E-business . . . is already so big and transformational that it has almost outgrown the bounds of the word “initiative.”
Jack Welch acknowledges that GE may have been intimidated by the Internet in its early days:
Why wasn’t the e-revolution launched by big, highly resourced, high-technology companies, rather than the small start-ups that led it? The answer may lie, as perhaps is true in GE’s case, in the mystery associated with the Internet—the perception that creating and operating Web sites was Nobel Prize work—the realm of the young and wild-eyed.
THE MISCONCEPTION
But even after deciding in 1999 to move aggressively into ebusiness, Welch and his fellow GE executives labored under a misconception.
They had devised an Internet strategy anchored in the belief that there were Internet-savvy companies gunning for GE and its traditional business models. The GE executives lumped these presumed rivals together under a catch phrase: destroyyourbusiness.com.
Welch believed that GE itself would have to play the role of “GE killer”—that is, devising the new Internet-based business models that would supplant the old ones.
To prepare for these efforts, GE put together e-business teams consisting of young Internet-savvy types. Stationed in off-site locations, they were tasked with figuring out tomorrow’s Internet business models. Once those models were identified, GE would pounce on them and adopt them before anyone else had the chance to do so.
But in May 1999, the teams of young Internet hotshots delivered a surprising report: There were no competitive threats out there to any of GE’s businesses. GE was so far ahead of the pack, they said, that it really didn’t need to worry about threats from new business models.
Nevertheless, argued the young people, GE had to make its traditional businesses Web-enabled. This would prevent customers from jumping ship to competitors.
CHANGE TO THE CORE
The young people were talking Welch’s language. This wasn’t brain surgery, as he liked to say. And so, in the spring of 1999, e-business leadership teams were formed in all GE businesses. Their mandate was to take GE’s business models, modify them, get them Web enabled, and move business processes from offline to on-line.
NBC was the attraction that lured Jack Welch to the Internet party. It was the first business in the GE stable to become deeply involved in the Internet.
Think about MSNBC. Think about cable. Now think about what you can do as you get into the Internet . . . we can drive traffic to sites. We’re communicating with millions of people every day in that business. How many offshoots can we develop? How many new things? I think CNBC.com will be an incredible property.
These kinds of visions persuaded Welch to set his ambitious goal for GE’s managers: Create and implement an Internet strategy before the end of 1999.
As he noted in the 1999 annual report:
E-business . . . is already so big and transformational that it has almost outgrown the bounds of the word “initiative.” While we are already generating billions in Web-based revenues, the contribution of e-business to GE has been so much more. It is changing this company to its core.
Because 85 percent of its transactions were with other businesses, GE was well positioned to take advantage of the businessto-business (B2B) marketplace on the Internet. On the other hand, this was still largely uncharted territory.
“It’s not as if you look at us versus our traditional competitors and say we’ve been resisting it while all these other guys have been doing it,” said Gary Reiner, senior vice president and GE’s chief information officer. “Business-to-business commerce over the Internet as we would define it today, in the kinds of businesses where we’ve been playing—we haven’t been doing much of it, nor has anybody else.”
Ultimately, Welch’s Internet vision boiled down to three imperatives:
- Keep upgrading people and retaining Internet-skilled talent.
- Figure out how to leverage information technology to create a competitive advantage for your businesses that customers can see and feel.
- Leverage information technology to support internal business processes.
WELCH RULES
- Adapt your business model to the Internet. Don’t worry that your business model will not work on the Internet.
- Think “Web enabled” rather than “Web threatened.” Your goal should be to take existing products and processes on-line rather than attempting to build up from zero.
- Think inside and outside. On the Internet, as in most aspects of business, the two key challenges are (a) to develop great people inside and (b) to present a compelling value proposition to the customer.