In 2011, GE announced that it had started a small software Centre of Excellence (CoE) to focus on software and analytics – and the increasingly important role technology would play in its business model. Today, GE has gone through a massive transformation and embraced a modern operating model to build essential capabilities for the next 100 years and more.
Deborah Sherry, SVP and Chief Commercial Officer at GE Digital Europe, explains why it was necessary for GE to reorganise its way of working and shares key learnings from GE’s digital journey.
The journey from industrial manufacturer to software and analytics company
Today, GE is uniquely positioned. It is an industry leader reimagining how industrials build, operate and service their assets. However, this required a major transformation over the last few years. GE’s digital journey started with creating a Centre of Excellence (CoE) in 2011. The CoE took capabilities from its Global Research Centre as well as from our internal IT organisation.
One of the early outcomes in 2013 was the announcement of a platform called Predix, which allows industrial organisations to develop business applications. Building the platform originated from a mandate to increase internal productivity. We wanted to discover new ways to unlock economic value. Today, Predix is the leading application development platform for the Industrial Internet – the foundation for GE’s digital offerings that enables industrial businesses to securely collect and analyse data in real time. At the onset, one of the challenges that we had was that GE had an enormous amount of data across different business units but we were not able to use this insight beyond its specific function.
In 2015 we understood that we needed to place a big focus on digitalisation. To tackle this challenge, we looked at what the most disruptive Silicon Valley companies were doing to move so quickly and how we could adapt it to our environment. We realised that we need a digital platform that allows us to innovate quickly and to leverage the wider digital knowledge of the software developer community in the same way that Apple uses the iOS to develop apps for its products.
When we searched the market, we realised that there was nothing available that caters to the needs of industrial organisations, so we decided to create our own digital business that focuses on improving productivity and growth in meaningful ways. That’s how GE Digital was founded.
A critical part of our journey was partnering with our digital teams with their industrial clients in the business, helping them understand their problems more clearly and develop solutions faster.
An additional step was the launch of our partner ecosystem in 2016, the largest Industrial IoT ecosystem in the world. One example of the ecosystem at work, Apple and GE announced a partnership to deliver industrial apps designed to bring predictive data and analytics from the
Predix Platform to the iPhone and iPad. Together, we also unveiled a new Predix software development kit (SDK) for iOS, which gives developers the tools to create their own Industrial IoT apps.
How to organise and operate a digital company
Our achievements over the last two years define the marker of success in organising both a horizontal and vertical orientation of the company. We appointed a Chief Digital Officer (CDO) for every vertical business within GE, allowing each industrial business to focus on its core business goals, including both hardware and services. This work was aligned to a digital blueprint in the vertical.
Why does this sound so simple and yet so critical for GE? For years, every business unit had their own focus and little cross-functional collaboration across the whole organisation. This is why it proved essential to have a CDO in every vertical that reports to Bill Ruh, the CEO of GE Digital and CDO of GE.
We have now worked for a while in this matrix environment and each CDO is accountable for his or her market, and for leveraging the core capabilities that we have built in GE Digital. This model allows us to truly focus on the end market in each vertical. In the same way this model allows us to drive productivity, simplification and reuse of a single set of core technologies that could be used by any of the verticals.
CDOs work effectively as CEOs of their digital business. They operate in a way that gives them an overview of everything from product strategy, product marketing and sales, to delivery and support. They own and run P&L for their markets from a digital point of view.
How any company can become digital
The most important aspect that we have shared in our leadership team – especially in the Industrial Internet of Things – is that digital shouldn’t be something that is separate from the rest of the organisation.
It often happens that organisations create a separate entity that is not passed to the rest of the organisation. The CDO is responsible for leading digital software capabilities within the traditional industrial businesses of GE and ensuring there is alignment in business objectives.
For example, imagining that a customer in aviation is looking for a new set of engines for a new fleet. Most likely, the outcome the customer wants covers positive outcomes in a wide range of aspects relating to the engines, such as passenger safety, fuel optimisation, on wing time and maintenance. All these different components are linked together and should be met by the technology supplier. This means closely integrating hardware, services and digital to deliver comprehensive solutions to our customers, not to work in silos. CDOs must influence markets and explain internally how digital fits in the broader industrial business, as digital is the key driver to progress in any organisation over time.
How to fund the digital journey
Historically, corporations largely fund this kind of digital piece from each business unit and its corporate reserve. Our target is to make sure that we become laser focused on the spending profile that is concerned with looking at the hardware and service businesses, but also on returns.
