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pioneered at GE. It means “the virtual elimination of defects from
every product, process and transaction [GE] engages in every day
around the globe.” It is not just a slogan but a measurement: It
means “fewer than 3.4 defects per million operations in a manufac-
turing or service process.” That is nearly perfect quality when you
consider that average sigma quality in corporate America is around
3 or 4, at a cost of about 10 to 15% of corporate revenues, Welch
reports.
Led by experts on quality who, depending on their skill level in
Six Sigma thinking, are creatively called Master Black Belts, Black
Belts or Green Belts, the activity dissects every process to improve
key business concerns such as enhancing customer productivity and
reducing customer capital outlays while increasing the “quality,
speed and efficiency” of all GE operations.
Launched in 1995, Six Sigma quality spread “like wildfire”
throughout GE to generate substantial returns on the billion-plus
dollars invested in it. For example, Six Sigma contributed over $300
million to GE’s operating income in 1997, $750 million in 1998, and
about $2 billion in 1999, and the impact continues. Profit margins
at GE historically ran around 10%, but with Six Sigma they were
boosted to 15% to 17% and higher.
All this leads to what Welch hoped for all along: a new kind of
company that is a hybrid of typical large companies with vast re-
sources and typical small companies with insatiable appetites. Welch
denies that GE is a conglomerate in the usual sense of the word.
Welch’s model is very different. It calls for GE to reign only over
businesses where it is number one or number two, generate ideas
from those businesses, and spread them to the others, all in a culture
of energy, excitement, and creativity.
The learning culture created by Work-Out and boundarylessness
that fueled Six Sigma gains enabled GE to get into e-business far
more rapidly and with greater depth and breadth than pretty much
any company close to its size. GE generates billions in revenue from
its e-business, but Welch notes that the transformation it has
brought is more pervasive.
Tackling the question of why the Internet revolution began at
small start-ups rather than big resourceful companies such as GE,
Welch speculated that it was a mystery of the unknown. At GE,
however, it did not take long for people to overcome that e-fear
and digitize the entire company, a tas kWelch says was way easier
than anyone at the company had ever imagined. E-business was