Is GE Right In Getting Out Of Appliances?

Posted by: Bruce Nussbaum on May 16, 2008

Lots of buzz on my post questioning whether or not GE is innovative or not. I’m still not sure. I know it is inventive and does high tech work well, but does it have an innovative culture?

As for dumping GE appliances, I know it’s a low-margin business at the moment but it might become be a higher-margin business with some cool innovation (look at Whirlpool’s expensive front-load washers). And I know GE appliances sells mostly to US customers but with the burgeoning middle class in Asia and the Middle East, it could become a global player. That’s what happened to GE jet engines and locomotives.

The other side to the argument, made by Matt Vella, is that most young people see GE in terms of a media play. So dumping appliances is like getting rid of old 20th century stuff to favor more high tech (jet engines, etc.) and media.

What do you think?

Reader Comments

bobestes

May 16, 2008 9:49 PM

One of the nice things about GE has always been that buying their stock is like buying a mutual fund. They do so many different things, that when one aspect of their business is down, another one is probably up.

In the past, you knew that they could do some high-tech cutting-edge stuff, but that they can sell a great refrigerator, too.

On a personal note, my grandfather was an engineer with the team that developed GE's first jet engines in Cincinnati, making us a GE family, and we grew up with GE appliances. It will be a little sad to see them go away.

Christopher

May 16, 2008 10:21 PM

Honestly? GE appliances started losing their quality in the 1980s. They haven't made a good appliances since then (my mother has a wee bit of trouble getting into a GE MRI knowing that a GE microwave is a piece of junk). In fact, I had thought that GE's appliance division had either been sold a long time ago, or at least the name was leased to someone else and manufactured by a third party. Unless they are willing to invest in making the appliances better, it seems best to chuck the whole division.

bobestes

May 16, 2008 10:35 PM

Huh, well, like I said, we were a GE family. I guess the same principle would apply to people in Michigan who will only buy American cars.

Aaron Keller

May 19, 2008 2:27 PM

It does seem to fit the Jack strategy of being number one or two in a category or not being there at all. They have steadily declined over the years and are probably looking at a large investment in innovation to get back in the pack. The change does free up the category for more real innovators. GE is good a domination but not very good at a come from behind strategy. In other words, bet on them if they are the lead horse don't if they seem to be the long shot. Unlike Apple, which seems to always ride the 40 to 1 horse to victory.

Perhaps Apple could get into appliances business before Steve launches into automobile design.

ajk

John Hall

May 20, 2008 8:02 PM

GE’s visibility in the marketplace, is intrinsically linked to its stock, and has been most visible due to its ‘distribution’ through sales of so many appliances that bear its logo in the home of many millions of people. These products are the 'daily billboard' of the brand that many people see in their homes when they open their fridge, or wash their clothes serve as a reminder to them that this company exists (except for viewing stock market shows on TV) and has been a powerhouse tool for brand memory in the market (and helps many consider the worth of buying their stock).

So eliminating (or not controlling this line of products by selling to others) as their main 'distribution' channel for the stock's ‘visibility program’ is not going to help their image for the long term. The brand of GE will become nearly invisible, and the loss of these most visible products will appear as a failed limb of the organization.

There are plenty of other companies who have embraced technology, R&D, innovation and other leading edge contributing factors (invention, ethnographic insights, totally new appliance definitions) and have prospered as world powerhouses. And those who truly compete globally have made their biggest powerhouse impact from staying current with advanced technologies, being global with it and doing it profitably.

GE Appliances unfortunately has not embraced these aspects to any large degree. For the most part, they have milked their appliance division by minimal investment and without applying a powerful model for global competitiveness that they should have used.

This move will more than likely hurt their image significantly as they will become a stock that has much less visibility once they acquiesce from areas they have not had the commitment to apply their corporate leadership claims to.

This is not evidence of a global innovator.

Christa Avampato

May 21, 2008 2:29 PM

Hi Bruce,
I think it's a good move on GE's part. The margin on applicances is so low that its not worth GE throwing resources into the business when they can make more money AND do more good in the world by investing their resources into efforts like clean energy. I heard Jeff Immelt speak at the Darden School about a year and a half ago and he exudes leadership and foresight. I was incredibly impressed by his thoughfulness and his sense of empathy. I have to believe that he has thought long and hard about this move, and is always doing what is best for the entire company.

Web Watcher

January 31, 2011 8:40 AM

Good point, too often utterly ignored.

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Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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