It is then by utilizing robust research and development projects, combined with an acquisition strategy that augments growth, management creates sustainable and evolving business model.

These are the hallmarks of effective leadership. through managing your future development, mostly through research and development, that when combined with a sound acquisition strategy, that you believe will augment your present internal growth, so as to look to sustain the business, longer-term, becomes your contribution as a leader.  These are the bedrock of good corporate management. It seems within GE, all of these have been forgotten or collapsed. Why, I mean how can that have happened?

For a company reputed to have a good management discipline and focus, yet this year, 2017, for GE, it seems all of these are lying in tatters, or some parts will lose out as a consequence, into the future. What has gone wrong at GE?

The last few months have been some of the most shocking ones in GE’s history. GE has been around since 1892 and was one of the corporate titans of the 20^th Century. Since the crisis of 2008, GE has been struggling to fully regain its position but all its actions were regarded very highly as “making good progress” as it maintained a relentless momentum of shedding and acquiring operations, as well as pursuing a buying back of its shares, and paying out the beloved GE dividend. This certainly provided a highly dynamic environment for managing the business. There has been a consistent muttering that this was not fast enough or clear enough. Well, GE faces a very different set of realities today.

Today, GE is in a very dark place at this moment. It is managing a full-blown set of crisis, that has investors highly spooked and demanding answers. Its share price is hovering around $17 per share, whereas, in February of this year, it was ranging in the $31- 32 price. Its market valuation, once over $400bn, is now closer to $150bn.

This is a long read, as the story itself is only just emerging and is a complex one. I simply have to step outside my own innovation comfort box to try to get to grips with the breaking GE story. It has shaken me.  I assume you already have some awareness of what is happening in a company that has been held up over so many years, as a model of good management.

So let’s jump in and try to find some answers to the GE story unfolding in front of our eyes, it is one that has more to come and a finish that is less than clear. Is it too big to fail? A Kodak moment? Will GE eventually break up? Or is this a set of crisis overhyped and those attempting to manage the complexity of this turnaround will simply put it back in good order in the next eighteen months. I just wonder if it does hold more ‘spin’ yet to be discovered?

Whatever, it is a big story happening in front of our eyes and it is generating more coverage by investors than you can possibly read. So here’s my take on it, so far:

Past transformation activities were not enough within GE, the cash has been running out!

Jeff Immelt who ran GE for the past 16 years, attempted to radically transform the business, he really did. GE was beyond the classic conglomerate, it had such a massive financial arm, GE Capital that at one point in that financial crisis of ’08 it had been determined as “systematically to be deemed as an important financial institution to be allowed not to fail”. In preceding years, Immelt stripped away as much of the tangled web of GE Capital to refocus the business on its core industrial business. GE Capital is certainly a tangled web and still might become central to any further crisis.

Yet GE stayed locked into the classic conglomerate structure, where Immelt chose the shaping of this by taking the high road of acquisition and spending, to be his attempt to reshape the business. In Immelt’s view, he was achieving a strategic transformation, yet it seemed he also relied far too much, in recent years, on the significant ramping up of the digital arm, now Digital GE, that equally required lots of cash. GE made a $4 billion bet on connecting industrial equipment via the Internet of Things (IoT) and analytical software with a suite of products called the “Predix Cloud”. This has a significant place in the future but it was not able to alter the conditions that radically changed in the marketplace GE are facing today.

The complexity of the GE transformation is unique and unfinished

This complexity of transformation, when you operate within any heavy industrial asset world, is a significant challenge, especially today when technology is fast displacing dated business models, technologies and ways of work at an ever-increasing pace. A world where others, far more nimble and agile, are able to respond as they are more laser-focused.

Yesterday’s models of the world, especially the conglomerate, has to be equal to the same task of responding to the short-term nature of our stock exchanges and increased returns. Our stock exchanges are still not recognizing the value or rewarding innovation in a time when companies need to be innovative more than ever. There is such misalignment in time for innovation to emerge. This impatience goes far beyond companies and investors, it is hurting the economy and society as a whole as well.  Each company, big or small needs to be nimble, agile and highly focused, on what will return a market premium, or the investor drives your business down even more. GE has been caught in this for some time. Time is not on your side in this world of immediate return. I wonder if GE will follow its rival, Siemens in moving towards more of a holding structure of separate entities?

With all Immelt’s selling off of those slower-growth, lower-tech, and non-industrial businesses, over the years, he just simply stayed with too much of the core business model as central, being managed centrally. He was ignoring the shifts taking place within the marketplace,  or perhaps he had the feeling he could shape them accordingly, simply by GE’s actions and rhetoric. More of his businesses were far more vulnerable than he realized to the changes taking place in these markets.

Even though he doubled the GE investment in R&D progressively, the innovations emerging from the businesses were not transformational enough to counterbalance all the negative positions developing in market shifts, although it produced some significant breakthroughs and advances on what went before.

A slowing growth, a rapid shifting of market sentiment, from fossil fuel to renewables, also went faster than expected. Other more focused companies were re-working their core business models where digital played a part. In retrospect it seemed in GE, it increasingly became the only growth game, in his view, besides acquisitions to bolt on to existing industrial business areas. Digital became overwhelming in management attention, to find and sell digital solutions.

Then came 2017 and the roof caved in on GE

Immelt kept faith on the existing core industrial business, he even recently decided to double down on the fossil fuel industry and you can question seriously was he ignoring the realities of where the sentiment in the market was going. He had a greater belief this was a time to consolidate within core businesses reliant on fossil fuel.

Until this year, a constant stream of GE buying back its own shares, paying out a good, solid and reliable dividends and profit returns has kept the investment market from deeper questioning. Coupled with a consistent upbeat stream of management views has projected GE as a well-run and highly effective, highly optimistic organization. There was a growing denial set in by all that steady reassuring news. Well not anymore, GE recently in its 3^rd quarter review revealed its chronic cash position. In reality, its free cash flow can’t pay its obligations. Its recent acquisitions were not achieving the synergies expected and especially GE power was in deep trouble. Could this have been foreseen?

In 2012 GE free cash flow (FCF) was $16.2bn, in 2015 this was down to $12.6bn, then in 2016, this started to drop significantly with it really “hitting the rocks” in 2017, with some suggesting a negative of  $3bn predicted for this year, although the urgent action currently was undertaken, might pull this back into positive territory, partly due to the dividend being cut in half, allows for this saving to flow through. Some in the markets still view the latest GE predictions with caution, as too optimistic.  In late January 2018, they will be announcing their 4th quarter and end year results, to confirm the full 2017 performance and that will determine, much of the future, and determine even more immediate action.  Presently the GE position is that they will claw back too  $6- 7bn (FCF) in 2018, although many in the market are predicting this might be tough as well. Suddenly they have had to be faced with a cash-starved reality.

