GE implemented a digital transformation under Jack Welch in the late 1990s and early 2000s through initiatives like Destroy Your Business (DYB) and Grow Your Business (GYB). Welch drove urgency for digitalization and appointed e-business leaders, but the DYB teams focused on e-commerce and were not fully integrated into business units. While some online sales growth occurred, the strategic focus and targets for digitalization did not stick after Welch's leadership changed, suggesting the transformation ultimately failed to be fully institutionalized within GE.

1. Section C Group 8
GE‟s Digital
Revolution
Strategic Change Process

2. General Electric
GE a $130B, 110 year old
corporation, structured into 3 business
segments OVERVIEW
BUSINESS KEY FINANCIAL STATISTICS
• Founded in 1889 by Thomas Alva Edison Revenue (2000): $ 130 Billion
as Edison General Electric Company • US(70%), Europe (19%)
• Multinational conglomerate corporation • Services (75%), Product(25%)
based in US • CAGR („96-00): 13%
• With presence in 130 countries, it‟s the Net earnings (2000): $ 13 Billion
3rd largest corporation as per Forbes • CAGR („96-00): 15%
• No. of employees (2000): 313,000 • Net earnings margin: 10%
Business segments: KEY EXECUTIVES
Short-cycle Long-cycle Fin. services
• GE Power • GE Appliance • GE Finance
• GE Medical • GE Lighting • Card services
• GE Aircraft • GE Plastics • Real Estate
• GE Transport • GE Industrial • Fleet Services
• GE Specialty • Re-insurance
Jack Welch Gary Reiner Gerry Podesta
Materials • Mortgage Chairman Chief Info. VP Americas,
insurance and CEO Officer GE Plastics

3. General Electric
Returned 23%/year to shareholders (1981-2000)
1998-2000
•Launch of DYB
1995-98 and evolvement
to GYB
•Announced •GE Plastics
1990-95
target for Six online revenue
Sigma rose 1100%
•Focus on being - From $0.1B in
1985-90 •40% of total 1999to $1.2B in
a “boundary
revenue from 2000
less company”
•Initiated strategy international
•Focus on •GE rated #1 on
of globalization operations
1981-85 services top e-business
- Business to be #1 •67% of revenue list by Internet
or #2 globally - To offset
•Jack Welch to slowing growth from services Week
CEO •Work-out sessions of industrial - As against
•Achieved 23%
- 2 day offsite to segment 15% in 1980
•Sold/closed 200 average annual
improve
businesses •Launched shareholder
effectiveness of
processes GE.com return over 20
•Acquired 370 years
new businesses

4. General Electric
Organization culture focuses on employee
initiatives, free flow of ideas and speed
 Welch shifted focus on cultural change to sustain high productivity ( employed
both Theory „E‟ and Theory „O‟ sequenced)
 Theory E – boosted productivity by carrying out restructuring, removed
bureaucracy, stripping layers of hierarchy and downsizing
 Theory O - articulated speed, simplicity and self confidence as core elements of
the organizational culture.
 Jack launched several new initiatives that redefine GE‟s “Social Architecture”:
Work-Out
Boundary less Software Initiative
Company
• Offsite meetings
• Stretch GE‟s
with groups of
• Benchmark activities performance targets
frontline employees
against world class • Managers incentivised
to improve
through external to achieve stretch
operational
focus targets
effectiveness
• Facilitate inter-unit • “Using dreams to set
• Employees
transfer of new business targets, with
empowered and to
ideas rapidly no real idea of how to
initiate implement
get there”
creative ideas

5. General Electric
Key HR initiatives included training,
expelling autocrats
 Emphasis on training
 Gradually took up change in long term HR policy
(Theory O)
 Expelling autocrats from the system (Theory O)
 Rebuilding base (Theory E)
 Practical training approach (Theory O)
 Implementation oriented (Theory O)
 Continuous skill improvement with no scope for
complacency (Theory O)

6. General Electric
GE established a series of management
discussion called „Operating System‟
Operating •Priority reviewed
Managers Meeting •Best practices celebrated
Corporate •Follow up on initiative
Executive Council •Feedback and recommendations
•Welch visit to GE business locations
Session C
•emphasis on continually improving skill set
•Identify Key opportunities and threats
Session I
•Driven by broad stretch goals
Corporate Officers •Discuss challenges of next years operating
Meeting budgets
Session II •Operating planning review for next year

