Does GE Have the Best IT?By Mel Duval | Posted 06-14-2007
Does GE Have the Best IT?
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Striving for Excellence
Striving for ExcellenceAt 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%.
What Makes GE So
What Makes GE So Good?In keeping with the Fairfield, Conn.-based conglomerate's renown for instituting stringent cost controls over literally everything it does, GE's six business units each with revenue of $16 billion to $47 billion must carefully justify I.T. project spending and track their results.
"They're very aggressive at understanding I.T. costs," offers Dean McMann, a one-time consultant to GE, and CEO at McMann and Ransford, a consulting firm in Sugarland, Texas. "They're not hoodwinked and they don't just look at developmental costs. They factor in training costs, rollout costs and the rest of it so they understand the cost structure much better and much earlier than most of the companies I've worked with."
The Hackett Group's Holland concurs. "GE's business-unit CIOs are all about driving costs out of there," he says. "When they do a justification for a project, there has to be a payback in one year. If you say you are going to save X million dollars with a project, the next year your budget is cut by that amount."
Those I.T. savings, along with other administrative cost reduction efforts, have contributed greatly to GE's long-term record of profitability. GE's net profit margin over the last decade of 10.89% is almost seven times the average of a handful of large conglomerates around the world, including United Technologies in the U.S., Germany's Siemens, and Mitsubishi of Japan. GE's rate of return on equity is more than double that of its peers.
To be sure, the I.T. management strategy supporting this juggernaut of profitability is equally impressive.
The company maintains a balance of centralized data centers and shared I.T. services that provide a backbone of common systems supporting its half-dozen diverse, multibillion-dollar business units. Most business applications, for instance, are run at various central data centers; many of the company's business units tend to have just file and print servers on site.
Help-desk support, some applications development and other non-core business applications are outsourced, with most of the work handled by GE's semi-captive outsourcing unit, Genpact, in India. "GE does a great deal of outsourcing," Holland points out, noting that the company was one of the first to take advantage of low-cost labor overseas for applications support. It was also one of the earliest corporate giants to outsource much of its I.T. service operations to low-cost markets such as India. "GE has been very cognizant of I.T. and other infrastructure costs, and did not want non-core functions to grow their expenses," Holland says.
There are companywide standard systems for general ledger and human resources selected by corporate CIO Gary Reiner, the architect of GE's I.T. infrastructure, but no corporate-standard system for enterprise resource planning in fact, some units, such as GE Real Estate, don't even use ERP.
"Reiner sets what are going to be the corporate systems, but the business-unit CIOs have some leeway for choosing their own business- and industry-specific systems," Holland explains.
Each business unit, as well as each of the unit's operating divisions, has its own CIO who works closely with the unit's general manager to decide the technologies they purchase or custom-build.
GE's I.T. management strategy and the capability with which it is executed is so admired, in fact, that numerous corporations have hired away CIOs who cut their teeth as I.T. leaders at one or more of GE's business units or divisions within those units (see "CIOs on the Move," p. 28).
Additionally, some companies have shaped their own I.T. management philosophy and operations in the image of GE's, in hopes of duplicating its performance.
According to some GE business-unit CIOs, the corporate Goliath achieves this excellence through four key information-technology practices:
Using I.T. to leverage its enterprisewide Lean Six Sigma philosophy while embracing the Information Technology Infrastructure Library (ITIL), a set of standards that GE is using to improve its centralized I.T. processes, which provide services companywide.
Striking a clever balance between centralized and decentralized I.T. management structures and systems frameworks; GE uses this practice to free up its business-unit and division CIOs to focus on projects that harness I.T. to boost their bottom line.
Training I.T. executives alongside their business-executive counterparts, which ensures that GE division CIOs think of themselves as business managers first, and technology leaders second.
Expecting business-unit and division CIOs to serve as change agents for their businesses, instead of caretakers of I.T. systems and processes, resulting in an enterprise that can move more swiftly to capitalize on business opportunities.
