Curt Fowler on How GE Uses Lean Innovation

Curt Fowler

Tuesday, May 6th, 2014

Lean innovation is not just for startups. According to a recent Harvard Business Review article by Brad Powers, GE is implementing lean innovation principles into its appliance division as it attempts to prove that it can bring manufacturing back to the US and compete successfully.

In 2008, GE invested $1 billion into the $5.6 billion appliance business. To be successful and compete against overseas competition GE had to make some dramatic changes. GE introduced a system called FastWorks based on the lean innovation principles we've been discussing in our lean innovation series.

FastWorks was created to dramatically reduce product development cycles while reducing cost and errors. Without it, GE had no chance of competing against leaner overseas competition paying a fraction of their union pay scale.

GE's first attempt to apply FastWorks was to create a refrigerator with French doors (the kind that open from the middle) for their high end Monogram line. Chip Blankenship, CEO of GE Appliances, issued a frightening challenge to the new team. They would be changing every part that the customer sees, must create a working product in 3 months and have a product in production in 12 months. GE's typical product development cycles took 3-4 years!

Customers were included throughout the development cycle. Customer feedback was delivered firsthand to the engineering team. The engineering team had typically been several touch points separated from the actual customer. Retail salespeople were brought into the GE training center in Louisville where the team bounced ideas off them and received candid feedback.

Within the first 6 weeks of forming the team in January 2013, they had developed a "minimum viable product" and customers did not like it. The stainless steel was too dark and they did not like the lighting. By August 2013 the team had cycled through 5 product iterations and customers finally started to like the product. Version 6 was produced in January 2014. Version 8 will be produced in October 2014 and the team plans to launch new products every year.

Typically GE revised products every 5 years and would have kept their new products a secret. GE has discovered that the secrets of lean innovation hold true. Secrecy is no longer a competitive advantage, speed to market and collaboration with customers are the new keys to success.

According to Power's article, the plan is working. This new product was launched with half the typical program cost, 2x the typical program speed and the product is selling at 2x the normal sales rate.

What do you think? Can the United States compete while manufacturing at home?

For more on lean innovation, check out our lean innovation series by clicking here.

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About Curt Fowler

Curt Fowler is the President and Founder of Fowler & Company, a business advisory firm founded to help its clients maximize the value of their organizations. Curt is a Certified Public Accountant and earned his Masters in Accountancy from the University of Georgia. He also earned an MBA in Strategy and Entrepreneurship from the Kellogg School at Northwestern. He has spent 20 years studying and learning from some of the best businesses in America including Verizon, Sara Lee, Cox Communications and many more.