Entrepreneurship in the modern economy has fundamentally changed the business models of traditional corporate giants like General Electric (GE), according to Viv Goldstein, the Global Director of Innovation Acceleration at GE.
Goldstein gave a talk in the Jordan Auditorium of the Mendoza College of Business on Friday morning. The lecture was part of the Ten Years Hence lecture series that aims to “explore issues, ideas and trends likely to affect business and society over the next decade,” according to Mendoza College of Business’s website.
Goldstein said the lessons manifest in the success of startups have transformed GE’s mindset.
“You’ve got to drive change and this change has to be constant,” she said.
It may be tempting, Goldstein said, to reduce the importance of entrepreneurship to simply technology, but the principles behind the Silicon Valley paradigm are much more far-reaching.
“Change is no longer just about technology, because the world of business and the world of innovation [are] changing,” Goldstein said,
Goldstein said the contrast between the prevailing business models at the end of the 20th century and those of today profoundly emphasize this change.
“If you look back 20 years at some of the largest, most successful companies, they grew through productivity which basically means they did things faster, better and cheaper,” Goldstein said.
Goldstein said GE was a perfect example of this during the Welch era, from 1981-2001 when Jack Welch served as CEO of GE, as an international giant that continually and incrementally improved cost and efficiency to remain dominant in the marketplace. However, Goldstein said this strategy is untenable in the modern dynamic economy.
“You’ve got these industries that have huge barriers to entry like motor vehicles and then you look at Tesla,” Goldstein said.
In almost every area of the economy, Goldstein said, startups can now quickly rival well-entrenched monoliths that were previously unchallenged. Goldstein said this is due in large part to the decreasing importance of physical capital like factories, equipment and inventory.
“If you look at some of the unicorns, the billion dollar startups, there is not one single physical asset,”
Airbnb is a prominent example of this phenomenon, Goldstein said, because it achieved a multi-billion dollar valuation by offering a service and has no significant tangible, physical assets.
Goldstein said GE has adopted a number of policies in order to adapt to this new environment and implement the successful principles of entrepreneurship. Connecting with creativity of the public to find solutions to problems is one of these initiatives, she said.
“Not all great ideas are invented by our own employees,” Goldstein said.
Goldstein said GE recognized the power of crowdsourcing and the potential of looking outside its own organization for intellectual capital, and thus, started giving prompts and challenges based on real business issues to the public.
Goldstein said eliminating the red tape and complacency of bureaucracy has been another major priority for GE.
“What we are now saying to 325,000 people is: do the right thing, and sometimes that means just cut through the clutter,” she said.
GE is trying to get its employees to look more closely and creatively at the situations their customers face, which means going beyond simply asking the customers what they want, Goldstein said.
“The true disruption comes from real deep understanding of the customer experience, of the customer journey, of pain points they have in whatever they’re using or experiencing at that moment,” Goldstein said.
One of the most tangible and important entrepreneurial shifts GE has made, Goldstein said, was the creation of the Portfolio Optimization Growth Board. This organization reviews proposals about new products and services by GE employees and grants funding. The board defines what stages the proposal is at: seed, launch or growth and gives financial support to match each stage.
“What too many products have done is gone from idea to scale, and that’s a miserable way to lose a lot money,” Goldstein said.
Goldstein said the multi-step process of GE’s growth board is designed to carefully nurture entrepreneurial endeavors and to make sure they do not flame out or expand too quickly.
