GE in the Digital Economy

By Slywotzky, Adrian J.; Morrison, David J. | Chief Executive (U.S.), March 2000 | Go to article overview

GE in the Digital Economy


Slywotzky, Adrian J., Morrison, David J., Chief Executive (U.S.)


With Jack Welch retiring as CEO in April, 2001, GE faces the challenge of replacing one of the grandmasters of strategy. While the company's management skills and depth of talent are legendary, Welch's shoes will be hard to fill. His successor will have to address one critical strategic issue: How will GE play to win in the digital economy?

Welch made bureaucracy-prone GE the most quick thinking and entrepreneurial company of its size, and he changed the way the game is played. In The Profit Zone, we described how Welch understood how his customers' priorities and economics were changing and the implications of these changes for strategy:

When Welch took the helm in 1981, he saw that market share leadership, more than scale economies, was the way to increase profit per product sold. So Welch raised the bar for operating units to be No. 1 or No. 2 in their business or simply get out.

When market share no longer guaranteed success, Welch initiated Work-Out-literally, take unnecessary work out of the process-- anticipating the reengineering wave by nearly half a decade. He insisted that the No. I market share position be translated to a No. 1 productivity position in every one of GE's businesses.

When Welch recognized that productivity leadership was no longer enough because profit was migrating downstream from making a product to offering product-based solutions and services, Welch led the way again.

Typically, GE has been way ahead of the curve whenever the source of competitive advantage was going to shift. This is why it has captured a disproportionate share of its industries' profit and shareholder value. But is GE leading or lagging in the next discontinuous change, the advent of digital business design?

Based on GE's demonstrated capacity for radical change, the company appears more ready than most traditional, incumbent firms to lead the transition from a conventional to a digital business design. Indeed, GE has already developed numerous Internet initiatives. Like all companies, GE expects e-commerce to lower procurement costs and its 28 business units are moving procurement online, some even installing Internet kiosks on factory floors for line workers. GE Capital Services sells mortgages online and has established platforms to pursue the small business market for financial services. NBC is rapidly trying to build its brand online; it was the first GE business to have its own Internet investments, and now holds a $600 million portfolio of about 35 Web companies including Snap.com and iVillage.

ATOMS OR BITS

Making the transition to a genuine digital business design, however, represents a bigger shift in mindset, and bigger potential benefits for value growth, than did any of those shifts that spurred Welch's previous reinventions. It will radically change the way GE relates to its customers, manages its finances, and recruits top talent. Given the company's stature as a pacesetter in strategy and leadership development, GE's response to the Internet could have even broader implications, by serving as a model for other incumbents.

The concept of going digital derives from the insight by Nicholas Negroponte of MIT that the fundamental distinction in the new economy is between atoms (whether paper and pencil, machinery, or storefronts) and bits (email, e-commerce, or satellite tracking), The Internet is not the only technology enabling the digital revolution, but its breadth and open architecture make it the most important.

Thanks to the Internet, customers will soon be able to describe exactly what they want, and suppliers will be able to deliver the desired product or service without compromise or delay. The innovation that catalyzes this shift is what we call the Choiceboard system-an interactive, online system that allows individual customers to design their own products by choosing from a dynamic menu of attributes, components, prices, and delivery options.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

GE in the Digital Economy
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.