Why Aren't Smaller Industrial Manufacturers as Digitally Nimble as GE?

Ed Marsh | Jun 1, 2017

A digital company moves to Boston

General Electric is a very different company than when Jack Welch handed the reigns to Jeff Immelt. A casual comparison reveals not only different leadership and management styles, but also very different corporate strategies.

Based on the market's embrace of Welch, perhaps his style and strategy were appropriate for that era. What's becoming increasingly clear is that Immelt's is brilliant for this era.

After shedding finance and unrelated activities, and declaring itself a digital technology company, GE has embraced digital approaches to manufacturing revenue growth which many SMB manufacturers resist:

  • fully developed, buyer focused digital revenue growth continuum
  • 3D Printing
  • IoT
  • data & cloud services & revenue models

And GE is nimbly navigating, experimenting, investing and improving in its brand, product & field marketing; its product roadmap; even its location and access to talent. The recent move to Boston undoubtedly involved tax considerations, but was largely based on access to the vibrant digital ecosystem in Boston & Cambridge which fits closely with GE's evolution.

Discounting the "big" red herring

Many middle market board members, owners and executive managers of middle market industrial manufacturers will dismiss GE's accomplishments with a simple "They're big. They can afford it."

Certainly starting a jet engine program from scratch; building wind farms around the world; or commissioning nuclear power plants is likely beyond the capability of a typical $50-500 million manufacturing company. 

But that's an irrelevant argument. Seriously. It discounts the enormous challenge of creating an entrepreneurial and adaptive environment in one of the 20 largest companies in the world. Middle market manufacturers have an enormous advantage in size - they're large enough to have resources to invest and small enough to move quickly and experiment.

The "scale" red herring is a convenient rationalization for lack of strategy.

There's only one reason every company can't hire a small group (say 2-10) smart, curious folks from different engineering, finance, social science, technology and business backgrounds and create its own skunk works.

The reason?

Management mindset!

This group should be tasked with a range of responsibilities including exploration of:

  • corporate development - exploring inorganic growth and opportunities for early stage strategic acquisitions
  • product roadmap vision - not simple incremental R&D, but big picture development opportunities
  • user experience - for a company's buyers, but also up and down the supply chain including vendors at at least as far as buyers' buyers
  • diverse trends - how will/could sharing economy and cloud based data models impact the business? How could blockchain be used to protect IP and simplify customer experience?
  • what will manufacturing look like as 3D printing achieves scale?
  • what disruptions are leaders in other industries using? From Sunday banking, self service payment of restaurant checks at the table, personalized pricing, Manufacturing Journalism and more

In other words, that team would be the radar for early warning; the Sun Tzu competitive strategy think tank; and the entrepreneurial scouts of opportunity. 

Some portion of their time should be unscripted, and a majority focused on priorities which are reviewed monthly by management and quarterly by the board. Their ideas can't be implemented on a whim - they must compete based on rigorous return on capital calculations. But they should be allowed to compete with traditional investments for the pool of growth capital which is available for initiatives focused on manufacturing revenue growth.

GE's use of Alexa

A great example of the entrepreneurial approach which has permeated GE is their experimentation with Amazon's Alexa.

While many industrial manufacturers are still debating whether their buyers actually use the internet, companies in the digital space are actively exploring the implications and opportunities (threats too!) of voice search.

GE has gone a step further - building STEM programs around B2C customer interaction through Alexa. Talk about long-term strategy and content! Of course what they learn from that work, and the interactions will have shorter term implications for their marketing and customer service in other product spaces.

GE had no advantage in seeing this opportunity beyond bright, curious people who have been empowered to seek opportunities and experiment. That's not a function of size - that's management mindset.

Strategy is feasible - even in traditional companies

It doesn't matter if your building is classic 70s (even down to the smoke stained fake wood paneling on the walls of the lobby and conference room.) In fact your deep understanding of niches in industrial manufacturing means that you likely have a depth of inside knowledge and expertise which is incredibly valuable.

But a vintage building, a strong conservative culture and a deep base in classic industrial manufacturing are assets are not restrictions...except in your mind.

Download your free copyStrategy Book Cover image.jpgThe solution is to explicitly set out on the journey of strategy exploration. That journey requires a roadmap, and often facilitation. The first step is easier - download this free guide for 52 pages of insights, trends and sample questions to start a typical industrial manufacturer on the right path. The second requires finding a resource with management and independent director perspectives, strategic vision and tactical expertise, and broad digital experience. I can guide the conversations with management and boards to launch and refine this strategy process. Contact me if you're ready to begin the journey or want to breathe vitality into an existing effort.