So the cash to fund the bets, fund the dividend, keep paying into a pension scheme, keep pushing the digital solution began to unravel, as the main business units generating the cash, built on fossil sources, dropped through the floor. Oil, gas, and power that GE had put ongoing bets on, have become significant cash consumers at unhealthy rates. The other parts of GE, especially healthcare and aviation could not bail them out.

Obligations mounted. Dividend cuts (50% ) have caused significant anguish for the longer-term smaller investor who was partly reliant on that consistent dividend pay-out. The dividend policy is still up for potentially more cutting, the share buyback is highly questionable (if you have no spare cash) and any M&A program suddenly becomes shrunken dramatically, down to small tweaks. Ouch!

Immelt retired and his vice chairs headed also for the exit door

Immelt made a series of expensive big bets that especially investors did not share as winners. The synergies were hard to extract on his promises. So in mid-2017, the writing was on the wall, Immelt needed to go. He resigned or was retired in June 2017 as CEO and it seemed quickly departed as handover Chairman, once the 3rd quarter results come out.

GE was heading for a full-blown crisis and the new CEO, John Flannery, quickly became also the Chairman and undertake a massive review “across the board”. Three vice chairs in Beth Comstock, Jeffrey Bernstein, and John Rice also decided the time was right. In Flannery’s opening discussion with investors, he outlined a dismantling of the legacy of his predecessor as he began with his comment “we need to make some major changes with urgency and depth of purpose”

So what has caused this radical shift to turn GE into a full-blown crisis?

Running out of cash, bad investments in recent big acquisitions, paying out of a dividend that GE’e earning could not sustain and the collapse of its GE Power division and coupled with the continued lackluster of the oil and gas business, transportation, and its lightening business has become the crisis. The business model was broken and was in a real urgent need to be fixed, markets were not performing and GE was becoming even more complex with the layering on of digital to every business, to shift the focus from product and service into product + service + digital.

GE had gone for a doubling down on fossil fuels when the world wanted solar, wind and all other renewable sources of energy, as well as the global customers seemingly determined to keep extending the life of the existing asset and not invest in the new, however much, GE tried, in its selling.

GE was attempting to unwind a very complex beast. It goes back actually a long way. Even in Jack Welch’s time but in the tenure of Jeff Immelt the GE stock fell by about half. Its stock is trading well below where it was 20 years ago. In 2017, so far, GE is the worst performing stock on the Dow Jones Industrial average. The trouble was GE was unable to make a complete strategic transformation, it got caught up in supporting its old business model, just by adding new digital clothes.

Renewable energy versus fossil fuel- a reality check

As solar and wind power costs have plunged, this has been challenging the traditional model of the industry. Mr. Immelt decided to bet the other way by investing in  2015 on Buying the power business of Alstrom for $10bn, a company specifically strong in coal plant designs.

Then he went and paid $7.4bn to merge with Baker Hughes that has an oilfield and gas manufacturing and services business, that has been in seriously difficult market conditions for a long time. This created a merged company where GE retains 62.5% stake. I have heard that In the past the attitude between GE and Baker Hughes in the marketplace was antagonistic to each other. Not ideal for a friendly merger and already the profits of that business for the first nine months of 2017 were down 41%, excluding restructuring costs. The synergies were not materializing in downturn situations.

The Gas turbine market, a significant part of the GE power division, for example, has fallen through the floor, along with the usually highly lucrative improving gas-fired plants has dropped away as the shift to alternative sources of energy continued. GE is not alone on this rapid decline and bad forecasting, Siemens, the other titan founded also in the 19^th century, Siemens in 1847, GE in 1892, has been equally scrabbling to drive down costs dramatically in their power and gas divisions. It does seem Siemens has been well ahead in spotting this trend, warning of the risks within the hydrocarbons- based power, a lot earlier.

Both Siemens and GE are having to deal with some rapid adjustments and downsizing. Inventory needs to be run down so the demand/supply is rightsized and any healthy return to positive financial results for GE might not show through until 2019 at the earliest, most even are predicting 2020, draining GE of much of its management attention.

There is going to be a very painful adjustment in their GE Power, as well as their Baker Hughes division, and related GE Energy Connections business, in adjusting to the present and near-term realities of today’s markets, one of the reduced demands for power and oil solutions. Is this cyclical or permanent? In GE’s case, they will be hoping for some shift in really tough market conditions, presently facing them as they have been placing really big bets in recent investments that fossil fuel will still be needed to satisfy the world’s power needs.

GE divested their Water business a while back due to concerns that the deal would not be approved by the US government. Not only was the Water business highly profitable, but it was a segment that would almost certainly have led to large profits in the future. Selling the water business was, in retrospect perhaps a poor business decision for pivoting away from being reliant on fossil fuel.

The confluence of issues came into reality also in 2017 for GE- a lack of cash finally hit home!

With the power division in so much trouble, on its own, it might be contained but GE’s troubles don’t just end there. The opaqueness of how GE managed its conglomerate has been a source of worry for investors over the years. Until this year a constant stream of buying back its own shares, paying out a good, solid and reliable dividend has quietened the market, along with a consistent upbeat stream of management views. There was a growing denial set in. Not anymore, GE recently in its 3^rd quarter review revealed its chronic cash position. In reality, its free cash flow can’t pay its obligations. Suddenly as I stated earlier, they have had to face up to a cash-starved reality.

Also, the pension fund has been grossly underfunded for some time, where some regard a fair value of the GE Pension fund to be $63b, benefit obligations of $94b and GE’s pension shortfall of $31b, the largest underfunded pension plan in the US. GE has been forced to borrow in new debt $6b to pre-fund some of its immediate obligations in 2018 to 2020. This becomes a real red flag as these obligations only continue to build and will constantly drag down share price for the dividend or shareholder return with this level of obligation. According to one analyst, this obligation of $31b equates to $3.50 each share.  So GE is shifting more to debt but needs to address this pension obligation, in the future.

Finding cash to fund obligations makes for a very uncomfortable position. To have its major business, Power, caught in a severe, possibly consistent declining market, reliant on fossil fuels, makes for a double whammy.

The pressure to save money; to delay payments, to renegotiate supply conditions, to reduce expenditure, all need a high sense of operating awareness, sensitivity and observation of possible consequences, as each changing action has its negative impacts when you are managing to extract cash or delay your spend or payment.

Yet the worries continued unabated.

Until the management of GE resolves the opaqueness that many still feel is surrounding GE. There will always be a feeling by many investors, that “they are spinning a good story,” something laid at the previous managements door of over hype and promise, under delivery. Here Mr.Flannery has been far more open, signaling the problems he is finding

The real opaqueness lies in GE Capital, it needs to become transparent.

There is a growing view that GE has billions of dollars of obligations from reinsurance agreements with other insurers. Each time GE was caught in a bid for contracts on any significant scale, GE Capital took on a portion of the carriers responsibilities of paying and helped in having access to more favourable rates of borrowing, due to its near- bank status (recall the designation some years back of “systematically important financial institution to big to allow to fail”.

