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The Changing Business Landscape – re : Speed vs Scale

The global business landscape has changed and what it takes to win / compete today is different than what it use to be. This stems from the increasing importance of “ speed “ rather than “scale “. To confirm the changing balance of power between speed and scale has shifted, look at GE and Siemens.

During most of the Jack Welch era at GE, Siemens, the German conglomerate, looked up to and even mimicked GE. The two companies often competed with one other in energy, healthcare, and engineering. GE usually won out, and being the biggest, this often determined who was viewed as the best !

This ended when Siemens divided itself into 3 companies several years ago with – Energy, Healthcare, and Industrial Solutions becoming separate businesses.  And with GE recently finalizing the spinoff of its energy business GE Vernova (after already spinning out GE Healthcare), the company seems to be following the Siemens playbook !      

To summarize, these 2 huge conglomerates of yesteryear adopted a demerging strategy to be better positioned to win going forward. And with this, Jim Snabe, the chairman of Siemens says – in an era of “ Digitization “ and “ Transitioning to Green “, speed is more important than scale.

“ We believe speed matters since it’s about more and better innovation as well as value creation. When Jack Welch was a leader size mattered more than anything, and you lead a conglomerate with a results-oriented, tough business model, where you are either No. 1 or No. 2 in each business, or you get out.

Now it’s about the speed to reinvent yourself and being more entrepreneurial. Because of the leadership model where you’re tough on results fails because it’s not about making a budget and achieving your budget –  it’s about exponentially innovating and reimagining the future as well as having the courage to try and overachieving. It’s also about leading with purpose. It’s completely different now.” 

The proof of this change in strategy – Since announcing their corporate demerging, GE reversed years of declining stock market performance and Siemens has reported 3 years of double-digit business growth !

April 22, 2024               Fortune / CAIL               CAIL Innovation commentary                        905-940-9000