Mini Case Study
Can GE Remake Itself as a Digital Firm? General Electric (GE) is the world's largest diversified manufacturer. Fortune named GE "America's Most Admired Company" in 1998, 1999, and 2000. Jack Welch, GE's CEO and Chairman since 1981, is often cited as the most admired CEO in the United States. Headquartered in Fairfield, Connecticut, the company consists of 20 units, including Appliances, Broadcasting (NBC), Capital, Medical Systems, and Transportation Systems. With the acquisition of Honeywell, announced in October 2000, GE became a company of $155 billion in revenue and 460,000 employees in 100 countries. Despite GE's size and old-economy businesses, Internet Week awarded GE its e-Business company of 2000. Did GE transform itself into a digital firm? At a January 1999 meeting of 500 top GE executives in Boca Raton, Florida, Welch announced a new initiative to turn GE into an Internet company. Earlier initiatives transformed GE and are partially responsible for its phenomenal rise in profit over the past two decades. Those initiatives were globalization of GE in the late 1980s, "products plus service" in 1995 which placed emphasis upon customer service, and Six Sigma in 1996, a quality program that mandated GE units to use feedback from customers as the center of the program. Welch announced that the Internet "will forever change the way business is done. It will change every relationship, between our businesses, between our customers, between our suppliers. By Internet-enabling its business processes, GE could reduce overhead costs by half, saving as much as $10 billion in the first two years. Gary Reiner, GE's corporate CIO, later explained "We are Web-enabling nearly all of the [purchasing] negotiations process, and we are targeting 100 percent of our transactions on the buy side being done electronically." On the sell side Reiner also wanted to automate as much as possible, including providing customer service and order taking. GE had quietly been involved with the Internet years before the Boca Raton meeting, conducting more purchasing and selling on the Internet than any other noncomputer manufacturer. For example within six months after beginning to use the Internet for purchasing in mid-1996, GE Lighting had reduced its purchasing cycle from 14 to seven days. It also reduced supply prices by 10% to 15% due to open bidding on the Internet. In 1997 seven other GE units began purchasing via the Net. The company even sold the concept to others, including Boeing and 3M. Polymerland, GE Plastic's distribution arm, began distributing technical documentation over the Web in 1994. It put its product catalog on the Net in 1995 and in 1997 established a site for sales transactions. Its online system enables customers to search for product by name, number or product characteristics, download product information, verify that the product meets their specifications, apply for credit, order, track the shipment, and even return merchandise. Polymerland's weekly online sales climbed from $10,000 in 1997 to $6 million in 2000.
In 1998 GE Industrial Systems developed an artificial intelligence system that assigns field engineers to customer site visits, reducing the average dispatch time from 18 hours to four. Prior to the system its engineers could not handle all the customer calls for help. The system handles thousands of constraints, such as not dispatching bearded engineers to sites requiring the wearing of facemasks. Industrial Systems now markets the system to other companies. Welch ordered all GE units to determine how dot-com companies could destroy their businesses, dubbing this project DYB (destroy your business). Welch explained that if these units don't identify their weaknesses, others would. Once armed with these answers, managers were to change their units to prevent it from happening. Each of GE's 20 units created small cross-functional teams to execute the initiative. Welch also wanted them to move...
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