GE has undertaken a major digital transformation to transition from being an industrial equipment provider to a provider of data-driven services and solutions. Key aspects of GE's transformation include developing software and analytics products, opening its Predix big data platform to third parties, and attaching sensors to machines to capture performance data and provide analytics to improve efficiency. GE has also hired new digital leaders, set up centers of excellence for software and digital initiatives, and trained employees in startup methodologies to foster innovation. The transformation aims to allow GE to capitalize on data from its industrial equipment and maintain relevance in a changing industry.
2. 2
General Electric:Preparing for a Digital Storm
remain in the Dow Jones Industrial Index
since the original index was established
in 18962
.
The Need for
Transformation
Over the last century, GE made the
bulk of its revenues by selling industrial
equipment and maintenance services
to its customers. However, in recent
years, it faced increased competition
from companies that were not just in the
business of selling equipment. These new
competitors used information generated
bylargemachinesorequipmenttoprovide
services that improved productivity and
reduced downtime.
GE realized that this trend had the
potential to reduce it to just a commodity
equipment provider. CEO Jeff Immelt
underlined the importance of this shift,
and the need to make drastic changes
in GE’s business model, when he said
in 2013: “We know that there will be
partnerships between the industrial
world and the internet world. And we
cannot afford to concede how the data
gathered in our industry is used by
other companies. We have to be part of
that conversation”3
.
In the same way that Millennials seem to
adopt the latest digital technology with
ease, our economy’s younger companies
also display a natural aptitude for the new
economy. However, while the stories of
the digital natives are instructive, what
about more established corporates with
longer histories? How can a company
that is over a century old transform itself
to thrive in a digital economy?
For GE, responding to change is part of
its modus operandi. This is a company
that has famously made change a core
capability and a constant in its history. For
over 120 years, GE has ploughed forward
under a banner of “Building, powering,
moving and curing the world. Not just
imagining. Doing1
.” This constant focus
on innovation and transformation has
made the company the only one to still
GE started taking steps to transform
itself from an organization predominantly
involved in selling hardware or industrial
equipment to one selling data-based
services. It started building software
around its products, enabling its
consumers to create new revenue
streams and become more efficient. In
doing so, it also wanted to secure the
value being created by its equipment.
As Bill Ruh, Vice President and Head of
GE’s software and analytics business,
said: “We want to deliver software
services across all our products at the
Silicon Valley speed. We are not going to
sell software. If you look at Google, they
have software but they sell advertising,
Amazon too sells retail. What we are
going to do is sell services wrapped
around our machines that make them
more efficient”4
.
GE is the only company
to be listed in the Dow
Jones Industrial Index
today that was included
in the original index in
1896.
We want to deliver
software services across
all our products at the
Silicon Valley speed.
–GE Vice President
3. 3
Since 2011, when GE resolved to expand
its business into the software and analytics
domain, it has developed and introduced
nearly 40 software products under its
“Predictivity” brand.8
These solutions
have been seeing strong traction across
industries. For instance, one of these
products, PowerUp, is being used by
E.ON to improve its operational efficiency.
In one year, over 1,400 turbines have been
contracted under the PowerUp services.
Using the product on a trial run, E.ON
experienced an overall increase of 4%
in power output on 60% of its turbines9
.
If rolled out across E.ON’s entire turbine
range, it is the equivalent to adding
19 new wind turbines. Revenues from
‘Predictivity’ solutions were expected to
touch $1.1 billion during 2014 and are
estimated to bring in $5 billion by 201710
.
GE is betting big on software and
analytics to bring about its transformation,
with Jeff Immelt stating: “I took over an
industrial company, now it will be known
as an analytics company”5
. GE’s focus
on data analytics was clear back in 2012
when it set aside up to $1.5 billion for
small take-overs to boost its presence
in analytics. By 2013, the company was
able to introduce a wide range of big
data products. These include predictive
software products, a Hadoop-based big
data software for ingesting and managing
industrial data, and a relationship with
Amazon Web Services to share industrial
data in public cloud6
.
GE’s transformation was based on a
combination of tactics: developing data-
driven solutions and opening up its big
data platform to external applications.
