This school sees strategy formation as a visionary process and is fell under the descriptive school of strategic management. The chief architect of the strategy is the CEO of a company. This school took formal leadership seriously and CEO is responsible for strategy formulation. It stressed on mental state and processes such as instinctive knowledge, belief, wisdom, experience and insight of a single leader. The leader should be visionary in formulating strategy. The entrepreneurial school promotes strategy as a process which has a clear image and sense of direction which can be termed as a vision.
Entrepreneurial strategy often occurs in startup companies and organizations in trouble and needing a turnaround. For any organization to sustain success it must engage in some form of entrepreneurial activity in order to effectively compete in the marketplace and continue to increase stakeholder value. In this school the organization becomes responsive to only one person, the CEO and vision is the central concept of this school. Vision is the mental representation of a leader and it outlines what the organization wants to be or how it wants the world in which it operates to be.
It is a long term view and concentrates on the future. It can be emotive and source of inspiration. It serves as a guiding idea and often tends to be a kind of image than a fully clear plan. Visions are often flexible so that the leaders can change them as they like. Visionary Leadership The visionary leadership is the main essence of the entrepreneurial school of thought. Visionary leaders are the builders of a new dawn, working with imagination, insight, and boldness. They present a challenge that calls forth the best in people and brings them together around a shared sense of purpose.
They work with the power of intentionality and alignment with a higher purpose. They are social innovators and change agents, seeing the big picture and thinking strategically. A visionary leader is effective in manifesting his or her vision because she/he creates specific, achievable goals, initiates action and enlists the participation of others. Contributions Entrepreneurship is more than the creation of business. It is the symbol of business tenacity and achievement. Entrepreneurs were the pioneers of today’s business successes.
Their sense of opportunity, their drive to innovate and their capacity for accomplishment have become the standard by which free enterprise is now measured. This standard has taken hold throughout the entire world. For example starting with just 10 developed countries in 1999, the Global Entrepreneurship Monitor (GEM) has now grown to include over 80 economies by 2011. In 2010, people were surveyed in 59 economies which account for over 52 percent of the world’s population and 84 percent of the world’s GDP. The past 20 years have witnessed the powerful emergence of entrepreneurial activity in the United States.
Successful multinational companies like General Electrics, General Motors, Apple, Microsoft, Dell, Google, Facebook, Intel and IBM have been using entrepreneurial school of thought in their strategic management processes. Approach to Strategy Making Strong leaders share the following approaches to strategy making. Strategy making is dominated by the active search of new opportunities. The power is centralized in the hands of the chief executive officer. Strategy moves forward by making large decisions in the face of uncertainty. Growth is the dominant goal.
Premises of Entrepreneurial School The strategy exists in the mind of a leader as a complete picture especially with a sound vision and long term direction of the organization’s future. The strategy formation process is partially conscious at best, based on the experience and knowledge of the leader. The leader conceives the strategy from others and then formulizes it in his way. Only the leader single mindedly promotes the vision and makes a close personal control of the implementation process so that he would be able to reformulate specific aspects as necessary.
The strategic vision is very flexible, so entrepreneurial strategy tends to be deliberate and emergent. This means it fully considered the every aspect of a company and very prominent in how the details of the vision unfold. Under entrepreneurial school of thought, organization is like a metal which can easily be molded into any shape according to the vision and mission of the organization. The leader is free to do necessary changes and transformation as needed. Entrepreneurial strategy tends to take the form of a niche which is a specialized but profitable segment of the market.
It protects the organization niche from the forces of open and direct competition. A sound vision and a visionary CEO can help organizations to sail cohesively through muddy waters. Especially in early or very difficult years of the organizations. Strategy exists in the mind of the leader in the form of a vision of the organization’s future. Limitations In my opinion the entrepreneurial school of thought has the following limitations which I have discussed below one by one. In entrepreneurial school of thought the strategy making is formulated by a single person i.
e. the CEO, so it may neglects the voice of other people in the organization. Sometimes when implementing strategy the CEO is not fully aware of the ground level realities of the organization. He may not be fully aware of the operational activities of the company. The predetermined and predefined strategy sometimes can blind a leader for potential development of the organization and unexpected dangers which are very common in today businesses. Now a day, it is very difficult for a firm to find a right leader for the company.