Few corporations have the size and breadth of this conglomerate. But for CIOs seeking to achieve I.T. excellence across a diverse organization fielding a variety of products and services, there is much to be learned from a close examination of GE's approach.
#1: Powering Six Sigma With I.T.">
Best Practice #1: Powering Six Sigma With I.T.A number of books have been written about the management philosophy and style of former GE chieftain Jack Welch. For many years an avowed skeptic when it came to the quality improvement programs that were hot in the 1980s, Welch had viewed them as too long on slogans and too short on results.
Then one day, Welch heard his longtime friend Lawrence Bossidy boast about the gains he was getting from a quality program, Six Sigma, at AlliedSignal, where he was CEO in the early 1990s. Bossidy had gotten the program from its creator, Motorola, and had plenty of benefits to show in terms of reduced costs, productivity gains and more profitable operations. Welch had Bossidy make a presentation to GE's executive management in June 1995, and the rest is history.
Perhaps less well known than how he came to believe in it was Welch's decision to lodge the prime responsibility and accountability for deploying the company's gargantuan Six Sigma quality improvement campaign under newly appointed CIO Reiner in 1996, when the program was less than a year old. Welch shrewdly reasoned that Six Sigma and I.T. should be made to work hand-in-glove, with the technology often providing people with the tools to replace several previously manual steps or tasks with a few strokes on a keyboard.
"Six Sigma is a five-step process," stated Reiner in an article in Baseline's sister publication CIO Insight in 2002.
Six Sigma uses a standard set of steps such as defining goals for improving a process to meet customer demands, measuring the current process and gathering information for future comparison. Teams then use those results to determine how a process can be improved or optimized, and once implemented, new designs are continuously measured to ensure goals are being achieved.
"Six Sigma," Reiner said, "gives you the tools you need to keep improving."
At its heart, Six Sigma is a system of practices designed to systematically eliminate defects, which are defined as units that are not members of the intended population. It could be related to a process, such as a mortgage approval that takes six hours to complete instead of two hours. Or it could be a defect related to manufacturing, such as a brake pad that wears out after six months of regular use instead of the intended two years.
The widely accepted definition of a Six Sigma process is one that produces no more than 3.4 defective parts per million opportunities. Using the brake pad example, for every million brake pads produced, only 3.4 may be defective to achieve Six Sigma quality.
Under Welch and Reiner's leadership, Six Sigma has become embedded into the GE culture. Since its introduction in 1996, more than 500,000 projects have been completed using Six Sigma, and more than 100,000 employees have achieved various levels of "belts." A Six Sigma black belt, for example, is awarded to an employee who has been fully trained in all aspects of the process and who can, in turn, lead a Six Sigma project. Master black belts are awarded to those who can teach Six Sigma and mentor black belts.
In 1997, GE credited its Six Sigma efforts with generating $300 million in additional operating income. By 1999, it had climbed to as much as $2 billion a year. Some analysts, such as Jennifer Murphy of Morgan Stanley, estimate the annual benefit to GE from Six Sigma today to be greater than $6.6 billion, while GE's own estimate runs as high as $10 billion.
The original Six Sigma program fostered by Welch more than a decade ago has since been expanded to include the principles of lean manufacturing, pioneered by Toyota Motor. Lean manufacturing places an emphasis on eliminating wasted effort and materials. But the corporate mantra of Six Sigma especially as its rubber hits the road in GE's I.T. function remains much the same.
Today, GE's renamed Lean Six Sigma strategy is applied within I.T. for everything from reducing network downtime to improving help-desk service. This ability to take the best of various quality and process improvement strategies has been one of GE's strengths, says George Eckes, CEO of Eckes & Associates, a firm in Superior, Colo., that trains companies on the use of Six Sigma. "In the early days, Six Sigma was used as a tactical tool to systematically go out and remove defects," adds Eckes, who has trained GE workers since 1996. "But GE allowed the process to evolve so it not only became a defect removal tool, it became a process improvement enabler."
