Why is the PRESS trying to DESTROY GE?

Why is there a current desire to DESTROY GE?

Before the 'WALL STREET MELTDOWN and the uprising against those who required and begged for Federal Government bailouts and survival packages, General Electric was a global ICON...

GE's GREAT ICON image was a combination of a strong, well managed company with predicable earnings, the largest capitalization, the WELCH deification and a diversified portfolio. I described in one ONE WORD...LATIN.

LATIN summarized the reason that the company not only prospered, but excelled, while its other peer DOW JONES companies disappeared or suffered. LATIN stands for Leadership (no cookie cutters) Adaptability (nothing is sacred) Talent (grow your own) Influencing (Being politically unacceptable) and Networks (meeting realistic expectations).

However since the Wall Street meltdown...GE has been placed in the "Financial services... you can't believe them" category and its stock has dropped to all time lows...

BUT the good news is that the GE management has Adapted...(consistent with the GE tradition) and admitted it made mistakes and is moving in the right direction...

• Jeff Immelt had vowed to reduce its dependence on GE Capital and return it to what is supposed to me...A means to grow the Industrial businesses and not be an END.
• Recognition that GE is a US company with a global presence... he said in the most recent annual report to invest globally, but keep the US operations a center of the global growth.
• A return to the disciplines of sound strategic thinking and decision making and include all of the input, both positive and negative and avoid being SURPRISED.

Jeff Immelt also made a personal commitment. He gave up over $12 million of personal wealth, because it was RIGHT and, even though his personal commitment deserved the incentives, the company stock did not...this is truly unique.

OVERALL.. I personally have a vested interest in GE, since I own GE stock and am a loyal GE alumnus...but I am and have been a strong opponent to the Immelt strategic vision of GO BIG and GO GLOBAL... My book: THE SECRET TO GE's SUCCESS and my continuing blog" GEWATCHER.. have continually challenged the IMMELT strategy and have described, in depth, GE's failures...

BUT.. GE is still the most successful US company and has demonstrated, over 127 years, that it is a winner and able to adapt and conquer change. One of the key elements is STRONG, DEDICATED, COMMITTED LEADERS...and based on what Jeff IMMELT has done and continues to do..I PERSONALLY am committed to continue my personal WEALTH to his leadership...however if I see evidence this is not correct, I will be the first to let you know.

Bill Rothschild, CEO Rothschild Strategies Unlimited LLC.. a personal, boutique that will let you know what is real and what you need to do to win...

GE wants "naysayers"!!!

In his "letter to shareholders" in the 2008 Annual Report: Jeff Immelt states:

"For 2009, we have sharpened our strategic processes and scenario planning. We have increased the frequency and changed the agendas of our operating meetings. Each of our businesses has set up a process to identify the "naysayers" in each of our industries to make sure their voices are heard inside GE. From the top to the bottom and across GE, we must and will listen more critically and respectfully to each other".

I would not use the word "naysayer" to describe what it takes to be a strong, skilled strategy reviewer, but it is clear that GE now recognizes that it is impossible to develop sound, realistic strategies and expectations, without having many points of view.

This is not a new GE situation. In the mid 1970s, Fred Borch, GE's CEO, recognized that his ambitious "go big/ venture" program was failing to provide "profitable earnings" and so he instituted the disciplined strategic thinking and decision making process that helped turn the company around.

Borch conducted a study and found: "In many cases, the operating businesses didn’t do an adequate job of evaluating their markets, customers, and competitors, and they often failed to identify technological and sociopolitical trends and forces that could negatively impact their businesses. The result was that there were too many omissions, miscalculations, and surprises." (excerpt from my book:" The Secret to GE's Success")

GE Instituted Annual Review Systems that included multi-functional professionals, from inside GE, consulting firms and academics. The propose was to challenge the underpinning assumptions and be sure that the best insights and intelligence sources were used in constructing the strategic priorities and execution strategies.

