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Strategic planning makes success repeatable

GE Capital
External observers were convinced we could not pursue all
three aircraft makers, but through our strategic planning
process, the idea kept returning. China could not be ignored.
It was expected to become the largest aviation market
in the world. We also believed that fuel price volatility,
continued margin pressure on airlines, and environmental
requirements would create a huge opportunity for engines
that provided lower fuel burn while maintaining the
relatively simple designs that reduce maintenance costs.
Noise and emissions reductions in particular were expected
to require a major advance in technology.
If we could develop such an engine, we thought we could
potentially create a signicant increase in market share.
This strategy led us to design the LEAP-X engine from
scratch, which is now the most fuel-efcient engine in its
thrust class. In the last two years, it was selected as the
sole Western engine for COMACs new C919 single-aisle
airliner, as one of two engines available for the Airbus
A320neo, and as the only engine for Boeings reengined
narrow-body 737.
Strategic planning makes success repeatable
Strategic planning helps take the luck out of success.
The process that created the strategy for the LEAP-X
engine has produced repeated successes over many
years at GE, and it involves three main elements: a clear
vision from GEs leadership, a yearly operating rhythm
that helps ingrain strategic thinking into our business,
and a culture of growth that fosters innovation and clear
thinking about performance.
The early 2000s were a critical time in GEs strategy for narrow-body aircraft engines. A wave of contract renewals was
on the horizon, which could have changed the competitive dynamics of the market for decades. The Commercial Aircraft
Corporation of China (COMAC) was a growing force in the market, yet traditional giants Boeing and Airbus remained.
The market for new engines was expected to be as large as $50 billion. The question for GE was where to place our bet.
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GE Capital
A clear vision from the top
In recent annual reports, our CEO, Jeffrey Immelt,
describes six strategic themes that will propel our
growth for decades. Since we rst envisioned them,
there have been adjustments, for example, to meet the
challenges of the global nancial crisis. But, overall, the
themes have remained a remarkably stable signpost for
all our strategic decisions.
They are united by a single question: How does GE
continue to grow? The rst answer to that question
is: by creating market solutions for tough societal
problems. Rising costs, for example, are a major concern
for health systems around the world and particularly
in the United States. The key question for the leadership
of GE Healthcare is how we can improve efciency in
delivery without sacricing quality or access.
In addition to solving problems for customers and
society, we believe that launching great new products
through technical leadership drives growth. That belief
translates into sustained technical investments, people
development, and the constant rening of our process
for innovation.
A third priority is growing services and software.
This priority helps to coordinate multiple GE businesses
around what we believe is a $100 billion potential in
infrastructure software segments, such as healthcare
information technology, Smart Grid, rail movement
planners, engine monitoring, and factory productivity.
The remaining three strategic priorities are leadership in
growth markets such as China, India and Latin America;
expansion from core markets into adjacent markets; and
creating value in specialty nance.
Each business within GE considers how it can drive
the six strategic priorities. In aerospace, for example,
the focus on growth markets and technical leadership
became the major strategic decision, discussed in the
opening summary, which led GE to become the sole
provider of narrow-body engines to COMAC.
The ability to execute quickly and broadly
We believe that one of our strengths is being a fast, big
company. To maintain this agility, we develop processes
aimed at making our size a facilitator of growth, not
bureaucracy. Our planning process creates an operating
rhythm that is designed to repeatedly test ideas and
then quickly turn decisions into reality.
We develop processes aimed
at making our size a facilitator
of growth, not bureaucracy.
Exhibit 1. Six strategic themes that guide GE (Source: GE 2010
Annual Report)
Our strategic plans are known as growth playbooks,
developed in the rst six months of every calendar year.
Starting in January, we consider how we have performed
against the previous years goals. Then, we conduct
two months of analysis that considers the present and
future of our market and our strengths and weaknesses.
In some cases we may forecast 10 to 15 years ahead,
but in businesses with long product cycles, such as
aerospace, we will look ahead 20 years or more. We call
in external experts to test our assumptions and help
minimize groupthink.
Towards the end of our market analysis, we start
dreaming about new growth ideas, and then we create
a vision for the changes we want to make to the business
and how we will make them, i.e., the strategy. This requires
further thinking about tactics, specically the critical
actions we need to take to realize our strategy, how we will
measure and maintain progress, and how we will address
major potential downsides. Finally, we consider the three-
year nancial implications and measures of our plan. All of
our conclusions and assumptions are tested again at our
annual strategy session at the end of May.
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GE Capital
One month later, the heads of all businesses present their nal playbooks to senior management. Based on the feedback
from GEs senior management and board, we move quickly in two annual sessions at the end of July and August to create
the operating plans that implement the growth playbooks in the coming year.
A growth culture
We foster a competitive meritocracy where the best performers win, but only when they also embody GE values. One
of these values, being a humble listener, helps in the open exchange and testing of ideas during strategic planning. We
learned some difcult lessons in the global nancial crisis, but the respect for alternative points of view helped us make
many decisions that reduced our risk exposures ahead of the crisis and reduced our costs signicantly.
We encourage our people to share ideas through regular meetings that run parallel with strategic planning and we
foster conversations about strategy. Our Corporate Executive Council, which meets four times per year, includes about
40 leaders from across the company, including the heads of businesses, GE senior management, and representatives
of legal, nance, operations, sales, and marketing. Our Commercial Council draws together about 20 leaders in
marketing, sales, human resources, and communications to generate ideas for increasing growth, such as GEs
innovation and team training programs. We also formed an Operating Council that focuses on product management,
material cost-out, simplication, Lean Six Sigma, and capital allocation.
Since all of GE moves in unison through strategic and
operational planning, it is much easier to spread and
implement good ideas from these initiatives than GEs
size would suggest. A single best practice can be rolled
out quickly, generating signicant savings, earnings,
and revenues for investors. We publicize such results
internally to foster healthy competition and inspire all GE
employees to help develop the next great idea.
Our leaders are expected to
be growth leaders, not just
productivity leaders.
To our leaders, we make it clear that they are expected
to be growth leaders, not just productivity leaders. GE
values are vital to ensuring this growth is sustainable.
Through many years of acquisitions, we have learned
that many companies focus most of their attention on
parts of the business that underperform targets. At GE,
we ask the same questions at the beginning of every
strategic plan, no matter how the business is performing
against its targets: How does this performance compare
to industry and overall economic indicators? Why did the
business perform the way it did? Do these reasons make
sense or do we need to keep investigating?
Conclusion
We want our leaders to think big and long term. We also
want them to be practical, action-oriented managers.
Strategic and operational planning is a structured
process that helps them connect a vision for growth with
quarterly results. Once their strategies are approved, our
leaders are empowered and expected to act. In 2010,
we generated $20 billion in revenue from businesses in
which we were not present in 2000.

