As they say, change is the only constant. For General Electric (GE), a multinational conglomerate with over a century of industrial history, this adage rings especially true. In an epochal move, GE has announced plans to split itself into three distinct companies, focusing on aviation, healthcare, and energy respectively. The split, which is set to occur over the next few years, signifies GE's move away from its historical status as a diverse conglomerate to more focused, efficient operations.
The split can be seen as a response to the increasing complexity and specialisation within GE's various industries. By forming three standalone entities, each can enjoy the benefits of increased operational efficiency and tailored strategic direction. It can focus on its core competencies, evolving with the industry trends and customer needs.
A report from Boston Consulting Group (2020) posits that in the current era of rapid technological progress and industry evolution, companies that follow a focused, specialised business model are more likely to outperform conglomerates in the long term. In essence, GE's move can be seen as a strategic adaptation to the changing business environment.
Let's delve deeper into the three offshoots of GE.
Firstly, the aviation business, renowned for being a world-leading provider of jet engines and related services, would continue to drive innovation and focus on sustainable aviation solutions.
The healthcare unit, a dominant player in medical imaging, diagnostics, and healthcare IT, would focus on advancing precision health and improving patient outcomes.
Finally, the energy company, encompassing renewable energy, power, and digital, is envisioned to provide a comprehensive portfolio to tackle global energy transition.
While the decision to split has been welcomed by many analysts and investors, it does not come without risks. These include potential disruption during the transition period, increased competition as standalone entities, and the loss of economies of scale and scope that GE currently enjoys as a conglomerate. Yet, the company assures shareholders that these issues are being meticulously addressed, and the benefits far outweigh potential drawbacks.
For shareholders, the split signals a significant revaluation opportunity. Each company, by focusing on their own market and competencies, is expected to drive a more robust value creation strategy. In the words of CEO Larry Culp, "This is the culmination of our transformation over the last several years to become a more focused, simpler, stronger high-tech industrial company."
The GE split represents a pivotal moment in corporate history, marking the end of an era for one of the world's largest and oldest conglomerates. Whether this decision will herald a triumphant or troubled future for GE and its offshoots, only time will tell. However, the spirit of the decision embodies a forward-thinking strategy, responding to evolving business climates and leaning into the winds of change, which is commendable.
GE's evolution serves as a testament to the enduring relevance of the principle of change within business dynamics. It poses an exciting case study for other conglomerates around the globe, potentially prompting a wave of deconglomeratisation. Akin to a phoenix rising from its ashes, the GE of tomorrow may look drastically different from today, but the essence of innovation, quality, and leadership will undeniably persist.