There was a continuing review and monitoring of the key underpinning assumptions to assure that they were wrong, actions could be taken to minimize any negative impacts. The key was to avoid "surprising yourself" and minimize the impact of surprises, if and when they occurred.

Another key element of this system was Admitting Mistakes. "The overriding objective was to ensure that the business units had realistic expectations and weren’t kidding themselves or senior manage­ment. Management had been surprised by all of the ventures, in one way or another, and this had negatively impacted its credibility on Wall Street. The new process was designed to ensure that these surprises were minimized and that promises were met. Once this process was in place, the worst thing that business unit managers could do was surprise senior management. If they did, they were often demoted or even fired" (excerpt from my book: The Secret to GE's Success")

I was fortunate to head up this strategy review and integration process for several years and it is one of my consulting firms most successful services.

I am pleased that GE plans to reinstate this type of review process, so that it will not suffer the consequences of "surprising itself".

Bill Rothschild, CEO Rothschild Strategies Unlimited, LLC

Immelt asserts: "GE will always invest to win globally, but this should include a preeminent position in a STRONG U.S."

Jeff Immelt made a strong statement in his 2009 "shareholder letter" which clearly demonstrates that he is in the GE leadership tradition. In my book: THE SECRET TO GE'S SUCCESS and my GEWATCHER blog, I have continually asserted that one of the key reasons that GE is still a strong and vibrant 127 year old company, is that its leaders were willing to admit mistakes and adapt. Jeff continues to adapt, admit mistakes and move on...he calls it "resetting". This is another example of adapting.

This is what Jeff wrote in his shareholder letter:

I have also learned something about my country. I run a global company, but I am a citizen of the U.S. I believe that a popular, thirty-year notion that the U.S. can evolve from being a technology and manufacturing leader to a service leader is just wrong. In the end, this philosophy transformed the financial services industry from one that supported commerce to a complex trading market that operated outside the economy. Real engineering was traded for financial engineering. In the end, our businesses, our government, and many local leaders lost sight of what makes a nation great: a passion for innovation.

To this end, we need an educational system that inspires hard work, discipline, and creative thinking. The ability to innovate must be valued again. We must discover new technologies and develop a productive manufacturing base. Our trade deficit is a sign of real weakness and we must reduce our debt to the world. GE will always invest to win globally, but this should include a preeminent position in a strong U.S.

There is no question that some of most talented smartest people became enamored with the "get rich/quickly" opportunities in financial services and haven't used their talents to create new products and services. Hopefully the "Wall Street meltdown" will change this and more students will go to engineering and scientific universities and not business schools. I agree with Jeff that we need to reward real innovation and creativity and not just "creative book keeping".

Bill Rothschild, author of THE SECRET TO GE's SUCCESS and other global best selling books and articles..visit http://www.strategyleader.com/ to learn more.

WINNERS...Set Realistic (even low) Expectations and EXCEED THEM

GE has the ability to do what I tell my clients "create realistic/ even lower" expectations and exceed them.

For the past few years, I believe that GE has created unusually high expectations and has not achieved them. This has contributed to the stock decline and loss of credibility. Now, the company can do the opposite. The "street" doesn't believe that GE can achieve the earnings it promises, but GE asserts it can,

SO...GE can do what it promised and be a perceived as an OVERACHIEVER...if it does, I believe the stock will surge and the GE management will regain the confidence it learns... and the investors will be happy.

A WIN/ WIN/ WIN opportunity...so I hope that Immelt and his team will use this unusual opportunity and be heroes.

Bill Rothschild, author of the only comprehensive, objective and insightful assessment of GE's successes and failures from Edison to Immelt... THE SECRET TO GE's SUCCESS and GE Watcher blog...

Economist's Magazines GE assessment is fair and balanced..but their conclusion is wrong!

