GE Growth Strategy

GE Growth Strategy
Business Development & Organic Growth
Hwang Soo
President of GE Korea
Feb. 12, 2008
This is GE
We are World’s Most Admired Company
•The only company listed in the
Dow Jones Industrial Index today
that was also included in the
6 Global Business Units
original index in 1896
•Employees: 320,000
Infrastructure
Commercial Finance
•Customer over 100 countries
•Revenues in 2007: $173B
•Earnings in 2007: $22.5B
•“Triple-A” debt rating since 1956
• Market Value: $4,200B(3rd)
• World’s Most Admired Company
…Fortune, FT, Barrons etc
Industrial
Healthcare
GE Money
NBC Universal
3/
We are One company:
Technologies+Financials+Media •Entertainment
Infrastructure
— Oil & Gas
— Energy
— Transportation
— Aviation
— Water
— Energy Fin Svcs
— Aviation Fin Svcs
Commercial Finance
GE Money
— Capital Solutions
— Real Estate
— Corp Fin Svcs
— Healthcare Fin Svcs
— Comm. Fin -Asia
— Europe
— Asia
— Americas
— Australia & NZ
Industrial
NBC Universal
— Television Group
— Universal
— Digital Media
— Consumer & Industrial
— Enterprise Solutions
Equipment Services
Security
Sensing
Fanuc
Inspect Tech
Healthcare
— Diagnostic Imaging
— Clinical Systems
— Info Technology
— Global Services
— Life Sciences
— Medical Diagnostic
— Interventional Cardiology
4/
& Surgery
GE is constantly evolving
1980
1955
Consumer
Products
Tech
Products
Power
Materials
27%
27%
Financial
22%
11%
25%
$27B
9x
Net income
$0.2B
$1.5B
7.5x
Industrial NI
100%
92%
(vs. Fin. Services)
28%
Power
29%
Aircraft
Engines
10%
Healthcare
23%
10%
Industrial
NBCU
Consumer Products
$3B
Revenue
Infrastructure
16%
46%
Tech Products
Commercial
Finance
+ GE Money
13% 7%
6%
Industrial
2005
$150B 5.5x
$18B
12x
50%
5/
Note: Breakout of businesses based on percentage of revenue
GE Strategy
GE Strategy
Shareholder
returns
Earnings growth
Returns on capital
Cash flow
Results
Operations
Foundation
Management discipline &
process excellence
Best
people
Strong
culture
Great
businesses
7/
GE strategy
Safe + reliable
growth company
GE advantage …
scale + breadth + depth
20%
Reliable execution … with businesses
that perform consistently while
expanding returns
10%+
2–3X GDP
Organic
Earnings
revenue growth growth
Great businesses … founded on market
leadership, domain expertise, competitive
advantage, and financial strength
Expanding
returns
Performance accelerating
Expanding operating profit rate
and return on total capital
Grow cash ≥ earnings
Industrial ≥ Financial Services
Common initiatives … where we can
scale ideas with speed driving
incremental returns
A simple structure and strong team …
filled with people who have broad and
deep careers
Clear strategy and financial goals
8/
Business Development:
Inorganic Growth
Business development at GE
How we fit into GE’s strategy …
… and what we’re responsible for
• Help sustain a healthy portfolio
filled with “great businesses”
Add
Strategic
analysis
Subtract
New technologies
New geographies
New growth platforms
Scale / cost reduction
Capabilities
— Low return
— Low growth
— “Low tech”
• Help strengthen the competitive
position of our businesses
– Evaluate our position relative to competitors
– Analyze and capitalize on industry trends
Acquisitions
Dispositions
Sustained
growth
JVs
and
partnerships
Portfolio
assessment
Integration
and
“de-integration”
200+ professionals to help GE drive growth
10 /
In 2002, set out to reposition portfolio
“Strike zone”
“Reposition for growth”
~75%
Invest to grow
Energy
Medical
Aircraft Engines
NBC
Specialty Materials
Plastics
Commercial Finance
GE Money
Expanded/New
growth platforms
Water
Security
Healthcare IT
Oil & Gas
Hispanic media
~15%
Add / Delete
• Transportation
+ Globalize service
business
• Industrial
+ Systems, Sensors,
Security
- Commodity
components
• Equipment Management
+ GE Products
- Commodity
• Other insurance
- Capital intensive; low
ROE & volatile earnings
Upgrade for growth
“Reposition for value”
~10%
Limit investment
• Consumer … Appliances +
Lighting
- Low distribution
leverage
• Global Exchange Services …
Low GE presence
• Employers Reinsurance …
Cyclical + unpredictable
• Equity portfolio … GE a small
player
Maximize value
11 /
Established high growth, high
margin businesses
Transformed the company with $80 billion of acquisitions and
$35 billion of dispositions, creating a faster-growing, higherreturning set of businesses.