Over the years we learnt that there are very few great entrepreneurial leaders who came and turned around businesses and companies e. g. Bill Gates, Jack Welch, Mark Zuckerberg Steve Jobs, Richard Branson etc. We are not sure which leader is a good match for over company. In short finding a great leader who can transform the struggling company into a profitable organization is a very difficult process. Sometimes the CEO of a company can get caught up in the operating details on the ground so much that she or he losses site of the strategic considerations.
In the end the leader may end up with an ambiguous and unclear strategic vision which eventually pulls down the whole organization. Most often entrepreneurial leaders are high risk takers and they have a tendency to go too far. They make vision and hope for the best but it is a high risk because today’s environment is dynamics and uncertain. In most cases in order to become a visionary leader one must be a CEO of the company. So it is very difficult for an ordinary employee or manager to become a visionary leader of the company.
Sometimes visions can take managers to one direction only and put them in a tightly close corner. The search for a new vision place too much burden on the leader which in effect can harm the capability and performance of a visionary leader. Sometimes advice about vision distracts attention of the employees when they are doing the right things and successfully handling the unknowable features like learning and political features. Comments on the school In a new competitive landscape, entrepreneurial strategies are becoming more and more important for both new as well as established enterprises.
For example due to increasing environmental dynamics and intensifying global competition, enterprises, regardless of their age or size, are forced to build more entrepreneurial strategies in order to compete and survive. These entrepreneurial strategies are said to be related to better company performance. The entrepreneurial school of thought has both contributions and shortcoming in strategic management. It is up to the organizations and the people to how they managed and balanced this school of thought premises and drawbacks.
We should not only look for the charismatic leader but for the visionary organization. We should look for steps and measures by which we can make our organization visionary and creative because in the end the main objective of a visionary leader is to make an organization profitable and healthy especially in the times of difficulty and trouble. General Electric General Electric, or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States.
The company operates through five segments namely Energy, Technology Infrastructure, Capital Finance and Consumer & Industrial. Today its business activities span a wide range of areas—everything from aircraft engine manufacturing, appliances, healthcare equipment, and even the NBC television network. In 2011, GE ranked among the Fortune 500 as the 26th-largest firm in the U. S. by gross revenue, as well as the 14th most profitable corporation. However, the company is currently listed the 4th-largest in the world among the Forbes Global 2000.
History As its name implies, however, GE can trace its roots to the early power industry. It was formed in 1892; the result of a merger of the competing companies Edison General Electric Company and the Thomson-Houston Company. GE established its first permanent research laboratory in Schenectady, NY, in 1900. This lab has produced a startling number of innovations over the years. In the 1940s GE became a major manufacturer of electric trains. A major shift came after about 1940, when diesel-electric locomotives replaced steam locomotives.
GE manufactured many of these large locomotives. The company was also a manufacturer of vacuum tubes for radios, and of x-ray tubes and complete x-ray machines beginning around 1912. In 1919, a GE researcher invented an important type of tube called the Magnetron, which has been in use for many years in microwave systems. GE has also manufactured home appliances, including stoves, the “Hotpoint” iron, washing machines, air conditioners, radios, and televisions.
The company is today one of the largest manufacturers of military and commercial jet aircraft engines and owns numerous research and manufacturing firms around the world as well as two television networks and other businesses. The impact that GE has had on engineering is suggested by the fact that GE employees have been granted an astounding 67,000 patents over the years. Case in Review Strategic Management at General Electric Perhaps no other organization has a history of sustained Corporate Entrepreneurship than does GE, many of whose innovations we take for granted today.
The carbon filament incandescent light bulb (1879), the first practical x-ray technology (1920), the first commercial home television programming (1928), the first successful jet aircraft (1942), providing the basic technology for fiber optic communications (1981), magnetic-resonance guided therapy technology (1993) for medical diagnosis, leading edge technologies of today such as breakthroughs on holographic data storage that can allow up to 40 high definition movies to be stored on a single DVD (2007), are some of the many examples of GE’s proven track record of innovation and Corporate Entrepreneurship.
GE’s commitment to Corporate Entrepreneurship can be measured by the resources deployed to innovation: a $5 Billion annual budget for research with 2,800 employees, 1,000 of whom hold PhDs, resulting in 2,537 US patents through 2008. The approach deployed by GE to manage Corporate Entrepreneurship is largely based upon its evolving organizational design and strategic processes.