My favorite magazine is the ECONOMIST, which calls itself a newspaper. It is my favorite because, unlike other magazines who think that brevity is the key to success, the Economist provides in-depth, comprehensive and in most cases, fair and balanced news, columns and special reports. Its GE analysis in March 21, 2009 edition, entitled: Losing its magic touch demonstrates what I am asserting. The Economist, unlike other publications, gave a good analysis of GE and its problems. Lets review some of the key points the article made about GE:

• "How did GE get itself into a mess that has seen $269 billion wiped off its stock market value since the beginning of 2008? The main reason is that the strategy which helped GE gain its reputation for consistently producing bumper profits, year in and year out, has backfired. At its core was GE Capital. Founded in 1932 as General Electric Contracts Corporation to provide financing that supported the group’s industrial businesses, the operation gradually expanded into other areas of lending unrelated to GE. Under Jack Welch, GE’s chief executive from 1981 to 2001, GE Capital grew rapidly." This is true GE Capital was established as GE Credit Corporation during the great depression to finance dealers inventories and consumer purchases (note this is different than the Economist "facts", but mine are correct).
• "If GE Capital were a bank, it would rank as one of the biggest in America (see chart 1). Its growth has made the division more and more important to its parent’s overall revenues and performance (see chart 2). In 2007 GE Capital’s profit made up 55% of the company’s total. "This is true and even though Jeff Immelt promised to reduce the dependence on GE Capital it didn't happen and the company became addicted to the ability to use GECC earnings to fill the gap and make the numbers.
• "Given the unit’s difficulties, it would be understandable if Mr Immelt wanted to jettison GE Capital as soon as it has been nursed back to health—which may take a while. But he insists he is committed to the business, which he says has strong franchises in areas such as aviation and energy finance, thanks to its close association with GE’s industrial activities." This is also insightful GE's success in aircraft engines was partially a result of GE's financing of the engines and providing operating leases to airlines. This was a successful strategy and should continue, but it doesn't require all of the consumer and commodity type of financing GECC does. These could be separated out and spun off. Possibly using a " tracking stock approach".
• "Mr Immelt, recognising that the world has changed, has placed more emphasis on organic growth since taking office. He has built up the company’s marketing expertise, whereas in Mr Welch’s GE engineers and spreadsheet jockeys were the masters. And he has focused on innovation. Since 2001 GE has invested $330m to expand its research facilities around the world. It spent $4.3 billion on R&D in 2008, up from $2.3 billion in 2002." This is a significant point. Welch focused on short term and not the long term and the company's ability to innovate declined during his tenure. Immelt needed to change the strategy and focus on innovation. In my book: The Secret to GE's SUCCESS" In my book, I entitled this "back to the future" since Immelt has tried to restore what GE once was, namely: innovative. However Jeff combined it with GO BIG (also discussed in the book") and this has become a major problem.
• "So does this mean that GE should be broken up? Assuming the company can revive GE Capital, there might be a case for hanging on to that business even if its margins are squeezed. By refocusing on its original mission, a stripped-down finance unit could help drive sales at GE’s industrial operations by providing finance for large infrastructure projects and other activities." This is key to GE's future success, namely to become more focused, more selective, use the financial arm as a MEANS to grow the other businesses and not an END in itself.
• "Some critics claim that GE’s boss has dented his credibility by making several optimistic predictions that have been quickly proved wrong. For instance, barely a couple of weeks before the company revealed that it had missed its earnings in the first quarter of 2008, Mr Immelt declared that he expected GE to hit its target. In September he denied that the company needed a fresh capital injection. But soon afterwards it announced that it had raised $15 billion from Mr Buffett and others." I totally agree that GE has created unrealistic expectations and has not been able to meet them. In my book, I challenged the company's assertion that it could grow at a 8% organic compounded growth rate, especially if the assumption that it could also grow earnings at the same rate, which had been the case under Welch.
• "Nevertheless the suspicion lingers that GE’s boss has a habit of promising too much. The best way for him to rebuild confidence in his leadership will be to demonstrate that GE can bounce back quickly from its woes. It will require a prodigious feat of managerial wizardry to pull that off." I agree that there has been a tendency to over promise and not deliver...however, it Immelt follows his predecessors he will lead through adversity, admit mistakes and adapt thus making the company even stronger. A review of GE's past (in my book) shows that GE leaders, of which there have only been 10) all faced adversities.
• -Edison picked the wrong technologies but adapted.
• -Swope and Young saw GE revenues drop 75% during the Great Depression,
• -Borch got the company growing again after the Great Electrical Conspiracy
• -Jones managed to overcome hyper inflation and
• -Immelt grew the company successfully and profitably after 9/11.

