In Jack: Straight From the Gut, famed GE CEO
Jack Welch (with John A. Byrne), gives a no-nonsense take on what made his 20-year tenure at GE so successful.

• The first fundamental in strategy is to be in the right business
  
  • In his initial speech as CEO in December 1981, Welch asked each of his leaders to be either number one or number two in their businesses.
    
  • If not, they need to come up with a plan to either fix, sell or close
    
  • This followed from Peter Drucker’s key questions:
    
    • “If you weren’t already in the business, would you enter it today?”
      
    • “If the answer is no, what are you going to do about it?”
      

• But, strategic planning was not the key to success. It was the human elements:
  
  • Leadership
    
  • Morale
    
  • Instinctive savvy
    

• Further, strategy was not a lengthy action plan. It was the evolution of a central idea (key themes) through continually changing circumstances.
  

• Unifying themes for GE
  
  • Reality: see things as they are, not as you would wish them to be
    
  • Quality / Excellence
    
  • Human Element
    

• For the human element, focus on having the best people
  
  • Beware the “superficial congeniality” of bureaucracy
    
  • Differentiation: Rank employees
    
    • 20% – A (Top)
      
    • 70% – B (Vital)
      
    • 10% – C (Bottom)
      
  • Get rid of the 10% each year
    

• Business paradoxes
  
  • Spending millions on buildings that made nothing (training facilities such as the famed Crotonville, NY leadership center), while closing down uncompetitive factories that produced goods
    
  • Paying the highest wages, while having the lowest wage costs
    
  • Managing long term, while eating short term
    
  • Needing to be hard in order to be soft
    

• The four E’s of leadership:
  
  • Personal energy
    
  • The ability to create an atmosphere that energizes others
    
  • The edge to make difficult decisions
    
  • The ability to consistently execute.
    

• Four major initiatives in the 1990’s
  
  • Globalization
    
  • Services
    
    • Re-define the business so that you are not one and two in the market as a way to push toward services.
      
    • Most famously, GE built its nuclear business model based on the assumption that they would never sell another product. Thus, services were to be what makes the business grow and succeed
      
  • Six Sigma
    
    • Focus on variation not just the averages.
      
    • Customers hate variation and unpredictability.
      
  • E-business: three ways to profit
    
    • Buy over the Internet
      
    • Make back office more efficient with the Internet
      
    • Sell products over the Internet.
      

• The CEO Formula: What This CEO Thing is All About
  
  • Integrity
    
  • The corporation and the community
    
  • Setting a tone
    
  • Maximizing an organization’s intellect
    
  • People first, strategy second
    
  • Informality
    
  • Self-confidence
    
  • Passion
    
  • Stretch
    
  • Celebrations
    
  • Aligning rewards with measurements
    
  • Differentiation develops great organizations
    
  • Owning the people: you own the business, you rent the people
    
  • Appraisals all the time
    
  • Culture counts
    
  • Strategy
    
  • Competitors
    
    • The following is always wrong: We’re losing market share because our competitors are crazy and they are giving the product away.
      
  • The field is important, not the Headquarters
    
  • Initiatives vs. Tactics
    
  • The communicator
    
  • Employee surveys
    
  • The advertising manager
    
  • Managing loose, managing tight
    
  • Investor relations
    
  • Wallow to come up with the best ideas (Brainstorm)
    
  • Your back room is somebody else’s front room, so out-source to them when it makes sense
    
  • Forget the zeros: think small