Summary of Scott Davis, Carter Copeland & Rob Wertheimer's Lessons from the Titans

Everest Media

Description

Please note: This is a companion version & not the original book.
Sample Book Insights:
#1 The case study of General Electric is the biggest story of them all, the amazing and disheartening narrative of a signature American company that rejuvenated its business several times and then faltered.
#2 Welch, the CEO of GE, saw the company’s potential and wanted to return it to its nimble roots. He cut layers of management and pushed decision-making down through the organization. He also invested heavily in factory automation and pushed productivity onto the factory floor.
#3 Welch’s approach to management was to fix it, close it, or sell it. He beefed up rewards with stock options, and encouraged risk taking. Those who missed their numbers went on probation and were fired if they fell short again.
#4 Welch’s focus on cash flow led him to make five large bets on future growth during his tenure at GE. These areas of focus would lead GE to another 15 years of unprecedented growth and success.

Sujets

• Leadership
• Business
• Economics
• Gestion et management

Informations

• Publié par: Everest Media LLC
• Date de parution: 01 mai 2022
• Nombre de lectures: 0
• EAN13: 9781669396710
• Langue: English
• Poids de l'ouvrage: 1 Mo

Extrait

Insights on Scott Davis and Carter Copeland & Rob Wertheimer's Lessons from the Titans
Contents Insights from Chapter 1 Insights from Chapter 2 Insights from Chapter 3 Insights from Chapter 4 Insights from Chapter 5 Insights from Chapter 6 Insights from Chapter 7 Insights from Chapter 8 Insights from Chapter 9 Insights from Chapter 10 Insights from Chapter 11 Insights from Chapter 12
Insights from Chapter 1

#1

The case study of General Electric is the biggest story of them all, the amazing and disheartening narrative of a signature American company that rejuvenated its business several times and then faltered.

#2

Welch, the CEO of GE, saw the company’s potential and wanted to return it to its nimble roots. He cut layers of management and pushed decision-making down through the organization. He also invested heavily in factory automation and pushed productivity onto the factory floor.

#3

Welch’s approach to management was to fix it, close it, or sell it. He beefed up rewards with stock options, and encouraged risk taking. Those who missed their numbers went on probation and were fired if they fell short again.

#4

Welch’s focus on cash flow led him to make five large bets on future growth during his tenure at GE. These areas of focus would lead GE to another 15 years of unprecedented growth and success.

#5

Welch was convinced that future growth in air travel would be driven by two trends. The first was direct point-to-point travel, which was the most common type of travel today. The second was globalization, and he saw this in his own businesses, where employees needed to travel around the world to see customers.

#6

Welch was also successful with the F series gas turbine, which was developed in the 1980s. He bet that natural gas would be plentiful and that electric utilities would shift away from dirtier coal power, and he was right.

#7

Welch was a contrarian by nature, and he was also a fan of razor/razor blade businesses. He figured that if he could dump his flashy consumer electronics business and invest the proceeds at a lower price in healthcare, that would be an ideal portfolio swap.

#8

Welch had no interest in selling TVs, but he loved the potential in the NBC asset he got in the RCA deal. He invested heavily in program development to bring NBC back. In the mid- to late 1980s, TVs were getting bigger and clearer, and consumer product companies were increasingly allocating more ad budgets to TV.

#9

Welch’s vision was to finance GE’s consumer products, and he saw that investors wanted to lend to companies like GE, whose AAA rating mirrored that of US government bonds, yet with a higher yield.

#10

Welch’s tenure at GE was extremely successful, as he had a bold playbook that boosted margins and cash even while investing heavily. However, his reputation began to become arrogant by the late 1990s.

#11

Welch’s last years were far from his best, and he was even destructive, but the value creation over time had cemented his legacy. The celebrity that began to follow him was a distraction for a CEO and an organization that had otherwise remained focused.

#12

The first step in any turnaround is to attack the cost base. Welch's approach was to fire his bottom 10 percent each year. That was too hard on a culture, but there is a level of turnover that makes sense.
Insights from Chapter 2

#1

The market’s expectations were out of sync with reality. GE had inflated its profits in the late 1990s due to its investment gains, outsized pension investment gains in the bull market, and a bubble in gas power generation. In 2000, the company had an eye-popping P/E ratio of 40x.

#2

Immelt was a hard-nosed executive who had risen to the top of a no-nonsense company. He was not interested in systems, and he used to claim that he knew his top 600 executives in some level of detail. But factory visits became less common, and business reviews lacked the intensity of the Welch era.

#3

Under Immelt, the culture at GE was defined by his softer edges. Instead of firing the bottom 10 percent, he took the long view on conventional ideas. Welch had pushed RD to develop products within its core, products that could be commercialized within five years.

#4

In the late 1980s, Welch had discovered that financial services offered a lot of discretion in declaring gains and losses. His earnings management became famous, even applauded, despite the clear ethical lapses guaranteed to occur with such discretion.

#5

The intimidation factor at GE was massive. And though Immelt softened Welch’s harder line on outside criticism, he largely looked the other way when subordinates carried on the practice.

#6

Welch’s successor, Jeff Immelt, despised spending time with analysts and shareholders. He even joked about that part of his job being the least pleasant. He believed that stakeholders were not imaginative enough to understand his big ideas.

#7

Immelt’s poor timing was almost surreal. In 2007, after arguably the greatest real estate bull market of all time, he went heavily into commercial properties. He also bought a subprime mortgage originator near the housing peak, despite GE having exited a similar business years earlier.

#8

The company’s manufacturing quality slipped under Immelt, and its acquisitions made the asset worse. The company’s financial expansion began under Welch, but Immelt took risk to dangerous levels.

#9

During Immelt’s tenure, the board seemed to be charmed by him. He frequently exceeded $20 million in annual compensation, all while shareholders continued to lose money from his poorly timed investments and lack of focus on operations.

#10

Every company struggles with the temptation to fudge numbers or improve short-term results at the expense of the long term. The good ones have accountability systems that keep most people in line. There is nothing that destroys a culture faster than wasteful spending and celebrity behavior among the executives.

#11

The Great Recession of 2008–2009 brought GE to its knees. It was harder hit than most companies, due to its outsized exposure to financial services, its record-high debt levels, and a deep recession that was hurting even its strongest businesses.

#12

I was an analyst at Morgan Stanley, and I had the gall to question Immelt’s strategies on the day of GE’s worst earnings miss in history. I nearly lost my job because of it.

#13

After the dividend cut and tarnished reputation in early 2009, Immelt finally began to shrink GE Capital and simplify the overall portfolio. He also began to invest in digital transformation and the acquisition of a French power infrastructure company named Alstom.

#14

Investors did not know that due diligence had revealed that Alstom was in poor shape, much worse than what anyone inside GE had previously thought. The EU dragged out approval of the deal for more than a year, all while Alstom's engineering and sales talent fled, and finances fell further into the abyss.

#15

The Alstom deal, which was one of the worst acquisitions in history, catalyzed the eventual firing of Immelt in August 2017. The company has continued to bleed cash, and its stock price has dropped from north of $30 all the way back to the financial crisis low of below $7.