Innovative Organisations - Case Study Example

Innovative Organizations - the case of General Electric ID 19714 Order No. 284943 [University Name] [Course Name] [Supervisor] [Any other details] 31 March 2009 Table of Contents: Introduction: Innovation is the way for organizations to maintain & improve their competitive advantages in their target markets. Innovations may be carried out in products or services depending upon the primary forte of the organizations and the customer requirements. Banbury and Mitchell (1995. pp19-20) presented the impact of incremental innovations on improvement of market share & business survival to conclude that incremental product innovations and rapid product introductions are critically important for overall business performance of organizations. In this paper, the author presents the characteristics of innovations of General Electric (GE). The presentation includes history of GE, innovation characteristics of GE, the most innovative service of GE and the perspective of how the author can contribute to the innovations of GE. History & Current Performance of General Electric (GE) Thomas Edison established the Edison General Electric Company in 1890. The series of innovations in GE started from the founder himself who invented one of the greatest products of this age - the electric lamp. In 1892, the Edison General Electric Company merged with their competition Thomson-Houston Company amidst common interests to for the "General Electric Company". The GE Global research still honours the heritage, legacy & dignity of Edison in their R&D activities (http://www.ge.com/company/history/edison.html). In the modern business world, GE has a wide range of products in the fields of lighting, electrical distribution, renewable energy, aviation, healthcare, business & consumer finance, Oil & Gas, water treatment & processing, railroads, media & entertainment and security (http://www.ge.com/products_services/index.html). In the area of process innovations, GE is one of the first companies of the world to implement Six Sigma successfully. Goldstein, Mark (2001. pp37, 39) a Six Sigma consultant comments that the foundations of this best practice that was implemented in GE Appliances in 1995 (and later on rolled out to the rest of GE Company by year 2000 as per the target set by Jack Welch) is yet to be seen in any other organization. GE proved that best practices cannot be adopted for the name sake rather the fundamental commitment to them by virtue of the foundations of innovative culture makes the difference. GE thrilled the entire world by demonstrating the level of value addition that they could achieve to their top line and bottom line - that means increased revenues at reduced costs. It is the sound fundamentals of innovative business processes of GE that has ensured them to be in profit even in these tough times. At the end of financial year 2008, GE has built an overall market cap of $105 billion with Price/Earnings ratio at 5.60, Price/Sales ratio at 0.58, Price/Book ratio at 1.0 and Price/Cash Flow ratio of 3.6. The return on equity achievement was 16.60, return on assets was 2.20 and Return on investment as 4.0. Except Price per book that is evaluated in most recent quarter, all other figures published are trailing twelve months (http://money.cnn.com/quote/snapshot/snapshot.htmlsymb=GE). The net income of GE in 2005, 2006, 2007 & 2008 is $16.72 Billion, $20.742 Billion, $22.20 Billion and $17.41 Billion respectively (http://money.cnn.com/quote/financials/financials.htmlsymb=GE&sid=2148&report=2& period=1). The company presented impressive financial performance in the markets amidst global financial turmoil. The strength of GE has been built as a result of their remarkable contribution to the mankind that has changed the lives of people and the global economies as whole. GE has a major financial services business that is going to pose trouble to the overall organization given the turbulent times in the current scenario and the questions raised on innovations & risk management in the financial services world. It would be very challenging for GE to maintain their reputation of innovations that never fail and have to set an example by not succumbing to the current crisis in the financial service world by remaining profitable. Characteristics of GE that facilitate innovation The primary innovations at GE can be mapped with Exploratory Research quadrant of Pearson's (1991) uncertainty map whereby the uncertainty about both product & output are high. The incandescent light bulb, X-ray, Jet Aircraft Engine, etc. were innovations that never had a market before the technologies were developed (Reyes. 2009. pp7; Jinwu, Zheng. 