The killing fields are emptying quickly. The bodies of business-to-consumer dot-coms have been largely carted off. The business-to-business sites are following them to the grave. In corporate America, companies trudge forward with the sober work of e-commerce--becoming more efficient, more profitable, more competitive.
In that realm, few companies have been as closely watched as General Electric. Cisco Systems and Oracle have made plenty of noise about their e-commerce successes, but e-commerce is essentially what they sell. Dell is a paragon of Web-enabled supply chain efficiency, but it too is a child of the Internet age. Among the old-economy stalwarts, arguably none has executed its e-commerce transformation with the breadth and dexterity of GE.
By now, volumes have been written about how CEO Jack Welch finally "got the Internet" in 1998, then crafted a plan for the company to use the Web to turbocharge its heralded Six Sigma Quality Initiative. Six Sigma steeped GE employees in an almost obsessive quest for perfection and a customer-centric approach to solving every business problem. Welch soon added his voice to the chorus of executives touting the Web's endless potential, calling it an "elixir" for business.
But even as Welch entered his last year at the helm (he's due to retire at the end of this year), critics in the Internet press and new-economy consultancies took him to task for promising more than he delivered, for talking bottom-line results without demonstrating them.
Such criticism has only strengthened the resolve of GE's e-business leaders to put the numbers on the table--and defend them. According to GE executives, the company will add US$1.6 billion to its bottom line this year, thanks to the Web. It will save roughly $600 million by purchasing goods through its online auction system. Another billion comes from production efficiencies across its 20 major business units. Analysts, who stand by GE's savings forecasts, also expect the company to trim between 10,000 and 15,000 jobs this year.
Meanwhile, executives say, e-commerce sales reached 10 percent of the company's $130 billion total revenue last year, with about 55 percent of those transactions coming from the Internet. (Electronic data interchange, or EDI, accounted for the rest.) That's far from the critical mass that GE is shooting for, but it's a sound beginning. Oh, and a vast majority of its Internet projects pay for themselves in a year; the others pay out within two.
Which is not to say GE has made it. Like every Internet startup, GE's divisions have made some mistakes of impressive magnitude. Not every division is charging ahead at warp speed into the Internet age. And for those seeking continual e-commerce savings of the 2001 variety, GE will no doubt disappoint.
Just as the big staff cuts of the 1980s still have an impact on GE's bottom line but are rarely spoken about, savings from online purchasing, selling, and production efficiencies become less of a story after the one-time savings.
To that end, efficiencies from online procurement, or "e-buy" in GE parlance, will start to level off by the end of next year. Production efficiencies gleaned from its "e-make" manufacturing effort will probably do the same within three years. The last place of refuge for flashy dollar savings will be in the "e-sell" arena, where the company is waiting impatiently for its customers to embrace the Web. And for a global corporation doing business in countries that are years--if not decades--away from boasting adequate Internet infrastructures, the company could be in for a long wait.
It's worth noting, though, that in reaching its online procurement and production goals that quickly, GE will be years ahead of most firms. And besides, company executives say, posting flashy savings numbers every year, in perpetuity, is not necessarily their aim. Nor is the Web expected to vastly increase the company's revenue by pushing the company into new markets. Asked about recent criticism that the company was not using the Web to attract new customers, senior VP and CIO Gary Reiner (pictured), GE's e-commerce point man, says, "We never, ever, ever used that as the objective of e-commerce. We view it as a source of productivity."
In that respect, GE will make its real progress in securing an ongoing advantage against competitors, by serving customers more effectively and efficiently using the Net, and by honing those Web-based skills to stay ahead of the competition.
