Who is GE without all its parts?

In the business section of The New York Times this morning,there’s an article about GE planning to sell its appliance division, the oldest business in the company’s 120 year history. The sharks are circling…investors are making more and more noise about selling off other parts as well.

Reminds me of my work for Norsk Hydro someyears ago, a 100 year old Norwegian conglomerate under attack from shareholders who felt the parts were worth more than the whole. My work for Hydro helped keep the company intact, but that’s another story.

The value-creating power of GE comes from managers crossing business lines on a regular basis, the creation of second-to-none generalist-leaders whose experience transcends the division they happen to work for at the moment. Strip out too many businesses to unlock shareholder value, and GE dies. So does one of the world’s most powerful schools of management.

There are always parts of organizations that can be shed for good reason – they just don’t fit. But in GE’s case, nothing fits and that’s the beauty of it all. GE is a paradox of focus…to be good at what it does, it needs to stay multi-disciplinary. Disassemble the company – even just a few of its main economic pistons – and the institutions will wither. This is the logic of identity-based management: who you are is as important as what you do. It is what separates great companies from good ones, to borrow from Jim Collins’ book title. But too many executives just don’t get it.

Jeff Immelt has a responsibility to investors, yes. But his larger leadership responsibility is to others as well, like up and coming managers who, if they survive “GE-U,” fire up others, including other organizations, which benefits everyone, even society. Immelt needs to be the steward of GE’s identity – its invisible, ultimately powerful, drive to be the purveyor of continuous rustworthy change.That’s what GE really “sells,” that’s how GE creates proprietary value,and the only way it can continue to do that is if it stays fundamentally intact.

  • tony spaeth

    I was stunned by the naivety of this sentence in the May 15 Wall Street Journal article: “As with other transactions involving strong consumer brands, any buyer could continue to use the GE appliance brand names.” It was the only reference to “brand” in a thousand word report. And it is dead wrong. There are no “strong consumer brands” to sell here other than GE. (The style and model names of individual appliances are just that; they are not brands as maker’s marks.) The GE appliance business has survived for decades, because customers imagined that GE still contained a dedicated group of appliance experts. Without the GE brand there is no business to be sold. But the GE brand cannot accompany the appliance business under new owners, any more than the IBM brand could have accompanied the computer product line acquired by Lenovo. GE without appliances is still GE, and indeed it is a GE with a heavier, more industrial image. But appliances without GE are virtually worthless, unless a brilliant and forceful new brand, a completely new corporate brand, were to be created for them. That, in fact, is do-able.

    June 17, 2008 at 5:11 am
  • brandsinger

    Hey guys! Larry and Tony, you both make excellent points—GE’s unique strength is its peculiar but synergistic diversity—and GE appliances without the GE brand are like raspberries without the color red. Good discussion—and Larry, congratulations on launching your company. Yours is a unique gift from which clients will benefit enormously.

    June 17, 2008 at 5:16 am

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