How the CEO of GE Appliances went from a “process boy” to an innovator

From his crew-neck cut, close shave, and open-necked shirt to his straightforward manners, you could still classify Kevin Nolan as the quintessential General Electric engineer.

That’s exactly what the CEO of GE Appliances was until 2016, when China’s Haier bought the Kentucky-based white goods company from GE for $ 5.4 billion in cash. The takeover set up what looked like an inevitable clash between a managerial model inherited from the US conglomerate and Haier’s radically decentralized vision. Nolan, then chief technology officer of the GE unit, traveled to China to answer the question baffled observers often asked – and still ask – about its new owner: “Who is this?” business ? What are they talking about ? ”

Zhang Ruimin, the founder of Haier, took over a refrigerator factory owned by Qingdao Municipality in 1984 and encouraged its transformation into a network of thousands of decentralized “micro-enterprises”, based on a transformation model. unique called Rendanheyi. Zhang became Honorary President last month, after creating what the company describes as a “self-organized, self-sustaining and scalable ecosystem enterprise” with annual revenue of Rmb 300 billion (£ 35 billion sterling). Each microenterprise takes the initiative to develop products and services with and for customers. They often compete for capital and buy central services such as human resources.

In China, Nolan first asked to see Haier’s organizational chart. “There is no organizational chart,” he was told. A few weeks later, he was asked to become technical director of the whole group. “It was an honor. And then they introduced me to another CTO, then another CTO. So we got three. Where I came from, the CTO is sort of the top of the engineering organization, so there should only be one. And I was very confused.

He was also worried about how the system would work in the United States, in part because the white goods market was more mature there, in part because GE Appliances was always evolving at the rate of a top-down, customer-driven system. process.

As the old “process type” of GE, who used to impose such rules on new acquisitions, he found it hard to believe that Haier wouldn’t want to exert a tighter grip on GE Appliances and its 15 000 employees. Instead, Haier only insisted that the group should define its own “primary goal” and strive to achieve a “zero distance” between customer needs and company operations. In 2017, Haier appointed Nolan CEO of GE Appliances, a position he said would never have been offered as part of General Electric’s carefully structured leadership development process.

He doesn’t need to point out the obvious irony: For many at GE Appliances, the sale seemed, Nolan says, “like your parents threw you out of the house,” but it’s the parents who have struggled ever since. . Efforts to clean up and simplify GE resulted in the announcement in November of a three-way separation. GE Appliances, meanwhile, recently announced a $ 450 million investment in its corporate headquarters and manufacturing facility and the addition of 1,000 jobs over the next two years.

Nolan and his team set a first-rate, familiar-sounding goal: “We want to be. . . the first company in America in five years. ” Jack Welch, general manager of GE from 1981 to 2001, would have recognized the objective. ” Without limits [a goal Welch set for GE in 1990], you have to win in your markets, empowerment: this is really the very essence of the company, isn’t it? Because these are timeless things, ”says Nolan.

Nolan says GE Appliances’ new focus arose out of an engineer’s exasperation at how managers sometimes block new ideas. Instead of letting entrepreneurial staff experiment, functions like HR and legal “want to control everyone’s life”.

Under GE, Nolan had always been “frustrated with how slow we were to grow because I always knew we had great technology, great innovation, but most of the time we just don’t have it. not executed. . . the budget was not approved, ”he said. “And then, three years later, you would see the contestants come out with [the same idea] and succeed.

Three questions for Kevin Nolan

Who is your leadership hero?

Mr. Ballentoni, my high school math teacher. He could recognize abilities and discover passions. He saw the talent that I didn’t know I had. He doesn’t know it, but he’s one of the people who has had the most significant and deepest influence in my professional life.

If you weren’t CEO, what would you be?

My passion is manufacturing, my job is engineering, my day job is CEO. If I weren’t the CEO, I would still be a maker and engineer who makes clocks.

What was the first leadership lesson you learned?

Do what makes you happy. In other words, align your work with your passion and enjoy it.

Like Nolan, Zhang de Haier is an admirer of Welch, despite the bumps in the American businessman’s legacy. GE Appliances’ goal was certainly a nifty way to merge GE culture at its best with the Chinese owner’s unique approach.

But as it approaches five years next June, GE Appliances cannot yet claim to have achieved its goal. Nolan Says It Is The “Fastest Growing” Home Appliance Company In The United States By Revenue And Market Share, But Whirlpool Remains The Biggest Of The Two measures. Pressed on this point, Nolan prides itself on being “number one in the hearts and minds of consumers”. It’s a laudable goal, but it surely wouldn’t have satisfied the notoriously tough Welshmen.

Even Welch, however, didn’t push his managerial revolutions as far as Nolan envisions. To accommodate the differences between the rapidly developing Chinese market and the more mature US economy, Nolan has maintained some core platforms, such as finance and engineering, to share best practices. But it also encourages microenterprises. The number has now grown to 15, and he is eager to divide the group further, into potentially hundreds of smaller entrepreneurial teams.

“You see most sports – 10 people on the field, nine people on the field. If you had a sport with 300 people in the field, that probably wouldn’t be too much fun. Law? It’s called chaos, ”he says.

From the outside, Haier can also appear chaotic. But Nolan insists that the quest to close the gap with the client can yield extraordinary results. He cites an idea encouraged during the pandemic by GE Appliances’ FirstBuild innovation unit, which GE created. An engineer decided there had to be a better way to grow mushrooms. By working with other mycophiles outside the company, they developed a growth chamber, called Mella, supported by the crowdfunding platform Indiegogo.

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Could a range of these small devices knock Whirlpool off the podium? Nolan points out that GE Appliances is still committed to making the mass production of refrigerators or dishwashers more efficient. At the same time, however, the cost of small runs of highly specialized products is now lower than ever before, due to 3D printing and other technologies.

“I would say I have more direct reports than most CEOs ever will and can continue to have more,” says Nolan. He sees his main role, however, as tackling the bureaucracy that could overwhelm innovative small microenterprises, while letting larger and mature operations thrive without close top-down attention.

“Every business wants to do something, do a lot of it, and make a lot of money. Thus, companies want completely simple solutions, individuals want completely personalized solutions, ”explains Nolan. “The future is how can you. . . take advantage of the scale so we can deliver things that are affordable, but right for you? . . . This is, I think, what successful companies in the future will need to understand.. ”

The glint in his eyes is that of an engineer with a bright idea that, for once, bureaucrats may not be able to kill.

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