Thankfully there is a set of actuaries examining GE’s long-term care reserves, many in the market believe these might be deficient. If there are any skeletons found here then GE would be very much down on its knees. No spare cash, struggling major portions of its business and a lack of growth in many markets is a very uncomfortable position to be in.

So why do I say that the enemy is already within?

Firstly we have the very real shift in the investors in GE. The secured dividend kept its stock as a large retail one, made up of pensioners, portfolio funds and individuals looking to have this guaranteed dividend come to them. There is growing fear the dividend might have to be cut again, or deferred in the possible near future. That takes GE out of one set of shareholders that held their shares due to the dividend, these shareholders made up a healthy part of the long-term investor. GE still sees its dividend as part of a new “balanced capital allocation mix” of R&D, CAPEX, the dividend and the company’s underfunded pension fund.  I wonder. This is ever more reliant on free cash flow.

The other investor, the large institutions, more looking for short-term gain, are always looking for rising share prices, attractive assets, good management providing strong returns. They are critical, fickle and demanding. At this moment, we are on the downside of many of these “needs” they expect by holding GE shares.

The type of investor attracted to GE is changing even more. In 2015 Trian Partners, known as activist investors, brought $2.5bn of GE stock, which was about 1.5% of the company. They campaigned immediately on how GE was undervalued and believed Immelt and his management team would not do the necessary things to deliver both a higher stock price and dividend.

“Activist investors” are regarded as the modern day “corporate raiders” of the 20^th century. They are part of a group of investors searching to unlock hidden value and increase shareholder value and have collectively, at their disposal, enormous assets of $120b or more, looking to invest in where they see opportunity. Their goal is clearly to increase their assets full stop.

They set about getting the management of the company to change strategy, they seek seats on their board, organize proxies and draw on the broader sentiment of the investor market to their side of the argument to maximise their position.

Trian Partners has recently achieved a seat on the GE board. They will be a part of a revamped board, that will shrink from 18 to 12, and three of these will be new directors. Recently the board might have been sleeping at the wheel, not seeing the problems as starkly as they have been painted in recent months. One can ask the question: why did they fail in their oversight and fiduciary duties? No wonder many are bailing out.

When you have more “activist investors “they often seek removal of the present company management or demand changes that are a radical shake-up as part of their belief of unlocking value.

The value of such an activist is he does prod a management into a more radical transformation, something GE should have achieved within themselves. It forces a very hard internal look at itself, one that is now being undertaken. The board itself wakes up and becomes the activist. The top management is put on notice.

 It remains within, that the problems still lie and all is clearly still to do.

GE, through its new Chairman & CEO, John Flannery has been responding. He undertook a 100-day review of the business he has taken over and presented his opening view in late November. The reaction has been muted as the market and investing community was expecting far more but there is a growing opinion of greater transparency than in the past.

The present portfolio is in need of a reset with a new guiding set of GE principles. The lighting business they have badly failed to refresh, transportation is in need for some radical rework and change in its market conditions before it shows growth. Both are likely to be sold, without some major redesign. The mergers they have made, have badly failed in generating the synergies or returns expected.

The renewable energy division is in a less than dominating market positions, something GE always prided itself on achieving, in “we must be No. 1 or No. 2 in market share” and their Digital and Additive business divisions are disruptors of ‘future’ promise but not yet of the substance to offset and absorb some of the other internal problems coming from declining profits and market conditions.

The two stars in the GE stable, are Aviation and Healthcare but these are in danger of being “swept up” in the same house cleaning need of greater rigor and fiscal tightness, to extract the essential cash needed for the group to fully function.

GE is restating what makes a GE business.

Its financial, operational and strategic characteristics need to be robust. There are presently far too many businesses caught out that need to prove themselves.

Mr. Flannery has promised to exit $20b of assets over the next 1 to 2 years, these will include transportation, industrial solutions, current and lighting and a host of 10 plus other transactions. This $20b promise is around 5% of the $365b on the books last year, that does not seem much does it? Selling off assets can also add to your problems as competitors “sniff” bargains and push down prices and markets don’t reward those that “blink first”.

His top team going forward is made up of 40% in new positions. The concern is they are all internally appointments and you worry that the same myopic view of the business might still prevail. Flannery said he would change GE’s culture to hold managers more accountable, demand better performance from the businesses and reduce the complexity of GE’s portfolio.

Why have so many “bright” executives (150 top executives) on the inside, why did they not spot some of this “storm”? With much of the same management caught up in this over last few years, coming through to replace some of the past ones they had been working for, are we honestly going to get the necessary challenging and fresh perspectives that Flannery suggests? Questionable.

Flannery promises to radically change the compensation plan for his top 5,000 employees with a higher equity mix and move from 20% to 50% of their compensation. This movement away from cash, into equity, aligns the top managements fortune to the shareholder’s expectations of share price and performance. They are at least working the same oars if the boat is to make headway.

The culture is expected to change.

Will it go back to the days of Jack Welch of stack-ranking, firing the bottom 10%, that would be a disaster. GE has never shed this Machiavellian culture in all the years of Immelt, as much as he felt he had tried it never trickled down through the management levels in a way that GE so needed to transform their culture.

As GE go through significant cost-cutting, reducing investments, research and development will we see a choking off of innovation? I fear so. What happens if the research and development dollar is radically cut or the talent within this area, senses threat and pressure. What does this do to the creative working environment?

As Mr. Flannery attempts to instill his planned “Accountability, Transparency, Rigor and Consistency” and his call for “getting back to basics” we will see a very different GE emerge. They are targeting $2 to $3b in cost-cutting. That is nothing on what it will have to be before the rescue is achieved. Already moves are currently underway to eliminate 1,500 jobs from the Head Office, and a suggested 4,500 from the European organization in the GE Power business. So many, many more to come, cutting into both professional and production staff. Maybe 15 to 20,000 in the months ahead. Will we see operation plants equally shut down with GE Power soon?

Job-cutting sends such a ‘chill’ message throughout the organization for a “flight or fight” reaction. The talent they have attracted might simply ‘melt’ away if they deem the culture goes back to the old GE type. This needs a light hand, not a heavy bringing down of the ax.

Are we about to enter “the death by a thousand cuts period” as internal managers view bold action differently, not experienced in a managing out of the normal,  and fail to really respond to the multiple crises on hand that point increasingly to radical surgery? I fear we might.

Remember that “the enemy lies within” when you have to make a dramatic turnaround involving 280,000+ employees, spread out in a global business, that have been fed a very different message on their ‘dominating’ position. I feel they are more than likely about to learn what “agile and lean” might mean in the new GE way, and let’s see how they ‘react’ and how it is managed, will determine real, lasting change, or simply, reluctant acquiescence, waiting for further management evolution.

