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velopment of GE’s unique culture but also reflect Welch’s imagi-
nation, energy, and vision. They are a concrete exposition of the
values that pervade GE’s culture, how those values are implemented,
their fruits, and the qualities of leadership that make it all possible—
a great resource for the sophisticated investor as well as the intel-
ligent manager.
The Core Operating Elements
Welch envisions an organization without boundaries. Artificial walls
dividing parts of the inside of an organization are to be destroyed.
The entire enterprise is a team, and responsibility is shared. A cul-
ture without boundaries renders impossible excuses such as “not
invented here,” a common way to evade responsibility. In this cul-
ture, Welch created “a vast laboratory whose principal product is new
ideas.” Ideas generated in one place are transported to others.
External boundaries are also exploded in this corporate culture.
Employees engage with broader communities through volunteer
work, and the company participates in outreach programs. GE en-
gages its various constituents as part of its daily life, learning how
better to serve customers as well as coventurers, distributors, and
others. GE is happy to learn from its own but equally happy to adapt
ideas created by others, including suppliers and competitors.
Boundaries retard development, stifle creativity, and complicate
operations. Destroying boundaries enabled GE to flourish amid
Welch’s three other core operating elements: speed, stretch, and sim-
plification.
Speedthrives on change. Teamwor kenhances speed, enabling
substantial increases in measures of performance straight across a
business. For example, by diminishing the cycle from order to re-
mittance, speed enhances inventory turnover. For a company GE’s
size, every single-digit improvement in its inventory turnover pro-
duces over a billion dollars in free cash for investment.
Speed’s “fun and excitement” facilitatesstretch, the idea of al-
ways setting outsized goals. The stretch philosophy says that if you
thin kyou can increase inventory turnover by one point in the next
cycle, set your goal at increasing it by two points. A boundaryless
culture is the key to a successful stretch philosophy because it em-
phasizes that “the quality of effort toward achieving the ‘impossible’
is the ultimate measure” of performance.
Stretch reverses much of conventional practice and incentive