Providing Clients with
Data-driven Solutions to
Improve Machine Efficiency
GE is attaching sensors to its machines
that enable it to capture performance
data. This data is then analyzed to
provide real-time information to improve
machine efficiency, prevent downtime
and enable effective scheduling of
predictive maintenance (see Figure 1).
By attaching sensors to its machines, GE
currently monitors and analyzes 50 million
data elements from 10 million sensors on
$1 trillion of managed assets daily. The
overall goal is to move customers toward
zero unplanned downtime7
and GE has
christened this convergence of industrial
machines, data and internet connectivity
the ‘Industrial Internet’.
GE currently monitors
and analyzes 50 million
data elements from 10
million sensors on $1
trillion of managed
assets daily to move
customers toward zero
unplanned downtime.
I took over an industrial
company, now it will be
known as an analytics
company.
–Jeff Immelt, CEO, GE
Betting Big on Software and Analytics to Drive the
Next Wave of Growth
Figure 1: Connecting the components of the Industrial Internet
Source: Innovation World 2013 Keynote, Bill Ruh, GE Software—The Emerging Industrial Internet
Connecting Minds & Machines
Remote and
Centralized
Data Visualization
Big Data
Analytics
Data Sharing
with the Right
People and
Machines
Physical and
Human Networks
Intelligence Flows
Back Into Machines
Extraction and Storage
of Proprietary Machine
Data Stream
Industrial
Data Systems
Machine-Based
Algorithms and
Data Analysis
Secure
Cloud-Based
Networks
Instrumental
Industrial machine
4. 4
Throwing Open the Big Data
Platform to enable Cross-
Industry Application
A sign of GE’s rapid digital progress can
be seen in how it has transitioned its
internal big data platform as an external
service. Before late 2014, GE had used
its Big Data platform Predix to build its
proprietary Predictivity solutions. The
platform was built in order to bring all of
GE’s industrial machines onto one cloud-
connected system. The goal was to
drive a 1% increase in performance per
industry. For instance, just in aviation, a
1% increase in performance can mean
savings of around $15 billion in jet fuel and
other costs in a few years11
(see Figure 2).
However,inOctober2014,GEannounced
it was opening the Predix platform to
other companies that would like to create
their own customized industry apps. With
this move, GE intends to make Predix
the default platform for industrial Big
Data. As Dave Barlett, Chief Technology
Officer for GE Aviation, says: “We want
Predix to become the Android or iOS of
the machine world. We want it to become
the language of the Industrial Internet .”
Throwing open Predix also helps GE in
monetizing its big data platform directly
and provides an opportunity to expand
in geographies and industries where it
had little presence. In December 2014,
GE licensed its Predix software platform
to the Japanese telecom giant SoftBank
Telecom, allowing it to build apps for
shipping, manufacturing and other
industries. This deal is expected to earn
potential revenues of $200 million across
major industries in Japan over the next 5
years13
.
Driving customer outcomes
Power of 1% Annual impact
Airlines 1% fuel $2-3B
Utility 1% fuel $4-5B
Oil & Gas 1% uptime $5-7B
Healthcare 1% productivity $4-5B
Transportation 1% mile velocity $5-7B
Source: Company presentation
We want Predix to
become the Android
or iOS of the machine
world. We want it to
become the language of
the Industrial Internet.
Dave Barlett, CTO, GE Aviation
Apart from opening up its big data
platform to others, GE is also partnering
with Intel and Cisco to develop the next
generation of Predix-ready devices. This
would allow operators to integrate Predix
into existing infrastructure, increasing its
uptake amongst companies with existing
industrial assets.
Using Smart Tools to Encourage
Collaboration Among Employees
GE is fostering a digital culture across the
organization by adapting new devices
and services. GE was among the early
adopters of devices such as the Apple
iPhone and iPad. In order to maximize
its mobile capabilities, GE set up the GE
Mobile Center of Excellence, an internal
group that develops tools to make mobile
devices more useful for its many business
units14
. Similarly, GE also partnered
with Box, an enterprise content sharing
and collaboration company, to help its
employees and partners take advantage
of the cloud to share content across
devices and platforms15
.
Figure 2: Savings as a Result of 1% Improvement in Efficiency
5. 5
GE’s digital transformation is not the
result of being in the right place at the
right time. Instead, it is the result of a
structured approach that involved a
strong top-down digital vision, capability
development, achieving all-round buy-in
and a constant focus on innovation (see
Figure 3).
