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Digitization: Jack Welch’s Key to Beating the Competition

By: Matthew Clark, Corcentric Consultant

Jack Welch, former CEO of GE, believed that widening the digital gap between his company and the competition is the single best way to gain an upper hand on the competition. Welch coined the phrase “Digitization,” which is the process of using the Internet and technology to achieve the goal of becoming a truly paperless business. Welch and his successor Jeffery Immelet have seen the impact that “Digitization” has made on GE, and they believe that companies of all sizes can benefit from the efficiencies of “Digitization.”

Welch started the “Digitization” initiative at GE back in 2001 and it is still a high priority today. Welch, who still sits on the Board of Directors of GE says, “Digitization is, in fact, a game changer for GE. And, with competition cutting back because of the economy, this is the time for GE to widen the digital gap, to further improve our competitive position. We will do that by increasing our spending on information technology by 10% to 15% this year despite the weak economy.”

GE started the “Digitization’ process on the “e-Sell” side. Using the Internet, GE was able conduct transactions with their established customers in a much more efficient manner. The transactions cost GE less to perform and their customers were extremely satisfied with the ease of doing business.

Welch’s company followed the same path on the “e-Buy” side. This is an area of extreme relevance to companies in the transportation industry. In the transportation industry efficient procurement processes are essential due to the high volume of purchasing that takes place on a regular basis. GE used technology and the Internet to send purchase orders and also receive supplier invoices electronically. They were able to achieve maximum efficiency and cost savings by digitizing their procurement process.

While the concepts of e-Sell and e-Buy are vital in the “Digitizing” process, Welch credits another area for making the biggest impact. “The biggest breakthrough of all was what we call “e-Make.” The concept of e-Make came from learning what the Internet could do for internal processes,” said Welch. GE used technology to eliminate antiquated processes that involved too many people dealing with too much paper. Many processes were automated and made more efficient by conducting them online. GE credits the digitizing of internal processes for taking over a billion dollars of cost out of their operations over the course of one year. One can’t help but think that companies in the transportation industry, especially those with multiple locations, could experience some significant savings by using Internet technology to improve the efficiency of their internal processes.

According to Welch, “Costs are coming out of companies at a rate unseen in years, in terms of digitizing all backroom processing, and in terms of having paperless businesses.” The transportation industry is constantly dealing with the rising cost of trucks and their component parts. Business owners in the transportation industry have to come up with new and innovative ways to differentiate from the competition. Jack Welch came to a similar crossroad in his business life, and he decided that “Digitizing” was the best way to widen the gap between GE and their competition. Welch called making the decision to take advantage of the technology available to him, “Totally transformational. I think it’s the biggest thing that occurred in business in my lifetime.” I think it is pretty clear what decision Welch would make if he were facing the challenges that exist today in the transportation industry.

If you would like information on how Corcentric can help your company with the “Digitizing” process please feel free to click here to contact Corcentric.