But the real benefit, and the greatest impact on corporate performance, say GE CIOs, comes when Lean Six Sigma is used by the I.T. department to assist business units in achieving their corporate goals.
"Lean Six Sigma involves speeding up the cycle time by reducing the work involved," says Hank Zupnick, CIO of the GE Real Estate unit. "We use black belts in Lean Six Sigma to help determine how to shorten the steps in our processes. A lot of times, you do that by applying technology."
"There are some good synergies between quality operations and I.T.," says Jeffrey Balagna, CIO and customer technology officer at Carlson Cos., and a former general manager of operations and CIO at GE's Medical Systems' Americas division. "Quality operations put an intense demand on information technology or a demand for information, both in understanding the problem and when you go to remediate quality issues."
At GE Energy Financial Services, a business unit headquartered in the leafy city of Stamford, Conn., business unit CIO Sigal Zarmi points to a 20-foot-long whiteboard to demonstrate exactly how I.T. and Lean Six Sigma work together to achieve business goals.
The entire length of the whiteboard is covered in yellow, orange, pink and purple sticky notes. Each color of note is used to describe work involved in a particular process, the people or organization involved in performing the work, and associated metrics, such as time spent performing the work, wait times for documents or computer processing to be completed, and the so-called "Big Y's" measurements in percentages of how well a process is meeting its goal, usually in relation to the customer's expectations.
The notes are the result of a Lean Six Sigma project undertaken eight months ago to streamline the unit's processes for closing debt financing deals. GE Energy Financial Services, which finances oil, gas and electrical projects as well as alternative energies such as wind power, will invest about $8 billion in project financing this year.
Much of the initial work, according to Zarmi, involves mapping out each step of the business process, from originating a loan through to structuring payments and eventual closing of the deal, and identifying where and how work is performed. The role of the technology team in this process, Zarmi says, is to first contribute to understanding how work is performed, such as which applications are involved and which computer systems are utilized. The next job is to help understand where the roadblocks or wait times are encountered. "You have to stabilize and understand the process before you can begin the work of automating or digitizing it," she says.
Once the mapping is completed, the technology team is expected to offer suggestions on how to streamline or automate work the "lean" part of the equation and eliminate defects or errors the Six Sigma piece.
In the debt financing project, the Lean Six Sigma team determined that a large amount of time was spent waiting for documents associated with a deal to be shuttled between departments, employees or the GE loan processing Center of Excellence in Norwalk, Conn. GE established the center to act as a service bureau for handling the more complicated aspects of approving financing, such as setting interest rates based on credit ratings and structuring loan payments. Some of the delays and wait times associated with the project were a hangover from a merger of debt financing units in 2004 that created GE Energy Financial Services.
A key solution was to extend the use of a document management system called the Deal Room to all users within Energy Financial Services. The Deal Room serves as a central repository for documents associated with a financing deal. Zarmi says it was created using proprietary technology, incorporating a commercial version of the Google search engine as the primary means to search for documents across multiple databases and file server systems.
As a result of improvements and the wider use of the Deal Room by all units within Energy Financial Services, the unit reduced cycle time for financing approvals by more than 20%. The exact time required to approve deals can vary greatly depending on the size and complexity of the financing. A $75 million investment in the world's largest solar power plant, for example, which went live in Portugal this March, involved numerous private companies and government agencies.
"A GE CIO is first and foremost a business leader," Zarmi says. "They are constantly thinking about the business processes, the business strategies and the business vision, and how they are going to contribute to the growth of the company."
These days, GE is also combining the rigor of Six Sigma's process improvement methodology with the Information Technology Infrastructure Library standards to further improve its I.T. processes. ITIL is a framework designed to promote best practices in I.T. service management, from adopting a common vocabulary for discussing quality of service to establishing performance metrics.
"ITIL defines the 'what' of service management, and Six Sigma defines the 'how' of quality improvement," writes Molly Bott, a GE I.T. Solutions enterprise consultant, in a GE white paper titled "Combining ITIL and Six Sigma to Improve Information Technology Service Management at General Electric." Bott co-authored the paper with I.T. consultant Malcolm Fry.
