value of this is enormous. Not only is GE developing new leaders, but it is also putting them to work on practical plans that will drive new growth for the company; and then it is seeding those leaders back into the organization and reinforcing their changed mindset with performance measures and rewards.
THEY SPOT OPPORTUNITIES FAST AND CHASE THEM CHEAP
As Ranjay Gulati of Harvard Business School notes, “The problem these companies face is, as they get bigger, as they scale, things slow down. They lose speed because they have so many systems and structures and processes, and they lose the ability to take risks. GE’s a smart company. They understand the pathology of bigness, and this allows them to be responsive.”
GE did not stop with its LIG program and its focus on Imagination Breakthroughs; it wanted to create a culture of pivoting throughout the organization. So the company turned to Eric Ries, the source of the concept of the pivot, and asked him to help inculcate that lean twenty-first century startup mentality in a $150 billion enterprise. The result was FastWorks, a program designed to create a culture, according to Beth Comstock, GE’s chief marketing officer and FastWorks sponsor, “where we operate faster while delivering better outcomes. At the heart of it is the discipline of testing and learning that permeates the entire the organization.”11
Ries helped GE build an approach and develop a playbook based on those practices, and my team and I worked with GE’s nearly 300 FastWorks coaches scattered across all the businesses to navigate and influence the existing culture, knowing that those practices would promptly fall flat if they were to hit a resistant or ill-equipped organization. This program has had a profound effect on GE’s ability to become growth-oriented and innovation-focused at all levels.
As an example, in one of GE Healthcare’s groups, a small team of engineers, marketers, and product designers is plotting the future of medical devices. With hopes of disrupting the market, the group is using a limited budget to streamline the development of a new PET/CT scanner while addressing customer concerns over price, performance, and ease of use. Similar to what all other GE businesses now have, Healthcare has a growth board that approves or rejects potential FastWorks projects. Wei Shen, whose team is developing the PET/CT scanner, felt as if she were on the TV show Shark Tank when she pitched the idea, which was initially rejected early in 2015 because it involved building a prototype that would cost a few million dollars. She secured approval after nixing the full prototype and cutting the projected cost by more than half.
If Shen’s team followed tradition, it would have spent two to four years building a new product based mostly on basic market-research surveys. Under FastWorks, the group constantly takes its ideas to customers throughout the development process to learn what will sell and what won’t, redesigning the scanner before devoting the time and money to creating a final product. The first two iterations cost a total of less than $300,000. Shen aims to have a product out in about half the normal time. The customer feedback is invaluable, Shen says. “I can build a product to have the best image quality, but it may not be at the right price point. Or I can build a product that’s so fast it can accommodate thirty to fifty patients a day. I can have a system that’s 50 percent lower-cost.”12
In this way, a corporation once so focused on execution and operational excellence is now developing a culture in which there is room for failing, learning, and seizing opportunities—all at an accelerated pace. Recently Immelt even launched a “Power of the Pivot” award to recognize those in the organization who will speak up, call a spade a spade, and lead others to change. The goal is to have an organization in which thousands of small changes can take place every day, even as larger “imagination breakthroughs” are also happening.
One of my close collaborators at GE, Simeon Sessley, whom you may recall from the foreword, believes that GE’s Six Sigma heritage has allowed it to become a company capable of thousands of pivots, large and small. Six Sigma, after all, is a discipline for making many small incremental improvements in processes. However, the innovation, growth, and customer-focus framework that has been culturally ingrained in the company changes the way people think, communicate, and work. In the past, Simeon says, GE, like most companies, was focused on answering financial-first questions such as, “Where are we in meeting our revenue goals, our profit margins, and our execution objectives?” Now, people are starting to focus increasingly on secondary questions that challenge beliefs and the status quo, such as, “Are we really meeting our customer needs with this path? Are we innovating enough? How will we disrupt our own businesses?”
These questions lead GE to think more about continual transformation and long-term opportunities rather than on the meeting of quarterly results.
THEY BALANCE EXPLORATION AND EXPLOITATION CONSTANTLY
What does an organization look like when it is positioned to pivot at any level and toward large or small opportunities? Maybe a lot like Toyota.
According to Matthew May in The Elegant Solution: Toyota’s Formula for Mastering Innovation, Toyota implements a million new ideas a year, many of which stem from their employees. These ideas are often small and easy to implement, but cumulatively they snowball to create a major impact.13 In a Harvard Business Review interview, Katsuaki Watanabe, the former CEO of Toyota, said, “There is no genius in our company. We just do whatever we believe is right, trying every day to improve every little bit and piece. But when seventy years of very small improvements accumulate, they become a revolution.”14
Toyota’s innovation in how cars are made enabled it to make cars more quickly and cheaply with less labor than American companies. In other words, by focusing on “How”—the culture and work processes of the organization—Toyota was able to achieve a faster and more effective “What”—the production and sale of vehicles.15
Incremental and disruptive innovation are commonly discussed as diametrically opposing philosophies, when really they should work in concert within an organization. Being able to make small incremental changes actually positions an organization for innovations that are more disruptive and that have a greater impact. This positioning occurs because once change and innovation are normalized in the way organizations operate, it becomes easier to surface, accept, and enact more disruptive or non-linear innovations. A culture of innovation gives employees and leaders the muscles and agility they need to make quick changes, develop breakthrough ideas, and diminish the common fear of failure and risk.
Toyota understands this. While it continually refines and produces some of the most reliable, affordable, and best-selling vehicles on the market, like the Corolla, which passed the 40-million threshold in 2013, it is also capable of seeking out and exploring new industry-shaking innovations, like the Prius, the first vehicle since the Stanley Steamer to offer a viable alternative to the internal-combustion engine.
Despite some doubts and hiccups in developing a new technology, the company fought through adversity to unveil the Prius in Japan in October 1997, two months ahead of schedule.16 The first Prius came to North America in July 2000, when national gas prices averaged about $1.50 a gallon. Some questioned whether the new technology would be appealing given low gas prices, so the company set modest sales goals of 12,000 units per year.17 Customers, however, thought differently. By the end of 2013 Toyota announced that it had sold more than 6 million hybrid vehicles throughout the globe, generating 41 million fewer tons of CO2.18 The Prius has become not just the best-selling hybrid, but also one of the world’s top-selling cars. Toyota managed this pivot because it was good at making continual improvements to existing processes, while also being culturally oriented toward making small and large bets.
Companies that are nimble—even giant companies like Toyota and GE—believe that being fast is more important than being big. They refuse to rely on the comforting view that “scale never fails.” Instead, they consciously architect an organizational culture that embraces