Drive the Digital Agenda
from the Top
Outlining a compelling leadership
vision for the organization
Highly visible digital leadership has been
a constant in GE’s transformation since
2011, when CEO Jeff Immelt outlined his
determination that GE would counter any
commoditization threat by capitalizing
on innovations in software and analytics.
His stated aim was “to create a global
network of connected machines from
which GE can offer outcomes-based
solutions that drive significant operational
improvement for customers”16
.
We never made real
progress here until we
brought people in from
outside GE.
- Jeff Immelt, CEO, GE
Making Digital a Key Part of the Organizational DNA
Figure 3: GE’s Journey towards Digital
Source: Capgemini Consulting Analysis
Building the right team to achieve the
vision
GE has long been recognized as a
breeding ground of outstanding business
leaders. However, the nature and potential
of the talent required for its software and
services offerings were different. GE
made a number of new hires at senior
levels to drive the transformation. It hired
William (Bill) Ruh as the Vice President of
its Global Software Center and made him
responsible for developing the software
to power the Industrial Internet. Prior
to joining GE, Bill Ruh was responsible
for developing advanced services and
solutions at Cisco and had more than 25
years of industry experience in enterprise
application integration and object oriented
technology.
GE also hired Kate Johnson as Chief
Commercial Officer for sales and
marketing, with the aim of building new
software and solution sales capabilities.
She had previously held senior roles at
Oracle Corporation. In May 2015, GE
named her CEO of the Industrial Internet
Software Group17
. Another key hire was
Harel Kodesh who joined GE as CTO of
GE Software. Harel was CEO and founder
of Nurego, an analytics company, and
prior to that a senior executive at EMC
and Amdocs18
.
The importance of bringing in leaders
from outside was outlined by Jeff Immelt
when he said: “We never made real
progress here until we brought people in
from outside GE”19
.
Develop the Vision and
communicate it effectively
Build a management team
with the knowledge and
skills to convert the vision
into a reality
Set realistic growth targets, and
mechanisms for optimization
Define KPIs and the methodology to recognize
revenues generated from new digital offerings
Drive the
Digital
Agenda
from The
Top
Build
Capabilities
essential for
Digital
Initiatives
Achieve
Business
Buy for Digital
Offerings
Accelerate
Innovation
Establish a dedicated center focused
on the digital agenda
Hire quality talent with technical and
business domain expertise
Invest in the right digital tools
Incubate creativity and
innovation to stay ahead
Develop partnerships and
derive synergies from
competitors
6. 6
Building Capabilities to
Support Organization-Wide
Digital Initiatives
Setting up a Center of Excellence
(CoE) for digital initiatives
GE set up a Global Software Center
based out of San Ramon, California.
Unlike traditional GE business units, the
CoE was not set up as a business unit
with its own P&L but was funded centrally
through a corpus amount of $1 billion20
.
The center, led by Bill Ruh, is dedicated
to developing predictive services based
on data collected from GE’s industrial
machines, which is essential for powering
GE’s Industrial Internet offering. GE also
set up a User Experience CoE tasked
with improving the quality of GE’s digital
experiences and defining the human
interface to the Industrial Internet. The
CoE’s team work across all businesses
to introduce user-experience methods
and improve the design of software
applications21
.
Developing functional capabilities to
sell solutions along with products
One key challenge in transitioning a
traditional, hardware-focused company
to selling software solutions is to change
the mindset of its sales force. At GE, the
sales force had to abandon its traditional
product-selling mindset and embrace a
solution-based sales approach. As Jeff
Instead of a features
list with pricing and
discount caps, we’re
shaping deals from
the ground up that
are based on the value
derived by the customer.
- Kate Johnson,
Chief Commercial Officer, GE
Injecting the spirit of a startup into a century-old
giant
Since 2011, GE has been working with Eric Reis, a tech entrepreneur and
author of ‘The Lean Startup’. This collaboration has developed a program called
FastWorks - designed to help GE foster innovation and accelerate product
development. The program combines a set of tools and behaviors designed to
deliver better outcomes for customers faster. The method focuses on building
imperfect early versions, releasing them to customers, getting feedback, and
then “pivoting” or adapting the products when necessary.
