What small businesses can learn from the General Electric pivot

On September 7, 2001, Jeffrey R. Immelt was named chairman and CEO of General Electric, the industrial giant founded by Thomas Edison 123 years ago. In that half week, Immelt’s world cascaded from an era of “benign growth to one of unprecedented geopolitical and economic risk.”

By Jeffrey Cunningham Professor of Practice, Management

On September 7, 2001, Jeffrey R. Immelt was named chairman and CEO of General Electric, the industrial giant founded by Thomas Edison 123 years ago. In that half week, Immelt’s world cascaded from an era of “benign growth to one of unprecedented geopolitical and economic risk.” In the space of a few short years, GE has become a nimble, market facing, digital organization, a transformation that is relevant to any enterprise, small or large. Whether you are launching a startup or running a family business you can imagine how General Electric’s CEO Jeff Immelt felt his fourth day on the job when the 9/11 tragedies struck.

Like most CEOs, Immelt’s first thought was how employees were affected, then he worried about the country coming under attack. The very future of his company was also very much on his mind. Immelt quickly saw, as all business leaders would realize, GE needed to reshape itself for a world that posed as many new challenges as opportunities. In making the big "pivot," Immelt took to heart a crucial lesson he learned from his predecessor, Jack Welch, one of the most successful CEOs in business history. Immelt says Welch taught him to stay focused on “what was right for the moment not what was right 20 or 30 years ago.” Accordingly, the company jettisoned its financial services business and an America-centric outlook. For the next few years it would undergo a total makeover in which it became an expert in technology and data, and laser focused on global business.

Inspired leadership wouldn’t be enough, however. Many companies fall into the trap of believing the right team will carry them forward, particularly in difficult times. During the financial crisis, an entire generation of experienced CEOs never saw the tumultuous changes looming ahead and helped drive the country into the Great Recession. But Immelt recognized leadership is only part of the answer: “We used to think if you had good leaders you could be in any business. Now we believe deep domain expertise is critically important for the future. Business has no shelf life.” That’s another way of saying markets demand constant analysis.

Any CEO that assumes personal leadership alone will keep customers happy is tempting fate in a world changing so rapidly. If you’re an entrepreneur and you want to change course, most likely you are considering a shift in the product portfolio. In that case, Immelt says, there is no better teacher than Warren Buffett. What he admires most about Buffett is that he never follows a fad when buying a business. Buffett’s approach, says Immelt, is that “he always thinks strategically and focuses on certain industries.” Immelt recommends this approach to any business leader: “I stick to a very disciplined box of what makes a GE business and (only then) what makes a good investment.”

During difficult times, leaders are supposed to have all the answers, but Immelt found a dollop of humility on the part of the CEO or founder can be good for business: “I've done this now 14 years. It's a hard job. You have to learn every day. What I love about our company and what I try to match myself is this sense that we're never as good as we can be and we can keep getting better.” Finally, a company can have the best strategy in the world, but without the right people, you can't execute. That means recruiting the best and brightest, a challenge for GE just as it is for any company competing with Silicon Valley and Wall Street. His secret weapon is diversity. Immelt says, “My first diversity training in GE was in the mid-80s. No matter where you came from, no matter what you've done, if you can bring it, if you've got merit, if you're winning, you're going to get promoted.” Call it the Immelt way — for any business.

Jeffrey Cunningham was publisher of Forbes Magazine for 20 years and is now a professor of practice at the W. P. Carey School of Business. This article is based on his interview with Jeff Immelt for IconicVoices.TV. First published in The Arizona Republic, January 19, 2016.