7. General Electric
Welch implemented four key strategic
initiatives - 1
Welch challenged organization to
renew itself strategically and
implemented four key strategic
initiatives
 Growth through Globalization
1
(1987): –
 All GE business to be either #1 or
#2 globally
 Took advantage of economic
downturn in Europe(„89-‟95),
Mexico(„95-‟96) and Asia(„97-
‟98)
 Urged Managers to viewed it as
a buying opportunity.
 Spent more than $32.5 billion on
acquisitions.
 By 1998 international revenues
represented 40% of total,
 Up from 20%(1985). Average Growth through Globalization
annual growth rate Global(„87-
‟98) was 15% Vs 6% Domestic.

8. General Electric
Welch implemented four key strategic
initiatives - 2
2 Reduce dependence on
traditional products(1994):
 Challenged Managers to offset
slowing growth of GE‟s
traditional products
 Product services experienced
much faster growth rate
compared to products
 By 1998, GE‟s product service
business comprised
 Medical equipment support
 Aircraft engine maintenance
 Power Equipment Servicing Growth in GE's Service Business
 Revenues exceed $12 Billion

9. General Electric
Welch implemented four key strategic
initiatives - 3
Six Sigma(1996)
3 Six Sigma (1996):
 Learnt how Six Sigma helped
Allied Signal to improve quality,
lower costs, increase productivity
 GE study found its error rates was
10,000 times the six sigma
standard
 Lost $8 billion and $12 billion a year
in inefficiencies
 In 1996, Welch announced goal
of reaching Six Sigma quality
levels
 Made investment of $500 million
in 2 years
 Soon returns over investment
exceed expectations
 By 1999 additional revenue of Cost and Benefits of Six Sigma Program
$1.5 billion was forecasted

10. General Electric
The Fourth
Drivers of E- Launch of E-
Strategy:
4 E-Business Business Initiative Business at GE
 The Internet Revolution and the dot- “GE’s reluctance
to embrace
com boom of the late 90s
e-commerce
 Welch‟s growing personal interest in the was seen as a
Internet and e-commerce space sign that its CEO
was past his
 CEC‟s conclusion that GE was prime”
vulnerable to E-Business initiatives by 1
start-ups/competitors
 Amazon‟s attack on Barnes and Noble
“There was a fear
was viewed as an important lesson. It
that talented
brought a sense of urgency to executives would
implement e-business initiatives at GE flee old giants to
join high-flying
start-ups”
2

11. General Electric
The Fourth Strategy: Drivers of E- Launch of E-
E-Business Business Initiative Business at GE
1994 : Late entry to the web. General Electric launches its website
GE.com and GEplastics.com
January 1999 : Welch announces company-wide E-Business
strategic initiative
1999 Boca Meeting : Each business is expected to explain how to
become an e-business leader
Launch of „Destroy your Business‟ – dyb/cannibalization
initiative
April 2000 : All GE businesses expected to identify an E-
Business leader, supported by a dyb.com task force
June 2000 : E-business was officially adopted as GE‟s fourth
strategic initiative along with Globalization, Services and
Six Sigma

12. General Electric
Implementation of E-Business
Jan „99, Boca •Each Business to find way to be
No. 1 in e-Biz in its industry
Meeting
•Take the initiative with
urgency
CEC Meeting, •Appoint a e-Biz leader in each
March business by Session C with a
dyb.com task force
•Priority to identify vulnerability
•Focus on internet as a
CIO, Gary sales opportunity
Reiner to •Facilitate online
support the transaction
•Provide Value added
business heads services

13. General Electric
Implementation of E-Business in GE
Plastics
CEO Plastics •17yrs old veteran in GE
Gary Rogers , •Plastics Engineer
appoints Gerry •Knew Plastics business
Podesta as Div‟s •Understood how GE
e-Biz GM works
•Includes 7 person
dyb.com team
Forms a Team of •25 Developers
62 people •30 People to
create Global
content
•Buy Team
•Design and
Subdivision of Research
Team Team
•Interact Team

