Back to the Future: Strategy lessons from the 1990s

When Marty McFly travelled forward in time, he encountered hoverboards, hologrammatic adverts, and self-lacing shoes.

These innovations have failed to materialise in the 35 years since Back to the Future II was released.

However, other technologies have made a great leap forward. Smart phones, social media, and AI have transformed consumer behaviour, just as the internet did during the early 1990s.

And companies seeking inspiration for their strategy would do well to look back in time to the last decade of that 20th century.

The emerging internet giants were not the shining example for most firms to follow during the 1990s.

General Electric (GE) was the company that others wanted to emulate.

During this period, GE reported nine consecutive years of double-digit profit growth. That translated into similar success on the stock market, where its share price rose almost 10-fold.

The world may have changed considerably since then, but there are two notable similarities to the early 1990s.

First, the decade started with periods of uncertainty and recession. Second, technological advances promised to kick-start a new era of growth.

With this in mind, it seems like a good moment to learn some key lessons from the golden era of GE.

1 Efficiency is king

The core of GE’s success lay in its relentless drive for efficiency.

In a large conglomerate, it requires a great deal of discipline to reduce bureaucracy and consistently drive down costs.

Jack Welch, the CEO since 1981, worked hard to overcome the company's old hierarchical approach which had 29 layers of management.

By the 1990s, a new culture of informality allowed people to communicate across layers and get things done quickly.

GE also transformed Six Sigma from a tool that ensured manufacturing quality to one that reduced mistakes. It also helped the company to cut out slack in all service-related activities.

Incentives and promotions were closely tied to an employee's ability to master Six Sigma. After its introduction, operating profit margins increased from 14.4% in 1995 to 17.3% in 1999.

My own research on companies succeeding for more than 100 years tells the same story. Efficiency is as important as innovation.

2: Focus on your strengths and embrace opportunities

Performance and efficiency also guided GE’s portfolio decisions.

Each business had to be number one or two in their industry, otherwise they were sold or shut down. Many any companies have adopted this rule since.

But the spread of GE's activities was wider than most analysts recommend today. This included medical technology, appliances, turbines, light bulbs, and plastics.

Economic theory suggests that companies can move outside their core activities, as long as marginal benefits outpace marginal costs.

This means that some companies might define their core business too narrowly today. A trusted brand or good relationships with suppliers and governments can be leveraged across a range of activities, especially in emerging economies.

3 Expand into markets that others neglect

While GE focused on efficiency, it doubled its revenues by expanding into new markets. A key driver behind this growth was the acquisitions it made in the United States and abroad.

Internationally, GE showed a strong preference for bargain hunting. The company often made large acquisitions when a country had fallen out of favour.

GE made 10 acquisitions and invested more than $1 billion in Mexico while its national economy was in turmoil.

In Europe, it picked up a number of financial service providers during the sluggish mid-1990s. This included SOVAC SA and Credit de l'Est in France.

This counter-cyclical international growth makes sense as it is cheaper. Companies that were not for sale during the good years may also become available for acquisition.

In 2024 there are plenty of struggling countries to choose from. Firms might look for bargains in Germany, Nigeria, or South Korea.

However, it is important to note that GE was an experienced global player. Tarun Khanna from Harvard notes that industries vary greatly in different countries.

Even if you are a strong player at home, you should not take the challenges abroad lightly.

4 Don’t be seduced by hype

Finally, it is also important to mention what GE did not do. The company did not buy into the hype and try to become into a dotcom company.

GE may have used the internet to reduce paperwork and become more efficient. However, management focused primarily on production and much less on e-commerce.

This is a particularly important lesson to heed in 2024. Companies that are clearly not tech firms should not try to reinvent themselves as one.

That does not mean ignoring the opportunities presented by AI. Firms should focus on understanding how to use AI to support the business they are already great at. This will require adjustments to established structures and processes.

If you are targeting greater success during 2025, don’t look to Google and OpenAI (unless you are a tech company, of course).

GE’s success story from the 1990s is probably more relevant.

The article is adapted from a piece originally published by Forbes.

Further reading:

Three steps for firms to achieve strategic agility

Why imitating innovation can be a successful strategy

Increase the odds of success in digital transformation

What is the secret to Walmart's success?

Christian Stadler is Professor of Strategic Management at Warwick Business School. He teaches Strategic Advantage and Strategy and Practice for the Executive MBA and Global Online MBA.

Learn more about strategy on the four-day Executive Education course Strategic Choices at WBS London at The Shard.

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