Lessons from GE

 It was just a few years ago that GE was extolled as one of the greatest firms that survived multiple decades/centuries to remain in the index while many withered away.

And today we see GE on a precipitous decline and booted out from the index. As always, failures offer greater lessons than successes. So what can we learn?

If I attempt to distil it down to one simple lesson — it is the failure of the 3 Horizon play. The 3 horizons that any firm is supposed to manage well are the Current, Adjacent and Disruptive.

Not too long ago, GE was given a discount by the stockmarket called ‘Conglomerate discount’. It was too varied and broad that the stock market thought it did not enough focus and excellence in specific areas and hence discounted the stock price. This is the Adjacent.

The problems of the current are too obvious. Poor capital decisions, window dressing of the business numbers with creative accounting from finance business, stagnant market segments, Ostrich mentality, rubber stamp board members….

On disruptive, while there were many initiatives such as GE Digital leveraging Internet of Things etc, they were too small to offset the declines in the first two horizons.

In Summary, failing to manage all the three horizons !