Winning (15 page)

Many people have a terrible time admitting their business is a true commodity. No matter how hard we tried, it was next to impossible to get people in our motors business, for instance, to accept this reality. And I have sat through countless meetings where this set of questions has surfaced that discomfort and generated enormous heat about the level of resources to commit to R & D and marketing in an attempt to make the product more unique.

Another of the many important issues this slide surfaces is market size. Too often, people like to call themselves the market leader, so they end up limiting the scope of their playing field to make that happen. In our case, the No. 1 or No. 2 mantra inadvertently had that exact effect. After more than a decade, we realized that businesses were increasingly tightening their overall market definition so that their shares were enormous.

We fixed that by saying that businesses had to define their market in such a way that their share of any market they were in could not be more than 10 percent. With that restriction, people were forced into a whole new mind-set, and opportunities for growth were suddenly everywhere.

On the road in Q & A sessions, this is how I talk about the market definition dynamic: Since I am usually sitting in a chair, I ask audience members to imagine that they are a chair manufacturer. They can define their market as the kind of chair I am usually in—with curved metal arms, blue fabric, and wheels. Or they can define it as all chairs. Best yet, they can define their market as all furniture. Imagine the share differences and the implications for strategy!

This kind of discussion is why this slide really deserves to be wallowed in. A rich, wide-ranging conversation puts everyone on the same page—just where they have to be to ultimately find the big aha.

SLIDE TWO

What the Competition Has Been Up To

 

• What has each competitor done in the past year to change the playing field?
  
 

• Has anyone introduced game-changing new products, new technologies, or a new distribution channel?
  
 

• Are there any new entrants, and what have they been up to in the past year?
  
 

 

This set of questions brings the players on the field to life. Competitor A has been stealing your key salespeople. Competitor B has introduced two new products. Competitors C and D have merged and are having all kinds of integration difficulties.

Some of this information may have surfaced during the wallowing of the first question set, but now it’s time to dig deeper into each competitor’s behavior.

Be granular—know what each competitor eats for breakfast.

SLIDE THREE

What You’ve Been Up To

 

• What have you done in the past year to change the competitive playing field?
  
 

• Have you bought a company, introduced a new product, stolen a competitor’s key salesperson, or licensed a new technology from a start-up?
  
 

• Have you lost any competitive advantages that you once had—a great salesperson, a special product, a proprietary technology?
  
 

 

The best thing about this slide is that it hits you between the eyes if you’re being outflanked. Very simply, the comparison of slides two and three tells you if you are leading the market or chasing it.

Sometimes these two slides show you that your competitors are doing a whole heck of a lot more than you are. You’d better find out why.

Other times, the comparison of these two slides paints a vivid picture of your business’s competitive dynamics.

Case in point is what happened in our medical business in 1976. The British company EMI had invented the CT scanner in the early ’70s, forcing the traditional X-ray manufacturers—Siemens, Philips, Picker, and us—into an intense equipment war. Soon enough, all of us were coming out with million-dollar machines six months apart, each claiming to be thirty seconds faster in scan time than the last entry. No one was particularly happy with this situation. The CT competitors were in a slugfest, and our customers—the hospitals—were frustrated that they had to make big capital outlays for technology that could be outdated within a year.

Seeing that dynamic, Walt Robb, the head of our medical business, and his team, came up with a breakthrough idea. GE would allocate its resources to design scanners that could be continually upgraded with hardware or software that would cost less than $100,000 a year. We would sell our machines by saying, “Buy a CT scanner from our Continuum Series, and our upgrades will keep you from becoming obsolete for a fraction of the price of new equipment.”

The Continuum concept changed the playing field. It made us No. 1 and has kept us there for twenty-five years.

The main point here is that slides two and three work as a pair. They take anything static out of strategy and get you ready for the questions that come next.

SLIDE FOUR

What’s Around the Corner?

 

• What scares you most in the year ahead—what one or two things could a competitor do to nail you?
  
 

• What new products or technologies could your competitors launch that might change the game?
  
 

• What M & A deals would knock you off your feet?
  
 

 

This set of questions is, with doubt, the one that most people miss.

They just don’t give it the paranoia it deserves.

Most people answering this set of questions underestimate the power and capabilities of their competitors. Too often, the assumption going in is that competitors will always look the way they do in slide one—they’ll never change.

Take the case of Aircraft Engines in the 1990s, when our engineers believed that they had designed the perfect engine for the Boeing 777—the GE90. We spent more than $1 billion to get more than 90,000 pounds of thrust out of a brand-new design, based on the assumption that Pratt & Whitney could not afford to launch a new engine and would be unable to extend their existing engines to that level.

We were wrong.

Pratt & Whitney, with only $200 million in development, did get 90,000 pounds of thrust out of their existing engines. Because their costs were less, we had to sell the GE90 at lower prices than we planned. We had underestimated the competition because we thought we had all the technical answers.

This story had a lucky ending. Several years later, Boeing developed a long-range version of the 777. It required 115,000 pounds of thrust, which the GE90 could meet since it was a new design and could be expanded. We ended up being chosen by Boeing as their sole source, but because of our early miscalculation, we suffered through a few painful, less profitable years.