It is all very much to do, and GE has little “wiggle” room it seems

 There is an enormous set of “What if’s” in GE, over the coming months. Nothing is certain, ever thing is uncertain, everything is to still do. The jury is out but many will want a guilty verdict if fresh evidence of change is not forthcoming. New evidence of problems will make it even harder. Everything has come into play.  What is being undertaken is one of the most complex, difficult turnarounds in modern business.

Lacking any proven turn around executives that will find this unrelenting in its pressures for the next 18 to 24 months. Execution has never been the strongest at GE, they have bounced from idea to idea, layering on their version of change before it has filtered down to the rank and file. This time it has to be very different.

A turnaround needs to be a strategic transformational one

A culture of turnaround need is as demanding as anything that comes towards you as a manager. It is life changing as it seems in GE’s case, it is life-threatening.  Jeff Immelt in his farewell view of “How I remade GE” commented: “I led through recessions, bubbles, and geopolitical risk. I saw at least three “black swan” events. New competitors emerged, business models changed, and we ushered in an entirely new way to invest. But we didn’t just persevere; we transformed the company. GE is well positioned to win in the future”

What he never stopped to question as deeply as he should have done, was the enemy within, those that resist change, those that chose to interpret it in their way. He should have appointed a Vice Chair of Change, who drove the change he wanted, in transforming GE, all the way through the GE organization. He had within himself this “Be All In” or “Game On” or “Let’s Go” with an enormous sense of competitiveness but he felt it was his to do, perhaps ego got in the way, so for others to follow it never was “full on” or that deep organizational commitment I felt.

In that remarkably ill-timed departure article over at HBR of “How I remade GE” his final words tell a story of promise yet to come:

“It will take years for GE to fully reap the benefits of the transformations. But as I contemplate my departure, I love where the company is positioned. I love what we’re targeting. The company in 2001 was certain that the future would look like the past. The company in 2017 is ready for any future. I’m confident that I’m handing over a company that will flourish in the 21st century. Some people at GE feel that the stock market doesn’t fully appreciate what we’ve accomplished. But I look at it this way: Our task now is just to perform, to execute, and let the market make its own judgment”.

Judgment time is here, the clock is ticking down. To flourish in the 21st century the new management tasked with this turnaround, really will need to challenge everything as the market and GE investors are certainly not in a friendly mood.

Self-belief or Delusional- we are still facing the volatile time

Immelt held a view that what people were calling GE, the 125-year-old start-up was his achievement, well that was a little delusional. They were and are slowly transforming into a digital industrial company that is defining the future of the internet of things but is it changing the very nature of the product businesses that GE are in? Nice vision, only part way there. and certainly, his claim “Change is in our DNA” was perhaps only skin deep. No one doubted his self-belief.  He made the opening comment in that (farewell) article for HBR: “remaking a historic and iconic company during an extremely volatile time” seems to be exactly where we are today. The difference is that this is of GE’s own making, this time they can’t blame others, it is theirs alone to turnaround.

Turning the page with difficulty, whats next?

As we turn the page with some difficulty, I’m optimistic at the strength that lies within the cores of GE; in its people, in its research, innovation, and real resolve to forge ahead. I’m certainly pessimistic at present, I worry that there is not going to be more “bad news” discovery when Flannery not just opens up the cupboards but starts working through the piles of issues he will find that need to be unraveled and reshaped.

Will it get even uglier, not just for investors but for the employees, for the customers to worry over? Well Yes, is my feeling, in all that I have read as it gets vicious as you spiral down, with less and fewer options. Everything seems to diminish. If GE starts pairing back R&D, they will begin to see their talent leave and their renown innovation spirit dry up.

It is far from that all doom and gloom, GE has incredible products and dedicated talented employees

I want to come back and focus on GE and its incredible potential in another post soon. At present, I’m still working on my shock. GE is clearly in the middle of a storm and like anyone caught up in this, it takes time to regain your footing and beliefs, mine as an admirer, included. No, GE in its real core, its product, is far, far, too good to fail.

As it slowly attempts to dig itself out of its own hole with a new strategy, let us see if it is enough to bring it back to health. Much is returning to the basics but recognizing that the recent business model needs a radical overhaul. The hard days to turn it around are still ahead.

Like many, I have a store of goodwill and sentiment for GE. I want to see them come out the other side, recognizable. I really wish I could help as I just feel they, the management, are ill-equipped for managing relentlessly a turnaround of this complexity and magnitude.

They do need all the help they can get and some good luck that sentiment; by investors, by the markets, by their customers. all the vested stakeholders, or their own employee’s, to not make the present position that GE finds itself in, even worse. Don’t hold your breath in the coming months, it will be a tough period.

It is theirs to do, they need to fight much within themselves, open themselves up to healthy questioning internally as well as externally seeking help. As I said, the floodgates are open, will GE survive but in what eventual shape?

***My research for this offering my personal assessment was drawing down from the GE material released in recent months, from management transcripts, numerous investor and analysts assessments and many views; especially countless articles on www.seekingalpha.com and in trade-related papers, or individual viewpoints that I found made a contribution to my own knowledge and understanding. Errors and omissions are clearly down to me.

*** some amendments or new editing was made on 7th December 2018

The post The enemy is already within. The flood gates are open. Can GE recover? first appeared on Building Your Innovation & Ecosystem Intelligence.

Dubbed “Innovation Breakthroughs – Igniting Europe’s Growth” They were celebrating 10 years of the opening of the centre and as you arrived, you saw the cranes at work to double the facility as well as further deepen their commitments within the surrounding community even further.

One such community success story has been the co-location they have with the Technical University of Munich (TUM), where both have evolved to share a real philosophy of creating new knowledge and making it available for the industrial innovation process through this partnership.

They combine in a number of “sweet spots” or research domains, that move the academic creative contributions of science into the industrial researchers alongside, working to advance products, bringing these concepts to commercial fruition.

The event also combine with the announcement of Euro €18.5 Million in New Research Program Funding announced as GE Marks the 10th Anniversary of its Global Research Centre in Europe with its university partners. A further community commitment.

Alongside side this announcement, a White Paper was issued on “The State of European Innovation”, drawing down from the GE Innovation Barometer  and other resources.

I have always liked to read with interest this set of Barometer insights,  and have enjoyed commenting upon (here for example) the results that are published each year. The GE Innovation Barometer I think really does offer valuable insights into innovation thinking by over 3,000 leaders in larger business organizations. It offers good insights into the inner thinking about innovation that has practical implications.

A quick tour of the R&D facilities reveals much about a company

While I was there, I was lucky enough to take a “quick” tour of the GE facility after my small contribution to a fascinating set of debates earlier in the day. I can honestly state the passion, commitment and sense of pride in all the researchers I meet were impressive. It goes way, way beyond putting on a positive spin to the visitor, it is a deep desire and I think a real motivation to push advancement.