GE IT Solutions' Enterprise Planning & Strategy Consulting Group was assigned to spearhead the improvement of I.T. service practices internally, with the goal of bringing its I.T. operations to full ITIL compatibility with the help of Six Sigma. When the project was completed, the results included:
Reduced costs resulting from less potential downtime and adverse effects of system, network and application failures.
Better decision-making due to greater access to information throughout the organization and companywide use of information outputs from devices such as cross-functional I.T. service dashboards.
Improved I.T. service levels resulting from operational efficiencies and an I.T. service management process loop for measuring and controlling service performance.
#2: Balancing Centralized & Decentralized I.T.">
Best Practice #2: Balancing Centralized & Decentralized I.T.
At its core, GE's I.T. strategy is built on a carefully defined balance of both centralized and decentralized systems. A centralized set of technologies, including computer hardware and companywide software applications, serves as the I.T. backbone. In addition, each business unit has a largely autonomous CIO working with the unit's general manager to determine which applications should be purchased or built and run locally in support of its business goals.
"The centralized I.T. governance model Reiner adopted has the I.T. strategy set from the top, but at each business unit there is an independence of execution," observes John Carrow, formerly a systems engineer and later a general manager in GE's Aerospace division (divested in 1993), and now senior vice president for strategic client development at Unisys. "This allows for flexibility in the business units. I think Reiner has achieved the right balance." Adds I.T. consultant and former CIO Strassmann, "This decentralized strategy enables GE to be highly adaptable."
This approach explains why GE's I.T. operations are so effective, observers say. By affording the business unit and division CIOs a level of freedom from daily operations, they can spend most of their time working with their general managers to create ways to energize the business through the use of different technologies.
"I didn't have to worry about data center management," says Kiran Garimella, technology vice president at webMethods and former CIO at GE Healthcare Financial Services. "They remove any kind of lower-level distraction from their CIOs at GE by having a core network infrastructure, including data center management, under shared services." The costs for this infrastructure are then charged back to the various business units. "It's a very good balance of responsibilities, because otherwise I wouldn't have been able to do some of the initiatives I accomplished as a result of that independence," Garimella adds.
GE's I.T. management scheme hasn't gone unnoticed elsewhere, for sure. The GE plan is followed by other companies, especially those with multiple large business units producing diverse products and services. "I'm very familiar with the GE I.T. structure, which is very similar to ours," says Gary Cantrell, vice president and CIO at Textron, an $11.5 billion conglomerate with several diverse businesses, including helicopters, business jets, golf carts, automotive fuel systems and resort property financing. "We have a CIO for each business unit and an applications staff at each unit.
"Our I.T. management strategy is to leverage our brand focus, and to do that, you have to have some autonomy for the CIOs at the business unit level," Cantrell adds. Interviewed by Baseline in April at The Hackett Group's Best Practices Conference in Atlanta, Cantrell points out that at the same time, Textron's information-technology operation provides its business units with a common consolidated infrastructure and centralized shared services, such as warehouse and transportation management systems, used by all its business units. "You've got to have that balance," he says, and GE does.
#3: Training CIOs For Excellence">
Best Practice #3: Training CIOs For Excellence
GE has long been lauded as a breeding place for top management talent, and indeed, many of its business and technology executives have gone on to lead other Fortune 500 companies. Jean-Michel Ares, a former CIO of GE's Power Systems unit, is now the CIO at beverage giant Coca-Cola. Stuart Scott, former CIO of GE Healthcare, is now CIO of Microsoft; Debora Horvath, a former CIO of GE Insurance, is currently CIO of Washington Mutual.
This reputation for breeding top management does not come by chance. GE carefully, and some even say ruthlessly, educates, develops and trains its managers at every step of their career. Management development programs are fine-tuned to match individual disciplines, such as information technology or finance, and training in such core practices as Six Sigma is expected for promotion.
