August to create

the operating plans that implement the growth playbooks in the coming year.

A growth culture

We foster a competitive meritocracy where the best performers win, but only when they also embody GE values. One

of these values, being a humble listener, helps in the open exchange and testing of ideas during strategic planning. We

learned some difficult lessons in the global financial crisis, but the respect for alternative points of view helped us make

many decisions that reduced our risk exposures ahead of the crisis and reduced our costs significantly.

We encourage our people to share ideas through regular meetings that run parallel with strategic planning and we

foster conversations about strategy. Our Corporate Executive Council, which meets four times per year, includes about

40 leaders from across the company, including the heads of businesses, GE senior management, and representatives

of legal, finance, operations, sales, and marketing. Our Commercial Council draws together about 20 leaders in

marketing, sales, human resources, and communications to generate ideas for increasing growth, such as GEs

innovation and team training programs. We also formed an Operating Council that focuses on product management,

material cost-out, simplification, Lean Six Sigma, and capital allocation.

Since all of GE moves in unison through strategic and

operational planning, it is much easier to spread and

implement good ideas from these initiatives than GEs

size would suggest. A single best practice can be rolled

out quickly, generating significant savings, earnings,

and revenues for investors. We publicize such resultsinternally to foster healthy competition and inspire all GE

employees to help develop the next great idea.

Our leaders are expected to

be growth leaders, not just

productivity leaders.

To our leaders, we make it clear that they are expected

to be growth leaders, not just productivity leaders. GE

values are vital to ensuring this growth is sustainable.

Through many years of acquisitions, we have learned

that many companies focus most of their attention on

parts of the business that underperform targets. At GE,

we ask the same questions at the beginning of every

strategic plan, no matter how the business is performing

against its targets: How does this performance compare

to industry and overall economic indicators? Why did the

business perform the way it did? Do these reasons make

sense or do we need to keep investigating?

ConclusionWe want our leaders to think big and long term. We also

want them to be practical, action-oriented managers.

Strategic and operational planning is a structured

process that helps them connect a vision for growth with

quarterly results. Once their strategies are approved, our

leaders are empowered and expected to act. In 2010,

we generated $20 billion in revenue from businesses in

which we were not present in 2000.

Growth Playbook

Focus on evaluating the past anddefining the future strategy and strategicpriorities for GE

- Understanding of environmentand competition

- Generation of ideas

- Development of action plans

Established for a period of three years, and revised on an annual basis

Operating Rhythm

Focus on the development of an annual operating plan based on the strategy

defined by the growth playbook

- Budgets- Investment funding

- Sales projections

- OM / cash-flow commitments

Overview of strategic process at GE

Exhibit 2. The strategic planning process at GE includes two major components (Source: GE)


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Market Overview Dreaming Front-EndEffectiveness

Growth Planning

Understand GenerateGrowth Ideas

Getting Better Financial &Compliance

Growth Playbook Approach

Environment

Segmentation

Competitive differentiation

Growth initiatives

Core

Extensions

Adjacencies

New businesses

Ability to execute

Initiatives andstrategy

Metrics

Dashboard

CY financialoverview

Growth & expense targets

Compliance initiatives

Risk assessment & control plans

The Growth Playbook process evaluates the current state and sets strategy for the future

On the way to approval, strategic ideas are questioned

and tested at every level of GE before they appear in the

growth playbook that goes before senior management

and the board. This may sound like a recipe for

discouraging innovation, but in a culture that values

openness and listening, it actually means ideas have timeto breathe and develop.

In the early 2000s, for example, it was clear that private

label credit cards for retail stores were beginning to

lose volume to general purpose credit cards. GE Capital

did not want to exit the store card business, but the

solution was not immediately obvious. We went through

a few years of brainstorming and testing before we

introduced a store card into the US market with a Visa or

MasterCard affiliation (which allowed the card to operate

GE Capital (NYSE: GE) works on things that matter. GE Capitaloffers businesses and consumers around the globe an array

of financial products and services. Providing more than

money, GE Capital brings insight, knowledge and expertise

to every loan and lease. Not just banking. Building.

For more information, visit www.gecapital.com or follow

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Copyright 2012 General Electric Capital Corporation. All rights reserved.

This publication provides general information and should not be used or taken as

business, financial, tax, accounting, legal or other advice. It has been prepared withoutregard to the circumstances and objectives of anyone who may review it; therefore,

you should not rely on this publication in place of expert advice or the exercise of your

independent judgment. The views expressed in this publication reflect those of the authors

and contributors and not necessarily the views of General E lectric Capital Corporation

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Contributor

Thomas Gentile, Executive Management, GE Healthcare

Exhibit 3. The growth playbook process evaluates the current state and sets the strategy for the future (Source: GE)

as both a general purpose card and a store card). Once it

was tested, we quickly rolled the card out in Europe and

Asia as well.

Strategic ideas are questioned and

tested at every level of GE.

Today, the business remains a great success, but that

success does not go unquestioned. We scrutinize good

and bad results alike because we view performance as

something to be understood and repeated. In the end,

we believe this is the heart of strategic planninga

feedback loop that continuously refines our approach

to business.


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