The turbulence continues for General Electric, as the initial member of the Dow Industrial Average was recently cut from the index.

And the Harvard Business Review thinks it knows why – “clueless, but deep-pocketed, activist investors and mergers and acquisitions folks masquerading as strategists,” said writer Roger L. Martin, director of the Martin Prosperity Institute and a former dean of the Rotman School of Management at the University of Toronto.

Here are his article's main takeaways:

An activist hedge fund named Trian put $2.5 billion into the company in 2015, and its co-founder, Ed Garten, wanted on to the board. In the midst of threats of a proxy fight and shareholder pressure CEO Jeff Immelt resigned, and shortly after present CEO John Flannery took over the Trian founder was on the board.

During Immelt's years and, it would seem, under Flannery as well, “the dominant mode had been of strategy by way of mergers, acquisitions, and divestitures (MA&D), including most recently the disastrous merger of the GE oil and gas business with Baker Hughes in 2016. In the fall of 2017 under Flannery, MA&D unsurprisingly became GE’s turnaround strategy tool,” said Martin.

The problem with juggling assets as a strategy, according to the Review, is that it is too easy to wind up making deals that assume the issue is performance. Sell underperforming assets and buy performing ones.

What Martin suggested, not just concerning GE but corporations in general, is that this deal-making mindset doesn't consider that “perhaps the problem is an uncompetitive value equation with customers.”

It also means that you sell your troubled assets cheap to others who fix them up and then sell them, maybe even back to you, at a fat profit – because they fix that value equation.

Martin doesn't think that past deals have helped GE fix its value equation so far – or that more divestitures will help, either.

But some will be glad to see GE take this approach, he noted. “The happiest folks out there are probably GE Healthcare’s two big global competitors, Philips and Siemens Healthineers,” he concluded, noting that, “while GE Healthcare’s executives spend the next two years on carve-out audits, creating services and systems to replace the GE shared services, negotiating new stock-based compensation, and doing road shows for investors, Philips and Siemens (which completed its 18-month health care spinoff/IPO exercise in March) executives will be focused on building their businesses at GE’s expense – an awesome window of opportunity for them.”

GE's strategy made news in late June, when it announced that it will spin off its healthcare division as a separate enterprise in an effort to focus its attention on its power, aviation and renewable energy businesses.

“Today marks an important milestone in GE’s history,” CEO John Flannery said in a statement. “We are aggressively driving forward as an aviation, power and renewable energy company – three highly complementary businesses poised for future growth. We will continue to improve our operations and balance sheet as we make GE simpler and stronger.”

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