CASE STUDY: CULTURE OF SERVICE: GENERAL ELECTRIC

GE’s most complex and intimate relationships develop in the large capital goods
businesses- jet engines and medical systems. In these situations, initial purchase price
ranges from millions of dollars to hundreds of millions of dollars. Despite these
intoxicating numbers-just imagining the commissions is enough to make you dizzy- GE
encourages it’s executive to look beyond it’s initial sales and consider the long-term
value of customer retention to the company’s bottom line.

Although GE probably won’t be auditing your wardrobe in the near future, its jet engine
businesses regularly perform what could be called “wing audits” to determine the exact
needs of the airline customers. The relatively small number of customers-there are only
300 airlines around the world-makes monitoring process highly manageable.
Additionally, the purchasing cycles of these customers are usually well known. So it’s
not difficult to project the sales revenue with reasonable certainty. What’s less easy to
foresee, however, is the strategic value, or what we call lifetime value, of this customer
base. This is where things get interesting.

You just can’t bolt a jet engine to a wing and forget about it. For the sake of both safety
and economy you’ve got to maintain the engine in a superb condition. Jet engines are
subject to continuous maintenance. From customer’s point of view, the expense of
maintaining a jet engine is far more significant than its initial purchase price. The vendor
has the similar perspective- it’s far more profitable to maintain a jet engine then it is to
sell a jet engine. In fact, most of the jet engines are steeply discounted, sometimes to the
point of being sold at cost. There’s simply no such thing as a short-term relationship
between a customer and a vendor in this sector. Breaking off the relationship poses
serious consequences for both parties. To maintain this relationship GE has developed
high value extranets for it’s large capital goods customers. Anyone who buys a GE jet
engine now knows that mission critical information is a mouse click away. The latest
FAA directives, as well as any safety bulletins, are posted on a special extranet designed
exclusively for jet engine customers. Blueprints, wiring diagrams, modifications and

www.nivagrowth.com 1
schematics-can be accessed from the extranet site. In some cases, engine problems can be
diagnosed in flight with the aid of sensors capable of beaming real time performance data
to service personnel on the ground. Spare parts can be ordered over this private network,
which allows customers to monitor shipping status. This feature alone saves airlines tens
of thousands of dollars, since it enables them to make decisions based on real time
knowledge instead of hunches and intuition.

In old days, the salespeople in GE were trained to act like elephant hunters. They’d go
out on a game hunt, find a big customer and bring back a half-billion-dollar order.
Nowadays, for example, the pricing on jet engines is so brutal that they’re sold at cost or
worse. Soothe money has to be made in parts or service. As a result, they have large
service operations around the world that they didn’t have a decade ago. The people
leading those operations have changed too. Today, they have shifted some of their top
talents into these service operations. They want to focus their resources into these service
operations because they’ve become very valuable profit centers for them. Their aircraft
engine services is now as important a business as their jet engine equipment
manufacturing operation.
Klaus Huber, director of European sales for GE’s aircraft engine division, doesn’t mince
words when talking about the role of on-to-one relationships in building long term
profitability. “What happens after they buy your product-is everything. In this business
you can’t leave people in the lurch. Because they will never come back to you again.”

Lufthansa is Huber’s largest account. Huber’s success as a manager is based on his

ability to maintain a steady stream of communication between GE and their airline. A
small squad of GE technicians and engineers assigned to the Lufthansa maintenance shop
provides “elbow-to-elbow” contact with their client. While this “live-in” arrangement
guarantees daily exchanges between the jet engine maker and its end-users, its only part
of the relationship process. In addition, Huber manages the overall relationship with the
help of a formal entity called the customer team, or CT. The CT is composed of
representatives from various specialties such as sales, customer support, technical
services, parts and repair. “All of us talk together on the phone every day. We make sure

www.nivagrowth.com 2
everybody on the team knows what the customers needs are. We make sure we’re
servicing those needs. And we look for new opportunities to serve the customer.”

Over the years, customer-driven behaviors have played a major role in the success of the
aircraft engines division. During the 1940s and 1950s, GE provided aircraft engines
solely to the military. In the 1960s the company saw an opportunity to sell into the
commercial aviation market and differentiated itself largely by establishing a more
customer-friendly environment than its competitors. Today GE is a leading provider of
the jet engines used on wide-body aircraft—the most lucrative part of the commercial
market.

Huber embodies an interesting synthesis of Welch’s concept of the “boundryless”

organization and our vision of the fully integrated, one-to-one enterprise in which “turf
wars” are obsolete and mission-critical information flows seamlessly across divisions.
“When a problem happens, we don’t argue about who’s at fault,” says Huber. “If the
plane isn’t flying, our customer is losing money. We know the clock is ticking, so we go
in and fix it, no argument. Responsiveness is our game.”
Extranets have also been designed for customers of GE’s medical systems business. GE
can remotely track the operational status of its medical systems worldwide, 24 hours a
day. An imaging device in a Boston Hospital will be monitored during the day by GE
technicians at New York. When the New York team’s shift is over, it hands off to a team
in Tokyo. 8 hours later a team based in Paris takes over. When the shift is through, New
York picks up the ball again.

Smart sensors alert the technicians to any variance in the machines operation. Based on
the machines known performance characteristics, the technician will diagnose and
troubleshoot the problem. In most cases, they are able to alert the operators at the
hospital before they even notice something’s out of kilter. And if necessary, they will
dispatch technicians to the scene to fix the problem before the customer has even asked
for help. This is what they mean when they say “We’re using information to build

www.nivagrowth.com 3
 intimate relationships with our customers”. This is where it becomes tougher for the
competitors to match them. What GE feels is that today customers are seeking
relationships, not products.

(Abridged form of case studies from 1to1 marketing by Don Peppers and Dr.Martha
Rogers)

ACTIVITY

1. What do understand by Welch’s “Boundary-less organization”? (5 marks)

2. Discuss in brief the role (as you perceive) of Sales person and Sales Manager involved in
GE large capital goods selling. (5 marks)

3. Explain how communication and relationship is at the core of business between GE and
Lufthansa. (5 marks)

4. Which of the 3 contemporary Selling approaches viz. Transactional, Consultative and

Enterprise apply to GE Selling? Explain in brief. (5 marks)

Note: Answer to each Question should be in maximum 300 – 400 words. Diagrams
and Examples are Welcome.

NIVA Case Studies – Professional B2B Selling / CRM / Strategic Marketing

(Adopted from: CRM book by Prof. Abhay Kardeguddi for SCDL, Pune.)

***********************************************************************

www.nivagrowth.com 4