How GE’s CEO used a Japanese manufacturing tactic to turn the company around—and got the stock to outperform Apple and Microsoft last year | Shawn Tully | 26 Jan 2024 | Fortune Magazine · Nuggets
Leaders, Investors & Entrepreneurs//5 min read/fortune.com
How GE’s CEO used a Japanese manufacturing tactic to turn the company around—and got the stock to outperform Apple and Microsoft last year | Shawn Tully | 26 Jan 2024 | Fortune Magazine
//Do read incase you're interested in turnaround case studies.
"We aren't going to solve our problems in conference rooms. We're going to solve them where the work is done." - Larry Culp (On the "Gemba" philosophy of shop-floor engagement)
"The breakup wasn’t an admission of failure; it was a realization of potential." - Larry Culp (Contextualizing the decision to split GE into three entities)
"In many ways, GE had become a victim of its own complexity. My job was to simplify the math and the mission." - Larry Culp (Reflecting on his arrival in 2018)
"Management is not a spectator sport. You have to get your hands dirty." - Larry Culp (Explaining the cultural shift toward operational excellence)
"We were managing for the quarter, not for the decade. That had to stop." - Larry Culp (Critiquing the previous era of financial engineering)
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Larry Culp’s tenure at GE is a landmark case study in corporate revitalization. Inheriting a conglomerate burdened by over $100 billion in debt and a stagnant culture, Culp applied Lean manufacturing principles to dismantle the 132-year-old icon into three focused, independent companies: GE HealthCare, GE Vernova, and GE Aerospace. By prioritizing operational "Gemba" (the work floor) over corporate bureaucracy, Culp successfully transitioned GE from a failing "conglomerate" to a high-performing trio of pure-play industrial leaders.
Key Takeaways
Operational Discipline over Financial Engineering: Culp replaced Wall Street-centric "quarterly management" with long-term operational health.
The Power of Lean: Utilized Kaizen (continuous improvement) and A3 Problem Solving to identify and eliminate waste across all business units.
Aggressive Deleveraging: Successfully reduced GE’s debt by more than $100 billion, restoring the balance sheet to investment-grade status.
Radical Simplification: Recognized that GE's diverse parts (Aviation, Energy, Healthcare) were undervalued as a single entity and moved to split them for maximum focus.
Decentralized Leadership: Pushed authority down from the "Fairfield/Boston" headquarters directly to the business unit leaders on the front lines.
Detailed Summary by Topic
The 2018 Crisis: Inheriting a Fallen Giant
When Culp became CEO in October 2018, GE was facing an existential crisis. The stock had plummeted, debt was soaring, and the Power division was struggling with a $22 billion write-down. As the first outsider CEO in the company's history, Culp was able to view the "Welch-era" conglomerate model objectively—concluding it was no longer fit for the modern market.
Lean Management: The Cultural Rewire
Culp brought the Danaher Business System (DBS) mindset to GE. He shifted the focus from "PowerPoint culture" to "Shop Floor culture." Through Kaizen events, teams worked to reduce lead times and improve quality. This wasn't a temporary initiative but a fundamental change in how GE employees perceived their daily tasks, moving toward a philosophy of "standardized work."
The Great Split: Creating the "Power of Three"
In November 2021, Culp announced the historic plan to split GE.
GE HealthCare: Spun off in January 2023.
GE Vernova (Energy): Spun off in April 2024.
GE Aerospace: Remained as the core "GE" entity, focused on propulsion and services.
This move allowed each company to have its own dedicated board and capital allocation strategy, catering to specific investor bases.
Performance & Market Impact
Under Culp, GE's stock saw a massive resurgence. By focusing on the high-margin Aerospace sector—which generates significant cash flow through engine maintenance contracts—Culp turned GE back into a "compounder" for shareholders. The market rewarded the transparency and the removal of the "conglomerate discount."
Data & Figures
Data Point
Value
Context
Debt Reduction
$100 Billion+
Total debt cleared by Culp since taking the helm in 2018.
Corporate History
132 Years
Length of GE's existence as a single entity before the final split.
Split Completion
April 2, 2024
The date the final separation of Vernova and Aerospace occurred.
Stock Growth
~95%
Increase in stock value in the year leading up to the final split.
Asset Write-down
$22 Billion
The size of the Power division write-down Culp managed upon arrival.
Rank
#1
Culp's placement on Fortune's2024 Businessperson of the Year list.
Stories & Anecdotes
The Greenville Visit: Early in his tenure, Culp visited a gas turbine plant in South Carolina. Instead of reviewing charts, he walked the floor to find "hidden factories" (piles of unfinished work). This became the baseline for GE's Lean transformation.
The A3 Mandate: Culp famously disliked long presentations. He forced executives to use A3 reports—a single-page format for problem-solving—to ensure clarity and speed in decision-making.
The Outsider Advantage: While previous insiders felt a loyalty to the "Conglomerate" brand, Culp’s background at Danaher gave him the "intellectual honesty" to admit that GE was better off divided.
References & Recommendations
People Referenced:
Larry Culp: CEO of GE; architect of the turnaround.
Jack Welch: Former CEO; his conglomerate model was the one Culp dismantled.
Geoff Colvin: Fortune editor and author of the analysis.
Concepts & Tools:
Lean Manufacturing: Operational methodology focused on waste reduction.
Kaizen: Japanese for "change for the better" (continuous improvement).
Gemba: "The actual place"; where value is created (the factory floor).
A3 Problem Solving: A standardized one-page reporting tool.
Entities:
Danaher Corporation: Culp's former company; provided the blueprint for GE’s Lean shift.
GE Aerospace / Vernova / HealthCare: The three "pure-play" successor companies.
Speakers & Credentials
Larry Culp (Main Subject): CEO of GE Aerospace. Known for operational excellence and his historic tenure at Danaher.
Geoff Colvin (Fortune Editor): Business journalist providing the overarching analysis of GE’s stock performance and cultural shift.
Actionable Next Steps
Conduct a "Waste Audit": Identify "waiting time" or "inventory bloat" in your current business processes.
Adopt A3 Thinking: Practice condensing complex business problems into a single-page A3 report to improve executive focus.
Prioritize the "Gemba": Schedule weekly "walks" where you interact directly with front-line employees to see operational bottlenecks firsthand.
Simplify the Portfolio: Assess if your organization is suffering from a "conglomerate discount" where too many diverse projects are diluting the value of the core business.
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