In technology, the training begins as soon as an employee is hired out of college. New technology staff hires are enrolled into IMLP, short for Information Management Leadership Program. It's a two-year program in which new staff rotate through different GE businesses such as GE Plastics or GE Healthcare, and are exposed to a variety of aspects of I.T. A new recruit might, for example, work in an infrastructure environment maintaining network reliability for six months, then move into application development.
"By the time you graduate out of IMLP, you generally become a highly sought-after commodity within GE," says Carlson's Balagna. While most of the learning in the program takes place within a business unit, employees also take in some classroom training in such things as project management and finance the amount varies from individual to individual at the John F. Welch Leadership Development Center at Crotonville, N.Y.
GE opened the Crotonville institution on a 53-acre campus in the Hudson River Valley in 1956, and originally named it the GE Management Development Institute. It serves as the primary training site for future GE leaders. The campus features training rooms as well as three amphitheatres, one of which is affectionately known as The Pit. It was here that Jack Welch would often engage in one-on-one debates with GE executives over the company's future.
Once staff graduate from IMLP, they go on assignment for a period of two years. They are closely evaluated by their bosses during that time and take part in annual reviews, where they are assessed to see if they exhibit five traits deemed as key to becoming a leader at GE: imagination; clear thinking, or the ability to take imaginative ideas and turn them into business actions; inclusiveness, which often translates into being able to include key personnel from GE's far-flung global operations in decision-making; external focus, or the ability to understand the larger market; and domain expertise. If employees are evaluated highly in those areas, senior managers recommend them for further management training.
Management candidates go through a new-manager's course and are placed in a supervisory or management role within six months to a year of graduation. Later in their careers, they will go through a manager development course, where they are taught everything from finance to sales and economics, marketing, public relations and leadership qualities. The training isn't focused on becoming a good I.T. leader, but on becoming a good business leader. It becomes increasingly difficult to climb through each level of training, as only a handful of candidates may be recommended for the top levels. As a result, senior management talent is culled from the mass of GE's 319,000 worldwide employees.
Management training "is one of the things GE does better than almost any company," Balagna says. "They develop you, and then as Jack Welch used to say, 'let you take a big swing.'" Your big swing may be being placed at the head of a multibillion-dollar GE business unit where you are expected to produce mandated results.
"By the way, if you swing and miss, the results for you aren't that good," Balagna adds. "It's a very Darwinian culture, but it gives people the opportunity to take their best shot."
In Balagna's case, he was targeted to rise to the upper echelons of GE management. He was eventually selected by his then boss at GE Medical Systems division, current CEO Jeffrey Immelt, to enroll in the business management course, designed for leadership candidates who have been targeted to run a GE business unit. Across the entire operations of GE, only 20 to 30 people may be selected to take this course each year. Candidates are pulled out of their current positions and put on a special assignment by the CEO and GE's Corporate Executive Council.
Balagna, who went through the program in 1998, and his classmates were directed by Welch to go to Russia and Ukraine for one month, and to determine GE's business strategy for the developing former Eastern Bloc economies. Should GE invest there, source material such as steel or parts, or stay out? In the end, Balagna and the other managers in the program recommended that GE should only source materials, given instabilities in the region. It was a recommendation Welch accepted, and proved at the time to be fortuitous, as the Russian economy was hit hard in the wake of the Asian financial crisis in 1998. The ruble lost 70% of its value against the U.S. dollar.
Following completion of the course, Balagna was promoted from his CIO position to general manager of GE Medical Systems. He has gone on to implement many of the education and training programs used at GE when he joined medical device maker Medtronic and then Carlson, including replicating IMLP for his new technology hires. "For the people who work at GE, there's one thing that's understood ... execution is everything. Everything else is conversation," Balagna says. "That's the GE culture."
#4: CIOs As Change Agents">
Best Practice #4: CIOs As Change Agents
The business unit CIOs, because of their relative freedom from daily I.T. operations, tend to focus their attentions on using technology and Six Sigma in combination to improve their businesses. For example, GE Real Estate CIO Zupnick is always in the hunt for ways to boost efficiencies and magnify business opportunities by trimming unnecessary steps in a process.
