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IN OCTOBER 2007 I attended the four-day program Leadership, Inno- vation, and Growth (LIG) at General Electric’s famed management devel- opment center in Crotonville, New York. LIG was the fi rst eff ort in the center’s 51-year history to bring all the senior members of a busi- ness’s management team together for training. Launched in 2006, the program had a specifi c purpose: to support CEO Jeffrey R. Immelt’s priority of growing GE by focusing more on expanding businesses and creating new ones than on making acquisitions.

As a senior editor at HBR, I was invited to go through LIG with 19 senior managers of GE Power Generation, one of the company’s oldest businesses. (It dates back to the days of Thomas Edison.) About a year later I revisited the “tur- bine heads,” as Immelt aff ectionately calls them, to see how much impact the program had made. The answer was plenty: The business had accelerated its push into emerging markets, launched initiatives to revamp product development, and stepped up eff orts to create new businesses. Managers seemed to be genuinely trying to alter their roles and behavior in order to foster growth. Why was LIG so eff ective in helping to bring about these changes? There were fi ve main reasons:

Team training accelerated the pace of change by giving ■

managers an opportunity to reach consensus on the barriers to change and how best to attack them.

Participants were encouraged to ■

consider both the hard barriers to change (organizational structure, capabilities, and resources) and the soft (how the members of the leader- ship team individually and collec- tively behave and spend their time).

The eternal management challenge ■

of balancing the short term and the long term – or simultaneously man- aging the present and creating the future – was explicitly addressed.

Beyond providing new concepts ■

that would make people look at their businesses and themselves diff erently, the course created a common vocabulary of change – literally words that be- came part of daily communications inside and across GE’s businesses.

The program was ■ not an academic exercise; it was struc- tured so that a team would emerge with the fi rst draft of an action plan for instituting change in its business and would feel obligated to deliver on it.

These principles – which can be applied to the design of any change-management program, not just one concerning growth – are the focus of this article.

The Need for LIG As I drove to Crotonville to attend Leadership, Innovation, and Growth that October, I wondered why such a program was even necessary. Shortly aft er becoming CEO, in September 2001, Jeff

HBR at Large BY STEVEN PROKESCH

How GE Teaches Teams to Lead Change

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HBR at Large How GE Teaches Teams to Lead Change

Immelt had launched an all-out eff ort to make GE as renowned for innovation and organic growth as it was for opera- tional excellence – the hallmark of his predecessor, Jack Welch. The company seemed to be making superb progress: GE’s revenues, exclusive of acquisitions, would increase by 9% in 2007, marking the third consecutive year the company had met or surpassed Immelt’s goal of growing organically at two or three times the pace of global GDP. Initia- tives such as “ecomagination” (develop- ing solutions to clean water and energy issues) and “imagination breakthroughs” (stretch ideas with the potential to be- come $1 billion businesses) had lived up to their catchy names; they were already producing billions of dollars in revenues. Rapidly expanding activities in emerging markets would generate $33.4 billion in revenues in 2007, which would help push sales outside the United States to more than half of GE’s total for the fi rst time.

Initially I assumed that these successes had resulted from fundamental changes in GE’s internal machinery. Substan- tially higher and much more focused R&D spending had greatly increased the fl ow of technology from GE’s laborato- ries. Thousands of marketers had been hired to bring more external focus to businesses. The growth imperative had been woven into core processes such as the annual strategic review (renamed

“the growth playbook”) and the annual HR review, when managers are assessed on their “growth values” – traits that GE had identifi ed as necessary to create new businesses and expand into new markets. (See “Growth as a Process,” an interview with Jeff Immelt, HBR June 2006.)

The reality, I learned, was that head- quarters was the main force behind GE’s successes. Immelt understood that to speed progress, he needed to pass the baton to the teams leading GE’s busi- nesses – which is where LIG came in. As he explained in the company’s 2007 annual report, the program’s aim was

“to embed growth into the DNA of our company.” By that he meant getting the

teams leading the businesses to think about organic growth day in and day out – to be constantly on the lookout for opportunities and to create inspirational strategic visions that would enlist their troops in the cause. He wanted them to weave innovation and growth into every aspect of their businesses. He didn’t just want these managers to reexamine their capabilities, processes, metrics, organiza- tional structures, and deployment of re- sources. He wanted them to reconsider how they individually and collectively led: their behavior, their roles, how they spent their time. In short, the purpose of LIG was to make innovation and growth as much of a religion at GE as Six Sigma had been under Jack Welch.

