Although most manufacturers are beginning to flirt with digital technologies, not one has successfully pulled off a digital transformation. CEOs still have to figure out its art - and science - forcing them to draw up their game plans on the fly, which inevitably leads to tension and trauma. But they are learning. Here's how GE has navigated its own digital transformation process.

About 30 years ago, as its appliances business became less profitable, GE began moving manufacturing to low-cost countries in a combination of joint ventures and outsourcing. But competitors soon emerged in developing markets; shipping and materials costs rose; wages increased in China and elsewhere; and GE didn't control the supply chain. Finally, core competency was an issue: the company's most innovative appliance-design work is done in the United States, and at a time when speed to market is everything, separating design and development from manufacturing no longer made sense. Around 2008 GE came to the conclusion that outsourcing was outdated as a business model for its appliances business. It set about to build in-house innovation capability, lean manufacturing, and a new approach to labor relations in that business and others, creating thousands of jobs and investing billions of dollars.

For decades, General Electric and other industrial-goods manufacturers based in rich countries grew by developing high-end products at home and distributing them globally, with some adaptations to local conditions - an approach known as glocalization. Now they must do an about-face and learn to bring low-end products created specifically for emerging markets into wealthy markets. That process, called reverse innovation, isn't easy to master. It requires a decentralized, local-market focus that clashes with the centralized, product-focused structure that multinationals have evolved for glocalization. In this article, Immelt, GE's CEO, and Govindarajan and Trimble, of Dartmouth's Tuck School of Business, describe how GE has dealt with that challenge. An anomaly within the ultrasound unit of GE Healthcare provided the blueprint. Because China's poorly funded rural clinics couldn't afford the company's sophisticated ultrasound machines, a local team built a cheap, portable ultrasound out of a laptop equipped with special peripherals and software. It not only became a hit in China but jump-started growth in the developed world by pioneering applications for situations where portability is critical, such as at accident sites. The team succeeded because a top executive championed it and gave it unprecedented autonomy. GE has since set up more than a dozen similar operations in an effort to expand beyond the premium segments in developing countries - and to preempt emerging giants from disrupting GE's sales at home.

Under Jack Welch's leadership, General Electric's managers applied their imaginations relentlessly to the task of making work more efficient. Jeffrey Immelt succeeded Welch as CEO on September 7, 2001, just in time to see the world change. Corporate scandals and terrorist attacks shook the global economy. In this fundamentally altered context, Immelt knew that GE could not simply cling to its status quo. Harvard Business Review offers the first deep look under the hood of Immelt's GE. In a conversation with editor Tom Stewart, Immelt was quick to point out that he is not leading a revolution; productivity is still important. But the new focus is on achieving organic revenue growth--and plenty of it. Immelt has set the audacious goal of increasing annual revenues from GE's existing businesses at two to three times the rate of global GDP growth. Hitting that target will depend on deep cultural change and, in Immelt's words, "making it personal" for every one of his managers. He's not afraid to pull the necessary levers. He has overseen changes to the company's famed talent management process (now, the highest potential executives are the ones who exhibit "growth leadership traits"); established new performance metrics; invested in new marketing capabilities and R&D resources; and created new mechanisms to flag promising ideas. Immelt expects positive results from each of these moves, but the real payoff comes from combining them in a process design he calls "Execute for Growth." It's vital, he believes, to cast growth as a process because that allows him to tap into a traditional strength of the organization--its process orientation--and put it in the service of the new goal. Meanwhile, investors are reassured to the extent that GE's recent stellar organic growth seems like the reliable and repeatable output of a well-designed process.