General Electric's Spin Machine - Company Business and Marketing

Industry Standard, The, Jan 22, 2001 by Mark Roberti

These divisions are at the forefront of GE's efforts, but the business practices and technologies they've developed are being adapted and implemented by other units. To be sure, GE deserves credit for moving faster than many other large companies to get wired. And its approach is sound. The company is trying to reduce costs and boost efficiencies by digitizing paper processes, while at the same time improving customer service and sharing more information with suppliers.

These endeavors are unlikely to make GE vastly more profitable, though, because the company isn't using the Internet to reach new markets or create major new sources of revenue. And while the company should be able to save money by moving internal processes online, the massive cost reductions GE has been touting -- which come from eliminating positions because customers and employees serve themselves -- have proved elusive at other companies.

GE projects that its units will generate about $7 billion in online sales for 2000. If successful, GE will produce online revenue that's more than double what Amazon.com is expected to post for 2000. That sounds impressive, given that GE's been at this e-business thing for just two years. But what GE executives rarely point out is that very little of the online revenue represents new business. The company is simply moving existing customers to the Web.

"It's not like we created a new market or a new channel," concedes GE Plastics' Podesta. "Most of the customers who were online were the same customers who were making orders by phone."

Some customers may order more plastic resins or light bulbs from GE because it's easier to purchase products online. Or they may order upgrades for turbines or aircraft engine parts suggested by GE based on the results from online diagnostic tools. Jean-Michel Ares, VP and CIO for GE Power Systems, says that through August his unit had received about $50 million in orders for power-generation parts and services that it wouldn't have gotten if customers weren't able to order online. That's nothing to sneeze at, but it's hardly earthshaking revenue for a $10 billion business.

CIO Reiner says GE doesn't track how much new business is coming in online. He says it's something the company will start evaluating in 2001. But for many of GE's manufacturing units, the Web is unlikely to provide a huge boost in revenue. "Who's going to buy from GE who doesn't already buy from GE?" asks a Wall Street analyst who covers the company, but requests anonymity. "I'm not sure the Internet really brings much in incremental sales." (GE Capital has a better shot at using the Web to sell more. See story, page 82.)

Aren't there benefits to moving existing customers to the Web? If you believe consultants, software vendors and many business magazines, yes. The argument is that a company saves plenty because it doesn't have to pay a platoon of operators to take orders by phone, and there are fewer errors because the information doesn't have to be typed into the company's own computer systems.