The Structure The brainchild of Susan P. Peters, GE’s vice president of executive development and chief learning offi cer, and Daniel S. Henson, then the company’s chief marketing offi cer and now the presi- dent of GE Capital Solutions, LIG began in September 2006 and ended in Sep- tember 2008. (A follow-up program, to be launched in 2009, is in the works.) Altogether 2,500 people in 260 teams went through the program. There were six teams at the session I attended: GE

Power Generation, one of the world’s largest manufacturers of equipment for producing electricity; GE Healthcare’s diagnostic imaging unit; NBC Univer- sal’s sales group; and three fi nancial ser- vices businesses – GE Money’s Nordic and Baltic operation, GE Capital Solu- tions Europe, and GE Corporate Finan- cial Services Europe.

Before a team went to Crotonville (or sometimes another site in the case of smaller business units), it had done three things: It had updated its three- year strategy, the growth playbook. All its members had undergone a 360 review, and the team’s scores on the growth val- ues had been tabulated and analyzed in granular detail. Finally, its success in creating an innovative climate had been assessed. (See the exhibit “Attributes of an Innovative Organization.”)

The speakers at my session were a blend of external gurus (mostly from leading U.S. business schools) and inter- nal thought leaders or role models who could demonstrate how the concepts had been or were being applied at GE.

“We realized that when you’re talking about capabilities and culture, you have to connect the dots with the GE folks because it can’t be abstract,” Henson told me.

Three internal examples were pre- sented. One – the transformation of GE Transportation from a mature, highly cyclical North American locomotive business into a fast-growing, diversifi ed global transportation company – was a dramatic success. But the two oth- ers – customer segmentation in GE Oil &

IDEA IN BRIEF

Management development ■

programs that focus on teach- ing and inspiring individuals to apply new approaches have a fundamental fl aw: If other members of an individual’s team have not taken the course, they may resist efforts to change.

The antidote to this problem ■

is training intact management teams.

When managers go through ■

a program together, they emerge with a consensus view of the opportunities and prob- lems and how best to attack them. The result: faster and more effective change.

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Gas, a business that provides equipment and services to the energy industry, and sales management and compensation in GE Capital Solutions – came across as works in progress, which surprised me. When I asked Peters about this, she ex- plained, “Cases used at Crotonville are always works in progress. The LIG ses- sions are about reality.”

After listening to the experts lec- ture on topics related to strategy, capa- bilities, and culture, the management teams dispersed to separate rooms. There, in brutally frank and free-fl owing conversations, they shared their take- aways and debated the implications

for their businesses and the way they led. A large amount of time – about 15 to 20 hours – was set aside for these breakouts.

On day four the course wrapped up with a plenary session at which each team had about 20 minutes to deliver a presentation to Immelt. The presenta- tion had to include a simplifi ed vision of growth for the business and the or- ganizational, cultural, and capability changes that the team members had de- cided should be made in order to opti- mize growth. This spirited give-and-take with the CEO was not the end, however.

Aft er going back to their businesses, the members of each team had to refi ne their thoughts into a one- or two-page

“commitment” letter to Immelt.

The Value of Team Training LIG’s team-based approach addresses shortcomings inherent in the individual- focused approach used by traditional management education programs. Al- though GE’s annual HR process helps individuals identify growth values in need of improvement and prescribes training, it fails to recognize the fact that the other members of their teams might have diff ering notions. For ex-

ample, someone who needs to become more inclusive might be on a team that doesn’t highly value a collegial style or isn’t interested in sharing information broadly. In that environment the indi- vidual might fi nd it diffi cult to change his or her ways.

The same is true for new ideas or techniques. For example, GE has been teaching its marketing and sales folks customer segmentation methods as part of an eff ort to make the company more customer focused. But upon returning to their businesses, many of these people have been frustrated in their attempts

to implement what they learned, be- cause managers who had not attended that training didn’t understand or value the eff ort.

