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.But CEO Jeffrey Immelt came to re-alize that the growth opportunities in key businessessuch as power distribution and health care were located in China andIndia, where demand for these basics is on a nonlinear growth curve.However, the high-end products GE brought to power distribution andhealth care were far too expensive to use in rural areas where most ofthe growth will occur, and removing features was not going to solvethis problem.It became apparent that products to serve these low-cost,high-demand markets had to be designed from the ground up.However, the entire GE organizational structure, measurement sys-tems, and culture were optimized around existing product lines.If thecurrent practices were not dramatically altered, GE would never beable to address those growth markets, and someday the companiesthat did would be positioned to bring their products into GE s hometerritory.GE knew how to compete against its traditional rivals, butnew competitors with a whole new price-performance paradigm wouldpose a formidable threat.Case: GE Healthcare20Almost by accident, an interesting organizational model arose in Chinathat had a lot of potential.A GE research lab in Israel had found a wayto move most of the functions typically performed in ultrasound hard-ware to software running on a PC; however, no one was interested inthis capability, because it would probably cannibalize a line of prod-ucts that sold for upward of $150,000.Then Omar Ishrak, an outsiderwith a lot of experience in ultrasound devices, was hired to lead GE sthree ultrasound business areas.Ishrak felt that a low-cost ultrasounddevice would be an excellent product for China and realized that thetypical GE organizational structure would squelch any local effort.Sohe created an independent local growth team (LGT) that had completebusiness responsibility for developing, manufacturing, and selling aPC-based ultrasound device suitable for rural Chinese clinics.20.Information in this section is from Jeffrey R.Immelt, Vijay Govindarajan, andChris Trimble, How GE Is Disrupting Itself, Harvard Business Review 87, no.10(October 2009). 154 THE LEAN MINDSETBy 2002, the team was selling a $30,000 device; by 2007, the pricehad come down to $15,000; and in 2010 a $7,900 pocket-size ul-trasound device was released.Even as sales in China grew rapidly,the new ultrasound device was introduced into U.S.and Europeanmarkets for use where portability and rapid diagnosis are importantemergency rooms, hospital floors, ambulances creating a whole newcategory of medical device.Today the product is a resounding success.This is the classic tale of a disruptive innovation, and its success wasattributed to the LGT concept, which is based on five key principles:1.Shift power to where the growth is.2.Build new offerings from the ground up.3.Build LGTs from the ground up, like new companies.4.Customize objectives, targets, and metrics.5.Have the LGT report to someone high in the organization.GE India Using the ultrasound LGT as a model, Immelt decided tomake the entire country of India into a separate business unit report-ing to a senior executive.This was not easy; it violated the prevailingwisdom in the company.GE had a matrix structure where producthad always come before country, so managing a country as a sepa-rate business unit was anathema. But Immelt realized that GE wasstructured and managed to support the glocalization strategy, and thisstrategy had to be changed.He used a country-focused organizationalstructure to drive the change.Since GE s first interdisciplinary R&D center outside the UnitedStates was already established in Bangalore, GE India had its ownproduct development capability.With its newly granted ability tomake local decisions, GE India chose to focus on developing an elec-trocardiogram (ECG) device, since heart disease is the single largestcause of death in India.There was a real need for a low-cost, ultra-portable ECG device that would allow rural health care professionalsto diagnose the many people who could not travel to a city for an ECG.Just as in China, the locally developed device was very differentfrom anything available from the rest of GE, but it had all of thesoftware power of any ECG device in the company
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