This blog post follows up on my presentation about whether GE is a digital company. GE transformed the industry in the 1990s with the implementation of Six Sigma, and then again transformed the industry with FastWorks, a lean startup model.
GE began to move towards to a focus on quality in the late ‘80s with Work-Out. Work-Out opened the culture of GE to the ideas from everyone, everywhere, decimated the bureaucracy, and encouraged boundary-less behavior. This created a learning environment that was ready for Six Sigma. Six Sigma embeds quality thinking into this mindset across every level and every operation across the globe.
GE recognized that the era of globalization and instant access to information, products, and services changed the way their customers connected to business, and as a result, their old business model was not working. The new competitive environment left no room for error. As a result, Jack Welch instigated a new corporate policy for GE that pledged to acquire Six Sigma goals by the millennium. Welch knew Six Sigma could help streamline the company, make it more efficient and productive, eliminate waste, and change it for the better.
Six Sigma outlines three key elements of quality: customer, process, and employee. They focused on delighting the customer, as they are the center of GE’s universe. They recognized quality requires outside-in thinking, viewing the business from a customer perspective. Finally, they recognized the need for leadership and employee commitment, as people create results. All GE employees were trained in the strategy.
To achieve Six Sigma quality, a process must produce no more than 3.4 defects per million opportunities. An “opportunity” is defined as a chance for nonconformance, or not meeting the required specifications. This means GE had to be nearly flawless in the execution of key processes.
General Electric’s implementation of Six Sigma took five years, and the end-result was a reported twelve billion dollars in savings. Across the company, GE associates embraced the customer-focused, data-driven philosophy and built on successes by sharing them across businesses. Six Sigma transformed GE and worked for 20 years, but as GE grew larger and more complex, it became harder to change to meet customers’ needs.
To become more innovative, in 2013, Immelt rolled out FastWorks, a lean startup model. FastWorks is a mindset that takes aspects of the Lean Startup movement, namely the flexible and transparent characteristics of a startup, and combines them with GE’s size and resources. FastWorks is a rigorous process where customers are involved with the product design from the beginning: they begin by asking customers questions to understand what outcome they are trying to achieve and problem they are trying to solve. The team then comes up with a hypothesis they can test or get customer validation for. The idea is to test and learn and then make changes with the customer based on those findings.
When Immelt decided to implement FastWorks, he brought in expert Eric Ries, author of The Lean Startup to work with GE leadership institute teams to adapt the principle to fit their products and needs. The initial FastWorks team trained a number of coaches on FastWorks. With these coaches, FastWorks’ leaders went on a roadshow to share the new program and to train 5,000 senior leaders in Lean Startup methodology and culture. They recognized this transition also required a change in culture.
To create this change in culture, GE named their new cultural orientation the “GE Beliefs.” The GE Beliefs are:
- Customers determine our success.
- Stay lean to go fast.
- Learn and adapt to win.
- Empower and inspire each other.
- Deliver results in an uncertain world.
In order to listen more closely to customer feedback and iterate quickly and rigorously, GE businesses restructured into cross-functional teams. The team listened to customer feedback together, bouncing ideas off retail salespeople and also testing products with designers. They engaged suppliers early on to improve responsiveness under the changing method. GE also worked to encourage cross-functional work and iterations by increasing leadership and team autonomy.
In the first year, 100 FastWorks projects were launched in the US, Europe, China, Russia, and Latin America, ranging from building disruptive healthcare solutions to co-creating a new solution for flow metering in multiphase oil wells. They were able to create a refrigerator that was developed at half the cost and time typically spent developing the product, and engineers at GE power improved a popular gas turbine.
FastWorks delivers better outcomes for the customers because it is based on data, customer validation, and rapid learning cycles. While it is a rigorous process where a lot of time is spent on customer discovery, only the main stakeholders on a project are involved, rather than large decision-making teams that can slow down a project’s development. Since adopting FastWorks, GE has seen shorter product cycles, quicker IT implementation, and faster customer responses.
It is important to note that FastWorks did not replace Six Sigma. You cannot draw an apples-to-apples comparison between lean startup principles and Six Sigma. Part of what lean startup models do is scale to introduce processes that squeeze out variability and enhance predictability, the goal of Six Sigma. Both prioritize product attributes that matter most to customers, rely on empowered employees, eschew wasted time and energy, and emphasize testing. Six Sigma is still a part of GE’s culture.
I know in my time at GE FastWorks and GE Beliefs were used and discussed daily and were an integral part of GE culture. While FastWorks may be working to help GE transform digitally, GE needs to push this model to find a way to further digitally disrupt industries for their customers while also eventually contributing financially to GE’s bottom line.