14. General Electric
Strategic Shift in E-Business
E-Sell
What worked in favor?
 Internet as a sales channel, riding on the E-Sell
Internet boom
 Websites that facilitated online transactions
 Polymerland, for instance raised its online
sales from $60,000 a week to $5 million a
week within 9 months
E-Make E-Buy
What did not work?
 Powerful websites were important
defensively, but they did not translate into
major sales boost Jan 2000: 5% online sales
Target: 30% online sales
 Cannibalization of traditional business
model
 Internal scepticism and career concerns for
many employees

15. General Electric
Strategic Shift in E-Business
E-Buy E-Make
 With no credible “Amazon”  Internal productivity thrust
threat, dyb.com evolved into  Automating touch-points to
gyb.com reduce SG&A expenses by
 Emphasis now on growth 30 percent
 Online purchasing as an E-  Distinguish front-room value
business growth/profit opportunity adding activities from back
was explored room support activities
 GE developed its own in-house
auction hosting service which was
quickly adopted in every GE
business
Target 100% of purchases from suppliers Targeted savings of $10 billion in 3 years
through GE Web based E-Buy initiative

16. General Electric
GE Plastics can be valued on the
following parameters
Strategic Approach
• Evaluation of threats, opportunity
• Evolved the idea from e-sell to e-buy to e-
make
Customer oriented features
• Customer friendly
• Efficient transactions
• Engaging customer interface
Approach towards business unit
•Achieved Integration and eliminated
compartmentalization
•conflict in terms of commitment and performance
of business units and the e-business
•Took away some of the best talent from the
business units

17. General Electric
Relevance for replication of the
model in other business units
Buy and interact related
features could be used by
others
Design and research has to
be done explicitly by each
team
Participation in development
of synergy and
communication

18. General Electric
Effectiveness of E-business implementation in
GE plastics
Growth in Online Sales
Online Sales increased from $100 million
to $1.2 billion and forecasted $4 billion in
Created a positive online relationship
with customers and build loyalty.
Improved process for service, speed and
customer satisfaction
E-buy option was expected to generate
savings

19. General Electric
Change Process behind e-business - 1
• Scaring top executives
Urgency • Personal involvement of CEO
• Active support from CEO
Leaders • People appointed as e-business leaders
• E-business leader in its industry
Vision • Pre-empt Amazon like scenarios

20. General Electric
Change Process behind e-business - 2
• Creation of „dyb‟ teams
Convey • Used their Operating System to good effect
• E-business leaders set BU strategy
Empower • Getting the best people
• Not allowing performance dips
Short • Having clear short term commitments
term wins

21. General Electric
Change Process behind e-business - 3
• Direction for e-business teams
• Integration into mainstream
Consolidate
• Possibly did not happen
• Change in leadership
Institutionalize • All talk of digitalization disappears from ARs from 2003

22. General Electric
Possible pitfalls
 Leadership is changing – Jack Welch exits
 Lack of dyb teams‟ integration with BUs
 Initiative losing steam too early
 Possibility of change failing to stick
 Strategic fit of the initiative
 E-sell is not universally applicable (aviation)
 Small base of „backroom‟ to push down SGA
in some businesses

23. General Electric
Future direction of DYB has 3 alternatives;
integration seems most promising
DYB Team‟s Future
Maintain Status Return to regular Integrate into
Quo responsibilities mainstream
• Resistance from • Loss of • Makes e-
BUs momentum business integral
• Possibility of • Declaring victory to decision
autocracy too early making
• Unlikely its
significance will
be lost

24. General Electric
Future direction of targets include 2 key
aspects
 Pursue the current targets
 Targets need to be mapped against
realities
 Targets need to be business specific since
some of cost/sales/procurement targets may
not be feasible for certain businesses
 For instance, E-sell may not be a feasible
option for aviation

25. General Electric
What possibly transpired
 In2002 Digitalization saved $2bn
 Post 2002 no annual report specifically
mentions Digitalization as a core focus
 Possibly new leader‟s focus is different
 Digitalization comprising of e-sell, e-buy and
e-make may have plateaued
 Thus, the change may have failed to stick or
the projections were inflated

26. General Electric
Thank You
“DYB and GYB were the wrong strategies, since these teams
were isolated and not integrated into the rest of the
organization.”
-Jack Welch, Lexicon of Leadership, 2003