American economy was in a recession during the early 1980s when GE appointed Jack Welch, the new CEO of the firm. Economy was plagued with high interest rate and powerful dollar which resulted in highest level of unemployment rates since Depression. To leverage the performance of diverse portfolio of GE, the new CEO sent in new resolution to be “better than the best” and set in place a series of radical changes to restructure the company over the coming 5 years.
The changes in GE came in three phases, commonly known as the first, second and third waves.
The first wave
Welch after taking charge, set the standard to be competent enough to stay at #1 or #2 position in the industry or disengage. According to Welch, this general “#1 or #2” objective is a “three circle concept” of his vision for GE.
Businesses were categorized as:
- Core (with the priority of “reinvesting in productivity and quality”)
- High-technology (challenged to “stay on the leading edge” by investing in R&D)
- Services (required to “add outstanding people and make contiguous acquisitions”)