InformationWeek

November 27, 2000

Chiefs Of The Year:
Internet Call To Arms

Gary Reiner, Jack Welch
General Electric

ack Welch has been chairman and CEO of General Electric for almost two decades. And although it's not an official corporate title, one could also call Welch GE's Internet commander-in-chief. His order to GE execs to "destroy" the business and rebuild for the Internet during a now-famous managers' meeting in January 1999 was a shot heard around GE's world. The idea was to figure out where the Internet could cut costs, boost customer service, and improve the productivity of every GE business unit before dot-coms could encroach on the company's territory.

Gary Reinger Photo by Chriss Wade That directive rallied GE's troops in dozens of businesses ranging from home appliances to jet engines to credit cards. And while Welch sparked GE's Internet fire, senior VP and CIO Gary Reiner, Welch's partner and five-star general, put his CEO's orders into action, transforming the $112 billion, century-old conglomerate into a respectable E-business player in each of its diverse markets.

"If any company has a successful CIO and CEO team, it's GE," says Paul Daversa, president of Resource Systems Group, an executive management firm that has recruited IT talent for GE. "Reiner is a poster child for developing the standard of a CIO working with a CEO to achieve success through IT," Daversa says. "GE was a first mover in E-commerce, but prior to that, it was an early believer in best-of-breed IT talent and how that can help transform business."

The success of GE's E-business efforts is apparent. For fiscal year 2000, ending Dec. 31, GE expects its E-business revenue to range from $5 billion to $10 billion. Two years ago, the company didn't even track E-business revenue. Today, every GE business unit conducts E-business in three major areas: selling products and services over the Web, buying supplies and materials online, and moving manufacturing-related processes onto the Internet.

"Jack sets aggressive goals with business managers on the sell, buy, and make sides," says Reiner, who joined GE in 1991 as VP of corporate business development and was named CIO in 1996. "My job is to work with the businesses to help get that implemented, from a policy and strategy perspective, as well as from the technology side," he says. "We're both very focused on productivity."

Focused may be an understatement. Over the last several months, GE has evaluated the "analog," or human, touchpoints of all processes across GE's business to get as many of them on the Web as possible. For instance, GE Capital's mortgage business eliminated 60% of the 200 analog steps in its mortgage application-approval process by moving much of the work to the Web. This let GE reduce the number of employees needed to process mortgage applications and redeploy them in more critical posts. GE expects to reduce costs in manufacturing processes (the "make" side of GE) by about 15% over the next two years through productivity improvements gained by using the Web.

GE's appliance business has seen tremendous benefits from its online customer-service function. Phone inquiries that otherwise cost GE about $5 per call to service can now be handled on the Web for about 20 cents. Meanwhile, "reverse" online auctions that have GE suppliers bidding for GE's business have reduced the manufacturer's spending on materials and supplies by about 13%.

"My job is to coordinate the E-business efforts and work with E-business leaders to make sure that everybody knows what everybody else is doing," Reiner says. Sometimes that means promoting "a certain way of doing something--to drive focus in the categories of make, buy, and sell and to leverage the obvious links between E-business and IT."

Welch and Reiner together meet regularly with GE E-business leaders--in person and via the Web and teleconferences--to review initiatives. "We listen and look for ideas and best practices that can be shared among other businesses in the company," Reiner says.

Jack Welch Photo by John Abbott/Corbis Outline One of those good ideas was GE's SourceBid E-auction software, developed 11 months ago for $15,000 by two people in GE's transportation business. When Welch and Reiner were presented with the software, both were "very excited" about it, says Reiner. "Jack said, 'Let's get this around the whole company,' and my job was to improve it and get it around," he says. As a result, GE purchased about $6 billion of its supplies via E-auctions this year using SourceBid. Next year, the company expects to purchase as much as $20 billion through E-auctions, Reiner says.

The importance of not just adopting technology, but adapting to technology, isn't lost on Welch. "A technology change, massive as it is, doesn't mean abandoning traditional management concepts. It means adapting those business principles to the transformational world of the Internet," Welch told attendees at GE's annual shareholders meeting in April. "Any company, old or new, that doesn't see this technology literally as important as breathing could be on its last breath."

In addition to looking for good ideas, Welch and Reiner are always on the lookout for concepts that won't work. "I sort of know what Jack wants, and he has a very good instinct for what E-commerce is good for, and what E-commerce isn't good for," Reiner says. Case in point: Welch and Reiner were skeptical of the dot-com market long before the market got skeptical, Reiner says. Even before the recent rash of dot-com busts, neither executive was eager to see smaller Web businesses spun out of GE. "Jack has a strong belief that [GE employees] should care about one currency--GE stock. He was dead right about that," Reiner says.

A year ago, when dot-coms were really hot, GE considered building a Web business to resell used assets such as manufacturing equipment returned after customer leases expired. The initial idea was for GE employees to run the venture and take it public. In the end, the company decided not to go ahead with the plan. So, instead of setting up a separate business to resell that equipment, GE resells assets over the Web within its business units.

While Welch and Reiner regularly review the E-business progress of GE units, Reiner is also involved in the review of non-IT functions that include IT components. For instance, Reiner has a hand in the finance and budget reviews of GE businesses because IT is a core part of that spending.

E-business is the second major team venture for the CIO and CEO. They also worked closely during the rollout of Welch's Six Sigma quality-assurance initiative in 1998. That program broke processes into sublevels and data sets to identify and improve inefficiencies. "Six Sigma got the company focused on the customer, and that work also earned the trust of the work force, which made it easier for the E-business transition," says Nicholas Heymann, an analyst who follows GE for Prudential Securities.

The overall strategy is working. "The company is changing the way it operates. It's winning customers. It's winning market share," Heymann says. Indeed, continued E-business success would mean nothing less than victory for Welch, Reiner, and the GE troops.

Return to the "Chiefs Of The Year" introduction page.

Photo of Welch by John Abbott/Corbis Outline
Photo of Reiner by Chriss Wade

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