2008. pp1). Hence, it can be perceived that GE took high risks to develop products that didn't have a market in the beginning. However, one fundamental aspect of GE innovations is that they were all targeted to bring major changes in the lifestyles of mankind. The key inventions by GE Global R&D are the incandescent light bulb, X-ray, Jet Aircraft Engine, Artificial Diamond, etc. that all contributed to major changes in the lives of human being on this planet. Moreover, GE used their own mechanism to identifying the business trends by surveying the world and then arriving at the future needs of mankind. In the current context, GE is focussed on the problems that endanger the existence of mankind (like global warming, epidemics, environment pollution, etc.) and have concentrated their innovation focus on the products & services that ensure solutions to such problems (Jinwu, Zheng. 2008. pp1). GE believes in applying the business goals to let the organization think beyond the box rather than staying in the comfort zones of the current business paradigm. They develop a layout of the challenges & targets against the goals and then involve the key people of the organization. The management promotes innovation in all the three strategic focus areas of GE - management of current core business, moving into new markets and creating entire new businesses (Harvard Business Publishing. 2007). GE fits into all the ten characteristics of Trott (2008) that help organizations to innovate - growth orientation, heritage & experience, vigilance, R&D, risk assessment & acceptance, receptivity, organization wide co-ordination, creativity, innovation strategy and diverse skills. (Reyes. 2009. pp14-16). The important aspects of GE innovation are the Intellectual Capital, Innovation Capability and the Organization's environment for innovation. Subramaniam & Youndt (2005. pp455-459) carried out a study on 93 organizations and concluded that intellectual capital of an organization positively impacts both incremental as well as radical innovation capabilities. Figure 1: Human Capital versus Radical Innovative Capability (Source: Subramaniam & Youndt 2005) GE possesses a huge intellectual capital operating across the world. Investment in intellectual capital at a large scale has resulted in the knowledgebase that ensures excellent innovation capabilities pertaining to both incremental & radical inventions. Today, GE has about 30000 technicians out of which 2700 technologists are engaged for development of sophisticated technologies that involve all the business segments of GE. The R&D budget of GE is $3.5 Billion putting together all technologies in which GE is involved. As per Dr. Chen Xiangli, President of GE China Technology Center at Sanghvi, the primary objective of GE is now to find out solutions to global issues that has threatened the survival of mankind - greenhouse gas emissions, epidemics, energy shortage, pollution, global warming, etc. Today, GE has R&D facilities in Bangalore (India), Shanghai (China), and Munich (Germany). [Jinwu, Zheng. 2008. pp1) The most innovative Service of GE From the author' perspective, the most innovative practice at GE is the Six Sigma implementation. GE spent half a billion dollars in Six Sigma initiatives in year 1999 and received benefits of over two billions by the end of fiscal year while the rest of the world had not even understood the theoretical fundamentals of this best practice. Six Sigma is a data driven quality management approach that requires the processes to improve to such as extent that the final production does not result in more than 3.4 defects per million opportunities as shown in the figure below: Figure 2: Defect versus Process Sigma (Source: Linderman and Schroeder. 2003) In this approach, the defects are eliminated incrementally by taking small & successful steps through "Six Sigma Projects". All Six Sigma projects are targeted to achieve three primary improvements within business process - Quality, Cost and Schedule. In the Six Sigma projects, the slowest step in the process framework is identified to be the bottleneck and then consider it as the constraint to be removed. The expectations are set from the process that can be achieved by raising the performance of the identified slowest step first, the next faster step taken as second, the subsequent faster step taken as third till the time the final goal is achieved. All projects practice a measurement based strategy and focus on the process improvements by reduction of variance in performance making it predictable. [http://www.isixsigma.com ] As mentioned earlier, the goals in GE are established in such a way that the key people are forced to think out of box thus coming out of their respective comfort zones and contribute to build a better future of the organization. Linderman and Schroeder et al (2002. pp196-200) analyzed the implementation of Six Sigma in GE and presented a sound correlation between Six Sigma success and the goals established thus developing a theoretical framework on how six sigma can be implemented. Their framework included correlations between goals & performance, goals & task strategies and goals & effort, persistence & direction. GE carefully selected Six Sigma projects that had their boundaries extended into customer's operations thus making them feel the direct benefits quickly. GE could not only achieve high performance at lower costs but also achieved customer delight leading to more orders and increase in existing order sizes thus achieving an overall improvement in customer loyalty (Goldstein. 