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How GE Software is transforming itself for the digital age

Den Howlett Profile picture for user gonzodaddy April 20, 2014

While visiting the San Francisco Bay Area I got an unexpected opportunity to visit with Jeremiah Stone, CTO GE Energy Management and William 'Bill' Ruh, Vice President and Global Technology Director. It was a fascinating couple of hours where we ran way over our allotted time slot. That's always a good sign.

jeremiah stone
Jeremiah Stone

As background, I've known Stone since his days in the sustainability unit at SAP and have recently re-acquainted myself with GE after some years. My interest comes from their white paper publication about GE's internet of things which saw developed into its 'mind and machines' mantra. More specifically, I am fascinated to learn about what GE Software is doing in support of the six major verticals in which it has multi-billion dollar businesses.

It turns out that despite its 150 year history, GE hasn't really had a software business that addresses those verticals in a way that aligns to the digital age. It knows there is an 'industrial internet of things' which it can tangibly demonstrate from the many machines it builds and manages but it is the opportunity for software to deliver massive value back to GE's customers that is the real prize.

In talking to Stone, it was apparent that just two months in and he is like a 'four year old in the candy store' - to use his expression. He is in month two of a three month learning curve which sees him getting his head around GE's energy business while thinking about what it will take to build a world class software engineering unit that can both feed and be fed by his counterparts in the other divisions. "Every day I'm trying to learn about what makes this business tick."

He showed me an almost full Moleskine where he has so far recorded more than 100 conversations with people inside GE, attempting to synthesize the essence of the company while soaking up more data to fuel his go forward strategy.

GE's mind melding to machinesJeff Immelt, CEO GE Earlier …Oct 9

One insight he shared which has impact on how Stone's and GE's strategy for building the software units will pan out: "HR is in a peer relationship with the line of business managers. This is so different to what I am used to. It means that GE HR people are fully aligned with our strategic direction. It makes hiring the best people a much better process than is usually the case."

The power of this arrangement is demonstrated by the fact GE has some of the smartest people in their respective field anywhere on the planet. What's more, they stay for many years. "Some of these people are brilliant, yet there's no ego waving as you see in a lot of companies and especially in Silicon Valley. It's truly humbling," says an excited Stone.

I'll be back in a few months to see how he's getting along but one thing is clear - in his division alone, the sheer number and volume of sensors capable of feeding advanced predictive analytic applications is truly mind boggling. It runs many billions, according to Ruh. So why is GE feverishly building this business?

The potential threats to GE

william ruh
William 'Bill' Ruh

"When you look at how many services are getting disintermediated, what's to say that someone might come along and do the same to us?" says Ruh. I find this surprising because GE, while operating in competitive markets like aero engines has huge market clout in areas like power plant manufacture and control systems. Ruh has an answer:

"What if Tesla, which has re-defined the auto manufacturing business decided to get into broader service opportunities? Or what if Google was able to build services that allowed you to step aside from the car dealer for service and the manufacturer for parts?" Ruh posits. When put in those terms, it is easy to understand why GE is working flat out to build as wide and deep a software moat as it can around its customers.

But what of the business model? Again, Ruh sees a huge market: $30 trillion in potential savings, cost reduction and efficiencies that could be earned via the industrial internet. "We're very much in the early stages but we of course want customers to sign up for what we offer on a long term basis. We say - here's the deal and here's what we think you'll save, try it for a year and if it doesn't work for you then hand the software back."

Psychology aside, that's all part of the modern way of doing business but on an industrial scale. Try it, pay for what you use and if it turns out to be a junker then throw it away. But is Ruh right in his speculation about competitive threats?

Coincidentally, I dropped in on a Facebook conversation initiated by Paul Greenberg, who as some will remember, wrote for us a five part exposition on his forward looking view of CRM. You can still get a copy. Greenberg was complaining bitterly about poor service for his brand new car. There is a software glitch that, at time of writing, was going to take some time to resolve. It was a lively discussion with 59 pieces in the thread.

Google as your friend?

In among the thread was the following comment:

While this does not apply to a new car like yours, I encourage everyone to do a Google search on any needed car repairs. The transmission went on my Audi and, totally by chance in regard to the timing, I received a letter from a law firm explaining that there was a successful class action lawsuit regarding transmissions on my make and year. It completely covered the thousands of dollars in repairs. Since then, I don't wait for the letter to come. I found online similar settlements that covered needed repairs. Sorry this does not help in your situation currently but perhaps in the future to avoid shelling out repair costs -- because the dealers won't tell you.

Or what about this?

Disappointing Paul....but stories with those dealers and car manufacturers can go really wild..unfortunately I have a bunch...with our previous BMW something went wrong...I googled it and found out that it was a fuse that had to be replaced. Told the service manager at the BMW dealership, he said that he can't go based on Google...but promised that I won't be overcharged for diagnosis....long story short. I ended up paying $800 and the issue turned out to be the same fuse that was only $90 and 5min to change....but they said that they had to test everything and wouldn't admit that they could have just done what they asked them to. On a Mercedes ended up having an issue that the dealer wanted $5k to mechanic friend fixed it for $200!!!! it's crazy how you can't trust the brand names to charge and be fair!!!

Maybe there is some truth is what Ruh is thinking. And while the risk may not be immediate, it is something that GE hopes to avoid. That, in part, is why it is building out a software business that last year booked $800 million with another $800 million in backlog and yet behaves very much like a startup. Only this one is for grown ups.

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