A Better Company
A.
High Growth + High Margin + Leadership
Healthcare
Infrastructure
Commercial Finance
GE Money
NBC Universal
Growth Platforms
High-Tech Industrial
B.
B. Low ROTC + Volatile
Insurance
Low-Growth Industrial
12 /
Organic Growth:
Growth as a Process
Organic Revenue Growth
Target: 8%
Current: 4%
Nike
or
Bottling
3%
or
GE Healthcare Technologies
Global GDP
GE
$12B~$14B of organic
growth every year
14 /
Making growth a process
Growth
Leadership Traits
Lean Six Sigma
Net Promoter Score
Customers
Use process
excellence to
satisfy customers
and drive growth
Growth
Leaders
Innovation
Generate new
ideas and
develop
capabilities to
make them a
reality
Inspire and
develop people
that know how to
help customers
and GE grow
Execute for
Growth
Emerging
Markets
Globalization
Create
opportunities
everywhere and
expand in
developing global
markets
Training
Enterprise Selling
& Brand
Imagination
Breakthroughs
CECOR framework
Great
Technology
Commercial
Excellence
Develop worldclass sales and
marketing talent
and demonstrate
the value of
“one GE”
Have the best
products, content
and services
New Product
Introduction
15 /
Imagination Breakthroughs are
making innovation a core capability
How we’re getting there:
1. Launched in Oct 2003… target: $50-100MM incremental
revenue
2. Marketing-led, cross-functional teams
3. Creating portfolio of growth
4. Rigor around key milestones and deliverables
5. Benchmarking… P&G, 3M, HP, FedEx, Target, Google, Pepsi
6. Ensuring strategic alignment of IB efforts
Funded … with lots of CEO attention
16 /
IB portfolio summary
Total
17
Commercial
Finance
103
5
10
GE Money
3
20
Healthcare
26
20
3
32
Infrastructure
$2-3B
Emerging Markets
6
Industrial
Annual
add’l revenue
8
18
Fin.
Ind.
9
4
NBCU
0
Total
20
40
Ecomagination
In market
15
50+
Emerging Market
17 /
Imagination breakthroughs
Holistic Breast Cancer
Management from GE
Healthcare
Water Scarcity
Solution from GE
Water
Evolution Series
Locomotive from
GE Transportation
“Air Taxi” Engine
from GE Aviation
IGCC Cleaner Coal
GE Energy
18 /
R&D Global Network
•Researcher: 2,600(1,000 Ph.D)
•Expenditures: $3.7B(2006)
Global Research
Center, HQ
Global Research
Center, Europe
Niskayuna NY, USA
Munich, Germany
Est. in 2004
Est. in 1900
John F. Welch
Technology Center
Bangalore, India
Est. in 1999
China
Technology
Center
Shanghai, China
Est. in 2003
19 /
Solve Environmental Issues +
Accelerate Business Growth
Green is green
4 Commitments
Grow revenues to $20B
Double R&D to $1.5B
Reduce GHG
Inform public
21 /
NPS driving even further
customer focus
“On a scale of 0-10, how likely are you to recommend
GE to a friend or colleague?”