Before I went to Munich I really got caught up in GE and its evolving story.
From the outside looking into GE I had felt it was evolving but I was not able to get ‘under the hood’ and see the ‘powerful forces’ that seem to be at work. This event helped trigger that growing awareness and brought it significantly to life for me.

GE often use an awful lot of ‘convening words’ that make you curious to connect to their technologies, and their industry areas and explain how and where these are evolving. I think this thinking has been ‘cranking up’ significantly in the past couple of years, and for good reasons. GE has a good evolving story to tell.

Included in their portfolio are some of the essential aspects of our lives, they connect us, connect enterprises and advance many things and reshape the future. When you hear about “mapped minds”, “brilliant factories”, “extreme machines”, “energy everywhere”, “super materials” and finally their take of the “industrial internet” it confronts you. That was how I felt when I walked through the doors into their lobby area.

For me it was going to be a promising day.
Irrespective of how or where I could contribute, I knew I was going to learn a lot from the event. As it turned out the panel I was invited upon became fairly lively.

I had the pleasure of being on a panel that included Mark Little, the Senior Vice President and Chief Technical Office for GE, Jean Botti, the Chief Technical and Innovation Officer for the Airbus Group and Christian Cahn von Seelen, the Head of Corporate Strategy, China and India Business at Skoda Auto.

The audience ranged from politicians, and senior representatives across industry, research institutions and health and the Q & A I felt could have gone on and on, debating Europe’s innovative future. We simply touched the ‘tip of the iceberg as there are equally dangers lurking not just under the surface as complex problems to tackle.

Yet equally, such a positive mass of deep knowledge, real tangible successes and high absorption of learning across Europe, all needs to be picked apart, mapped out and reconnected in new ways, does provide a promising future in innovative ways to get Europe moving again, in growth, jobs and unified commitments. I only wish it was less left in Politicians and Bureaucratic hands and our institutions and business leaders were more deeply involved in shaping the process, not just lobbying for their specific part.

Plenty of pride, some angst.

Sitting in Germany you can always ‘feel’ that real pride, a clear determination and belief in the achievements made and plenty yet to come-

Equally, you know what will be delivered in much of the approaches can be summarized as making connected sense. Sometimes the rest of Europe does seem to want to ‘pull’ in other ways and that is hard to understand from a German’s perspective. This is part of ‘our’ creative tensions in Europe to be bridged.

It is part of the challenges we face in Europe, connecting all the diversity and opinions of 28 countries to get growth and a real momentum within the European economy going again. Debating the required innovation fits across Europe is complex and challenging.

What I liked in my visit was a reminder that if you combine much that is good from one culture and fuse it in thoughtful ways that capitalise on the diversity of the other or across many, you can really see tangible results. Collaborating on big challenges would be one ‘unifier’.

I think the combination of the fusion of the mindsets of an American company that believes it is a scale-based entrepreneur organization, managing complicated technologies and ‘big things’ and a collection of bright researching minds, all drawn from not just across Europe but many parts of the world, sitting next to a university (TUM) that are plugging into the German way of doing things is a good example of this collaborating across big challenges.

Of course, managing complex situations across cultures can be frustrating but this host of ‘connected points’ strikes me to be a winning formula. Of course in GE’s case, you throw in the connected nine Global Research centres you certainly ‘sense’ this motion towards an accelerating future within GE. 2,000 scientists and engineers and 50,000 technologists. It can make you pause for breath, it’s simply impressive, and ‘living proof’ of connecting minds, knowledge, and cultures with machines on how it can generate results that are advancing what we know today in significant ways.

Then we have the wave of connecting minds and machines.

Mark Little the Chief Technology Officer for GE was heading out of the door early afternoon to catch the flight to get him back to GE’s next event, of connecting minds and machines being held the next day. Now this promises a different, potentially radical new future in industry and GE are placing a lot of resource and commitments into it.

GE is taking a real lead here. In the last three years, they have been ramping up their thinking, dubbed “the industrial internet” and moving into the power of connected industrial assets (the machines) through embedding sensor technology everywhere on the machine, bringing back its data from often hostile environments and through the analytics applied can turn this into ‘intelligent information.’

This offers the potential of real-time decision making, delivering required and necessary insights at the right time, to the operators and business decision-makers so as to manage that dreaded aspect all industries fear of “downtime” better. It also allows for managing more efficiently and effectively the assets.

Already I gather GE has put over £1 billion into this potential game-changing move to transform industry. CEO and Chairman Jeff Immelt’s opening to this event with his headline view: “if you went to bed last night as an Industrial company, you are going to wake up in the morning as a software and analytical company” where the separation between data and industry has vanished. Does this change the business model, I think so.

Of course, Jeff Immelt is saying this, he runs a “big bets company” and they are setting about transforming the industry for competitive advantage. Yet again though, it is the way they seem to be setting about it that makes you feel it is happening and shifting the dynamics of big asset business, in significant ways.

Platforms, Partnerships and the Ecosystem

I strongly believe the future of collaboration is going to be based around platforms and ecosystems, where you bring together the minds and the business interest, gathered around specific but complex issues to solve. GE are working on delivering this.

Through their platform of Predix, GE are providing “industrial-strength software and analytics” and spoke of having 40 apps ready for customer use today at this event. They are also throwing open the platform for others to use, build and develop their apps. GE will offer the backbone, architecture, resilience, and security for others to come onto this platform with growing confidence and work towards ‘apps’ that are even more tailor-specific to their needs beyond ‘just’ sensors.

The partners already working with delivering from this platform are Cisco, Intel and Accenture and GE’s investment in Pivotal will mean the amount of time GE executives will be spending in San Francisco building the resources behind this is a space worth following.

I gather they have 800 data scientists and GE is on a further massive recruit to ramp this up, well over doubling this in the region, to attract and blend the best in talent, software and analytics. I also gathered they have been but recruiting the ‘forty something’ person as well for their business experience, as they sit down and work through issue upon issue with their customers.

It is clearly evolving at some speed, GE are delivering the Medici Effect of breakthrough insights at the intersections of ideas, concepts and cultures. as our world becomes more intersectional when we merge one field into a new, unfamiliar territory for these radical changes in how we will manage in the future.

The combinations of smart machines, enabling technologies, big data modelling and analytics and determining the customer outcomes in increasing collaborations, will radically alter the Business Model of GE in future years, in ways that we yet can’t imagine.

As I left the R&D centre in Munich

As I look up at the crane as I left and saw the shell of the additional building going up in Munich, I can imagine that science, research and technology will fuse in ways that we are only beginning to grasp. I wonder what type of mix of skills that group of future employees will have, far more a blend, perhaps a more broad set, rather than one that is deep only.

We will be seeing software services, a changing portfolio strategy and GE’s scientists, researchers and engineers all managing not just in their deep domains of knowledge but broadening out into far greater engagements alongside customers. It alters and unleashes.

