1 McGinsey & Company IM551 IT Management & Strategy KAIST Business School Information & Media Management

22 Kim, Seok Tae Moon, Sung Jin Lee, Jin Soon Im,Jae Hyoun Jeffrey R. Immelt

33 I. Corporate Overview II. Success Factors III. Business Process IV. GE, for the next V. Suggestion McGinsey & Company Agenda

4 GE’s Present History of GE Key Person of GE Business Portfolio Performance McGinsey & Company

55 Jeff Immelt, Chairman & CEO Keith S. Sherin,CFO Gary M. Reiner, CIO $173 billion USD (2007) $22.5 billion USD (2007) 320,000 (2007) $4,200 billion USD The only company listed in the Dow Jones Industrial Index today that was also included in the original index in 1896 KEY PEOPLE REVENUE NET INCOME EMPLOYEES Market Value Characteristics GE’s Present

66 History of GE Thomas Edison opened a new laboratory in New Jersey Edison had organized his various businesses into the Edison General Electric Co General Electric was one of the original 12 companies listed on the newly-formed Dow Jones Industrial Average. GE is the only one that remains today The Radio Corporation of America (RCA) was founded by GE and American Telephone & Telegraph (AT&T) 1960s General Electric was one of the eight major computer companies with IBM 1981 Jack Welch inaugurate to CEO 1996 Introduction of Six Sigma Quality 2001 Jeffrey Immelt inaugurate to CEO 2004 NBC Universal, 3 rd largest media company from Vivendi Universal 2005 GE reorganized its 11 businesses into 6 large units

77 Key Person Reginald H. Jones CEO, 1972 – 1981  Managerial qualities  Relationship between business and government Jack F. Welch Jr. CEO, 1981 – 2001  Customer-Focused Methodology to Improve Quality without Defect  Today…Rigorous Employee 6σ Certification Jeffrey R. Immelt CEO, 2001 – Present  New Frontiers & Strategic Alliances for GE  Business Transformation Tomas Edison Founder, 1847 – 1931  Invent the phonograph and electric light bulb  hold 1,093 U.S. patents

88 Oil & Gas Transportation Aviation Water Medical Diagnostic Clinical Systems Life Sciences Capital Solution Real Estate Corp Finance SVC Healthcare Finance SVC Television Group Universal Digital Media Infrastructure Commercial Finance NBC Universal Business Portfolio 6 Global Business Unit Industrial GE Money Europe Asia America Australia Customer & Industrial Enterprise Solution Security/Sensing Healthcare

99 Performance Earnings (in $ billions) Revenue by Region A B C D A. US 50% B. Europe 23% C. Pacific Basin 13% D. Americas 7% E. Others 7% Consolidated Revenues (in $ billions) Revenue by Business A C E A. Infrastructure 29% B. Industrial 23% C. NBCU 10% D. Healthcare 10% E. Commercial + GE Money 28% B C D Compound annual growth rate of 13% Compound annual growth rate of 14% E

10 McGinsey & Company Executive for Growth Summary of Success Factor - Organic Growth - Biz Transformation - Globalization Lessons from Jack Welch & Immelt McGinsey & Company

11 Imagination Breakthroughs CECOR framework Execute for Growth Execute for Growth Lean Six Sigma Net Promoter Score One GE: Enterprise Solutions & Brand Growth Leadership Traits Emerging Markets Growth Leaders Inspire and develop people that know how to help customers and GE grow Growth Leaders Inspire and develop people that know how to help customers and GE grow Customers Use process excellence to satisfy customers and drive growth Customers Use process excellence to satisfy customers and drive growth Innovation Generate new ideas and develop capabilities to make them a reality Great Technology Have the best products, content and services Great Technology Have the best products, content and services Commercial Excellence Develop world- class sales and marketing talent and demonstrate the value of “ one GE ” Commercial Excellence Develop world- class sales and marketing talent and demonstrate the value of “ one GE ” Globalization Create opportunities everywhere and expand in developing global markets Globalization Create opportunities everywhere and expand in developing global markets New Product Introduction

12 Work-out CAP (Change Acceleration Process) Six sigma Performance Ranking System (Vital Curve) Crotonvill Execution Performance

13 How we fit into GE’s strategy Help sustain a healthy portfolio filled with “ great businesses ” Help strengthen the competitive position of our businesses AddSubstract + New technologies - Low return + New geographies - Low growth + New growth platforms - Low tech + Scale / cost reduction + Capabilities Strategic Analysis JVs and Partner ships Disposit ions Acquisit ions Portfolio assessm ent Integrat ion and “ de- integrat ion ” Sustain Growth

14 GE is continuously evolving Strong portfolio

15 13% - In 2005, global revenue : 75$ billion, 21$ billon from developing countries - In 2004, impressive 37% increase on the previous year. - Over the next decade, 60% of GE’s growth : developing countries (predict) - China, India, Russia, Europe, Southeast Asia, Middle East, South America.

