MIT Sloan Executive Education innovation@work Blog

Are companies like GE suffering from a lack of entrepreneurial thinking?

Are companies like GE suffering from a lack of entrepreneurial thinking?

You have likely heard the news—General Electric announced it is considering breaking itself up into smaller units after poor shareholder returns last year. Its GE Capital insurance portfolio will take a $6.2 billion after-tax charge for the fourth quarter of 2017.

"Our results over the past several years including 2017 and the insurance charge only further my belief that we need to continue to move with purpose to reshape GE,” CEO John Flannery was reported as saying on an investor call last month. “We will continue to rigorously review our alternatives to deliver shareholder value and report out to you as we make progress this spring."

In a recent opinion piece in the Boston Globe, our own Bill Aulet, Professor of the Practice and Managing Director of The Martin Trust Center for MIT Entrepreneurship, wrote that he was overcome with sadness when he heard the news.

“I started my career at IBM in the early 1980s and saw that company brought low, and now a similar scenario is playing out with another venerable firm.”

You may be wondering why a professor of entrepreneurship wouldn’t want to see a big conglomerate broken up into smaller, more nimble companies that can be more entrepreneurial?

Aulet will tell you that this kind of thinking illustrates a misguided assumption about entrepreneurship and existing corporations, namely that entrepreneurship translates to startups.

“As an entrepreneurship educator, I teach students the mind-set and skills to help them succeed in bringing new, innovative products to market and new ventures into being. But there is a common misunderstanding that entrepreneurship equals startups and that we are preparing our students to join the Silicon Valley depicted on TV dramas. Not so.”

Aulet goes on to explain that entrepreneurs—people who create new products that create significant value for their customers—exist in startups, nonprofits, established companies, governments, and academia alike. But the recent talk of “financial engineering” and “releasing value” on the part of GE is not the parlance of entrepreneurs, nor the language of true value creation.

While startups are an excellent way to create value in a sector like information technology, which is characterized by rapid product-development cycles, other industries require a much longer time horizon to adopt a new product, such as aircraft engines or pharmaceuticals. “Resource-constrained startups can get the low-hanging fruit in these industries, but to reach the bigger fruit higher in the innovation tree, we need more patient capital and organizations with long-term assets and staying power.”

In his piece, Aulet revisits IBM’s shift in the 1990s to what he considers an unhealthy focus on management at the expense of entrepreneurship, leading to more than five years of diminishing revenues.

“And now GE.” The company that has set the bar for leadership, growth, management, and tremendous, long-term investment in people has fallen victim to "impatient investors who blame poor execution" for the underwhelming retuns. Aulet believes that while the execution may have been subpar, former GE CEO Jeff Immelt pursued a bold growth strategy consistent with the legacy of those who came before him, and that the strategy was right. "Now GE is considering selling off assets that took over a century to build."

For Aulet, all of this is indicative of a larger problem—a dearth of continued entrepreneurial thinking in large companies.

“This is an extremely costly vacuum. It is imperative for companies like GE to have high-quality corporate entrepreneurs integrated into their organizations if they are to provide long-term value—and not just for shareholders but also for society at large.”

Bill Aulet is the author of Disciplined Entrepreneurship: 24 Steps to a Successful Startup and Disciplined Entrepreneurship Workbook. He leads the Entrepreneurship Development Program at MIT Sloan and teaches in our Advanced Management Program, offered this spring May 29–June 28.

This entry was posted in Entrepreneurship on Fri Feb 02, 2018 by MIT Sloan Executive Education


innovation@work Blog

At MIT Sloan Executive Education, our portfolio of non-degree programs reflect MIT Sloan's core mission—to develop principled, innovative leaders and to generate ideas that advance management practice. Subscribe to our blog to stay up-to-date on hot business topics, faculty research and news, world events, participant insights, and much more!

Subscribe to Blog by Email

Search innovation@work Blog

Interested in writing a guest post?

Cutting-edge research and business insights presented by MIT Sloan faculty.

Media Gallery

Visit the Media Gallery to view videos and read articles and blog posts written by MIT Sloan Executive Education faculty and staff.