?Bubbles burst and excessends in an ugly fashion.?
You would expect such a dire statement from a marketanalyst or economic pundit, especially in light of the news of Bear Stearns?dramatic collapse and the subprime mortgage crisis. But it?s the opening linewritten by Jeffrey Immelt, chairman and
Immelt is one of the mostadmired CEOs, and GE continues to lead allindustries in its management style and systems. Even as the domestic economycontinues to slip into recession, he reflects in his annual report on theinvestments GE has made in emerging technologies and markets that will, in hiswords, enable the company to reach its 2008 financial targets even underchallenging conditions.
How can Immelt be sooptimistic? In a word, he has faith in his technology and business operationsprocesses.
As one of the world?slargest manufacturers, GE is in the business of selling technology. It produceseverything from light bulbs to massive electrical generators, jet aircraftengines and high-resolution medical scanners. It sells products and services tocustomers in every corner of the globe, and it manages a worldwide supply chainand distribution network. Underlying this massive operation is technology thatproduces innovations, manages manufacturing, yields business analytics, andenables communications between partners and customers.
?Management and the boardspend a significant amount of time defining what makes a great GE business,? Immelt writes. ?We invest in leadership businesses that reflect the essentialthemes mentioned earlier and leverage our key capabilities: brand, technology,content development, globalization, people and financial strength. We likebusinesses where good management results in superior financial results. We likebroadly diversified businesses with multiple ways to grow. We believe that ourprocess skills create a competitive advantage. We like businesses where we can ?retool?our strategies to capture new opportunities for profitable growth.?
GE is one of the bestexamples of a company that leverages technology for both its products and its operations.When the company was founded by Thomas Edison more than a century ago, it wasin the business of supplying equipment to factories for powering assembly linesand tool shops. As time passed, GE morphed into a conglomerate that usesinformation technology as the underpinning of every device and piece ofequipment it sells.
*To go deeper on GE, read the Baseline article Does GE Have the Best I.T.?
For its $3 billion annualinvestment in technology research and development, GE is reaping tremendousrewards. It?s seen a 39 percent increase over the last three years ininfrastructure products?wind turbines, engines and locomotives?and $100 billionpipeline in service orders. There?s a lot of technology driving that business:computer-aided design and product lifecycle management software forengineering, ERP for order and supply chain management, financial analytics forreporting, and scores of communications and collaboration applications thatlink the company?s global workforce of 170,000 employees.
But think beyond the lightbulbs and dishwashers. Efficient management and profitable operations rely increasinglyon good information management. As Jack Welsh, Immelt?s predecessor once said,?If it can?t be measured, it can?t be managed.? GE goes to great pains toensure that it captures every micron of data about its operations?from designto manufacturing, marketing, service delivery and, ultimately, customersatisfaction. Nothing moves in GE without having an analytic attached to it.That philosophy is summed up in two words: ?operational excellence.?
?We have significantly increasedour technical funding and have a rich pipeline of new products coming to themarket,? Immelt writes. ?We have applied GE process skills, such as Lean SixSigma, to improve our speed and responsiveness. We are using Net Promoter scoresto measure our progress with customers. We have built strong engineering andcommercial teams around the world to tap into new growth markets.?
Let?s go back to theeconomic conditions in which GE is operating.
Bear Stearns recently collapsed and wassold to rival JPMorgan Chase for a fraction of its former value because?inpart?it and scores of other banks and financial investment firms like it failedto adequately manage information. Without fully appreciating the risks theywere undertaking in the subprime market, they wrote billions of dollars inshaky loans and then resold them to investors.
JPMorgan, like GE, usessophisticated analytics to understand its business and market conditions. It?smade huge investments in technology to help navigate its business throughtroubled markets, putting it in a position to weather the economic storm andrescue its one-time rival. While the acquisition is still fresh, JPMorgan isalready signaling that its new property will require a massive technologyoverhaul?probably a reflection of the poor infrastructure and processes thatsank Bear Stearns.
What GE and othersuccessful companies have figured out is that they may make refrigerators andelectronics, but their real commodity is information. How enterprises invest inthe systems that manage information and how management then acts on thatintelligence will ultimately determine their long-term viability.
Lawrence M. Walsh iseditor of Baseline.Share your thoughts on how technology can help businesses weather the comingrecession at [email protected].