This explains why the entire aft er- noon of my day two was devoted to cus- tomer segmentation. A lecture by David Reibstein, of the University of Pennsyl- vania’s Wharton School, seemed pretty basic for a company of GE’s sophistica- tion. But Stephen R. Bolze, the president of Power Generation, explained to me that it was probably not basic for people in functions such as manufacturing, who don’t regularly interact with customers. In their quest for high quality, effi ciency, and low costs, those people tend to like standardization and to dislike variety and customization. The lectures and ensuing team discussions helped them understand why strategies that might complicate their operations could be in the best interests of customers and the overall business.

As I listened to the Power Generation managers debate what they could do to optimize growth, I wondered why it took a special program like LIG to generate such conversations. Why didn’t the an- nual update of the growth playbook ad- dress the likely impact of constraints on carbon dioxide emissions, or the poten- tial markets for wind turbines in China and biofuels in Latin America, or the possibility of collaboration with Home Depot to sell residential solar panels?

GE executives explained to me that the growth playbook largely focuses on existing businesses and markets over the next three years. Much of the update is

The aim of the LIG program at General Electric was “to embed growth into the DNA of our company.”

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HBR at Large How GE Teaches Teams to Lead Change

highly structured: Managers pull to- gether facts and fi gures on markets, the competitive landscape, and concrete goals; they spend two days marching through dozens of charts in meetings that are divided into one-hour blocks; and they boil all that down into a report that Immelt and GE’s three vice chair- men can easily digest. This process leaves leadership teams no time to refl ect on opportunities far off the beaten track or six to eight years in the future – let alone

the capabilities, resources, and leader- ship behaviors required to seize them.

Thus LIG was a radical departure for GE, because it removed intact leader- ship teams from the exigencies of their businesses and allowed them to discuss the white space in a candid, introspec- tive fashion for four whole days. Henson, who has led fi ve business units other than Capital Solutions during his 21-year career at GE, told me, “As a team goes through the program, its members ask

themselves, ‘How do we stack up? Are we really as good as we can be? Are we walk- ing the talk? Are we leading this business the way we think it should be led in or- der to optimize growth?’ You can see the bar being reset. You can see the team co- alescing around the changes they need to make.” That’s exactly what happened with the managers of Power Generation.

The Barriers to Change During the fi rst breakout on the morn- ing of day one, the Power Gen team guessed and then learned their actual team scores for the 360 review of their growth values. This immediately trig- gered a reassessment of almost every aspect of their business.

“We’re not as good at anticipating major trends as we ought to be.”

“Is solar a good place to be?” “How quickly do we need to be creating a service business in all segments?”

“Renewable energy, clean coal, nuclear – all are going to be policy dependent. Are we good at this?”

“Are we structured right to be a $45 billion business?”

“Is our management DNA too thin? If we spin out product lines as stand-alone busi- nesses, are we going to have the manage- ment talent to run them?”

“Engineering is too strong in this organization.”

The reassessment continued in this manner throughout the four days. This was astonishing considering that Power Gen – whose products include gas tur- bines and engines, steam turbines, combined cycle systems, wind turbines, generators, and solar technology – was already a paragon of organic growth. Its annual revenues would hit $13.4 billion in 2007 and were expected to soar to $18 billion in 2008 (at this writing it ap- pears that they will exceed $19 billion). They were forecast to reach $40 billion to $45 billion by 2017, with products and services related to renewable energy ac- counting for half. And that was exclusive of any acquisitions that might be made.

But the discussion caused the man- agers to realize that they might achieve

Attributes of an Innovative Organization Before attending the Leadership, Innovation, and Growth program, the senior managers of a GE business would assess their team’s success in creating a climate supportive of creativity. The chart below compares the average score of the Power Generation team with the average scores of 10 innovative and fi ve stagnant organizations. The team members were pleasantly surprised to fi nd themselves largely aligned with the innovative organizations, but their scores sparked a discussion of whether they took enough risks, spent too much time debating issues, and were too serious.

Challenge/Involvement Team members feel connected and stretched by their work and take pride in it.

Freedom Team members feel empowered to try new approaches to their work.

Trust/Openness Team members feel safe sharing ideas and working with one another.

Idea time Team members have time to think about and develop new ideas.

Playfulness/Humor Team members see their workplace as easygoing, fun, and relaxed.

Conflict Team members experience

personal tension and interpersonal warfare at work.

Idea support Team members encourage one

another’s ideas.

Debate Team members

constructively discuss and

challenge one another’s ideas

and approaches.

Risk taking Team members can make decisions and

take action in the face of uncertainty.