Combining in future ways with the chosen universities, institutions and partners, increasing working through and on these platforms. where collaboration and co-creation will move way beyond today’s open innovation concepts, focusing on bringing ‘synergies’ that deliver those vital winning outcomes.

The future era of innovation suddenly looks even brighter.

So those Asset-intensive industries that are looking to reduce costs, improve efficiencies and search to unlock new sources of customer value, are moving into a ‘connected realisation’ that will bring the industrial internet into increasing focus. It will sit alongside the social side, where the internet of things (IoT) has been making most of the running to date, encroaching far more of our business and personal lives.

The promise of deep, lasting connections and relationships all seem to be offering innovation in a new era of prosperity, were connected enterprise and the connected world come together with very different business models, built on this ‘promise’ of platforms and ecosystems, delivering in very tangible ways through a collaborative common cause.

A place where “Everything connects,” a book written recently by Faisel Hoque, is suggesting where people, insights, capital, infrastructure and ecosystems combine. One where the age of creativity, innovation and sustainability come together as the needed skills required to be continually adaptive.

I’m all for that era. We are at perhaps an inflexion point on the way we are thinking, managing, and collaborating in a connected universe for new growth possibilities. I’d like to believe so and from what I can see, GE is well on their way to working this out in its own, highly focused way.

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The Barometer has explored the actions or constraints that senior business executives are worrying over in their pursuit of innovation.

The fieldwork was undertaken in April and May, 2014 and covered 3,200 phone interviews to people directly involved in the innovation strategy or process. It covered 26 countries and was conducted by Edelman Berland on GE’s behalf.

The supporting website provides the GE view of how this report reflects and provides an overview, an interactive, resources and key point headings sections to explore.

I  personally think GE have actually been a little too low-key on this report and frankly far too conservative on the potential takeaways in reading their ‘take’ in the overview.

It has significant implications for our organizations to grapple with but each is certainly not alone, it is a collective need to move innovation forward or you place much at risk if you don’t find solutions to the issues raised in this report.

This year the Barometer broke out of its past and steamed ahead.

The GE Barometer report for 2014 does seem to have broadened out its assessment on innovation, in my opinion, into a more comprehensive one around three aspects: 1) What are today’s drivers and barriers, 2) what are the trends, practices, myths and realities and 3) the country and public policy issues to tackle for supporting innovation.

There are two reports, one is a summary that can stand alone to quickly grasp the issues but does not really do the real justice that the full report provides in 68-odd slides. I’d recommend you explore both.

So what do I  have as my takeaways from this GE Barometer 2014?

I have summarized thirteen points that make some more than helpful insight into what is holding innovation back. In some ways by not cracking some of these it will kill off some businesses and this increased anxiety and fear I sense runs through many presently engaged in innovation, it is these that ‘reveals’ these tension points within this report. Take a read and see if you agree?

These are my thoughts summarized in these thirteen points gathered from the report:

1. Inequality, caused increasingly by technological innovation, will have a growing impact and fears on the ability to innovate, if innovation within countries or regions is not recognized as a real wealth creator or destroyer and its enablers are not effectively put into place and leveraged. The ability to resolve this or not, will have significant impacts on the lives and country positions within the global race for innovating competitiveness.

2. It is interesting to see a fairly equal view on the challenges being presented by a technological shift is either a revolution (52% think so) or an evolution (42%) and it does seem a number of emerging countries are rising to the challenge. Whereas the established ones might be less caught up in this, seeing this as part and parcel of radical changes going on. I think there seems an underlying complacency in some, a determination in others to shift the dynamics of how their country is seen and invested in.

3. The effect of this multifaceted change going on where greater collaboration convergence of technologies, the place of Big Data and the Internet of Things (IoT) seems to be leaving many of our organizations ill-prepared to embrace these.

4. External collaboration is a confirmed reality, the world over and it seems most organizations have passed through the downsides and see open collaborations as “risks worth taking” to innovate successfully today.

5. Big Data seems to be dominating many people’s minds today. 94% accept the reality of Big Data as something here to stay but the fears; constraints and impact, are far from worked through. Naturally you would understand this as Big Data is very emerging in its redefined concept but you gain a really clear sense of significant resistance to focus on this and how organizations are (totally) lacking in their abilities to capitalize on this. Some are actually “dreading the challenges and impact” it will have.

6. The Internet of Things (IoT) is seen to likely have a positive impact on jobs but 44% of those surveyed surprisingly had not heard of the “Industrial Internet” notion when asked. As this is a ‘GE-speak’ view of the more popular IoT it might not be a surprise as I can’t believe these level would not have heard or thought about IoT surely? There are clear ‘lead and laggards’ in different industries, with many indicating they are “not quite prepared” or “not at all prepared” for what this means on their business. (OMG!)

7. There is a review of how the global game of innovation is being played out with the balance required to localise the needs. ‘Glocal’ still resounds for many but I think this catch phrase might be not reflecting the true inability to tap into specific market needs and from this, local innovation might be significantly constrained. Like to understand this more to see if I might be right here, I think so.

8. The focal point of GE’s press release was entitled “Disruption Ready” yet there seems a huge anxiety here. The difficulties of changing mind sets, behaviours and processes is potentially going to “kill the business” is suggested, unless the ability to quickly adapt and implement emerging technologies is not undertaken. I think this needs a greater all-encompassing reflection as disruption itself is getting a lot of ‘airing’ at the moment. In this report 72% state they will protect their core business profitability and believe (mistakenly in my opinion) successful innovation (62% of responders) will come from planned innovation. Perhaps but not in the present way we structure innovation.

9. There is a strong continued worry over (a lack of) internal agility was acknowledged but the citing of “internal inertia” is seen as a critical challenge that can equally “kill their business” rings some real alarm bells for me.

10. Speed-to-market is split right down the middle. 50% believe getting to market as quickly as possible is key, 50% argue “not to rush” and take the time to perfect their innovation (another mistake in my opinion)

11. 60% of all interviewed still deem it difficult to define an effective business model and yet another seen challenge that is “killing the ability to innovate”. The scaling of innovation is equally seen as a concern and part of this real underlying Business Model issue.

With all the progress on BM’s you would think organizations would be working this defining and experimenting with different BM’s well through? The understanding, concepts and frameworks are out there but the board room seems to be blind to embracing this. It will change that is for sure.

12. The area that seems more ‘ripe’ for engaging and collaborating is between public sector and private industry on working through the needs for innovation and laying in the right policies and frameworks. The growing recognition that SME’s are leading the recovery charge, the encouraging of more start-ups and attracting into the country the multinational is tough to get into the right balance.

The public sector ‘reaction and responses’ lag more than lead and taking too much time to bring into place the factors for promoting innovation but within this report are some great slides on issues that can frame some healthy discussions and allow all the sides within the country innovation debates to engage and work out the evolving frameworks. I liked this section to help in this.

