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. Jack Welch viewed tackling the Internet as the fourth major initiative of his tenure at the helm of GE, after Work-Out, globalization, and Six Sigma quality.
During the 1980s, GE went through a substantial modernization effort, in part to take advantage of emerging technologies. Exploiting the Internet was a natural extension of these efforts.
But large, established companies like GE needed time to figure out the Internet. Many of these companies, especially retailers, moved slowly onto the Internet, fearful of cannibalizing their long-established brick-and-mortar businesses. Many were unwilling or unable to trade away profits for speculative ventures into e-business. Yes, Wall Street loved the dotcoms in their heyday, but Wall Street also expected companies like GE to make money.
THE WAITING GAME
GE’s relationship with the Internet dates back to October 1994, when GE Plastics set up the company’s first Web site. This was a straightforward “brochureware” site that presented information aimed at its key audience of design engineers.
Three years later, GE Polymerland, the distribution arm of GE Plastics, became the first GE Web site to engage in electronic transactions. This was only a small step forward, however, because GE Plastics was still doing transactions both off-line and on-line.
So GE was neither an early mover on the Web nor a particularly adventurous player when it did move. To some extent, this reflects the Old Economy background of its CEO.
Welch earned his doctorate in chemical engineering at the University of Illinois in 1960. As the Internet gained increasing attention in the early and mid-1990s, Welch began to feel his way. He watched intently as other companies reacted to this new phenomenon.
Like many other executives, he was bemused by Wall Street’s embrace of the dotcoms. And no doubt, he envied these startups’ high valuations, but not so much that he was tempted to plunge his company into the Internet world at an early, untested stage.
So he watched and waited.
LATE, BUT NOT TOO LATE
For Welch, the year 1998 was a turning point. By that time, it seemed that everyone around him was using the Internet for one thing or another. His wife was making their vacation plans on the Web. His colleagues at corporate headquarters were shopping on-line. By Christmas 1998, Welch was persuaded that the Internet Revolution was here to stay.
At that point, most of GE’s Web sites were like GE Plastics’: essentially on-line brochures. “The epiphany,” observed Pam Wickham, Manager, E-Business Communications and www.ge.com, “which Jack got toward the end of 1998, was the transaction piece, that this was the business model to pursue, that the Internet could provide a revenue stream.”
So Welch issued a challenge: As quickly as possible, all GE businesses would build Web sites that were fully equipped to handle transactions.
When Welch issued his challenge, GE Polymerland’s Web site generated revenues of only $10,000 a week. By the end of 1999, that figure had risen to $6 million a week, and by June 2000, the site was bringing in $15 million a week.
And of course, GE Polymerland was only one example among many. In response to Welch’s challenge, GE’s many businesses developed “e-businesses.” Critical aspects of these businesses, such as sales, product development, and customer collaboration, began to be performed partially or totally on-line.
One of the most appealing benefits of an e-business is increased efficiency. Under the old system, for example, a number of people took part in the ordering and fulfillment processes. At each one of these “touch points,” human error could enter the system. Such errors are all but eliminated on the Internet, where the customer gets the chance to “create” the kind of product he or she wants without intermediation.
Today, only a few years after Jack Welch’s strong push toward the Internet, General Electric is widely regarded as one of the best examples of an Old Economy giant successfully embracing e-commerce.
WELCH RULES
- Look before you leap into e-business. Welch was criticized for being a late mover on the Internet, but GE avoided many of the problems on the “bleeding edge” of technology.
- Look for appropriate e-business opportunities. Web brochures are not enough. What products can you sell in cyberspace?
- Take advantage of the Web’s efficiencies. E-business, with its minimal transaction costs, can be highly profitable. Elimination of human error in the orderfulfillment process can further enhance profitability.