By August 2014, GE had already trained 40,000 employees under the FastWorks
initiative, one of the largest in the company’s history24
. The program has the
backing of GE’s top management, including Jeff Immelt and Chief Marketing
Officer Beth Comstock. It is expected to bring the agility and innovative spirit of
a startup into this much larger corporate giant.
An early result from the FastWorks initiative was an oil well flow meter technology,
GE Safire™, aimed at managing oil and gas reservoirs efficiently. The FastWorks
program helped GE to move from a problem statement to a prototype within a
year and the solution is now being commercialized with Chevron25
. FastWorks’
principles were also seen in action with the five-year, $500 million project by
GE engineers to upgrade its H-class turbine. The FastWorks approach was
applied to the project, which started with a proof-of-concept exercise costing
$25 million, and it is now expected to be completed for half the cost26
.
Immelt says, “The transition we have
to make with our customers is going
from agreements that are break/fix to
agreements that guarantee outcomes”.
As part of the process to develop its
go-to-market and commercialization
strategies, GE hired Kate Johnson as
Chief Commercial Officer. Her aim was to
create and expand GE’s outcome-based
sales capabilities. She also led a new
Commercial CoE that had been set up to
focus on increasing service revenue and
margin growth22
.
GE’s sales team now includes solution
architects, who combine industrial
knowledge with advanced analytics to
develop models for setting and achieving
business outcomes. Sales professionals
now needed to do a whole range of
calculations and modeling before they
even approached a potential customer.
This completely changed the way GE’s
offerings are priced to their customers.
As Kate Johnson says: “Instead of a
features list with pricing and discount
caps, we’re shaping deals from the
ground up that are based on the value
derived by the customer. It’s a completely
different set of economics that is very
disruptive in the industry”23
. Moving to
such a model was not easy though. GE
had to convince its salesforce of the need
to move from a transactional sales model
to a consultative selling model that has a
different incentive philosophy.
Achieve Business Buy-In for
Digital Offerings
Transforming GE’s business inevitably
led to some friction between the deep-
rooted industrial mindset of keeping
things within a defined step-by-step
process and the startup ethic of fail-fast
and learn. To overcome this resistance,
the Global Software Center team
7. 7
GE Venture has
specialized teams
focused on in-depth
research and analysis
- the teams identify
unmet needs, isolate
opportunities and look
for companies that
fulfill the need gap.
Figure 4: Creating an Ecosystem to Foster Innovation
Source: Capgemini Consulting Analysis
look for companies that fulfill the need
gap. As Noah Lewis, Managing Partner
for GE Ventures, explains: “We spend a
lot of time developing specific investment
themes, starting 10 years out in the
marketplace. We map out the major trends
and directions as well as profit pools, and
identify disruption” 31
.
Creating an Ecosystem to
Speed-Up Innovation
Transformation is an ongoing journey
and organizations need to constantly
innovate to stay ahead. GE has created
an entire ecosystem that enables it to
gather innovative ideas and speed up the
process of taking new products to market
(see Figure 4).
Investing in tomorrow’s ideas through
GE Ventures
In January 2013, GE started its corporate
venture capital entity, ‘GE Ventures’. It was
born out of a restructuring of its health,
energy, software and manufacturing
venture investment groups. The venture
has an annual fund commitment of $150
million28
. It invests in a variety of areas such
as software, analytics, healthcare, energy,
advanced manufacturing, among others.
One notable exit is Veracyte, a molecular
diagnostic company. The company
IPO’d in 2013 and has in recent months
announced a research collaboration with
GE’s healthcare team29
.
As of January 2015, GE Ventures had 61
startups in its portfolio covering software,
energy, healthcare and advanced
manufacturing30
. The venture arm has
specialized teams focused on in-depth
research and analysis - the teams identify
unmet needs, isolate opportunities and
engaged with business units that were
eager to participate in the initiative during
its inception. The rapid transformations
achieved by these pioneering business
units, and the revenue returns they
delivered from Industrial Internet offerings,
made it difficult for other units to remain
agnostic.
As Bill Ruh explains: “I said, ‘We’re going
to do this; who wants to be first in line?’
