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MBA_2025_session_3_ strategies_CS

The document discusses corporate strategies for innovation, focusing on General Electric and Berkshire Hathaway as case studies. It highlights GE's management style, portfolio simplification, and the shift from Google to Alphabet, emphasizing the importance of independence and strong leadership in corporate structures. Key takeaways include the role of corporate coordination mechanisms, the balance between exploration and exploitation, and the impact of management philosophy on performance.

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6 views39 pages

MBA_2025_session_3_ strategies_CS

The document discusses corporate strategies for innovation, focusing on General Electric and Berkshire Hathaway as case studies. It highlights GE's management style, portfolio simplification, and the shift from Google to Alphabet, emphasizing the importance of independence and strong leadership in corporate structures. Key takeaways include the role of corporate coordination mechanisms, the balance between exploration and exploitation, and the impact of management philosophy on performance.

Uploaded by

garima.8300
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Corporate strategy for innovation

(+ Strategies of Corporate Strategy)

Prof. Jan Hohberger


[email protected]
The power of the platform synergies
(Product differenciation + cost synergies)
GENERAL ELECTRIC
The power of management?
GE’s Corporate Portfolio
• GE Aviation
• GE Capital
• GE Digital
• GE Energy Connections
• GE Healthcare
• GE Lighting
• GE Oil & Gas
• GE Power
• GE Renewable Energy
• GE Transportation
• GE Appliances
• GE NBC
GE management style and synergies

https://www.youtube.com/watch?v=rADedqrVqSI

5
GE management style and synergies
People “simplicity,
speed,
• Promote As, train Bs, fire Cs
self-confidence”
• Only keep people who buy into your values
• Rotation through different units

Markets
• Be number one (or two) in every market
• Fix, sell or close

Structure & incentives


• Remove middle managers, widen span of control
• Incentive and control based on (big) performance outcomes not inputs
• Stretch financial targets
6
GE management style and synergies

https://youtu.be/CCVy7OxThGo

7
GE management style and synergies

https://www.youtube.com/watch?v=JaNckDLiu3I
https://www.youtube.com/watch?v=LfHfj4j1yEQ

8
GE the worst performing stock in the DOW since 2001
Letter to Shareholder 2017: “A Simpler,
More Powerful Portfolio”
“In recent years, we have been making our $125 billion company simpler by
focusing on core industrial businesses and deeper by means of building new
capabilities. We create value through technology, delivering essential systems
like engines, scanners, and turbines. We have a diversified model: product and
service, multiple geographies, industry balance, creating demand through data,
and financing. It is important that all our business achieve a competitive cost
position and superior organic growth.”

“Over the last decade, we transformed the GE portfolio, increasing the portion of
earnings from our industrial businesses from about 45% to 90%.”
http://www.ge.com/ar2016/ceo-letter/#ceo-video
More on GE (recommended by Bill Gates)

https://www.youtube.com/watch?v=kRE0mSvhW1o
(a bit slow)

11
BERKSHIRE HATHAWAY
The power of simplicity
BH Corporate Portfolio
Buffet vs. S&P 500
Management Philosophy
Berkshire’s ownership may make even the best of managers more effective. First, we eliminate
all of the ritualistic and nonproductive activities that normally go with the job of CEO. Our
managers are totally in charge of their personal schedules. Second, we give each a simple
mission: Just run your business as if:

1. you own 100% of it;


2. it is the only asset in the world that you and your family have or will ever have; and
3. you can’t sell or merge it for at least a century.

As a corollary, we tell them they should not let any of their


decisions be affected even slightly by accounting considerations.
Berkshire Hathaway Headquarters in 2016
“We employ 361,270 people worldwide”

https://www.berkshirehathaway.com/
What happens if Warren Buffet dies?

“I think the stock is more likely to go


up but if I died tonight, I think the
stock would go up tomorrow and
there’d be speculation about
breakups and all that sort of thing”

Warren Buffet
(2017 annual meeting)

17
Stock performance (recent times)

18
Corporate strategies archetypes

What does this mean for the relationships of units-units, units-HQ, role of HQ,
incentive systems, management style, culture etc.

19
20
Dr. Jan Hohberger 21
Case: Google to
Alphabet

22
In which Business is Alphabet active?

23
What is the core of Alphabet?

What let to the sustained competitive advantage of Alphabet?

How does Android and Youtube fit to Google?

24
What is the logic behind the Moonshot investments?

How do they fit to into Alphabet and to Google?

How do they benefit from being part of Alphabet?

25
What is the logic behind the change from Google to
Alphabet?

How does the reorganization helps Google or moonshots?

What are the disadvantages?

26
What is Alphabet? (Larry Page)
• Alphabet is mostly a collection of companies.
• The largest of which, of course, is Google. This newer Google is
a bit slimmed down, with the companies that are pretty far afield of our main internet products
contained in Alphabet instead. …
• Fundamentally, we believe this allows us more management scale, as we can run things
independently that aren’t very related.
• Alphabet is about businesses prospering through strong leaders and independence. In general,
our model is to have a strong CEO who runs each business, with Sergey and me in service to
them as needed.
• We will rigorously handle capital allocation and work to make sure each business is executing
well. We’ll also make sure we have a great CEO for each business, and we’ll determine their
compensation.
• I should add that we are not intending for this to be a big consumer brand with related
products—the whole point is that Alphabet companies should have independence and develop
their own brands.
The Market Reaction
From Google to Alphabet
A case of corporate restructuring

Unit A Unit B Unit C

Unit G1 Unit G2 Unit G3

30
But, …!

31
The New Structure (CNBC)

Revenue Cost

<1%
<7%

99%
93%
From Google to Alphabet

Unit A Unit B Unit C

Unit G1 Unit G2 Unit G3

33
Annual Report 2023

34
35
37
Summary & take aways
• Archetypes of corporate structures

• Connection of corporate coordination


mechanisms and corporate scope

• The corporate role in innovation

• The balance/trade off between


exploration and exploitation

• ……
38
Next

Jose Marcilla
Novartis, President Latin America
and Canada (LACan)

Date: 24/01
Time: 14:00-15:30
Location: Esade forum 39

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