Through the leadership of a series of chief executive officers from 1951 to 2000 (Cordiner, Borsch, Jones, and Welch), GE has established the Strategic Business Unit (SBU), supported by reporting and training, as fundamental organizational concept for Corporate Entrepreneurship. First implemented by Fred J. Borsch, this concept establishes relatively autonomous organizations that are free from most of the GE bureaucracy to pursue Corporate Entrepreneurship.
Often, these SBUs report directly to the chief executive office to ensure visibility and attention. Examples of this approach can be found in the success of GE’s commercial aircraft engine business. Other examples include the industrial diamond and the plastics businesses, the later providing the autonomy and freedom to innovate CEO Jack Welch attributes to his own personal success. While SBUs remained somewhat free from GE bureaucracy, they do not lack planning, strategic analysis, and oversight.
A combination of strategic planning and analysis using the GE/McKinsey competitive strength and market competitiveness matrix, coupled formally under Jones, and later loosely under Jack Welch with strategic reviews by the chief executive office provide a process of governance and oversight that still allowed the creativity and flexibility needed for Corporate Entrepreneurship to flourish. The General Electric Company (GE), one of the world’s largest businesses and more than 100 years old, has a long history of starting new entrepreneurial businesses from scratch and raising them into sizeable industries.
GE has not confined itself to entrepreneurship in manufacturing. Its financing arm, GE Credit Corporation, was largely responsible for triggering the upheaval that transformed the American financial system which has now spread to several countries worldwide. For example, GE failed in the computer business but has been a successful innovator in three totally different fields such as aircraft engines, engineered inorganic plastics, and medical electronics. Strategic Approach GE has incorporated the strategic business unit (SBU) process into their strategic process.
This means that at least annually, or during periodic strategy review sessions where previous initiatives are reviewed with the chief executive office, new initiatives can be brought forward and evaluated using the GE/McKinsey Matrix. Those approved can be resourced and SBUs can be established to manage the implementation process. This means at each periodic strategic review an agenda needs to be in place for corporate entrepreneurs to bring their ideas. Additionally, during the annual planning cycle a budget needs to be established to fund such initiatives.
General Electric Transformation under Jack Welch When Jack Welch became CEO of GE in 1981, he set out to reenergize one of America’s largest companies. Through a revision of GE’s mission and values Jack Welch grew GE from a $14+ billion company into a $410+ billion company, ready to face competitors and future challenges. He realigned goals and motivation, forcing managers to stretch to previously unknown limits and restructured GE into one of the world’s most steady corporations.
During GE’s twenty years with Welch, GE shareholders consistently benefited from the legendary leadership of one of 20th century’s most successful CEOs. Jack Welch’s management and motivation approach included three main areas: 1. Goal setting and preparing the company on a corporate level for its competitive challenges. 2. Empowering employees at all levels of the organization. 3. Communicating his new goals and visions through the entire organization, using such tools as extensive training programs, newly formed teams and 360° review processes.
Strategic Management as a Visionary Process at General Electric When Welch took over GE, he had a vision of creating an organization where people at all levels could be held responsible for their own work, and in the end make decisions for the betterment of their job. The goal was not to control workers, but instead to liberate them. Welch characterized this as creating a boundary less organization in which empowered employees were self-directed and motivated to effectively reach their goals.
When Welch became the CEO of GE he found that the company was still organized the way it had been when GE was founded near the turn of the century. Specifically, it was represented by an overwhelming nine layers of management between the ground floor and the CEO. This bureaucracy lead to an unresponsive, inward focused company whose employees found great difficulty in communicating with one another. In fact, if GE’s massive cost structure was not dramatically restructured, analysts projected that GE would become unprofitable by the end of 1982.
Welch addressed this issue by eliminating whole layers of management consolidating overlapping jobs and business units, and forcing employees at every level to take more responsibility for their own work. They stopped gathering unnecessary financial data and eliminated unnecessary reports. In the plant, equipment operators became responsible for the quality of their own work, reducing the need for inspectors. In effect, employees were given the ability to eliminate those aspects of their job that were unproductive and thus unnecessary.