13. Lastly I liked the self-evaluation of each respondents view of their own countries innovation improvement or not, around that countries innovation framework. The developed countries are in need of waking up and listening, it seems.

My summary of the report.

So a rich report with lots of issues that do, it seems, need to be unlocked, unblocked and further uncovered to allow innovation to deepen and take hold. There are so many warning signals that I feel cannot be left much longer to tackle.

When you see “fear, anxiety, dread, killing our business, inertia, not prepared, not heard of, and killing the ability to innovate” it might raise one or two alarm bells somewhere.

Perhaps the alarm bells should be going off within the boardrooms, they need to start paying closer attention here, clearly they are still reluctant to understand and embrace innovation, they are not getting the multiple messages as it has far too many ‘disruptive forces’ to deal with but avoiding addressing these is far, far worse.

I think GE and their Barometer 2014 has some really helpful clues in not only what is “holding innovation back” but more in pointing up to “what needs to change” to allow innovation to really move forward. Please take some time to read it.

I would finally like to congratulate GE for investing in this initiative, it helps serve their global business by knowing more of what is the present thinking across many of their customers and across broad industries and public bodies they work with and it is proving thought leadership.

It also allows us all to understand the issues surrounding innovation

I certainly do look forward to where they take their GE Barometer 2015 on innovation as they have raised numerous issues that can be further followed up just from this 2014 report alone.

The post So what is holding innovation back? A new GE report first appeared on Building Your Innovation & Ecosystem Intelligence.

Just released on 18^th January is the GE Global Innovation Barometer with the results of its second annual review on innovation. Here is the source site to check out and explore your own needs: http://www.ge.com/innovationbarometer/

The aim of the release is to use this and have this available for the meeting in Davos as well as shape GE’s innovation agenda going forward. For the Davos meeting, let’s hope our leaders have the time and inclination to review its content.

No doubt GE will be there and if  Beth Comstock is going as the senior vice president and chief marketing officer of GE I’m sure she will be leading the “innovation does matter” charge.
Beth is emphasising a number of vital points that are arising from this survey. Let me provide a few, her rallying cry for business leaders is to understand where and how their innovation strategies are being challenged and to drive towards new solutions.

The report raises all the uncertainties found in today’s market place are challenging business’ ability to innovate. There is a growing restriction on accessing external funding or a conservative attitude and appetite for risk. Some would argue this ‘hording’ of cash, of not investing at this time does push us into more of a deeper hole so how can this be resolved.

Enter the political group to provide a more confident environment for investment so let’s trust some resolution of resolve and consensus emerges out of this meeting of minds.

The top line summary taken from this GE barometer taken in October/ November 2011

• • 9 of 10 executives report economic crisis negatively impacts their ability to innovate
• • View innovation as primary driver of economic growth, jobs, quality of life
• • Pro-innovation markets produce better economic results
• • New model for innovation in the 21st century validated
• • USA, Japan, Germany, China still perceived as most innovative

The continued belief, confirmed by the majority of business leaders interviewed is that innovation continues as the main driver of prosperity, competitiveness and job creation, and but also points out how challenging and uncertain the present economic and political environments we are in, may hinder companies’ ability to deliver meaningful innovation.

My one comment here on this– Leaders please ‘walk the talk’ on innovation.

A partnership paradox

I found more than interesting in the release by GE that a disconnect has surfaced between the importance of partnerships and the need to pursue them in the near term. There is a clear confirmation (86% of those surveyed) that partenerships are an important component of the new model of innovation but only 21% believe finding partners is an immediate priority to innovate more on a day-to-day basis

My comment here: That is a real disconnect between the present belief and momentum supposedly going on in open innovation and the possible activity taking place in the trenches and what the top knows about. That gap if it is there I think needs urgently addressing to get everyone on the same collaborative page.  Might actually “put the cat amongst the pigeons” for many.

Creating conditions for meaningful innovation
There is a reminder that one-size does not fit all. At the global level innovation continues to move towards an open, more collaborative model, innovation at the local level presents a complex landscape of challenges and opportunities that broad strokes can’t resolve. These constraints or nuances need to be dealt with at the market level as perceptions on innovations ‘place’ are radically different. This is where the barometer has some good insights for those applying global innovation across different market situations.

My comment here: Adopting a more flexible approach to innovation might have increasing value, especially in these more uncertain times where discontinuities will increase more than decrease.

Embracing the new innovation approach
The report reflects on the needed shift for innovation to thrive in the 21^st century. That is embracing a new paradigm, one that engenders this collaboration need between several partners, values the creative power of smaller organizations and individuals, and tailors solutions to meet local needs.

Business leaders around the world agree that great innovations in the 21st century will be about shared value — addressing both human needs and the bottom line – versus delivering profit alone.

• • More than ever, 88 percent of executives agreed that the way companies will innovate in the 21^st century is totally different than ever before.
• • 77 percent of executives acknowledged that individuals and small- to mid-sized enterprises have the ability to be as innovative as large companies.
• • 73 percent agreed that innovation will be driven by people’s creativity over scientific research.

My comment here: Again, I have to question this, not the notion or intent but the real understanding.  I would argue innovation still has not got the appropriate attention and critical understanding at leadership level for the vast majority. To believe they are taking us through a new paradigm is a tough one, I would suggest they are being dragged ‘kicking and screaming’ into the 21^st century, hanging on to tried and tested 20^th century practices.

My second comment here: The danger for executives in larger organizations does lie in the second point- individuals and small-to-mid-sized enterprises do have the ability to match and often exceed them in innovation. In individuals and small units or the smaller pockets of like minded communities does lie the potential of creativity and large organizations are struggling to get their heads around this dilemma.

Convergence and Divergence- narrow the gap.
So I hope the combined forces of Beth Comstock, GE and its global innovation barometer discussed in Davos provides a platform for strengthening innovation’s message at the leadership level.

I would certainly feel within GE it is shifting the focus in their own innovation challenges and as they absorb the outcomes of this barometer I look forward to seeing more innovation coming from them.

Come on GE lead the way and show that continued willingness to take risks and engage across and with society. It is better than the alternatives that many leaders are taking- to reduce innovation where they will eventually pay that price.

Get the innovation message across Beth please. The Global Economy needs innovation more than ever to move forward.

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What is under the innovation bonnet at GE?

There does seem an awful lot going on in GE around innovation on what we can observe from the outside looking in. Of course, you would expect this in an organization the size of GE employing 300,000 people across 100 countries and generating $150 billion dollars in revenue.

In Jeffrey Immelts (Chair and CEO) own words “the toughest years of my life were 2008 to 2009”.To drop 31 billion dollars in revenue in two years is tough to manage through, and to see net earnings drop by nearly $6 billion dollars in this period to where it is today, of $11.6 billion dollars, must have been very hard.
GE seems though on a path of recovery after these very tough years. Is innovation leading that recovery? It is hard to really tell from the outside, trying to read behind the hype as you can’t see so much under that innovation bonnet as you would ideally like. It needs greater transparency and ease of clarity, well certainly for me.

