America's most admired companies (cont.)
Perseverance prevails. That's the moral of Toyota's story, which has been astonishing. You may recall that 25 years ago, it was just one of a herd of Asian interlopers selling fuel-efficient econoboxes, and Detroit snickered at the notion that Americans would ever want to buy many of them. As everyone now knows, that crystal ball was cloudy: Toyota's Camry has been the bestselling car in the U.S. since 2002, and the Lexus LS 430 has been the leading luxury-car brand for seven straight years. The company's long-term strategy is as green as anyone's. Sales of the Prius, which runs on a gas-electric hybrid engine, passed 100,000 units in 2006. The Prius is today as de rigueur in Hollywood as the hydrocarbon-swilling Hummer used to be. (Read more on the company that has become America's best automaker.)
For sheer adaptability over time, GE is hard to beat. Of the 12 companies Charles Dow chose to make up his original Dow Jones industrial average in 1896, GE is the only one still in the index. In the year of our first corporate-reputation survey, Jack Welch stepped into the CEO job, and he quickly set about remaking GE. Under current chief Jeffrey Immelt, the company has been reinventing itself all over again.
John Rice is CEO of the infrastructure division, whose $65 billion in annual revenues from aviation, energy, rail, and water systems makes it the single biggest piece of the company. Says Rice: "Five years ago this business didn't really exist yet." The energy part of it alone has grown almost threefold so far this decade, expanding to include earth-friendly technologies like wind power and remote pollution monitoring.
That's driven by GE's much-publicized "Ecomagination" campaign, which is aimed at supercharging revenues while doubling its $700 million R&D budget to come up with solar-energy hybrid locomotives, lower-emission aircraft engines, more efficient lighting, and ever more sophisticated water-purification systems. Evidently conservation begins at home: GE cut its own energy bills by about $70 million last year, partly by installing new lighting in more than 100 of its plants, and reduced its greenhouse-gas emissions by about 150,000 tons. "If you buy the argument that environmental challenges today require technological solutions, then you need big companies involved that have the resources to invest," says Rice. "And if you can do that and still create value for shareholders, then you have something that's sustainable."
Rice joined GE at age 21 in 1978. What's the biggest change he's noticed at the company in the past 25 years? "When I first got here, the idea of ever connecting with senior management - seeing them, talking to them - was very remote," he says. "Now we try hard to be nonbureaucratic and get great ideas from everywhere in the company. We really are a team. This is the ultimate team sport." He adds, "Of course, the challenge is figuring out what you need to do to stay great. A culture that allows that, where learning is encouraged, is the biggest change I've seen."
Rice predicts that in 2007, GE for the first time will get more of its revenues from overseas than from the U.S. As companies stretch their global reach, building on past strengths gets both harder and more essential. "I like to say that the whole world is becoming American," says George Buckley, CEO of 3M (No. 14 on our list). "By that I mean customers everywhere want what Americans have always demanded: They want it all, they want it cheap, and they want it now."
Ed Zore, CEO of Northwestern Mutual, agrees. Talk about adaptable: Despite a couple of decades of relentless deregulation and killer competition in the financial industry, the 150-year-old life and health insurer - which has added wealth management, investment advice, and many other services to its mix - tops its industry as the Most Admired company for the 24th straight year. "The hardest thing is to keep changing your business model without losing your focus on the customer," says Zore. "The world is more complex and fast-moving all the time, and that isn't going away. In another 25 years we'll look back at this moment, right now, and say that these were the good old days." Don't doubt it.