16 Biz Portfolio Restructuring - No.1 or No.2 : Fix, Sell, or Close - 3-Circle concept : 12 Division, Finance/ Service Reorganization - Downsizing - Delayering - Empowerment Cultural revolution - Crotonville - Work-out - CAP - Performance Ranking System Core Business : Power Systems, Appliances, Lighting, Transportation Technology : Aircraft Engine, Aerospace, Materials, Medical Systems Service Business : Finance Service, Communications, Information Service, Broadcasting Core Business : Power Systems, Appliances, Lighting, Transportation Technology : Aircraft Engine, Aerospace, Materials, Medical Systems Service Business : Finance Service, Communications, Information Service, Broadcasting

17 Establish much more openness and trust Rebalancing the portfolio Marketing-oriented “ At the customer, For the customer (ACFC)” Growth :New platforms, New process New people profile Infrastructure for developing countries

18 Jack WelchJeff Immelt Paradigm Efficiency Oriented Strong business and down- sizing 1.2 or sell Effectiveness Oriented Growth engines for the future Methodology 6 Sigma Quality and costs Finance Growth External growth Marketing Target Market EU, USADeveloping countries Portfolio Cash Generator finance, Service Growth engine Infrastructure ResponsibilityWithin the lawSocial responsibility

19 McGinsey & Company Why Process is Important Business Process in GE Tools for Change Methodologies - Work Out - Six Sigma - CAP McGinsey & Company

20 Strategy Process Execute Process Execute Monitor & Feedback Process Improvement Plan KPI / Action Item Process Control Improve Strategy-Process Alignment - Align to changing external factors (market, competition, technology and customers ) Continuous Process Improvement - Standardization - Optimization Strategic Operational

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22 SmallLarge Quality Technical Strategy Work-Out “Expert-driven” Six Sigma “Data-driven” Acceptance Cultural Strategy Leadership Development Corp. Entry Programs Crotonville Courses GE Values & 360° Reviews Learning Organization Change Acceleration Process(CAP) Cultural Integration Scopes of Changes Component of Change

23 Improvement and implementation of a new “ Open Culture ” - Building Trust : Tear down barriers within the organization - Empowering Employees : Leverage individual creativity and potential - Elimination of Unnecessary Work : Remove bureaucracy - A new paradigm for GE : Participation through a sense of accomplishment and ownership Goal How Typical Org. Structure Sponsor Employee Empowerment & Speedy Decision Making Set Concrete Goal Oversee & Support Follow-Up Champion Admin. Office Measure Current Status & Data Collection Continuous Monitoring Select & Train Facilitator Facilitator Accurate Understanding about Issue at Hand Develop Facilitation Skill Maintain Comm. With Admin. Office Work-out Process Pre-Meeting (D-4Weeks) Pre-Meeting (D-4Weeks) Derive Issue Clarification of Driving Body Compose Participants Work-Out Session (D) Work-Out Session (D) Participation of Sponsors Team start-up Problem Solving Execution Plan Presentation / Decision Making Follow-up Meeting (D+12Weeks) Follow-up Meeting (D+12Weeks) Regular/Occasional Monitoring Share Success Story Reward

24 Goal How To maintain its position of advantage, Six Sigma targets a 6 sigma level of quality for all business processes in SVC, product, sales, etc. - Targets this level of optimization not only product and SVCs, but all across its business operations - Achieve superior management quality and cost competitiveness by eliminating loss due to faults or mistakes by management systems Define high-level project goals and the current process Set up control mechanisms and continuously monitor the process Measure key aspects of the current process and collect relevant data Analyze the data to verify cause-and-effect relationships. Improve or optimize the process based upon data analysis Six Sigma Process DMAIC Success Factors Six Sigma Org. Structure Champion Responsible to represent the needs and to improve the operational effectiveness Master Black Belt Ensure that quality objectives and targets are set, plans are determined, progress is tracked, and education is provided Black Belt Heart and soul of the Six Sigma quality initiative. Lead quality projects and work full time until they are complete. Green Belt Employees trained in Six Sigma Definition Measurement Analysis Improvement Control  Strong Top-level Leadership  Systematic Nurturing of Six Sigma Experts  Formation of Organizational Structure committed to Innovation  Support management in consulting, training, finance issues  Link to Reward/Promotion Structure  Regular sharing of Know-How  Sharing of Success Cases/Best Practices

25 Goal How Achieve change acceleration by increasing employee acceptance regarding changes - Built an competitive organization through continuous cultural revolution - Remove bureaucratic elements within the org. structure Work-Out tools Quality (Technical Strategy ) Acceptance (Cultural Strategy) Key Strategy Initiatives Change Acceleration Process Creating A Shared Need Shaping A Vision Mobilizing Commitment Improved State Making Change Last Monitoring Progress Current State Transition State Changing Systems & Structures Leading Change Leading a changeSecure Champion to drive changes Creating a Shared Need Share necessary changes & persuade with diagnostics & analysis Shaping a vision Share a visionary image of what this change can achieve Mobilizing Commitment Find and support committed employees to put changes into practice and spread its realization Monitoring Process Control and monitor goals, actions and achievement levels of change activities Making change last Make changes last by training all employees across the organization Changing system and structure Set up systems and structures to support, drive and complete changes 7 Stages of ChangeCAP Session

26 McGinsey & Company Pressure on GE customers Enabling sustainable growth GE’s commitments GE's Next McGinsey & Company

27 Carbon Constraints Emerging Markets Growth Emissions Standards Climate Change Debate Increasing Population Resource Pressure External Stakeholders Regulation Customer

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29 Energy Solar, Wind, Biogas, IGCC, Gas turbines SolarWind Water Reuse, Desalination, Industrial, Cooling Transportation Aviation, Rail, Automotive, Marine, Fleet Industrial Lighting, Appliance, Motor, Finance

30 Year 2100 Year 2020 Year 2010 Year 2000 Before 1990s Product Diversifications + Organization Restructuring + Productivity Process Management for growth + Organization development R&D investment + Customer focused Adaptive and challenging attitudes

31 McGinsey & Company Suggestion McGinsey & Company

32 Questions ? McGinsey&Company