FOR CIOS Brief: GE Positions Itself As A Digital Industrial Leader by John C. McCarthy Why Read This Brief GE recently hosted Minds + Machines 2015, its fourth annual industrial Internet marketing and customer event. At the event, Chairman and CEO Jeffrey Immelt laid out his vision for the company, how GE shifted from information technology to business technology, and how this has helped it become more customer-obsessed. Key Takeaways GE Sets The Vision And Pace For B2B Digital Strategies With its vision for the digital industrial company, GE puts the customer at the center of its industrial products and services. By leveraging software and analytics, it connects partners and customers around customer outcomes. FORRESTER.COM
by John C. McCarthy with Pascal Matzke and Laura Easton GE Aims To Deliver Customer Value By Focusing On Software GE s fourth annual Minds + Machines conference, held recently in San Francisco, has evolved into the firm s lead marketing effort around its industrial Internet vision. It has essentially become the industry lighthouse event for software, analytics, and connected products innovation in the industrial space. Whereas last year s event was one day and attracted 400 industry, partner, and customer attendees, this year s event ran for three days with more than 1,500 attendees and 15 partner sponsors. Under its tagline of the digital industrial company, GE clearly is taking a customer-obsessed approach. The company is heavily focused on making the industrial Internet and smart connected products backed by analytics real so that it can better address its customers business issues. The attention was focused on GE s Predix industrial cloud platform and driving outcomes for customers. Jeffrey Immelt, GE s chairman and CEO, kicked the event off with a speech focused on GE s industrial Internet agenda and its impact in the major industries that GE serves. Below we analyze some of his core statements. Market Volatility Drives The Need For Higher Productivity Jeff Immelt started by pointing to what effectively is one of the biggest concerns for most CEOs today: the ongoing volatility of markets and continuously changing customer behavior. In his assessment, this drives the need for industrial firms to push toward new levels of productivity. The industrial Internet is the future, and what it means for driving industrial productivity. We are on the cusp of the next productivity revolution. We live in a time of slow growth and volatility, more populism and regulation, and this could be with us for a while. But as industrial companies, we have what we need to invest to win, and productivity remains absolutely critical to the future of industries, for our investors, employees, and customers. The ability to move quickly, to continue to take advantage of opportunities has never been more important in the volatile times we live in. Forrester Research, Inc., 60 Acorn Park Drive, Cambridge, MA 02140 USA +1 617-613-6000 Fax: +1 617-613-5000 forrester.com 2015 Forrester Research, Inc. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Unauthorized copying or distributing is a violation of copyright law.
The thesis that I bring to you today is that as an industrial company, it is our turn. Technology has created immense value for tech companies, the consumers have been big beneficiaries of the Internet age, but as industrial companies, we averaged 4% productivity from 1990 to 2010, and from 2011 to 2015, the productivity of industrial companies has dropped to 1%. The opportunity for industrial companies is to grab this next age of productivity. And where connectivity has allowed for information to flow, it has not created much value. Higher Productivity Leads To Customer Value Traditionally, when industrial firms talked about productivity gains, they were thinking about cost savings. Not in GE s case anymore. For Jeff Immelt, higher productivity helps in being more valuable to customers and linking product value to customer outcomes. And it s about getting faster in reacting to changing demands. We totally believe in this transformation of the digital industrial. This is the next wave of productivity. And we need to lead in driving new systems inside our company and with our customers. [We believe] that we can only do that if we become faster and more focused on customer outcomes. And that we are valuable to our customers. It s really about driving customer productivity and customer outcomes. That has to be at the top of everything we believe. It s about the merger of physical and analytical. All the work that we are doing internally for productivity will be taken to our customers, partners, and collaborators. It s about an ecosystem. It s about industrial companies having platforms and applications. It s about being a big company that s also fast that s our goal. So all of us need this digital industrial context in which we pursue the future. We need to turn connectivity into insights and insights into outcomes, and that is what the industrial Internet is about no unplanned downtime, asset optimization. And this whole new industry that s all about getting productivity to where it should be. As industrial companies, we can make it happen for ourselves, and that s where GE wants to be. GE Wants Its Predix Platform To Become The Operating System Of The Digital Industrial Age At the same event last year, Jeff Immelt famously said, If you went to bed last night as an industrial company, you re going to wake up today as a software and analytics company. This year, Immelt put some numbers to this by stating that GE wants to grow its software investments by 20% to become a $15 billion software company by 2020. But unlike many of its competitors, GE is not looking to grow through a collection of diverse software and analytics platforms serving the different products and services the company offers. GE s vision is to turn its Predix platform into the operating system for its ecosystem of partners and customers. 2
We have an operating system called Predix that creates value for our customers.... Our goal for the next 12 months is to establish Predix as an industrial cloud, to continue to accelerate asset performance management as the seminal way to get started in the industrial Internet, to link internal productivity with external applications with our customers and [create] new business models that take the industrial Internet into our industries in a productive way. To be successful here requires a cloud-based platform for the industrial Internet that has all the capabilities of security and connectivity, but what you have to add to that is real vertical capability the ability to write applications for a healthcare or transportation setting. What will make the industrial Internet work is this notion of a horizontal platform with vertical applications that really bring customer outcomes and productivity into the marketplace. We expect to have 20,000 people developing on top of Predix in the next year as well as a list of partners to help roll out Predix for customers. We are taking all the work that we are doing internally with industrial Internet and making it applications for our customers. GE s Tech Management Has Shifted Into Being A Revenue Growth Leader Unlike other firms like Robert Bosch or Philips that incubate new software engineering groups independently from their tech management functions, at GE, tech management and software engineering around products and services are inherently intertwined. CIOs and IT professionals are the biggest driver for productivity within GE. This is the day, the era, the time for the CIO to be in the center of all the action of our company.... Looking inside our company, the nature of the CIO has changed dramatically. This has gone from being an outsourcer and cost center function to being the centerpiece of all of our productivity and innovation. Our CIOs and IT leaders have gone from being software purchasers to being revenue growth leaders. Inside our company, we have merged what we long considered our IT function with our digital and apps function into a one digital framework. We plan to take our operating system, Predix, from our lab engineers out to our customer installed base to have one operating system that our people can write applications on to make us faster and more productive. That s the vision we have for the company. 3
What It Means GE s Moves Signal Shift Of Digital To Top Of B2B CEOs Agenda Jeff Immelt s comments and the announcements by GE signal a tipping point in the digital agenda. Having been a dominant issue for B2C executives for the last five years, digital disruption will now be felt across a broad array of B2B industries. It s a wake-up call for CEOs to drive the digital industrial mantra in the B2B sector. To his credit, Immelt has been key in driving the digital and analytics shift within GE. Many of the GE presenters acknowledged how important his role was in driving the firm s transformation. He has directly challenged CEOs at GE s global competitors like Siemens, Mitsubishi, and Schneider Electric to do the same. It will drive the business technology and age of the customer transformation. CIOs will have to follow the lead of CEOs who are scrambling to keep pace with GE, either as competitors or as supply chain partners. The war for talent goes into overdrive. The market was already struggling to find the great designers, architects, agile developers, and data scientists required for the digital era on the B2C side. Now all these B2B companies will need the same skills. As a result, Forrester expects to see even more software companies acquired by traditional firms to jump-start that refreshed skill base. It s a new architecture for industrial digital. GE s endorsement and acknowledgement that it is doing things differently will break through the logjam around the adoption of new approaches like experience design, public cloud, partnering for innovation, open source, and the role of analytics. This provides CIOs and business leaders with a respected industry to use as a case study to drive change within their own organizations. 4
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