Should Big Business Fear Dot-Coms?

Jack Welch has plenty of reasons to be confident. After all, he built General Electric into one of the world’s largest companies, turning an appliance-maker into a defense giant and broadcasting powerhouse in the process. And the soon-to-retire Welch has written an impressive swan song for himself: a merger with Honeywell worth $45 billion (US$).

So perhaps his confidence got the better of him when CBS and “60 Minutes” came calling. Maybe he went just a bit overboard when he boldly proclaimed that big companies like his have nothing to fear from dot-coms as long as they use the Internet themselves.

Then again, maybe he was dead on. Welch’s claim that dot-coms have “nothing” seems a bit over-the-top, almost like baiting e-commerce companies to take their best shot at his empire. Clearly, he isn’t the least bit intimidated.

And for good reason.

No Fear

Welch and GE aren’t exactly first-movers in the Internet world. According to the “60 Minutes” piece, Welch caught a glimpse of the Web over his wife’s shoulder, and then found his way into a Yahoo! chat room afire with GE rumors. He was soon “hooked” on the Web. That was two years ago.

Two years is a lifetime in the dot-com world, but to a company like GE it’s just a blip. And that’s a big part of the reason why Welch isn’t worried. GE has spent decades building its infrastructure, and in just two years has been able to turn itself from a Web site-less company into one that wins praise from analysts for being Internet-savvy.

That praise may be faint, because it’s all relative. GE is more savvy than some old-economy companies, but not nearly as deep into the Web as it could be — or should be. Still, Welch is right that in saying that, compared to GE, dot-coms lack the trappings of big-time businesses.

Got Stuff?

Dot-coms “are out building warehouses… freezers… to ship little things around,” said Welch in the interview. “We got all that stuff.”

Right he is. For dot-coms, building real-world assets is a major step — and a costly and time-consuming one at that.

Think about it. The two years it took GE to develop an online presence represents just 1/54th of the company’s history; but a dot-com might spend more than half its young life building out its own infrastructure, or forging the alliances that give it access to the buildings and freezers it needs. The cost in time and effort to 108-year-old GE to move toward e-commerce — by joining or even setting up a business-to-business hub, or launching an online media network — is relatively small change.

Slow and Clumsy?

Of course, the argument all along has been that big, lumbering old-economy companies can’t possibly keep up with the pace of change. In other words, by the time the GEs of the world have their Web sites up and running, the Internet will have moved onto a wireless network, and companies like GE will forever be playing catch-up.

But it’s hard to believe that Jack Welch, or his soon-to-be-named successor, will have to stumble across a wireless Web user in order to realize the potential and, more importantly, to act upon it. The secret is out, and everyone knows it. In those few remaining companies that haven’t yet joined the parade, there is no doubt a board member or high-ranking executive is jumping up and down right now begging for a budget to go online.

David vs. Goliath?

So, did Welch overstate? Maybe. Dot-coms are hardly rock-throwing kids battling a well-armed militia. Some are strategically savvy, well-financed companies with management that was seasoned at those very old-world companies they’re up against. Some will use their small size and speed to beat the competition to new markets, seizing new opportunities before they’re even spotted by the giants.

But those victories will be few and far between. Old-economy companies have more than just “freezers and warehouses.” They also have years of experience in working with customers, and in finding and keeping loyal employees. For now, at least, the advantage lies with the old economy.

Their confidence might border on cockiness, and it might be irritating. But for the moment, it’s well-founded.

Leave a Comment

Please sign in to post or reply to a comment. New users create a free account.

E-commerce Times Channels