GE Digital CEO explains strategic 'pivot' following difficult year

It's safe to say that General Electric (GE) had a tough 2017, reporting fourth quarter losses of $9.8 billion, watching its stock value plummet by up to 42 percent and all topped off by the early retirement of CEO Jeff Immelt in October.

Tom Macaulay Jun 18th 2018
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It's safe to say that General Electric (GE) had a tough 2017, reporting fourth quarter losses of $9.8 billion, watching its stock value plummet by up to 42 percent and all topped off by the early retirement of CEO Jeff Immelt in October.

As the industrial powerhouse eyes a turnaround under the leadership of John Flannery, the digital arm of the company sees the “industrial internet" playing a key role in the company’s chances of recovery.

Back in 2015, the company launched GE Digital in an attempt to take advantage of a market opportunity it estimates could be worth $225 billion by 2020 due to the proliferation of connected devices and advances in analytics.

Immelt clearly believed in the business unit, ploughing billions of dollars into GE Digital. In 2016, GE Digital bought ServiceMax, a cloud-based field service management company, for $915 million and Meridium, an asset performance management and service automation, for $495 million.

AS GE's stock continued to slump Immelt had to change course though, and soon reigned in spending for the digital arm.

In November 2017, Immelt's successor John Flannery told investors "we're still deeply committed to [digital], but we want a much more focused strategy," with a “focus on a handful of applications” centred on industrial performance management.

GE Digital CEO Bill Ruh refers to this change in focus as a "pivot".

"You've got to remember, we created GE Digital in 2015, and we started selling these products in 2016, so we're really only in our third full year of operation,” Ruh tells Computerworld UK. 

"We found that you have to focus. One example is we now focus more on our products' differentiation."

The centre piece to GE Digital's product portfolio is Predix, a software platform to create apps that manage industrial machines.

Flannery expects Predix product revenues to double in 2018 to around $1 billion, and Ruh's strategy to get there is to aim Predix at GE’s core customers, selling them more targeted applications rather than selling them on the platform behind them.

Abandoned data centres

GE had planned to build its own "Predix Cloud" to handle the proliferation of data being produced by industrial assets.

The company aimed to roll out its cloud to customers in 2016, but curtailed the plans in favour of running Predix in the established public clouds.

"We realised very early on that being in the data centre cloud business didn't make any sense, because you're in an arms race with Amazon and Microsoft and Google, who are spending billions and billions of dollars on data centres that you can't and shouldn’t produce," says Ruh. 

The switch allowed GE engineers to concentrate on developing applications.

"We found ourselves focusing on two application areas - asset performance management and service automation - and really holding ourselves true to those areas. That's proven to be really effective, because we're really the leaders in those areas."

As opposed to Immelt's acquisition-heavy approach, Ruh is concentrating on the performance of existing components.

"We're spending a lot of time on integrating our acquisitions together," says Ruh. “If we have to fill a gap, we will acquire something, but right now we're very comfortable with where we are."

The established markets for Predix includes the oil and gas and energy sectors, where industrial giants including BP and EDF use the software to predict equipment failures.

Evidence of the benefits of industrial IoT and the growing technical capacity to implement it is also opening up new markets.

"In markets that we serve that are non-traditional - food and beverage for example - we certainly always look for a lighthouse account, because I think nothing matters more than visible signs of proof," says Ruh.

To that end, GE Digital recently partnered with food and drinks packaging giants SIG Holding to deploy Predix in more than 400 factories with the aim of boosting supply chain efficiencies and quality control in the business.

The Swiss company also forms part of a growing European market for Predix. 

"Europe in the last quarter was almost equal to North America in terms of orders, which is great because we were seeing a lot of weakness in our product line a little over a year ago, and now we're seeing a lot of strength in the pipeline, a lot of strength in the sales. So we're pretty excited about what we're seeing in Europe, " says Ruh.