Risky e-business
Business executives in general are loath to say so on the record, but some snicker at other companies that are buried in legacy integration problems, and wonder who will be the better off for all the technology spending.
But GE's critics say that one of the chief failings of the company's e-commerce effort is that it has not shut down its call centres and other redundant systems. Speaking broadly of traditional companies making the move to e-commerce, Jean-Gabriel Henry, a senior analyst with Jupiter Research, a unit of Jupiter Media Metrix, says he's seen "a lot of managers saying, 'Hey, we've got this e-commerce software, the procurement software, the CRM [customer relationship management] systems, how come we're not shutting down these call centres?'"
"In GE, there hasn't been that vast a movement over from the offline to the online channels. You have to offer things online because people want it, but that doesn't mean you can lay off all these people. But [e-commerce] is no longer something that'll make you more profitable. You have to do it because everyone else is doing it. If your online sales are, say, one-third of total sales, you're managing an extra system and paying for that, not reducing the cost of the systems you already have," Henry says.
Other analysts dispute that point, but whatever the case, GE says it is shaving costs. Terry Dunn, general manager of global communications for GE Appliances, says the division has seen "significant double-digit reductions" in call centre volume in the past year. Dunn would not say how much those reductions would save in labour or telecom costs.
Of course, not everyone believes that such gains by early movers in e-commerce will translate to a significant long-term competitive advantage. In business-to-consumer e-commerce, for example, hundreds of companies rushed their sites to market, only to find that their target customers weren't ready to transact with them online.
Likewise, some executives believe that they do themselves no great favour by investing in systems that their corporate customers are not yet willing or able to take advantage of--particularly as the economy weakens.
Such logic is the source of either heartburn or ridicule among most analysts. Prudential Securities' Nick Heymann, for one, says GE is "head and shoulders above other traditional companies in this e-commerce conversion process," which will give the company a "big advantage."
Michael Regan, an analyst with Credit Suisse First Boston, agrees, and adds that GE stands to make long-lasting bottom-line gains as a result of its e-business push. "Not much went to the bottom line in 2000 because while there was some benefit, there were also a lot of expenses to get things going," he says. "But those benefits far outweigh the expenses in 2001."
As to the longer lasting competitive benefits of this effort, Regan says, "lots of others will try to digitise, but lots of others have tried to follow Six Sigma as well, and nobody's been able to do it as well as GE."
The biggest hurdle GE faces, he says, is cultural: "But that's the case with any company. It's also why we've got more confidence in GE than in anyone else. They thrive on change and challenge."
Analysts and executives agree that the credit for that culture belongs squarely with Welch. "Without this type of leadership, e-business is hard to implement," says Tim Chapman, who leads the operations practice at consulting firm McKinsey.
Chapman and others say that because Welch elevated e-commerce to the "initiative" plateau--one of only four the company has had in its history, and the only one since Six Sigma--corporate managers were quick to carry the flag.
"One of the things that would've made digitisation a failure is if we were digitising poor processes," says Steve Hacala, GE Capital's managing director of corporate technology and e-business. The core tenets of Six Sigma, "customer focus, insisting on excellence, and eliminating bureaucracy, have all set us up for digitisation."
To see how Six Sigma and e-commerce work hand-in-hand in areas other than online selling, one must look no further than GE Medical Systems, which received US$7.6 billion in orders for equipment and supplies last year.
"A few years ago, we thought of everything in terms of quarterly figures," says Naren Gursahaney, GE Medical Systems' CIO and general manager of e-business. "In the last couple of years, we've gotten people focused on a monthly rhythm."
Now, with what GE insiders refer to interchangeably as a digital cockpit or digital dashboard, managers track key business metrics on the Web on a weekly basis.
"In real time, we can see how we're doing vs. financial targets we've set for that acquisition," Gursahaney says. "We can also drill down to see which function hasn't completed tasks we've set for this date. Considering the number of acquisitions we've done, it's been a huge help with productivity."