An important aspect of this has been the Work-Out, which has opened the communication channels necessary to help bring about innovative change. The Work-Out has been an empowerment concept greatly favored by Welch. Developed at General Electric during the “Jack Welch era,” Work-Out is a hybrid problem-confrontation/change-acceleration process that calls a “time out” from typical bureaucratic practices and behaviors and substitutes continuous focus, efficient decision-making and accelerated implementation.
Thousands of GE employees get an opportunity to get together and share their ideas, thoughts and know-how, while building and fostering a more creative and team oriented atmosphere. The Work-Out encourages communication and accountability with the ultimate goal being to drive above average team performance. By providing each team member with the opportunity to contribute his ideas to the decision making process, Jack Welch’s hoped to stimulate individuals to constructively challenge their bosses and promote a more motivated workplace.
Under Jack Welch, GE began to realize that human beings are not machines and that each person has the potential to enhance productivity. Knowing how to use this resource can not only give the company a competitive edge, it can make each employee feel more important in the production process and thus more motivated. Although it is difficult to measure the results of empowerment, GE believes that the success of the company in the future will prove that it was the right decision to make. “Boundary less behavior” and the elimination of unnecessary communication filters are the key phrases to describe Jack Welch’s attitude towards communication.
He encourages input from every employee, from the factory floor to the executive suite. One of his objectives was to motivate people to think outside the box and challenge the status quo. Open communication channels between Welch and his employees have been an important tool in this regard. These channels work in both directions, giving employees the ability to air their concerns and work towards a consensus for action.
They also help motivate employees, because once again employees feel that they are directly contributing to the success of the company. Cultural Change Processes GE’s Work-Out process was created in 1988 as part of the ongoing drive for better productivity and efficiency. Initially, Work-Out was intended to identify and eliminate unneeded processes and tasks that were left over from previous years, when management had more layers.
After restructuring, many groups did more work with fewer people, rather than making comprehensive operational changes. The aptly named Work-Out, a process involves identifying an area in need of improvement and bringing people together from all sides of the process i. e. design, marketing, production, sales, etc.
to identify a better method. The Work-Out team meets outside of its normal work environment to discuss the issues and develop recommendations. Team recommendations are presented to the responsible managers, who must accept or reject proposals on the spot. Ideas that require further study are reviewed for a period of time agreed on by the team before a final decision is made. The process encourages responsive leadership and greater employee participation, which increases the rate of change throughout the organization. As Work-Out evolved, customers and supplier-partners were introduced to the process.
The Work-Out process is now part of everyday life at GE. In General Electric Jack Welch was the practitioner. He brought so many changes like: Boundaryless Organization Welch believed that the key to translating diversity into a competitive advantage was the ‘frictionless transfer of best practices and learning within the organization, and the close partnership relations with its suppliers. The Boundaryless Organization initiative aimed to blur GE’s internal and external boundaries through information sharing, cross business learning and the integration of key suppliers into GE’s end-to-end processes.
Six Sigma Quality Program This methodology, developed by Motorola, was implemented by GE on an unprecedented scale throughout the whole organization. It is a comprehensive quantitative system for defining, measuring, analyzing, improving and controlling every aspect of corporate processes. It was developed after GE performed 55,000 Six Sigma projects involving 4000 quality leaders, and consists of more than 50 tools used in implementing the steps of Six Sigma.
Digitization This initiative was introduced in 1999 with the launch of Welch’s destroy-your-business. com program where line managers were encouraged to visualize how their business might be ‘crushed by the dotcom power’ Digitization allowed further improvements in internal process and the discovery of profitable new market opportunities. Merger & acquisition Jack Welch made more than 200 merger & acquisition. The reason behind the success of merger & acquisition was its integration model.
These acquisitions accelerate the future of GE. Delayering When Welch assumed the position of CEO, he saw the extent of GE’s vast bureaucracy. There were more than 500 senior managers, more than 100 vice presidents, and some 25,000 managers. There were strategic planners who hired vice presidents, and vice presidents who hired strategic planners. Removing entire layers of management was a defining aspect of Welch’s hardware revolution. Not only did he eliminate layers of management, he also dis-mantled the walls that had separated key functions within the company. E-initiative Welch used to refer to GE’s Internet initiative.
