How does a company break into the huge potential marketplace that is the Industrial Internet? Spending on the Industrial Internet—the convergence of industrial machines, data, and the Internet (one aspect of the Internet of Things)—was $20 billion in 2012. Analysts are forecasting that number will reach $514 billion by 2020, creating nearly $1.3 trillion in value. MIT Sloan Management Review recently published a case study of one company that is succeeding in its efforts to be a major player in this market--GE. Here are five key strategies that GE is using to build its position in this growing market.
Get the talent you need
Developing new digital capabilities means building a new base of talent. GE turned to consumer advertising to recruit millennials to join GE as Industrial Internet developers and remind them of GE’s massive digital transformation effort.
You may be familiar with the ads; they feature a recent college graduate, Owen, excitedly breaking the news to his parents and friends that he had just landed a computer programming job—with GE. Owen tries to tell them that he will be writing code to help machines communicate but they are puzzled; after all, GE isn’t exactly known for its software. The ad campaign is just one component of GE’s human resource strategy, which is itself part of a larger corporate strategy to transform GE into a top ten software company.
Make a platform, not a product
GE doesn’t intend on becoming merely a software product company. It is building out a cloud-based, open platform that will enable customers, third party developers and GE itself to create customized software solutions in several different industry sectors. The platform has open standards and protocols that allow customers to more easily and quickly connect their machines to the Industrial Internet. The platform can accommodate the size and scale of industrial data for every customer at current levels of use, but it also has been designed to scale up as demand grows. The number and variety of Predix-related apps are not limited to what GE offers. Whereas customers may develop their own custom applications for use on the Predix platform, GE executives are working to build a developer community and create a new market for apps that can be hosted on the Predix platform.
Take a different sales approach
For GE, a pilot program is often an essential step of the adoption process for new customers, especially in the oil and gas sector (a focus of the case study). In early 2015, GE executed a four-week engagement with one of the largest global energy companies, which wanted to reinvent how it manages its “static” equipment. GE positioned Predix to help the customer rethink how it manages these assets and at the end of the four weeks, they developed a software solution that that allowed the customer to “walk through” how their reliability engineers could use Predix to better manage their static assets.
GE executives see the pilots as a way to bring customers onto the selling team. “To get anywhere in the oil and gas industry, we need help selling. We need customer voices out in the industry with success stories, or we’re just not going to come to the table with the credibility that we need. So we need to inspire our customers to want to do that,” says one executive.
Change the pricing model
Moving forward, GE’s pricing model is changing because of Predix. In the past, GE customers would buy bundles of equipment, services and software and treat these expenses as a capital expenditure. But with Predix, GE customers are beginning to treat these purchases as an operational expense. “We’ve got some customers that don’t ever want to actually buy the equipment. They just want us to come out and get paid based on production. It’s a service contract that wraps up equipment, services, software and all the analytics,” says Ron Holsey, Digital Commercial Leader, Surface, GE Oil & Gas. Holsey thinks this new model shows that GE is putting its money where its mouth is. “If we improve, say, their power consumption by X, we get $1; by Y, we get $1.50,” he says, noting that customers are becoming more open to this type of arrangement and sharing the data necessary to establish the baseline measurements that makes the model work. “In order for us to leverage the analytics, customers are asking us to put a little bit more risk on the table ourselves, and that’s the difference that we’ve seen in the market,” says Holsey.
Make an Investment
GE has bet big on the Industrial Internet. The company is committing $1 billion to put sensors on gas turbines, jet engines, and other machines; connect them to the cloud and, analyze the resulting flow of data to identify ways to improve machine productivity and reliability. “One billion dollars represents a big swing for GE,” says Matthias Heilmann, Chief Digital Officer of GE Oil & Gas Digital Solutions. “It signals this is real, this is our future. Indeed, GE has created an entirely new business division, GE Digital, to focus on selling industrial internet applications across the company’s many business divisions.
This post is adapted from the MIT SMR case study, “GE’s Big Bet on Data & Analytics,” published February 2016.
Originally posted on Data Science Central