Giants Can Be Nimble

Jim McNerney's eureka moment on the Web arrived a year ago, along with an antique bamboo fishing rod. Only when the chief executive of GE Aircraft Engines bought the rod at an eBay auction did the power of business transactions on the Web hit him--with the sudden impact of an angry 10-pound bass striking a fly. It dawned on him that the Web would change not only his shopping habits but also everything about the way his company does business.

It was a shift in mindset that was already reverberating throughout General Electric Co. Since urging executives to "," in January, 1999, Chairman and CEO Jack Welch has been leading by example. He and 3,000 other top GE executives have young mentors teaching them how to use the Web. Immediately after quarterly executive meetings, Welch also Webcasts results to the company's 300,000 employees. "There are no secrets," Welch said in a videotaped April interview with Prudential Securities. "The whole organization has everything."

Sure, there's an element of showbiz here. But GE is dead serious about getting all its people to use the Web--to cut out layers of middle management, promote teamwork, improve customer service, and save money. "GE has figured out how important the Web will be for its businesses," Merrill Lynch & Co. analyst Jeanne Terrile noted in an April report.

Cincinnati-based GE Aircraft Engines illustrates both the promise and the challenges of Webifying a corporation. A year ago, McNerney brought in a SWAT team to jumpstart the process. To fill the role of the division's global e-commerce chief, he hired John Rosenfeld, an ex-Green Beret and tech expert who built an e-business for printer maker Lexmark International Group. McNerney paired him with David Overbeeke, Aircraft Engines' general manager for fleet management operations, who helped turn its service side into a much bigger moneymaker.

To make its e-unit feel special, GEAE bought a warehouse near its engine plant and decorated it in a mix of Romper Room and Star Trek--red, green, and purple chairs surround an ultra-wired conference table. "We put the renegades in there and told them to come take us, the old company, over," says McNerney.

But the targets are tough: to shift $1 billion of the company's $11 billion in annual sales to the Web, generate $250 million in new revenue, and slash $100 million in costs. The heart of the plan is the division's Customer Web Center, a hub of millions of pages of information about GE engines--and a place for customers to order thousands of new parts and fix old ones. Decisions on repairs that used to take weeks now take minutes. "This is extremely exciting stuff," says Pat Wildenburg, head of purchasing for Delta Air Lines Inc. "The value will come over time."

The most concrete results so far are cost savings--$33 million through August--from using the Web to harness information and buy office and factory supplies. For instance, instead of buying 250 kinds of goggles, the unit shaved 50% off the average price by demanding only eight varieties. Companywide, GE says buying $2.1 billion in supplies online already has saved $234 million.

Not everything's hunky-dory yet, however. By mid-August, still in test mode, Aircraft Engines' e-division had recorded no revenue. Admits Rosenfeld: "We're still at the bottom of the mountain." And so is the rest of GE--which is why the company tracks every inch of Net progress, from job cuts to auction savings, on a weekly basis.

Ultimately, the Web is as much a tool for transforming how GE manages itself as it is for producing immediate profits and cost savings. For one, it's teaching GE division chiefs how it feels to be students again. McNerney began answering his own e-mail only after Rosenfeld started tutoring him a year ago. "We're a flatter organization as a result," he says. Therein lies the fundamental promise of the Web: to help even the world's biggest and most successful companies change with the times--at Internet speed.

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