As part of GE’s e-Initiative, Welch recommended that every process should be digitized. The GE CEO sees this as yet another important step in making the company faster and more agile. In 2000, digitization helped the company sell more than $8 billion of products and services via the Internet. Welch calculates that GE’s digitization of its processes will save the company in excess of $1. 5 billion in operating margin in 2001. GE calculates that e-Business will save over $1 billion in operating margin in 2001 and have $1. 5 billion in cost savings.
Welch also predicts that in 2001 GE will buy about $12 billion in materials over the Internet and rack up online sales of about $20 billion. He now calls the Internet “the thing of the future” and sees it as a productivity tool to “make the old young and the slow fast. ” The Product Services Initiative Welch knew that GE’s manufacturing business would take the company only so far, as the market for huge-ticket items like jet engines was limited. In 1995, Welch made product services a top priority, helping to double GE’s product service business to $17 billion by 2000.
Globalization Globalization was aimed at exploiting international economies of scale across GE’s business portfolio and taking advantage of global opportunities as they arose. During the 1997 Asian financial crisis, GE invested acquired distressed assets in the region in order to leverage off an eventual upturn. This approach had paid off for GE in the past during the US and European recessions in the1980’s and the Mexican crisis in the mid 1990 are allowing the company to accumulate quality assets at discount prices. Re-shaping General Electric for the Future Jeff Immelt the current CEO of General Electric is planning years of explosive growth.
He’s trying to recast GE for decades to come, spending big bucks to create the new infrastructure of innovation, increasing GE’s global research facilities, investing in new, cutting-edge R&D centers in Bangalore, India, Shanghai, China and Munich, Germany. The simple fact is that most of GE’s growth will come from outside the US. Jeff Immelt predicts that developing countries will account for 60% of the company’s growth in the next 10 years, vs. about 20% for the past decade.
To Jeff Immelt, the best managers are leaders who are experts in their business and intensely passionate about what they’re doing. Analysis and Conclusion Jack Welch’s attitude towards strategic management comes down to a few very simple ideas: breaking down hierarchies, ensuring free information flows throughout the organization, and encouraging people to talk, listen and be open to new ideas. Welch succeeded in transforming a complacent large size company into an energized company ready to face world competition.
By flattening the organization and by removing unnecessary layers of bureaucracy, he liberated employees and empowered them to make decisions and effect their jobs, as well as the company as a whole. At the same time, he relied on stretch goals and the slope of satisfaction to further push the company to new levels of achievement. An additional sense of empowerment was relayed through various communication, training and motivation mediums, such as the “Work-Out”, “the Pit”, “the Corporate Executive Council” and other special project teams.
Through the use of 360- degree review processes, appropriate bonus schemes and structural organizational changes, Welch created and opened communication channels at GE, allowing for unprecedented networking, teamwork, and openness to take place at GE. All of these factors combined to form a motivating force for the employees of GE. This motivation in turn has led to a decade of outstanding performance by Jack Welch and General Electric Corporation. In today’s dynamic world one can’t just relay on conventional strategic tools.
In order to compete with other firms, the company must have to develop or involved in some sort of entrepreneurial strategies and activities. The creativity technology and innovation is the future of the business. In the above General Electric case we found that how the visionary and entrepreneurial leadership of Jack Welch transform the company into one of the most profitable company of the time. We learn that how he introduces new creative ideas and programs like work out, six sigma, digitization, delayering, e-initiative etc. to earn not only high profits but also make the company growth and position sustainable.
From the above case of General Electric company and the visionary leadership of Jack Welch we see that how Jack Welch take new steps and measures to search for the new opportunities by introducing new tools like workout, six sigma , e-initiative, digitization, etc. As a CEO he also takes some bold steps like delayering by firing managers and employees and reduced the hierarchy levels of the organization, but the end result is good for the company. He was able to do that because he has the power and vision for the future. Under his tenure GE makes lot of mergers and acquisitions and the company becomes more globalized.
The GE company achieved a dominant growth under Jack welch, which is one of the main characteristics of strategy making approach under the entrepreneurial school of thought. References Strategy Safari by Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel Slater, R. (1999). Jack Welch and the GE way (1st Ed. ). New York, NY: McGraw-Hill. General Electric Company (2009, December 25). GE Global Research Center. Retrieved December 25, 2009, from http://www. ge. com/research/ www. cluteonline. com/journals/index. php/JBCS/article www. slideshare. net www. businessweek. com www. moreexpertise. com books. google. com. pk www. 1000ventures. com