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Building the Industrial Internet With GE

Oct. 5, 2015
General Electric has transformed these last 14 years under CEO Jeff Immelt. Will the Industrial Internet and the company's shift toward software be his lasting legacy?

SAN FRANCISCO — When General Electric employees discuss Jeff Immelt and his leadership of the company, the word foresight seems to pop up in every conversation. Immelt had the vision and the foresight, they say, to jettison struggling divisions, to dive into larger assets and wind up developing analytics, to understand that everything that happened in the consumer world was going to happen in the industrial world.

Immelt has served as the company’s chairman and CEO for the last 14 years — he took over the top spot from Jack Welch on September 7, 2001, two business days prior to 9/11 — and all of his recent decisions look like the brickwork of a legacy. Most recently, he has shifted the company toward software, overhauling more than a century of tradition.

“He has lived through the refocusing of the company and its core industrial base,” said Stephen Pavlovsky, who has worked for the company for close to three decades and is currently equipment insight leader at GE Intelligent Platforms. “With the shedding of the financial arms, and even the appliance business, we’re really a company built now around infrastructure OEMs, water, oil and gas, transportation, medical.

“He’s led that transformation.”

Immelt delivered the opening keynote last week at the fourth annual GE Minds + Machines, a three-day event held on the northern shores of the San Francisco Bay, within sight of Alcatraz, the Golden Gate Bridge and plenty of hills and mountains.

Minds + Machines is a celebration of the Industrial Internet — or, if you prefer, Industrial Internet of Things, or just Internet of Things, or Industrie 4.0 — filled with presentations about the technology, its latest rounds of development, and its myriad uses. Just about all of the 1,600 people in attendance were champions for the technology, too, which meant Immelt was preaching to the proverbial choir. There was little dissension around the floor.

During the middle of his 30 minutes on the stage, Immelt delivered a flurry of numbers that, if reached, will help GE continue to transform: Within the next five years, GE will be a $15 billion software business (it checked in around $3 billion in 2011 and is right around $6 billion today); its industrial app economy, powered by its Industrial cloud platform, Predix, will be worth $225 billion; and its customers will have realized $1 billion in productivity savings. The biggest number: Within the next 15 years, digital industrial companies will add $15 trillion to global GDP

Some of Immelt’s other thoughts from that opener.

Productivity remains absolutely critical to the future of our industries, for investors and employees and customers, and the ability to move quickly, to continue to take advantage of opportunities, has never been more important than it is today, in the volatile times we live in.

We totally believe in the transformation of a digital industry, that this will be the next wave of productivity. We need to be at the lead, and we need to provide systems inside for companies and customers. We can only do that if we become faster and more focused on customer outcomes. This really is what our company is all about. As an industrial company, it’s our turn. Technology has created value for tech companies. The consumers have been the beneficiaries of the Internet age. As an industrial company, we averaged 4% productivity from 1990 to 2010, but from 2011 to 2015, the productivity of industrial companies has gone up 1%. So the opportunity for industrial companies is to grab this next age of productivity. It’s created connectivity, but it hasn’t created much value.

We’re going to turn connectivity into insights, analysis and outcomes.

The Industrial Internet is a fancy phrase, but what it really means is no unplanned downtime and asset optimization. We’re in the beginning days of an entirely new industry that’s all about getting productivity where it should be. We believe the Industrial Internet could be twice  the size of the consumer Internet, and it’s the industrial companies that don’t need to outsource it, that don’t need to wait for somebody else to make it happen — we can make it happen ourselves.

Our aspiration is to be a digital industrial company. We’re about $6 billion in software today, and we’d like to grow that 20% and be a $10 billion software company by 2020. (Immelt revised this in a slide that stated the 2020 goal is to reach $15 billion.) We want our operating system, Predix, to create value for our customers, and we believe our CIO and our IT investments are the biggest drivers of productivity inside our company today. This is the day, the era, the time for the CIO to be at the center of all the action.

The nature of the CIO has really changed dramatically. Our CIOs have gone from being software purchasers to being app writers, productivity leaders, they’ve gone from the back room to the front room.

The Industrial Internet is about the merger of the physical and the analytical worlds. This is going to happen with or without us.

It’s about ecosystem. It’s about industrial companies having platforms, building platforms and applications. We can build it on our own, we can build it together.

It’s about being a big company that’s also fast. Inside our company, I say fast beats slow, but very fast can beat small and fast. Our goal is to be a big and fast company, and I think all of us need to have this digital industrial complex.

I think what makes the Industrial Internet perhaps different from the consumer Internet is it has both a horizontal and a vertical presence. To be successful, there needs to be a cloud-based platform for the Industrial Internet — security and connectivity are important, but what you have to have there is real vertical capability — the ability to write applications that are successful in the health care setting, and in the transportation setting, and in the aviation setting. Ultimately, what I think will make the Industrial Internet work is having horizontal platforms and vertical applications that bring productivity into the marketplace.

We need to get our own equipment here, right? In order to be credible, we have to take our digital thread — which starts with engineers and goes through our factory sites, all the way to our install base — and we have to make sure we’re implementing our own Industrial Internet protocols. We have 400 factories, and about 100 of them are what we call Brilliant Factories, which have 20% less unplanned downtime and 20% more productivity. That’s the Industrial Internet. We have more than 30,000 field-service engineers, and they’re all going to be sensor-abled, they’re all going to have mobile capability, they’re all going to have analytics at their fingertips. That’s the Industrial Internet. And then we’re going to take all the things we’re doing inside the company and we’re going to turn them into applications for our customers. We’re basically going to take the company and run it inside-out.

I don’t consider us a software company. I consider us a company that has to be based in software to be successful.

This is just a vision for the future, because I think increasingly in a lot of our businesses where we talk about knowledge of the asset, knowledge of the analytics, building software, putting it in the cloud: When you put them all together, you’re going to have a new business models. In our case, energy and energy services work with utilities. We’re going to combine Predix, financing, our knowledge of our assets — and build new solutions.

We have a lot of people in their mid-20s, and I was sitting with about a dozen of them a week or two ago. They are writing their own apps, they can design their own systems, which makes me happy I’m getting old. I’m not sure I can compete with these guys in the world today. But that’s where employees are going to be empowered as we run our companies today.

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