"One of my people may be involved in a Six Sigma event process, or a Six Sigma black belt in the company will come to us and seek our help in reducing the work steps in a process," Zupnick explains. "This is when we identify opportunities to eliminate, say, four steps at once, or we use a new screen to handle or store data that is done manually now." He calls these "lean events."
Zupnick sees his role as the CIO of a GE division as a business driver, helping the general manager find ways to use I.T. to streamline processes and foster growth by enabling the unit to move more quickly to seize business opportunities. "Five weeks ago, I was in Paris with a group of our property management people who were trying to reduce the steps in the tenant process," he says. In this case, the "tenant process" includes a variety of steps property managers take to qualify and retain high-quality tenants in the real estate developments they manage.
"We helped them realize that they could be more effective by focusing not on every single tenant equally, but instead by focusing on only the most desirable ones whose leases were expiring." The property managers' time was put to more effective use concentrating on the best tenants. "We want to identify ways to get them to stay on with us," Zupnick adds.
At GE, CIOs are expected to take the initiative, bringing business-growth projects to bear whenever possible. In this instance, Zupnick and his team devised a system that provides metrics on the tenants. "It has a number of flags, [such as] sending off e-mails and followups alerting property managers when the most desirable tenants have leases that are coming up for renewal."
Zupnick says the impetus for the custom business systems his department builds often comes from his own staff 's initiative. In one example, the I.T. group came up with an idea to use technology to give the sales team more information on properties under consideration for investment. "We have been working for a number of years with a company called MapInfo in Troy, N.Y., on special mapping. We developed and integrated mapping with our loan portfolio. This enables our salespeople to see what other deals we have in, say, Walnut Creek, Calif. It also helps them understand the other issues in the area, things like the crime rate, growth projections, and mass-transit access to the site, which is very important."
According to Zupnick, his department turned the application into an internal GE product called Market at a Glance. A salesperson might have 50 deals under consideration, but have only five or six under close watch. "Market at a Glance helps them focus on that one deal and its area and see, for instance, if four out of five other deals we have in that area are outperforming the market, or maybe only two out of six are outperforming the market," he says. In other words, the system allows the sales staff to immediately compare the chances of a deal outperforming the market-or conversely, doing more poorly than other deals in the area—based on its location.
"The businesspeople might have come to that idea five years from now," Zupnick admits. "But my I.T. people, with their knowledge of spatial mapping, brought that idea forward and said, 'Let's go for it.'"
Whither I.T. In a GE Breakup?
In response to the stock's sluggishness and the perception that the company is hindered by slow growth, CEO Immelt continues to push GE into faster-growing businesses such as health care and aerospace, while shedding older industrial lines such as plastics that have put a drag on financial performance. Between 2003 and 2006, GE acquired businesses worth $80 billion and sold off units worth $35 billion. But those moves may be too little, too late for GE shareholders.
Regardless, one big question remains: How would GE's I.T. operations fare if the company's half-dozen business units—and possibly even some of its larger operating divisions within those units—were spun off to stand on their own, or sold to other companies or investment groups?
"I think that GE's I.T. would fare well, especially versus the average company's I.T., because of the GE mind-set," says Hackett Group's Holland. "They are all accustomed to have the same kinds of control structures in place, and if put on their own, they would go out and create almost the mirror images of what they had with the mother ship."
The loss of certain efficiencies enabled through shared services, though, would be an added cost that the various spun-off businesses would have to absorb. "If they were operating as independent, separate business units, there would be a huge cost associated with that because of the synergies they had been leveraging under GE," Holland observes.
In the meantime, breakup or no, GE's I.T. strategy—embracing Lean Six Sigma, a centralized/decentralized management structure and a progressive corporate training regimen for CIOs that is second to none—stands alongside its stellar record of profitability as a gold standard for I.T. management practices.
: Setting The Performance Bar">