GE's success has been because of its LEADERSHIP, ADAPTABILITY, TALENT, INFLUENCING PUBLIC ISSUES and CREATING STRONG MANAGEMENT SYSTEMS and NETWORKS...I call this LATIN in my book.

In closing, I believe that the ECONOMIST has done a great job in summarizing what GE is and the key challenges it faces, however I DON'T THINK IT WILL REQUIRE A WIZARD, BUT A RETURN TO SOUND STRATEGIC THINKING AND DECISION MAKING that made the company stronger even in adversity.

Bill Rothschild, author of THE SECRET TO GE's SUCCESS and GE WATCH blog (www.strategyleader.com)

Shareholder versus Stakeholder Value

In a recent FINANCIAL TIMES front page article the issue was raised about who created the Shareholder value concept and its negative impact on US businesses. The author asserted that the concept can be traced to Jack Welch's speech in 1981. Welch asserts that maximizing SHORT TERM profits to enhance Shareholder value, which really means increasing the share price is not a strategy and is not a good thing to do.
I totally agree with JACK that maximizing short term profits to increase the STOCK price is poor management. But in fact, this is what he did and it enhanced the share price.
But this concept of CREATING and MEETING Wall STREET EXPECTATIONS didn't start with JACK, it really started with Fred Borch and enhanced by Reg Jones... Jack two previous predecessors.
It started when GE was involved in PRICE FIXING. Borch took over because GE stock had stopped and Fred recognized it need a jump start. He and Reg, his CFO, decided to create and meet realistic expectations on Wall Street and it was GE that established the now accepted approach of guiding the Street.
GE under Jones mastered this approach and GE stock started to move upward, however Jones also recognized the need to balance all STAKEHOLDER (investors, stockholders, governments, employees, management, unions, communities and others) results, but clearly recognized that it was impossible to satisfy all stakeholders.
Welch elected to focus on shareholders, employees and management and he was successful..but times have changed and these stakeholders are under attack.
The issue facing Immelt and other current CEO's is how to balance the conflicting needs and expectations of all stakeholders and determine which is the right mix and emphasis.

Bill Rothschild, author to the most comprehensive, objective and insightful evaluation of GE's 127 years of successes and failures...THE SECRET TO GE's SUCCESS..

GE should show the world its total portfolio...to regain confidence!

My son, Steve, and I were chatting about the GE situation yesterday and he made a great recommendation. Steve, who is a marketing expert and CEO of a new healthcare information venture, said that people really doesn't know what GE really is and the company needs to have extensive marketing and public relations campaign to explain what the company is and what it's opportunities are.

I believe that Steve is right. GE has become so complex and global that it is unclear what it is. In simple terms, GE is a strategic portfolio led company, with strong positions, globally in energy, health care and many other infrastructure markets that are very likely to benefit from the massive stimulus plans in the United States and China. It has had a strong leadership team and it is not just another financial services company.

In my book, THE SECRET TO GE's SUCCESS, I use the word LATIN to summarize GE's successes. It stands for Leadership, Adaptability, Talent, Influencing and Networks. These five characteristics explain why GE has been able to be successful for over 127 years, and overcome failures and adversity. I believe that GE still has strengths in each of these areas, but the company must be more aggressive in communicating what it is, why it is positioned to be successful for another 100 years.

In short, GE needs to give the world the BIG PICTURE and explain why they should have renewed confidence that the company will be able to overcome its current adversities and be successful for another 127 years.

Bill Rothschild, Rothschild Strategies Unlimited, LLC