TECHNOLOGY MANAGEMENT

CASE 1: GENERAL ELECTRIC: CHANGING WITH THE TIMES

The successful management of technology and innovation has become one of the most critical
aspects of business today. To recognize the importance of the management of technology and
innovation (MTI) one can simply look at the impact of those skills on many of the leading firms
around the world. Here is a brief overview of one of the world’s leading technology firms,
General Electric (GE). This overview illustrates many of the topics included in this part of the
book. GE: The Firm’s History Today, GE is one of the world’s leading firms. Their products range
from the light bulb, invented by GE’s founder, Thomas Edison, to the handheld ultrasound
machines that are revolutionizing the practice of medicine around the world. GE is the only firm
that was included in the original 1896 Dow Jones Industrial Average that still operates as an
independent firm. This highly diversified firm has over 300,000 employees worldwide and in
2009 had revenues over $156 billion, with net income exceeding $11 billion. GE is composed of
a number of business units—some of which would be in the Fortune 500 if they were
independent firms. How GE grew from Thomas Edison’s small research facility in Menlo Park to
today’s multiproduct, global giant is through a process and pattern of strategic decisions that
include acquisitions, divestitures, innovations, and reorganizations. GE was founded in 1890
when Thomas Edison brought his business interests together and formed Edison General
Electric. Edison GE then merged with Thomson-Houston Company in 1892. This set the pattern
of innovation and acquisition that is part of GE today. Throughout its history, GE has been a
leader in patent applications and has acquired and divested a number of businesses in its drive
to remain a leading innovator with a competitive advantage. GE throughout its history has
caught each new wave of innovation as it has emerged. GE caught the initial wave of innovation
that occurred around electricity. The firm then was able to catch the next wave of innovations
that included trains and radios. GE began manufacturing diesel locomotives and founded Radio
Corporation of America in 1919. This pattern of innovation continued in World War I as GE used
its engineering knowledge to move into the aircraft engine business. GE pioneered
superchargers for airplane engines. This innovation made it possible for aircraft to go higher
and faster. Throughout the decades between WWI and WWII, GE continued to develop turbo
superchargers. When WWII started, GE was in the unique position of being the leader in the
development and manufacturing of exhaust-driven supercharging engines. Superchargers later
became a key element in jet engines. As a result, as airplanes changed from propeller powered
to jet powered GE became a dominant player in the industry. The result is that today GE is one
of the leading manufacturers of jet engines in the world. (The last appendix in this text will
discuss how managers can analyze and use such waves of innovation.) In recent years
technology has opened up new entertainment domains. Seeing this trend, GE today is the third
largest media conglomerate in the world. Technology has allowed many firms to enter financial
business domains. Again, GE responded and now GE Financial is one of the world’s largest
financial firms in both the consumer and commercial markets. GE is also extensively involved in
the green energy sector as a major manufacturer of wind turbines for electricity generation.
And, of course, GE still makes light bulbs. This brief history demonstrates how GE was able to
take advantage of, and advance with major technological changes in the general business
environment. If the firm had remained focused solely on light bulbs, it is doubtful the company
would still exist. Instead, the company has taken advantage of environmental changes through
strategic management and implementation of new technologies.

How GE Changes In reviewing GE, it is critical to realize that the firm did not simply state, “We
want to take advantage of changes in technology.” Instead, the firm made numerous changes in
its organization, including structure, personnel policies, and leadership, to make taking
advantage of changes in technology possible. To illustrate, in 2002 GE introduced its compact
ultrasound machine. This machine sold for $30,000 and combined a laptop computer with
sophisticated diagnostic software. GE followed this innovation five years later with a model that
was half the price. While this machine does not have the clarity of GE’s large ultrasound
machines, which cost seven to eight times more, the portable ultrasound is usable in areas of
the world where hospitals do not exist. The portable ultrasound machine is a growth product in
China, India, and other countries where medical facilities are scarce. But developing this
product required that GE also make changes in its processes and structure. The norm in product
lines is to have a single integrated business unit for the global market. However, GE recognized
that even though the large conventional ultrasound and the portable machine were related, the
placement and functionality were very different. Therefore, GE created a facility for portable
ultrasounds in Wuxi, China. Thus, the firm created a new organizational unit to handle this
product. Not only is the unit separate but the organizational processes and policies were
implemented to meet this unique market. This involved an innovative way of building
structures known as local growth teams (LGT) and processes that followed five critical
principles:

Shift power to where the growth is Build new offerings from the ground up Build local growth
teams like new companies Customize objectives, targets, and metrics to fit the business you
want to grow. Have the local growth team report to someone high in the organization so that
appropriate resources are available.

From the beginning with portable ultrasound machines, GE now has expanded its local growth
process to include more than a dozen LGTs in China and India. This has powered much of GE’s
recent growth. To further push innovation GE recently introduced (2005) Ecomagination. GE
CEO, Jeff Immelt, announced at the time
GE will help build tomorrow’s smart energy grid: help drive electric vehicles out of the labs and
onto the world’s roadways; and work to build advanced, cleaner energy production in the
United States, India, China, and the middle East at mammoth scale. Nobody else can do this like
GE can. These changes illustrate one of the foundations for the management of technology and
innovation: Not a single change but an organization-wide effort is needed to succeed. A firm
cannot simply decide to introduce a new technology or take advantage of a given opportunity.
Instead, the company must ensure that the firm has strategies and processes in place that allow
it to fit with new technologies and introduce innovations to both the organization and its
people. This alignment is critical to the successful management of technology and innovation.
Strategic Perspective GE is a company well into its second century of existence. The firm
continues to invest in innovative initiatives, make acquisitions to enhance GE’s position, while
divesting businesses that no longer fit the firm’s strategic choices. The firm’s long-range
strategy is based on four keys:

Be global—connect locally, scale globally Drive innovation—lead with technology and content
innovation Build relationships—grow customer and partner relationships worldwide Leverage
strengths—use GE’s size, expertise, financial capability, and brand.

Questions:

1. The GE case illustrates the changes a company can go through because of a change in
technology and innovation. What changes in technology do you think GE has
undertaken? In process? In product? What type of innovation do you think these
changes illustrate.
2. How has GE combined its technology and strategic management to be successful?
3. What strategic concerns would you have for GE in the future? What technology and
product changes should it monitor? How well has GE balanced the marketing and
technology capabilities within the firm?