GE Digital addendum
The term “digital” is only referenced twice, in the 87 minutes of GE’s Q4 2018 earnings call that took place at the end of January. In a transcript of the call, posted on the Seeking Alpha financial blogging site, none of the financial analysts who participated, asked about the company’s digital strategy in spite of GE announcing a new $1.3bn digital business on December 13 2018. Their main concern was the company’s Power business, which is referenced 62 times in the transcript.
GE was among the industrial giants that showed huge potential in evolving from a company that makes big machines to one that sells software-powered services. It was, but where is it now? Last December, Bill Ruh, the GE chief who led this strategy, left the company.
Computer Weekly first started reporting on the GE story in 2013, when Ruh was vice-president for software at GE Research. At the time Ruh talked about how industrial IoT would enable GE to predict machine failures, and power a service-led business. Ruh eventually headed up the company’s digital division GE Digital.
GE joined the ranks of traditional organisations pioneering platform businesses. Its former CEO, Jeff Immelt, was regarded as a digital visionary. Under his watch, GE became a 150-year-old startup. In a 2015 McKinsey article he wrote: “We want to treat analytics like it’s as core to the company over the next 20 years as material science has been over the past 50 years.”
Looking at the company’s Q1 2017 earnings statement, released just a few months before Immelt stepped down, he stated: “GE is continuing its portfolio transformation and investing in innovations in GE Digital and GE Additive.” The term “digital” appears five times in this statement.
Immelt’s tenure as the CEO of GE was plagued with problems in the company’s power division, something that remains a big issue.
In June 2017, he was replaced by John Flannery, who has subsequently been replaced by Larry Culp. Winding the clock forward to Q4 2018, and in the latest earnings release on Seeking Alpha, “digital” is referenced only twice, to announce that GE Digital will be spun off as a separate company.
GE also announced an agreement to sell a majority stake in field management services firm ServiceMax, a company it acquired in 2017. As Computer Weekly reported at the time of the acquisition, ServiceMax was among the key components in GE’s digital strategy. When combined with the concept of running digital twins of customers’ machines, Ruh believed GE could move beyond simply predicting machine failures. Instead, he said GE would be able to deliver business outcomes to its customers, such as higher production yield.
Digital version 2.0
Analyst Forrester believes among the positives to come out of the demise of GE Digital version 1, is that a new version 2 business will be able to operate as a separate company. “GE Digital can focus on developing as a software business and not an internal IT shop for GE industrial units,” Forrester noted.
However, all along, the challenges GE has faced is that it is not being recognised for its software business. Immelt acknowledged this challenge in a 2017 Harvard Business Review article. “It will take years for GE to fully reap the benefits of the transformations,” he wrote.
When Computer Weekly met Ruh in July 2018, he described how Saudi company Obeikan was building food and beverage applications on top of the GE Digital Predix platform, helping GE expand the reach of its software platform. Now that Ruh has left GE, what will GE Digital version 2, evolve into?
Growing a software arm is hard. Looking at GE’s progress to date, there are wider lessons that can be gleaned. Every business that wants to compete effectively with agile startups and the web platform giants will need to go through challenging times before their transformation is complete.Those who start the journey may not be the ones who complete it.
Incidentally, “Additive”, which Immelt highlighted in his 2017 trading statement, refers to using 3D printing in manufacturing. And yes, GE does have an additive manufacturing division. But it is not mentioned a single time in the transcript of the Q4 2018 earnings call, posted on Seeking Alpha.