We see much activity outside-in but not enough of what is going on ‘inside’

Clearly, the ‘flagship’ of innovation, publicity-wise, has been the imagination theme for GE, with two stated growth pillars. These are open innovation activities for the outside –in. Let me summarize these:

The Ecomagination was GE’s open challenge commitment to imagine and build innovative solutions that solve today’s environmental challenges and benefit customers and society at large.

There has been two ‘biggies’ in challenges thathave opened up as a call to action from the outside of GE with the promise of  the winner achieving a commercial relationship with GE and the “bait’ of having funds of $200 million as a capital pledge within this area to award.

The two challenges so far have been “Powering the Grid” and presently “Powering your Home”.

The other open challenge is healthymagination. This is again an external idea challenge focusing on three critical criteria: lowering costs, touching more people and improving quality with the aim of providing  100 new innovations by 2015.

Healthymagination is an investment by GE of $6 billion over six years to develop innovations that measurably improve quality, access and cost by up to 15% with a focus on lower-cost technology, more IT, expanding access, and consumer-driven health. There seem to be more winners in
this one.

These tell me that the innovation ideas are flowing into the organization an clearly swirling around being explored, evaluated and worked upon. I worry over the level of disappointment by the many that don’t get to the reward stage.

How sustainable is this approach?

Certainly it is fuelling much to encourage more of these challenges but with a real need to increasingly establishing pathways for multiple winners either in commercial relationships with GE or directed to others to commercialise if GE decide not to.

There must be some brilliant ideas that can’t simply fit within the ‘appetite’ of GE’s quest for innovations on a large scale, likely to be at least offering the potential of $1 billion in annual sales.

Researching to understand innovation in the world

We also can see GE has been growing in its understanding of innovation in the outside world with GE releasing their first-of-its-kind “Global Innovation Barometer” at the end of January 2011. It is focusing on identifying the changing landscape for innovation in the 21^st
century.

This report (http://bit.ly/dPyT0j) follows a previous one that came out in July 2010 that was an European survey, again sponsored by GE, (http://slidesha.re/ecqMfl) on the current barriers and the current state of innovation policies within the EU.

These tell me they are actively curious about the world of innovation.

The questions for me though are far more about the inside workings of GE for innovation?

The global research centers for GE (www.geglobalresearch.com) provide some solid indicators of what research is being conducted. Research has been doubled in recent years and GE spends $4.4 billion on this area. By the way this sum is getting close to the magical figure of 3% of the revenue that the EU wants each country in the EU to commit to innovation research to maintain and progress.

GE employees 3,000 technologists and they are promoting their Engineers and Scientists as the modern-day “Edisons” and feature a different person each day to show who they are, and what they are working upon. Nice touch I feel, to get them to form as an innovation research community with a real face.

Corralling from the top the best and brightest

I also gather at the top they have a Corporate approach to corralling the top 100 big ideas as protected and guide these through the GE innovation pipeline, providing they keep hurdling the different ‘stage gates’ required to make progress through the system and the ones that don’t make it through the next gate get moved out the coral and others come in to inject fresh innovation ‘big growth blood stock’.

All these tell me that on innovation they indicate the huge strides GE are making for an organization to open up and make innovation as part of ‘coursing’ through the GE blood. Or does it?

GE has opened up; they are certainly ‘open’ for external ideas (providing they are big enough to survive within GE) but what really is under the GE innovation bonnet within its culture to innovate? What makes the innovation activity tick, to promote it, sustain it, instil it in every person thinking, working for GE?

So has transformation arrived or where are they on their innovation journey actually?

This is my difficulty to fully understand. Apart from the usual “innovation is a constant journey” stuff, I find the GE story is not so open for all to see on its journey point from what I can see. I’d love that to change to understand and value. We read governance reports, we get enthralled in big projects, we see the end result in new innovations but has the inside really changed or just added the outside-in?

There is a real pressing need for GE I can only assume it is grappling with. The fact the sums involved in often these ‘winner takes all’ imagination competitions must only give a limited ‘lift’ to GE more in the judging, evaluating and assessing of external ideas.

This intensity of activities has the danger that it is only a short term effect on building an internal culture for innovation unless the benefits can be ‘touched and felt’ throughout the organization, not just simply read about, blogged with pride and interest.

The rules of innovation are changing at GE or are they?

Beth Comstock (SVP & CMO) has mentioned in recent interviews “the rules of innovation are changing”. She was talking far more admittedly about what GE have been learning through their market research and in these big engagements with the outside world. I am sure she is bringing that learning into the organization.

She also offers two other themes that resonated with me:“Doing well by doing good” and “Makes good in people’s lives”. Again these were more in the external context of where GE is heading. I would suggest this is equally where the inside should be going as well, making their lives feel good by given the chance to make their personal contribution to building a sustaining culture of  innovation across GE.

For me, innovation should always have a social result, as it is first and foremost, a people engagement activity.It is not just a bottom-line result, and I would feel running a challenge internally that uses those two themes might give such a personal identification and sense of engagement and significantly advance the adoption of innovation as part of the everyday job.

How about an internal imagination challenge on a similar scale to the others?

GE needs to translate this external engagement within perhaps a matching inside engagement. Something as highly visible and as big in its challenge: to transform the culture of GE to a lasting innovating one.
Perhaps an inner-imagination set of challenges, to embed a greater innovation culture within GE.

In other words, they spend a similar appropriate sum of money internally but not for one ‘big’ idea but for the thousands of small ideas resident in the employee’s minds that effect their everyday work and then allow them the time to pull down the resources to translate them, wherever they reside, not just in the research lab, but across all 300,000 people working for GE. Let innovation cascade throughout the organization.

Most would compare equally with the existing  healthymagination goals of reduce costs, increase access (to innovation), improve engagement and quality, and most importantly opening up minds, sparking conversations and exploring all the possibilities that innovation touches within an organization.

I quote from a recent article “the term innovation now acts as the proxy for strategic renewal and market disruption- what we really need is to uncloak it and recognise the breadth of change enterprises face” ( www.innovationmanagement.se for the source article http://bit.ly/hyTNVh).

They always say the biggest challenge lies within, not just a reliance on simply bringing in the outside-in perspective, it can deflect from the potential that is within and also that can go more inside-out.

Innovation is certainly changing and what it means, and how we are going to manage it going forward. GE needs a new inner culture to innovate far more, to manage greater growth ambitions across a complex array of business sectors tackling substantial societal problems, and to achieve this I’d like to see more openness under their innovation bonnet-

GE need to have a fully visible commitment to changing the culture so it is made up of many innovators across the whole organization, not just selected parts of it. Now that is a big imagination challenge

The post Going behind the outside-in of imagination at GE. first appeared on Building Your Innovation & Ecosystem Intelligence.