Source: The Creative Problem Solving Group

10 innovative organizations

GE Power Generation

5 stagnant organizations

300

0

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hbr.org | January 2009 | Harvard Business Review 103

even more growth. Consider how their thinking about wind-generated power evolved. In 2002 GE had purchased bankrupt Enron’s wind-turbine busi- ness at a bargain-basement price. The Power Gen leaders recalled how the business had struggled in the fi rst three years (GE even considered killing it) but since then it had exceeded their wild- est dreams. Its annual revenues soared from $800 million at the time it was purchased to $4.7 billion in 2007 (and were expected to reach $6.8 billion in 2008). They acknowledged to one an- other that they had underestimated the wind business’s potential because they’d been looking at it through the traditional lens: growth in demand for electricity and the comparative costs of producing it. But in a carbon-conscious world, they concluded, maybe the old rules don’t always apply; maybe limits on carbon emissions and tax incentives for clean, renewable power matter more. This sparked a conversation about GE’s ability to understand and infl uence gov- ernment policies. The managers agreed that it was defi cient and that beefi ng it up was therefore a priority. And by the way, were they currently making the same mistake with solar and underesti- mating its potential?

The managers had a similar discussion about emerging markets and diversity.

“The only way to get to $45 billion in 2017 is to get $5 billion in China.”

“Everyone is focused on India and China. Why not focus on Latin America?”

“It took us four years to take wind to Chile. What would it require to take wind to China in six months?”

“How many really good senior people do we need in China?”

“Look at the lack of Middle Easterners and Chinese – and women – around this table.”

“Cultural diversity has been a problem for 20 years.”

Of 25 members of Power Gen’s senior management team (six couldn’t attend the LIG session), 19 were American, four were European, one was Latin American, and one was Chinese.

Managing the Present and the Future Another epiphany for the Power Gen leaders was that in order to increase the rate of organic growth, they would have to rethink their individual and collec- tive roles – how and where they spent their time. This message came through loud and clear in several presentations, especially one by John Dineen, who was then the president of Transportation. (He became the head of GE Healthcare in July 2008.) In his talk and a follow- up interview, Dineen said that when the Transportation team had gone through LIG, its members had recognized that with sustained organic growth added to their priorities, the scope of their jobs would be two to three times as broad.

“We realized that when we went back to our day jobs,” he said, “if we did things the way we always did them, we would continue to get the same results, and if we really wanted to do what we were talking about here, we had to operate diff erently. So we had to restructure the organization, change roles, look for dif- ferent talents, and physically spend our time diff erently.”

One big step that Dineen and his lieutenants had taken was to delegate most of the responsibility for the core business to the layer below. They re- organized functions such as sales and engineering and gave local teams more authority so that the leadership could extract itself from the problems of the present and spend more time on op- portunities that would create the future. The growth initiatives (along with an initiative to introduce lean manufac- turing techniques) made them see that they had to “empower people, encour- age them to experiment, and help them to develop new skills,” Dineen said. “A lot of our time had to be spent doing that. Clear strategies weren’t going to be enough.”

His team had also realized that the core had to be in solid shape if it was to be delegated. All this was beginning to sound to me like yet another example of the inherent confl ict between the short

term and the long term. Au contraire, Dineen said: “To me, that was one of the big ahas. In the early phases people would use the ‘or’ word: ‘You’re opera- tionally excellent or you’re a growth company.’ That’s not really the way it should work. Operational excellence gives you the time, the money, and the resources to focus on growth. If you’re not operationally excellent, you’re fi ght- ing fi res. When the house is on fi re, it’s hard to talk about building a new patio.”

So the blatant message was that Jeff Immelt’s priority of organic growth doesn’t confl ict with Jack Welch’s em- phasis on operational excellence. “This is about being ambidextrous,” Susan Pe- ters, GE’s VP of executive development, told me.

“Growth Values” at GE General Electric identifi es the following leadership traits as necessary for in- novating, creating new businesses, and expanding into new markets:

External focus Defi nes success through the customer’s eyes. Is in tune with industry dynamics. Sees around corners.

Clear thinker Seeks simple solutions to complex prob- lems. Is decisive and focused. Communi- cates clear and consistent priorities.

Imagination Generates new and creative ideas. Is resourceful and open to change. Takes risks on both people and ideas. Displays courage and tenacity.

