From Edison to Immelt: the GE way

General Electric is one of the great corporations of our times. While others fall by the wayside, it has forged a uniquely strong ...

General Electric is one of the great corporations of our times.
FromEdisontoImmelttheGEwayWhile others fall by the wayside, it has forged a uniquely strong corporate trajectory over more than a century. But what makes the giant tick? How has GE outlasted the competition and does it have the strength and sense of purpose to carry on? Stuart Crainer explores the GE way.

Recent tumultuous events have served to emphasize a commercial fact of life: companies die. In a world fixated on growth and expansion, it is easy to forget that companies – no matter their size or seeming impregnability – routinely close their doors, or have them forcibly closed, for the final time. Think of Lehman Brothers, Enron, Andersen, WorldCom, Barings, Digital, PanAm and many thousands of others. In a typical four weeks in mid-2009, eight public companies with assets of more than $1 billion filed for bankruptcy in the United States.

As the names and numbers above demonstrate, long-term corporate survival isn’t easy. Some die relatively young; others linger, drifting hopelessly into old age – witness General Motors. Only a handful of companies are robust enough to renew themselves and survive over a century.

Among the chosen few is General Electric (GE). In 1878, Thomas Alva Edison set up the Edison Electric Light Company. The company evolved into the Edison General Electric Company and, in 1892, merged with Thomson-Houston Electric Company to form the General Electric Company. In 1896, when the Dow Jones Industrial Index was launched, General Electric was listed. It is the only one of the original companies still listed.

Now 117 years old, the American titan is a truly global corporation. More than half of its revenues come from outside the United States. Its 327,000 employees work at GE locations in 160 countries. It is one of the world’s most successful and innovative companies, a benchmark.

But what are the secrets of GE’s longevity? And can its recipe for survival be maintained in the face of apparently dwindling American economic power and truly global competition?

Staying alive

“The natural average lifespan of a corporation should be as long as two or three centuries,” writes Arie de Geus in The Living Company, noting a few prospering relics such as the Sumitomo Group and the Scandinavian company, Stora. But the reality is that companies do not head off into the Florida sunset to play bingo. They usually die young. GE is an exception, a very large exception.

De Geus quotes a Dutch survey of corporate life expectancy in Japan and Europe that came up with 12.5 years as the average life expectancy of all firms. “The average life expectancy of a multinational corporation – Fortune 500 or its equivalent – is between 40 and 50 years,” says de Geus, noting that one-third of 1970’s Fortune 500 had disappeared by 1983. Such endemic failure is attributed by de Geus to the focus of managers on profits and the bottom line rather than on the human community that makes up their organization.

Continue Reading in PDF Format . . .

Comments (0)