A number wanted to, so we developed
them at a very fast pace and got them
successful quickly. The performance gains
and revenue enhancements were visible
to other executives, who then asked
their own businesses, ‘How can we do
this?’” The peer pressure and the visible
benefits led to a domino effect across
business units, resulting in others to start
experimenting with software services27
.
Crowd-sourcing ideas through partnerships
Partnering with various crowdsourcing platforms
to develop new ideas and improve existing ones
Partners: Quirky, Kaggle, GradCad,
Frost Data Capital, Local Motors
Partnering with potential competitors
Collaborating with companies providing competitive
products/services to learn and improve offerings
Partners: Intel, Cisco,
Amazon Web Services
Teaming up with incubators and providing startups
with access to GE departments, engineers, executives
and specific capabilities/ technologies
Teaming up with incubators to reduce
time-to-market for innovative offerings
Incubators: LemnosLabs, Rock Health,
Breakout Labs, Startup Health, Bolt, Surge
Investing in futuristic ideas through GE Ventures
Developing specific investment themes, mapping
out major trends and identifying disruption
Investments: Rethink Robotics,
GRIDNET, Caremerge, Predixion
Creating an
Ecosystem for
Innovation
8. 8
Software and Analytics Organization
SoftwareResearch Product Development SoftwareCTO
Co-Located SoftwareCTOsfor Business Alignment
Technical Resources : 1,000+ in COEsand 10,000+ in Business
Aviation Oil & Gas Energy Management
Power & Water Healthcare Transportation Aviation
Governing the Transformation
To avoid fragmentation of approach and investment, GE’s software and analytics commercialization team was designated a
common capability that would support the rest of the organization.
Within the software group, there are distinct roles for heads of software research, product development and software CTO.
These executives work with dedicated co-located software CTOs to encourage business alignment. This team is then supported
by over 1,000 technical resources in dedicated CoEs and around 10,000 people in all businesses. These technical resources
include computational and analytical scientists, platform developers and software engineers.
Nurturing startups to reduce time-to-
market for products and solutions
GE Ventures has also teamed up with
various startup incubation labs such as
Lemnos Labs, Rock Health, Breakout
Labs, Startup Health, Bolt and Surge.
These collaborative partnerships enable
the incubation labs to provide startups
with access to GE technologies and
information resources. Simultaneously, it
allows GE to gain experience in engaging
with startup communities. Executives
from GE Ventures also act as a guide for
startups, facilitating interaction with GE
departments, engineers or executives
who may become pilot customers,
advisers or business partners for their
ideas32
.
GE has also partnered with Frost Data
Capital, an incubator for Big Data
startups, and launched an Industrial
Internet incubator called Frost I3, which
aims to launch 30 startups33
.
Crowdsourcing ideas through
partnerships
GE has also partnered with various
crowdsourcing platforms to gain
access to new and innovative product
ideas. It has partnered with Quirky, a
crowdsourced invention platform, to
develop its Wink range of connected
products. GE also gave Quirky and
its inventor community access to
thousands of its patents. The aim is to
work with this agile startup to develop
new and innovative products and to
do so at speed.34
The partnership
has yielded products such as a smart
window and door sensor, Tripper; an
outlet for monitoring and managing
power usage, Outlink; 35
and Aros,
a smart air conditioner 36
. Other GE
partnerships include Kaggle – an online
community of data scientists – which
9. 9
The apparent rapid
transformation of peer
business units and
the revenue benefits
that they derived out
of Industrial Internet
offerings made it
difficult for other units
to remain ignorant.
it is using for obtaining algorithms to
optimize airline paths and reduce air
delays37
; and Local Motors, an open
source hardware innovator for designing,
testing, and producing large appliances38
.
Collaborating with potential
competitors to learn and improve
GE is collaborating with potential
competitors, such as Intel, Cisco,
Amazon Web Services and Microsoft,
which provide similar technology
solutions. The company is deploying the
majority of its new apps from the cloud.
The idea is to introduce a data analytics
platform that can manage large-scale
industrial machines in the cloud. GE is
also part of an open membership group,
the Industrial Internet Consortium (IIC).
The consortium focuses on sharing best
practices and reference architectures.
It also influences the global standards
development process for Internet and
industrial systems39
.