Inclusiveness Is a team player. Respects others’ ideas and contributions. Creates excitement, drives engagement, builds loyalty and commitment.

Expertise Has in-depth domain knowledge and credibility built on experience. Continu- ously develops self. Loves learning.

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HBR at Large How GE Teaches Teams to Lead Change

In October 2008, as governments scrambled to prevent a global fi nancial meltdown, GE CEO Jeff Immelt sat down with HBR senior editor Steven Prokesch at the company’s headquarters in Fairfi eld, Connecticut, to discuss his progress in making organic growth an integral part of GE’s culture.

If there’s a deep recession, will it test your managers’ commitment to organic growth? It’s easy to talk about growth and innovation when the econ- omy is growing. It’s more diffi cult now. There’s no doubt about that. There will be fewer projects, but the projects will still take place, and they’re going to have an impact. I think that’s how you keep people motivated at a time like this. Every employee of every company is scared right now. So working on stuff that’s going to be important for the future is probably particularly critical now.

It’s very important both to safeguard the company against dangers and to be on the lookout for the opportunities that tough times create. During the last really volatile and diffi cult time period, right after 9/11, the commercial aviation industry was hit hard. But our aircraft leasing and jet engine busi- nesses were able to gain market share and to embed them- selves with customers. I think this cycle is going to provide an equal amount of opportunity.

Earlier this week we had our top 175 people together. The fi rst day we talked all about operations protection, scenario planning, the economy. The second day we talked about growth. We talked about NBC Universal’s Hulu website, a premium version of YouTube; how we’re going to build our franchise in the Middle East; and budding health care tech- nologies like digital pathology. And you know, people paid attention. They weren’t fl ipping through their BlackBerrys or checking to see what the Dow was doing. That said, the job is far from fi nished. A major change-management effort like this is a 10-year process. It takes a decade to build the talent, culture, and tools, and to learn from our mistakes.

What have been the biggest challenges in changing leadership behavior? Early on it was convincing people, particularly at high levels, that they were going to be in their jobs longer – for four or fi ve years – and therefore actually had to do something to ac- celerate growth. Today that’s become the expectation.

We still struggle with decisiveness, which to me is one of the core traits of a growth culture. To pursue growth, you have to give some clear noes and yeses, and I would say that what we always struggle with – even at high levels in the company – is too many maybes.

Creating a Growth Culture at GE: An Interview with Jeffrey R. Immelt

In the next breakout session, the Power Gen managers talked soberly about the state of their core. They quickly agreed that the operations responsible for heavy-duty gas turbines needed to be strengthened. The units that made generators and steam turbines were also candidates, some added. Then the con- versation turned to “planting seeds.”

A Vocabulary of Change One would expect any worthwhile man- agement development course to off er frameworks, and LIG certainly had its fair share. But a handful of the frame- works went beyond the typical mission of challenging conventional assump- tions, practices, and behaviors. They quickly became part of the everyday lan- guage of conversations and reports alike. Clearly, when that happens, the desired change accelerates.

“Planting seeds,” a term used by John Dineen to describe making investments that will bear fruit far down the road, has achieved this status. Charts with images of seeds sprouting into fl ow- ers have proliferated throughout GE. At the LIG session I attended, Dineen talked about how fortunate he was that his predecessors at Transportation had planted seeds that he could nurture and harvest and about how he, too, was planting seeds.

“Box 1,” “Box 2,” “Box 3,” and “nonlin- ear shift s” are other terms that have en- tered the GE lexicon. They came from Vijay Govindarajan, a professor at Dart- mouth’s Tuck School of Business. Box 1 holds incremental innovation aimed at strengthening the core business – some- thing at which GE already excels. Box 2 innovation involves adjacencies: tak- ing a company’s existing technologies

to new markets or customers or taking new technologies to its existing markets or customers. And Box 3 innovation ex- ploits nonlinear, or discontinuous, shift s in technologies or markets with radically new products or business models – as Amazon’s online bookstore and Tata’s $2,500 car for India did. (The Power Gen managers decided that probable nonlin- ear shift s in their world included a car- bon tax, the forced closure of coal plants, the rise of biomass waste and other non- traditional fuels, the soaring demand for new generating capacity in China and other emerging economies, a CAFE standard of at least 40 miles per gallon for cars, and distributed power made by small generators like fuel cells.)

When Power Gen managers talk now about a prop

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