CORPORATE VIEW

General Electric: a 124-year old digital start-up

GE has created an ambitious digital strategy that exploits a fundamental change in how machines and people interact. To achieve it, the company is learning to rely on external partners in order to be part of an eco-system that facilitates growth.

As a 124-year old company, General Electric (GE) has experienced countless changes in its operating environment and responded by consistently evolving its business model. So, while the digital revolution might seem incongruous for a company often associated with complex aircraft or marine engines, the company has – quite naturally – been able to put digitisation at the heart of its many businesses.

“GE has always been about reinvention,” explains Roland Teixeira de Mattos, CEO for the Benelux, who leads GE’s regional strategy and cross-business initiatives. “We might have a reputation for ‘Big Iron’ products such as gas turbines but we’ve always responded to the changing world and customer requests and needs. Digital is no different.”

GE has historically been an industrial company but in recent decades its finance arm, GE Capital, had grown significantly and by 2014 contributed almost half the group’s profit. In 2015, following a strategic review that analysed correlations between GE’s business divisions, the company announced that it would divest most of its Capital operations as they were no longer core to its value creation goals.

“That decision essentially returned GE to its industrial roots and prompted the acquisition of Alstom in Europe, for example,” says Teixeira. “It was combined with an aggressive move into digital.” To this end, GE Digital was created in 2015, bringing together previously separate digital efforts. It is tasked with connecting machines, data and people, to give industrial companies valuable insights that enable them to manage assets and operations more efficiently.”

A new relationship between people and technology

GE aims to exploit a fundamental change in how machines and people interact. “Over the past 20 years, we’ve been able to get increasing amounts of data from machines and communicated more with them. It’s been a bilateral relationship where machines provide data points and engineers then react and make decisions,” says Teixeira. “Now we want humans and machines to work more closely together to improve performance.”

“Now we want humans and machines to work more closely together to improve performance.”

GE’s model – and its ultimate goal – is the creation of a Digital Twin, which uses the industrial internet to provide insights into a machine’s performance, history and potential. “It’s essentially a digital operating model that enables an individual to work much more closely with a machine, whether in an oil refinery, a ship or an airplane. It is achieved by the use of a greater number of smarter sensors that are capable of conveying more information and making sense of it.”

Many machines already make extensive use of sensors and produce large volumes of data. For example, during a typical flight an aircraft might generate 1 terabyte of data relating to parameters such as speed, pressure and other variables. Given the number of flights each plane makes and how many planes are in a fleet, airline companies generate huge volumes of data. “But this is best seen as ‘dark data’ – it is not especially valuable,” says Teixeira.

The industrial internet of the future will have three main characteristics, according to Teixeira. Firstly, it will generate and transmit far greater volumes of data: instead of the 30-40 sensors on a typical engine today, there might be up to 120, for example. Secondly, data integrity, machine stability and cyber security will be paramount given that many industrial machines are safety-critical and require significant redundancy. Thirdly, data will no longer be ‘dark’: instead it will be analysed to deliver meaningful information that can be used to create operational value and connect with other machines and data sources. For example, wind turbine data could be analysed alongside weather information, enabling optimisation of electricity production.

Harnessing the industrial internet to create a Digital Twin will be challenging because each machine is different. “External and internal factors vary for every type of engine, which means that the Digital Twin is a work in progress,” says Teixeira. “But the objective is worth pursuing because the rewards are so great. It will mean that maintenance will no longer be calendar-based but condition-based, enhancing asset performance management and improving efficiency. It will also increase flexibility: imagine the efficiency benefits if an oil refinery could automatically adapt its processes in advance to account for forthcoming deliveries of low or high calorific oil.”

“Our digital strategy is about optimising existing assets, so they are more efficient and deliver greater benefits.”

In mature economies such as the Benelux, GE’s digital strategy makes particular sense, according to Teixeira. “Many countries essentially have most of the major infrastructure, such as trams, trains, power plants or hospitals, they require. That limits opportunities for GE. However, our digital strategy is about optimising existing assets, so they are more efficient and deliver greater benefits. And optimisation, rather than replacement, offer huge opportunities in Benelux and other developed countries.”

A new way of thinking

Predix, GE’s industrial internet operating system that underpins its Digital Twin model, is notable not just for its ability to connect industrial equipment, analyse data, and deliver real-time insights but also for its open-source nature. “Nine years ago, I was part of a committee that began to plan how GE could leverage open innovation,” recalls Teixeira. “We recognised that change was underway and that a new model could deliver greater benefits.”

The change from historic GE thinking is dramatic. “GE has always been about entrepreneurship, leadership and team engagement, so in that sense, digital doesn’t change anything,” says Teixeira. “However, a defining feature of the company since its creation has been protection of intellectual property (IP). Of course, there were instances where we shared IP, such as the design of a motor, with partners but it was a very tightly controlled process. In contrast, the digital sphere is much more open. We have had to accept that we cannot build everything ourselves and to learn to rely on external partners in order to be part of an eco-system that facilitates our growth.”

To that end, GE partners with Cisco for edge computing, which instead of transmitting data from a remote location, such as an aircraft engine, to a server or the cloud, processes, analyses and acts on that data at the remote location. Similarly, GE works with Accenture to help clients implement business model changes as part of their digital strategy. “We’ve always worked with partners but the difference is that we now seek to multiply the benefits of our IP by sharing it more widely,” says Teixeira.

Building financial partnerships

While GE has divested most of its Finance group, it continues to play an important part in helping its customers to access finance. On occasion the company will directly lend to facilitate a project. However, more usually it leads or participates in a syndicated finance arrangement, which utilises the capacity of a number of banks or other investors. “Our involvement gives a boost to the financing and enables us to show our support for supply chain partners,” says Teixeira.

Many of the companies involved in GE projects, such as the construction companies that make undersea moorings for offshore wind, are financially sophisticated and have access to the capital markets. However, GE’s support and involvement can be essential to facilitate projects in some countries in Africa, for example, where there is greater risk and a longer time to development.

GE’s relationships with its banking partners are critical to its success, both to facilitate operations and sales. “It is important to us that the banks we work with understand our business and our objectives,” says Teixeira. “We also need to be kept up to date with what is happening in the banking world and how it will affect GE.” Teixeira adds that its interaction with ING is always extremely positive. “Their culture is focused on really getting to know what we do. They have visited our businesses – including GE Digital – and taken the time to understand each segment and its challenges. As a Benelux company, we also appreciate having a local contact.”

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