Corporate Revolutionary
GE is not an organization that believes
in sitting still. Since its inception, it has
reinvented itself at critical junctures. This
certainly holds true in the digital age as
well. GE has made a bold play to lead
the ‘Industrial Internet’ and has shown
an impressive appetite for radically
changing its normal ways of working and
its culture to achieve results. While many
digital natives, from FaceBook to Uber,
continue to take much of the limelight,
this 120-year-old giant of the corporate
world shows that digital agility is not just
confined to the new Millennial corporates.
10. 10
1 GE Factsheet
2 GE Factsheet
3 AllThingsD, “GE CEO Jeff Immelt’s Big Data Bet”, May 2013
4 Livemint, “GE reinvents itself as a software start-up”, September 2013
5 CBC News, “GE CEO Jeff Immelt sees future in infrastructure, analytics”, September 2014
6 Gigaom, “GE’s industrial internet focus means it’s a big data company now”, June 2013
7 Businesswire, “GE to Open Up Predix Industrial Internet Platform to All Users”, October 2014
8 The Predictivity solutions are based on GE’s Big Data platform for Industrial Internet called Predix
9 Recharge, “E. ON lauds GE PowerUp platform”, October 2014
10 Bloomberg Business, “GE Sees Fourfold Rise in Sales From Industrial Internet”, October 2014
11 Wired, “GE’s radical software helps Jet Engines fix themselves”, October 2013
12 GE Reports, “GE Opens Predix Industrial Internet Software Platform to SoftBank in First Licensing Deal”, December 2014
13 GE Newsroom, “GE Opens Predix Software Platform to SoftBank Telecom in First Licensing Deal”, December 2014
14 Apple profile of GE usage of iOS devices
15 Company website
16 HBS Blogs, “DIGITAL LESSONS FROM A 122 YEAR OLD COMPANY”, April 2014
17 Fortune, “GE names Kate Johnson CEO of industrial internet software group”, May 2015
18 ZDNET, “GE appoints former IBM, EMC execs to software leadership posts”, November 2014
19 InformationWeek, “GE CEO Jeff Immelt’s Analytics Lessons Learned”, October 2013
20 Harvard Business Review, “Building a Software Start-Up Inside GE”, January 2015
21 IDSA,“GE User Experience Strategy and Capacity Building”, 2012.
22 Harvard Business Review, “Digital Ubiquity: How Connections, Sensors, and Data Are Revolutionizing Business”, November 2014
23 Harvard Business Review, “Digital Ubiquity: How Connections, Sensors, and Data Are Revolutionizing Business”, November 2014
24 Bloomberg Business, “General Electric Wants to Act Like a Startup”, August 2014
25 GE Annual Report 2013
26 The economist, “General Electric: A hard act to follow”, June 2014
27 Harvard Business Review, “Building a Software Start-Up Inside GE”, January 2015
28 CB Insights, “General Electric and Siemens Venture Capital: A Comparison of Their Investments”, December 2013
29 Company website
30 GE Reports, “Backing the Future: Where GE Ventures Sees the Next Big Ideas”, January 2015
31 Mobile Enterprise, “How GE Ventures, Fidelity Labs and The Weather Channel Innovate with Mobile”, September 2014
32 Wall Street Journal, “GE Ventures’ Sue Siegel: Accelerators Reduce Risk for Early-Stage Investors”, May 2014
33 GE Ventures, “GE Partners with Frost Data Capital to Launch 30 New Industrial Internet Start-Ups”, May 2014
34 Wired, “Quirky and GE Partner to Conquer the Internet of Things”, November 2013
35 Techcrunch, “Quirky, GE Unveil Their Vision For The Connected Home”, November 2014
36 Triple Pundit, “Partnership Between GE and Quirky Presents a ‘Truly Brilliant’ Air Conditioner”, March 2014
37 GE Ventures, “GE Partners with Frost Data Capital to Launch 30 New Industrial Internet Start-Ups”, May 2014
38 CNET, “GE and Local Motors team up to make small-batch appliances”, March 2014
39 Cisco, “AT&T, Cisco, GE, IBM, and Intel Form Industrial Internet Consortium to Improve Integration of the Physical and Digital
Worlds”, March 2014
References