Growth Playbook
Focus on evaluating the past and
defining the future strategy and strategic
priorities for GE
- Understanding of environment
and competition
- Generation of ideas
- Development of action plans
Established for a period of three years,
and revised on an annual basis
Operating Rhythm
Focus on the development of an annual
operating plan based on the strategy
defined by the growth playbook
- Budgets
- Investment funding
- Sales projections
- OM / cash-flow commitments
Overview of strategic process at GE
Exhibit 2. The strategic planning process at GE includes two major components (Source: GE)
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GE Capital
Market Overview Dreaming
Front-End
Effectiveness
Growth Planning
Understand
Generate
Growth Ideas
Getting Better
Financial &
Compliance
Growth Playbook Approach
Environment
Segmentation
Competitive
differentiation
Growth initiatives
Core
Extensions
Adjacencies
New businesses
Ability to execute
Initiatives and
strategy
Metrics
Dashboard
CY financial
overview
Growth & expense
targets
Compliance
initiatives
Risk assessment
& control plans
The Growth Playbook process evaluates the current state and sets strategy for the future
On the way to approval, strategic ideas are questioned
and tested at every level of GE before they appear in the
growth playbook that goes before senior management
and the board. This may sound like a recipe for
discouraging innovation, but in a culture that values
openness and listening, it actually means ideas have time
to breathe and develop.
In the early 2000s, for example, it was clear that private
label credit cards for retail stores were beginning to
lose volume to general purpose credit cards. GE Capital
did not want to exit the store card business, but the
solution was not immediately obvious. We went through
a few years of brainstorming and testing before we
introduced a store card into the US market with a Visa or
MasterCard afliation (which allowed the card to operate
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Copyright 2012 General Electric Capital Corporation. All rights reserved.

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Contributor

Thomas Gentile, Executive Management, GE Healthcare
Exhibit 3. The growth playbook process evaluates the current state and sets the strategy for the future (Source: GE)
as both a general purpose card and a store card). Once it
was tested, we quickly rolled the card out in Europe and
Asia as well.
Strategic ideas are questioned and
tested at every level of GE.
Today, the business remains a great success, but that
success does not go unquestioned. We scrutinize good
and bad results alike because we view performance as
something to be understood and repeated. In the end,
we believe this is the heart of strategic planninga
feedback loop that continuously renes our approach
to business.
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GE Capital