Convert The Simple Economy Into A High-Tech Based Complex Economy
By W.A. Wijewardena -September 17, 2012
Dr. W.A. Wijewardena
Jack Welch, Chairman and CEO of the US giant General Electric or GE from 1981 to 2001, has offered his experiences as a fool-proof survival kit whichanyone – people, companies or nations – could use if they wish to be winners in a hostile competitive world.
Jack Welch: Produce what others cannot copy
In his autobiography ‘Straight from the Gut,’ which he published immediately after he left GE in 2001, he has narrated the strategy he adopted to make a turnaround in GE which was heading for bankruptcy at the time he assumed its captaincy.
GE, a reputed brand name for household electric appliances for many decades, had faced the inevitable problem of losing its well protected markets to cheap imports from Japan that had flooded the US and other consumer markets in 1960s and 1970s.
GE, a reputed brand name for household electric appliances for many decades, had faced the inevitable problem of losing its well protected markets to cheap imports from Japan that had flooded the US and other consumer markets in 1960s and 1970s.
When GE could not survive the Japanese onslaught and was forced to close its doors, the reaction of any other person would have been to protest to the US Government and seek banning of Japanese imports, explains Jack Welch. But he and his team had burned the midnight oils for many days and finally zeroed on the cause of the GE’s plight.
That cause was simply that GE had been producing electric appliances like irons, refrigerators, ovens and deep freezers which involved low technology and therefore could be copied by anyone with ease. If they will go into high tech products which could not be copied by others easily, they would enjoy a protected market for some time, he and others at GE had reasoned.
So, Jack Welch had decided to close all the factories that had been manufacturing these low tech products and used the savings for doing research on three main products which involved high technology and, therefore, could not be easily copied by competitors.
These three products were electric power generating turbines, jet engines and sophisticated medical equipment like magnetic resonance imaging or MRI machines and equipment to undertake non-invasive surgeries, a novelty getting fast popularity at that time.
Having concentrated on these three high tech products, GE was able to eliminate the competitors effectively and managed to make a quick turnaround in its business within a few years.
What does this lesson teach the rest of the world? That is, the competition out there is fierce, cannot be avoided and should be faced with a matching strategy. That matching strategy, based on a world view that things around us are not soothing or comfortable at all times, makes it necessary for us to change from a simple production process to a complex production process. Why a complex production process? Because that is the way to keep our competitors at a safe distance from us so that they cannot grab a big chunk of our markets.
Today, a new branch of economics calling itself ‘complexity economics’ has offered the same advice to nations intending to create prosperity on a sustainable basis.
So, Jack Welch had decided to close all the factories that had been manufacturing these low tech products and used the savings for doing research on three main products which involved high technology and, therefore, could not be easily copied by competitors.
These three products were electric power generating turbines, jet engines and sophisticated medical equipment like magnetic resonance imaging or MRI machines and equipment to undertake non-invasive surgeries, a novelty getting fast popularity at that time.
Having concentrated on these three high tech products, GE was able to eliminate the competitors effectively and managed to make a quick turnaround in its business within a few years.
What does this lesson teach the rest of the world? That is, the competition out there is fierce, cannot be avoided and should be faced with a matching strategy. That matching strategy, based on a world view that things around us are not soothing or comfortable at all times, makes it necessary for us to change from a simple production process to a complex production process. Why a complex production process? Because that is the way to keep our competitors at a safe distance from us so that they cannot grab a big chunk of our markets.
Today, a new branch of economics calling itself ‘complexity economics’ has offered the same advice to nations intending to create prosperity on a sustainable basis.
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