The General Electric story, of a long-proud initial member of the Dow Jones Industrial Average falling out of that index — and appearing to be in competitive free fall — provides a powerful illustration of two effects we see throughout today’s corporate world: clueless, but deep-pocketed, activist investors and mergers and acquisitions folks masquerading as strategists.
GE’s Fall Has Been Accelerated by Two Problems. Most Other Big Companies Face Them, Too.
Activist investors and mistaking M&A for strategy.
June 29, 2018
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Summary.
Too many companies approach strategy as the act of simply rejuggling your corporate portfolio. This works out great for the private equity business — but it only weakens large corporations, making them increasingly vulnerable to activist investors. In this piece, the author discusses the factors behind GE’s catastrophic fall, and highlights the lessons that any company can take away from their experience. Ultimately, he concludes that there’s no escaping activist investors entirely, but if companies pursue strategies that continually improve their value equations with customers, they can at least keep those activists looking elsewhere.