Unlocking 90s GE Secrets: Proven Business Lessons For Contemporary Success

In the 90s GE reported nine straight years of double-digit profit growth. The stock market responded in kind, and the share price rose almost 10-fold.

The world is different today but two similarities caught my eyes. First, like today the decade started with periods of uncertainty and recession. Second, advance in technology - AI today, the internet back then - can kick-start an era of growth.

With this in mind, why not search for lessons from GE, the most admired company of the 90s?

Lesson #1: efficiency is king

At the core of GE’s success was a relentless drive towards efficiency. In a large conglomerate, lots of discipline is needed to reduce bureaucracy and consistently drive down costs. GE did so in two different ways: First, Jack Welch, the CEO since 1981, worked hard to overcome the company's old hierarchical approach, with its 29 layers of management. By the 1990s, a new culture of informality allowed people to communicate across layers and get things done quickly.?Secondly, GE transformed Six Sigma from a tool that ensured manufacturing quality to one that reduced mistakes and cut out slack in all service-related activities. Incentives and promotions were closely tied to the ability to master Six Sigma. After its introduction, operating profit margins increased from 14.4% in 1995 to 17.3% in 1999.

My own research on companies succeeding for more than 100 years tells the same story: efficiency is as important as innovation.

Lesson #2: if you are not No. 1 or 2 in an industry, leave

Performance and efficiency also guided GE’s portfolio decisions. A rule since adopted by many companies was that each business had to be No. 1 or 2 in its industry – otherwise it was sold or shut down. But the spread of GE's activities was wider than what most analysts recommend today. Medical technology, appliances, turbines, light bulbs, and plastics all found a home in the conglomerate. Economic theory suggests that companies can move outside their core activities, as long as marginal benefits outpace marginal costs. Looking forward, this means that some companies might define their core business too narrowly today. Particularly in emerging economies, a trusted brand or good relationships with suppliers and governments can be leveraged across a wide range of activities.

Lesson #3: expand into markets neglected by others

While GE focused on efficiency, it also expanded into new markets, more than doubling its revenues. A big driver behind this growth was the acquisitions it made both in the U.S. and abroad.

Internationally, GE showed a strong preference for bargain hunting. The company often made big acquisitions when a country had fallen out of favor. For example, when Mexico devalued the Peso, and the economy was in turmoil, GE made?10 acquisitions and invested more than $1 billion in new and existing operations there. In Europe, it picked up a number of financial service providers, such as SOVAC SA and Credit de l'Est in France, during the sluggish mid-1990s. This counter-cyclical international growth makes sense as it is cheaper and companies that are not for sale during the good years are available.

In 2024 there are plenty of struggling countries to choose from. Firms might want take a look at bargains in Germany, Nigeria, or possibly South Korea. It is important to note, though, that GE was an experienced global player. Tarun Khanna from Harvard points out that industries are very different in different countries. So even if you are a strong player at home, you should not take the challenges abroad lightly.

Lesson #4: Don’t be seduced by hype

Finally, it is also important to mention what GE did not do. It did not buy into the hype and try to turn itself into a dotcom company. Sure, GE used the internet to reduce paperwork and become more efficient, but management was focused primarily on production and much less on e-commerce. In 2024, this is important to remember. If you are not a tech company, don’t try to transform yourself into one. That does not mean that you ignore the opportunities of AI. What you need to figure out is how to use AI to support what you are great in already. And never forget, that this will require adjustments of established structures and processes.

To be ready for 2025, don’t look to Google and OpenAI – unless, of course, you're a tech company. GE’s story from the 1990s is probably more relevant. It highlights the importance of efficiency, informality and focus.

An earlier version of this article was published in Forbes.