Striving for ExcellenceBy Mel Duval | Posted 2007-06-12 Email Print
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From its embrace of ITIL, its clever balance between centralized and decentralized IT, and its rigorous management training, General Electric's tech team follows best practices. It's won a number of IT awards. And it's helped GE grow into a $163 billion b
Striving for Excellence At General Electric's annual meeting in Greenville, S.C., in late April, Jeffrey Immelt, the company's CEO and chairman, had to deal with some contentious issues. Shareholders complained that GE was manufacturing its light bulbs offshore instead of in the United States. A conservative group pressed GE to stop giving charitable donations to groups connected with the Rev.
Jesse Jackson. And some GE pensioners were less than happy with their retirement payouts.
But the overriding concern at Greenville was the company's stock performance.
Since Immelt took over from John (Jack) Welch in 2001, GE shares have flatlined, dropping 7% while the Dow Jones Industrial Average has shot up 35%. More recently, GE shares were down 5.6% in 2006 while the Standard & Poor's 500 Index climbed 4.7%. "Is it frustrating? Sure it is, but the thing investors will always respond to is consistent earnings growth," Immelt said just before the meeting.
Less than a month later, GE announced a deal to sell for $11.6 billion its plastics division. GE plans to use the bulk of the proceeds from the sale to fund a buyback of as much as $8 billion of its own stock this year. The sale is part of Immelt's ongoing strategy to overhaul the company's business portfolio, shedding slower-growth businesses in favor of those that are poised to surge, returning greater profitability.
Some institutional investors and analysts argue that the businesses that make up the giant conglomerate, which has a market capitalization of $386 billion on May 25, are worth more separately than under the conglomerate's umbrella. GE has six main divisions Infrastructure, Commercial Finance, GE Money, Healthcare, NBC Universal, and Industrial but under each of those divisions are major businesses such as GE Real Estate, Aviation Financial Services, GE Plastics and Universal Studios theme parks.
Breaking up the house that Jack Welch built sounds unthinkable. And clearly, that's not the approach Immelt favors. On the GE Web site, he reminds visitors in a video presentation that through good times and bad, GE has generated double-digit earnings growth and has consistently increased its dividends for 31 straight years. Last year, the company netted $20.8 billion in profit making it the country's fifth most profitable company on revenue of $163 billion.
And what's been driving this sustained growth?
A key factor that has always set GE apart competitively is the company's vaunted information-technology capabilities. The company's I.T. savvy has created increased savings, efficiencies and productivity for the company.
GE's information-technology strategy and performance mirror the company's corporate philosophy to be the best in the markets in which it operates.
But how good is it? And what happens to GE's I.T. if the company is split apart?
"GE did a benchmark with us of all their worldwide operations, including finance, procurement, human resources and I.T., and they came out as world-class," says Scott Holland, I.T. practice leader at The Hackett Group, a strategic consulting firm. "It's astonishing to me, for the vast size of GE, just how good they are with their I.T. operation. Without a doubt, they pride themselves at being the best and are looked at as being the leader in this area."
Others have also recognized GE's I.T. as being among the best. Indeed, GE has won any number of I.T. best practices awards in the past few years, many of them for customer-facing technologies and processes.
Last year, as an example, its Consumer Finance Division received a best practices award for its customer relationship management (CRM) from The Data Warehousing Institute (TDWI). The award recognized GE's success in using master data management, which provides single-source and consolidated views of all of the company's data assets across customers, products and vendors. "The challenge is that there are many flavors of customer data integration, definitions of master data, and competing business functions that must reach consensus. Hence, achieving accuracy, timeliness and relevance with customer data in various business contexts calls for a well-thought-out process and architecture," TDWI said in announcing the award.
In 2005, GE Commercial Finance Fleet Services' maintenance control center was recognized as a center of excellence for customer service by Purdue University's Center for Customer-Driven Quality. Certification is given to customer service call centers that rank in the top 10% for effectiveness and efficiency. Based in Eden Prairie, Minn., GE's team of 107 technical advisers handles more than 5,000 calls a day, helping customers control costs by directing fleet drivers to preferred vendors and negotiating repair costs. Fleet Services was the first in the fleet industry to receive this certification.
The previous year, Fleet Services also received a CRM excellence award from Gartner on the basis of its strong commitment and solid illustration of a balanced and integrated approach to customer relationship management. Gartner defines CRM as a "business strategy with outcomes that optimize profitability, revenue and customer satisfaction by organizing around customer segments fostering customer-satisfying behaviors and implementing customer-centric processes."
And among other large global conglomerates, GE's "Information Productivity," based on a scale developed by Paul A. Strassmann a former technology executive at General Foods, Kraft, Xerox, the Department of Defense and NASA, and a recognized authority on the value of using I.T. for business results is near the top. With an IP value of 29.1% (the average for all 2,836 firms analyzed in a broad Baseline sample is -1.2%), GE ranks behind only United Technologies, which has an IP value of 36.1%, and Mitsubishi at 32%. Other global conglomerates' IP values were 20.6% for Sumitomo; Tyco International, -2.2%; Siemens, -4.1%; and General Motors, -9.8%.