9-10
Promoters
10
7-8
Passively satisfied
8
9
7
6
Net
Promoter =
Score
%
promoters
%
detractors
(NPS)
World%class
promoters
50%+
Typical
%
promoters
10%
to 30%
5
0-6
Detractors
4
3
2
1
0
Why we like NPS
• Simple
• Prioritizes improvement actions
• Responsiveness single biggest factor
22 /
Globalization
($ in billions)
Global revenue
~$81
$70
~$87
Developing countries – growth
*$50
15+%
15+%
AAGR
$29
$10
‘00
'05
'07
'06
Priorities
Share in Japan + Europe
Expand presence in China, India
Technology + sourcing
Developing markets
‘06
‘10
“Play the big GE”
1 Lead in infrastructure
2 Capture wealth creation
3 Build local capability … people,
service, risk
4 Drive GE advantages
Have built strong global capability
23 /
A better company
Stronger portfolio
High growth
+
High margin
+
Leadership
Low ROTC
+
Volatile
95%
60%
5%
40%
2001
2006
+
+
+
+
+
+
+
Healthcare
Infra.
Comm’l. Fin.
GE Money
NBCU
Growth
platforms
+ Sold Insurance
+ Sold low growth
Industrial
Improved
capability
+
Growth as a
process
Deliver
results
Revenue
+8%
Margin expansion Operating ~16.2%
profit
through product
management &
simplification
EPS
+10-12%
Cash generation
funds
reinvestment
ROTC
~19.5%
Great team
Cash
~$24B
Invest & deliver
24 /
What makes GE great?
GE Strategy
Shareholder
returns
Earnings growth
Returns on capital
Cash flow
Results
Operations
Foundation
Management discipline &
process excellence
Best
people
Strong
culture
Great
businesses
26 /
Growth generation leaders…
always executing with integrity
Best People…Investing $1B every year
27 /
Employee Engagement
Change Culture
A Continuing Journey
2006
2005
2004
2003
Retaining & Engaging
Lean Six Sigma
Speed & Quality
Growth:
IB’s, CECOR, Lean, Customer Centric, Execution
Imagination at Work:
Imagine, Solve, Build, Lead
Using Change as a Strategic and
ACFC (At the Customer For the Customer):
Competitive Advantage
2000 Faster, Better, Closer to the Customer
Digitization:
Optimizing Change
1998 Sell, Buy, Make using Technological Tools
Effectiveness
Six Sigma Quality:
1996
Productivity, Span, Data-Driven Decision-Making
Building a Culture that
Make Customers Winners:
Drives Change
GE Tool-Kit
Key Strategic Initiatives:
QMI*, NPI*, OTR*, SP*, Productivity, Globalization
1992
Change Acceleration Process (CAP):
Increase success and accelerate change
Process Improvement:
Process-mapping, re-engineering, Bullet Train Approach
Productivity / Best Practices:
Benchmarking External Organizations, Sharing Best Practices
1989
Work-Out™ / Town Meetings:
Empowerment, action – Expert-Driven Decision-Making, Action Work-Outs™, Customized Work-Outs™
Strong Culture
28 /
Six great businesses
Industry leaders in market share, value and profitability
Infrastructure
NBCU
Commercial
Finance
Industrial
GE Money
Healthcare
29 /
Rigorous Operating System
Annual Integrated Business and Leadership Processes
Core business processes
GE Opinion
Survey
(Biannual)
Session D
(Compliance)
April
February
January
Session C
(Org/Staffing
Succession)
March
Growth
Playbook
(Strategy)
June
May
Session C
Follow Up
August
July
S-II
(Operating
Plan)
October
September
Session CC-II
Follow Up
December
November
Corporate
Officers
Mtg (COM)
Global
Leadership
Mtg (GLM)
Corporate
Exec Council
(CEC)
CEC
CEC
SEB
Orientation
Meeting
CEC
Leadership meetings
30 /
Invest & deliver
Invest in
leadership
businesses
Reliable
execution &
financial
discipline
Safe & reliable growth company
20%
2-3X
GDP
10%+
Revenue
Earnings
Returns
Growth
as a
process
Great
people &
team
“Built for the future”
+ Infrastructure technology + Demographics
+ Emerging markets
+ Digital connections
+ Environmental technology + Value from origination
31 /