Getting the right strategy means you have to assume your competitors are damn good, or at the very least as good as you are, and that they are moving just as fast or faster.

When it comes to peering into the future, you just can’t be paranoid enough.

SLIDE FIVE

What’s Your Winning Move?

 

• What can you do to change the playing field—is it an acquisition, a new product, globalization?
  
 

• What can you do to make customers stick to you more than ever before and more than to anyone else?
  
 

 

This is the moment to leap from analysis to action. You decide to launch the new product, make the acquisition, double the sales force, or invest in major new capacity. In reality, this is when Walt Robb and his team made the decision to allocate major resources to the Continuum Series, the strategic move that would keep GE’s medical customers “sticky” for decades.

By the time you’ve finished this set of questions, the effectiveness of your strategy should be pretty clear. Your big aha is winning, or it needs to change. Even if you didn’t have a strategy before, this process should help you get one.

But either way, you’ve only just begun.

THE RIGHT PEOPLE

Here’s a familiar scene. Managers meet for months on end in intensive sessions about the company’s competitive situation and direction. Committees and subcommittees are formed. Surveys are conducted. Sometimes consultants are brought in. And then, at last and with tons of fanfare, the company’s leaders announce a new strategy.

Which just sits there.

Any strategy, no matter how smart, is dead on arrival unless a company brings it to life with people—the
right
people.

Forget speeches. They’re just hot air. The organization knows who’s important. Only if those important people are assigned to lead a new strategy will it take off.

Consider what happened in Power Systems when our push toward product services first got announced. Immediately, all the engineers wanted to know what the heck was going on. After all, they had joined GE because they wanted to build the biggest, highest-powered, most environmentally sensitive turbines. Suddenly, they were being told that the people who serviced their “masterpieces” were going to be the stars of the show.

Didn’t service people, they thought, carry oilcans?

Although the engineers heard the speeches, they didn’t take them seriously, which was easy enough, since services were buried in the existing organization.

What did we do? We eventually took Ric Artigas, a PhD and the engineering leader in Locomotives, and put him in charge of a new and separate P & L devoted to Power Systems’ services business. It was a real signal—Ric was a well-respected player. With his new stature, he had no trouble recruiting the best engineers in Power Systems, who were needed to design sophisticated software packages for turbine upgrades.

The services strategy was under way. In 2005, Ric’s operating profit of close to $2.5 billion will be about equal to revenues when he took over in 1997.

Getting strategy right also means matching people with jobs—a match that often depends on where a business is on the commodity continuum.

It goes without saying that you cannot pigeonhole. Good people are too multifaceted. That said, I would still make the case that due to their skills and personalities, some people work more effectively in commodities and others are better in highly differentiated products or services.

Let’s look at the motors business as an example. It’s about as commoditized as you’ll ever find. Several good companies make the product, and all have good service, quality, and cost.

The right people for this business are hard driving, meticulous, and detail oriented. They are not dreamers, they’re hand-to-hand combat fighters.

Lloyd Trotter is the perfect example. Lloyd joined GE in 1970 as a field service engineer in its high-intensity quartz lighting department, and for thirty years after that, his career was factories, factories, and more factories. He was a foreman, a production manager, and plant supervisor in Lighting, Appliances, and virtually every electrical distribution and control (ED&C) business we had. By the time Lloyd was made CEO of ED&C in 1992, he could tell you from the parking lot whether or not a factory was humming. Two steps closer and he could tell you what it could do better.

Of course, Lloyd liked thinking about strategy, but he liked implementing it more. He was in his element with people who sweated the nitty-gritty details like he did, talking about ways to squeeze efficiencies out of every process. He was a master of discipline. And that’s what made him exactly the right kind of leader to drive our commodities businesses.
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At the other end of the spectrum, it’s generally a different kind of person who thrives. Not better or worse, just different.

Take jet engines. Each engine is a unique, high-tech engineering miracle that requires about a billion dollars of investment to develop. The product life cycle is measured in years. And the customers are tough—the airlines themselves, perennially strapped for money, and the powerful airframers, Boeing and Airbus.

For many years, the jet engine business had its own distinct culture of romance. The people who gravitated toward it weren’t your usual business types—they were in love with the very idea of flying and the wonder of airplanes.

Brian Rowe was perfect for such an environment.

Brian started his career as an apprentice with DeHavilland Engines in England before joining GE as a factory-floor engineer in 1957. After stints in virtually every possible jet engine design project, he was named head of GE’s aircraft engine business in 1979.

Brian was a huge, gregarious guy—outspoken, opinionated, and visionary. He loved airplanes so much he would have worn goggles and a scarf to work if he could have.

Unlike Lloyd, Brian pretty much hated the nuts and bolts of management, and discussions of operating margins and cash flow bored him. But he sure did have the guts and the vision to place the big bets, laying a billion dollars on a single investment that would take years to pay off. Likewise, Brian’s personality made him a great salesman with customers, who shared his enthusiasm for every new technological advance.

Lloyd and Brian were both a case of perfect fit—right for their jobs, right for the business situation, right for the strategy. You won’t always get that lucky, and strategy can get implemented without an ideal match.