Lights out, lessons from the turmoil at GE

This is the first attempt at what could become a monthly feature on this blog. I’m always experimenting with new things to write about and books are my latest source of inspiration 🙂 It fits with the theme of this blog – I want to write about things as a mechanism to learn and retain! What better way to retain knowledge than to write down what you learned from books!

I recently finished the book Lights Out: Pride, Delusion, and the Fall of General Electric which goes into detail about the downfall of General Electric. There are some great lessons for leaders and especially leaders in the fintech space from this book.

Financial services is a double edged sword

GE got addicted to its financial services revenue. It is a powerful drug that GE couldn’t wean itself off. At its core, GE was an industrial company that was ill-suited to the compliance and risk management thinking that is required if you are running a financial services enterprise. For non-finance types, financial services look like easy money and there is a temptation to continuously squeeze that orange. A recurring example was the use of extending credit to customers at great terms to bring forward revenue. GE Capital is a great case study on how over-reliance on financial services in support of your core business can lead to ruin. Embedded fintech has its downsides!

A Culture of yes destroys organizations

Anybody who disagreed or questioned Jeff got shown the door. This led to a culture of always saying yes to Jeff. Even if you believed it was a wrong decision, the right strategy was to always agree with the boss. This attitude permeated through every layer of management. This led to nobody questioning the obvious bad decisions and then making up numbers to meet the unrealistic plan and expectations. GE Capital was available as a lever to make this happen. Everybody had their head under the sand.

Buying growth is hard!

Jeff’s strategic quandary was that growth had stalled. The street wanted growth which the core business could not organically produce. Thus commenced his deal-making and efforts to buy growth, which caused the eventual failure of the company. GE Capital was used as a revenue driver in the interim to buy time to get real growth. As time went by growth in the core never materialized and the strong culture of yes prevented everybody on the team from course correcting. Eventually, the house of cards crumbled.

This book was a good read and it raised some very deep leadership questions for me. As leaders, we want to be inspiring to our teams and push them to have lofty goals. We always talk about having an open culture where different points of view are welcome. But how true are we to that concept? Dissent in organizations more often than not is always viewed as pessimism. Just like accountability theater, the more often an organization talks about being open to challenging ideas and strategy, the less they are open to challenge. Is yes man culture inevitable? Do we always get high on our supply?

Deep questions to ponder on…

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