Especially with software, the returns in a new market or new product line could take anywhere from two to three years to really start paying for themselves – whereas in industrial business, you can start to see returns far more quickly, usually within a 12-month horizon.
What we are going through right now is looking at a core budget within GE Digital for services, platform and horizontal applications. The business units have their own budgets for digital that extend on top of that.
This is something new that we have introduced only within the past year. If we look at the capital allocation, we are in a process. We continually ask ourselves: what is the core, what are the target markets and what is truly transformational?
We expect that in the next five years, the interlock we have in capital spend is going to look very different than it has been in the last few years.
Building an agile organisation and embracing Artificial Intelligence
It was never easy in the beginning. It is still not easy, because industrial space is a very hard market in which to crack technologies; but we believe that we are approaching the tipping point and other markets will follow soon.
It is interesting in an industrial scenario that many of our customers fear digital early on. This is a natural occurrence, because they see digital as a replacement to the way they work. Similarly, now there are fears of employees or markets about what Artificial Intelligence will achieve in the future.
In the early days, there was resistance, partly because people were confused when you spoke about business outcomes and value. For example, in power, if you wanted to improve reliability for a power plant and improve that reliability by one percent, you could achieve that via hardware, service or digital efficiency. The challenge with digital during that time was that customers couldn’t believe that software or analytics could improve performance in the same way as an operator could – the latter being what they had known for 30 years.
We had to first create a shift in mentality and we had to create it on multiple levels. We also helped our customers to see that the value of digital is truly incremental and it made their jobs better. It made the company more efficient and also created an opportunity for that customer to think about their own digital transformation.
By itself, Artificial Intelligence is a buzzword like Big Data or Cloud and other technology statements. It means everything and nothing to people. With the power of AI, deep or machine learning and the capabilities that we have, it is about making the outcome more precise and being able to push the envelope.
We do it in a couple of ways. One is around simulation with technology called Digital Twins. If someone wants to model a scenario – for example, how a piece of equipment might work – they are able to do it in a way that is not connected to the production system. Therefore, power plant operators are able to try, simulate and test how this might work well in advance before it has been implemented.
AI creates a whole new level of knowledge and great opportunities for learning better knowledge management. From a human point of view, we are very focused on the task at hand. For example, I have an issue that I am going to resolve and here is how I resolved it. AI instead looks historically at what patterns have emerged over the last three years that can help us avoid repeating the same mistakes, and also learn from that insight. That is the power of Artificial Intelligence .
The second way to use AI as an organisation is to make decisions around how we manage equipment based on data and how the system operates in the ground versus what the actual manufacturer tells us.
For example, think about a car. The manufacturer tells you that you can’t go over 65 mph with a particular type of tyre. That’s for risk and safety. However, when you are driving, the issue is around human error; you have human elements in place and we humans make mistakes. You need to take account of all the other variables that transform optimal performance, such as weather and road conditions, the way you drive, the health of the car, or the type of fuel you have.
It is so different when something is in production and AI truly helps us think through ways to unlock new economic value. Historically, in many cases, industrial settings have been manual. AI is never a replacement to the way that people work. We see AI as an enabler that enriches tasks and allows people to drive higher order value operations within the organisation.
Key findings of GE’s digital journey for business leaders
Lean in and look outside
We become sceptics very quickly because of human nature. As a business leader, you have to live and breathe digital if you want to understand and see the patterns with which other industries have evolved. You have to become the CDO of the company.
First, look at other industries, because the way they have evolved is not so dissimilar to the way that you operate. The one thing you need to do is to look outside of your environment and think about that change. Do it in such a progressive way that you leverage your whole business strategy, completely retool how your business works and reimagine how your services work through digital.
Be bold and challenge your own organisation
Digital is not something that you can implement in an incremental fashion, because that is not a transformation. If you implement digital in an incremental fashion, it narrows the way in which existing business works. Incremental dialogue will never give the opportunity to make the needed change.
Therefore, digital moves should be something bold that in many ways challenge the current way of doing business. Eventually you’ll find a way to align back to where the business’s traditional business lies. With this approach you’ll allow the organisation to embrace all the new possibilities.
Create a network of people
Not everyone understands what the end state is for digital and why digital transformation is a journey. When creating steps forward, you need to work with a network of individuals that can help shape your thinking.
No one should ever be alone throughout the dialogue. Create an extensive network of people from different backgrounds who can challenge you in a positive way throughout your journey of transformation!
This article was originally published in the book Surfing the Digital Tsunami. Text was written by Kati Lehmuskoski.