2001. pp44). How the author wishes to contribute to the future of GE The author wishes to become a Six Sigma black belt holder and contribute to Six Sigma projects in GE. The Six Sigma black belt holders are expected to design a Six Sigma project and monitor the progress to observe & correct deviations from design. The black belt holders are specifically required to set the project goals very carefully looking into the targeted benefits and continuously measure the progress of the project to detect & report deviations from the goals. For example, if the goal of a project is customer retention the black belt holders are expected to find out the lapses in customer services and the factors that have caused the lapses identified. For example, if the lapses are pertaining to variation in equipment delivery cycle then the primary factors that might be causing the variations may be that the type of equipment being manufactured has high variations in flow shop cycle or the courier services for delivering the equipment to the geographic location of specific customers are not reliable. Such bottleneck factors can be brought to surface by identifying & measuring certain metrics which is the job of black belt holders (Hoerl. 2001. pp392-393). In GE, the Six Sigma black belt holders possess full time assignments and thus are operationally responsible for implementing & tangibly demonstrating the improvements. To achieve Six Sigma black belt level, individuals need to learn statistical as well as technical aspects of Six Sigma - like Analysis of Variance (ANOVA), Quality Function Deployment (QFD), Critical to Quality Metrics (CTQ), Failure Modes & Effects Analysis (FMEA), Define - Measure - Analyse - Improve - Control (DMAIC) and Design for Six Sigma (DFSS) [Hoerl. 2001. pp399]. The author wishes to go through the comprehensive training of Six Sigma black belt within GE and contribute to the planning of new Six Sigma projects such that GE can be taken forward to higher levels of excellence. In this turbulent times, GE much be looking forward to running more Six Sigma projects to carry out further improvements in overall business performance. Specifically, the author wishes to take up Six Sigma projects in those innovations of GE that are expected to contribute heavily to the survival of mankind on this planet. Conclusions & Recommendations: Innovation is not just the job of R&D department of an organization. Innovation is a culture that needs to be deeply imbibed within the cultural foundations of an organization. An innovative organization needs to establish hard core goals that may not be achievable in their current business paradigm without applying the additional efforts and taking a calculated risk amidst uncertainty. In this paper, the author presented how GE has established the foundations of their innovation culture by spreading the practice of thinking at workplace thus always offering something unique to the world. GE's primary strengths have been their innovations targeted to change the lives of human beings on this planet thus making them astoundingly successful. Their current venture is to contribute to survival of human beings on this planet that is definitely going to take GE to altogether new heights. The author profoundly wishes to be a part of this mission of GE through their Six Sigma framework in the role of one of their black belts. Reference List: Banbury, Catherine M. and Mitchell, Will. (1995). The Effect of Introducing Incremental Innovations on Market Share and Business Survival. Strategic Management Journal. Vol. 16. Special Issue: Technological Transformation and the New Competitive Landscape. John Wiley and Sons. pp19-20. General Electric's Innovation Strategy. Harvard Business Publishing. 2007. Retrieved on March 31, 2009. Available at http://blogs.harvardbusiness.org/bq/2007/10/general-electrics-innovation-s.html. Goldstein, Mark. (2001). Six Sigma Program Success Factors. Six Sigma Forum Magazine. pp37, 39, 44. Hoerl, Roger W. (2001). Six Sigma Black Belts - What do they need to know. Journal of Quality Technology. Vol. 33. No. 4. pp392-393, 399. Jinwu, Zheng. (2008). GE's Research - Advanced Technologies Lead to Success. Science Times. China. pp1-2. Linderman, Kevin and Schroeder, Roger G. et al. (2003). Six Sigma - A goal theoretic perspective. Journal of Operations Management. Vol. 21. Elsevier. pp196-200. Reyes, Jose Dr. (2009). Ethics, Environment and Innovation. University of Derby. pp7, 14-16. Subramaniam, Mohan and Youndt, Mark A. (2005). The Influence of Intellectual Capital on the Types of Innovative Capabilities. Academy of Management Journal. Vol. 48.No.3. pp455-459. End of Document Read More