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24-10-2015, 06:55 AM
Digital future: GE unlocks value in industrial internet
Richard Gluyas
[Image: richard_gluyas.png]
Business Correspondent
Melbourne
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GE chairman and CEO Jeff Immelt is ‘absolutely sure’ of the value of industrial internet.Source: News Corp Australia
[b]At GE’s first Minds + Machines conference in 2012, chairman and chief executive Jeff Immelt and his team were preparing for the worst — that customers, investors or anyone else of great importance would see the whole idea of this industrial internet thing as a furphy.[/b]
So, you’re planning to do what with the web?
“If I go back to 2010, all we were saying was: ‘Let’s screw around with some analytics and see what happens’,” Immelt says, laughing at the memory. “Two years later at Minds + Machines, we were kind of waiting to see if anyone said: ‘Hey, this is bullshit!”
Since then, GE has taken the great leap into the less unknown.
Immelt is now “100 per cent sure” that the productivity enhancing power of the industrial internet is real, so the GE machine is up-ending itself to become a digital industrial leviathan. The business and cultural transformation of GE is immense and ongoing, even for a company with a long history of disruptive change since it was co-founded by Thomas Edison in 1878.
From the very top of GE right down to its nether regions, a fundamental change in thinking is required. Immelt, for example, concedes he had to deliberate long and hard before agreeing to open up GE’s Predix operating platform to external app developers, mainly because he was schooled in the old industrial world where the systems were closed and supported a perceived competitive advantage.
“But the people running this for us came from Microsoft and Cisco,” he says. “They slap me in the face and say: ‘If you ever want to be relevant in this world you have to have an open system’.”
Immelt also thought deeply about whether to build the necessary talent base organically, or do it in one hit with an acquisition. While there’s still scepticism about the organic route he chose, the GE chief says he’s been able to lure software and IT professionals who would previously have never regarded a stint at the stodgy industrial company as a viable career option.
To achieve this, GE’s leaders had to roll their sleeves up and get involved, convincing people that the mission of revolutionising industrial companies was a worthy one and achievable.
“It’s critical to bring people in from outside our company and our culture,” he says. “Then you have to make sure that everyone is thoroughly afraid, and that if we don’t do it we’re going to get killed.
“There’s a healthy paranoia inside GE which says: ‘If we don’t do it someone else will’.”
Since taking over from his legendary predecessor Jack Welch only a few days after the September 11, 2001 terrorist attacks on the US, Immelt has wrought a degree of change inside GE that’s often overlooked or disregarded.
With the soon-to-be-completed divestment of most of its financial services business, Immelt will have sold about 65 per cent of the assets he inherited from Welch, exiting television and the appliance operations, among other things.
Further, 70 per cent of GE will be offshore, instead of 70 per cent inside the US under Welch.
It’s indicative of the importance of the industrial internet to GE that Immelt feels it’s the most important project in his decade-and-a-half as CEO.
The scale of the opportunity is clearly important to him, and one of the reasons he’s decided to take it on. As recently as 2004, GE was the most valuable company on the planet, with investors prepared to pay an extraordinary premium for the personality cult of Jack.
Under Welch, GE traded at a monstrous multiple of 50-60 times earnings, with half the company’s earnings coming from a finance business.
The collapse of Lehman Brothers in 2008 permanently erased the pre-crisis halo of non-banks, leading to GE significantly underperforming the market over two business cycles.
Immelt, however, is developing a spring in his step, with GE stock up about 20 per cent since the start of the year compared to a flat industrials sector.
Not surprisingly, he sees the recent emergence of activist shareholder Nelson Peltz, who shelled out $US2.5bn for a 1 per cent stake in the group, as validation of GE’s industrial internet strategy.
Peltz’s Trian Fund Management has never made a bigger investment, and it now ranks as a top-10 GE shareholder.
“We like long-only investors who know the company; he underwrote GE for what we are,” Immelt says.
“I’m absolutely certain now that there’s going to be immense value created out of the industrial internet in the next five-10 years.
“But now the focus is back on us, which means I have a different fear. “A few years ago I was spending all this money thinking: ‘Is this a good idea?
“The challenge now is: ‘How do we win?’”
- THE AUSTRALIAN
- OCTOBER 24, 2015 12:00AM
Richard Gluyas
[Image: richard_gluyas.png]
Business Correspondent
Melbourne
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The global trend Australia can't afford to miss
[Image: 538597-74d57250-7965-11e5-80ed-95011193132b.jpg]
GE chairman and CEO Jeff Immelt is ‘absolutely sure’ of the value of industrial internet.Source: News Corp Australia
[b]At GE’s first Minds + Machines conference in 2012, chairman and chief executive Jeff Immelt and his team were preparing for the worst — that customers, investors or anyone else of great importance would see the whole idea of this industrial internet thing as a furphy.[/b]
So, you’re planning to do what with the web?
“If I go back to 2010, all we were saying was: ‘Let’s screw around with some analytics and see what happens’,” Immelt says, laughing at the memory. “Two years later at Minds + Machines, we were kind of waiting to see if anyone said: ‘Hey, this is bullshit!”
Since then, GE has taken the great leap into the less unknown.
Immelt is now “100 per cent sure” that the productivity enhancing power of the industrial internet is real, so the GE machine is up-ending itself to become a digital industrial leviathan. The business and cultural transformation of GE is immense and ongoing, even for a company with a long history of disruptive change since it was co-founded by Thomas Edison in 1878.
From the very top of GE right down to its nether regions, a fundamental change in thinking is required. Immelt, for example, concedes he had to deliberate long and hard before agreeing to open up GE’s Predix operating platform to external app developers, mainly because he was schooled in the old industrial world where the systems were closed and supported a perceived competitive advantage.
“But the people running this for us came from Microsoft and Cisco,” he says. “They slap me in the face and say: ‘If you ever want to be relevant in this world you have to have an open system’.”
Immelt also thought deeply about whether to build the necessary talent base organically, or do it in one hit with an acquisition. While there’s still scepticism about the organic route he chose, the GE chief says he’s been able to lure software and IT professionals who would previously have never regarded a stint at the stodgy industrial company as a viable career option.
To achieve this, GE’s leaders had to roll their sleeves up and get involved, convincing people that the mission of revolutionising industrial companies was a worthy one and achievable.
“It’s critical to bring people in from outside our company and our culture,” he says. “Then you have to make sure that everyone is thoroughly afraid, and that if we don’t do it we’re going to get killed.
“There’s a healthy paranoia inside GE which says: ‘If we don’t do it someone else will’.”
Since taking over from his legendary predecessor Jack Welch only a few days after the September 11, 2001 terrorist attacks on the US, Immelt has wrought a degree of change inside GE that’s often overlooked or disregarded.
With the soon-to-be-completed divestment of most of its financial services business, Immelt will have sold about 65 per cent of the assets he inherited from Welch, exiting television and the appliance operations, among other things.
Further, 70 per cent of GE will be offshore, instead of 70 per cent inside the US under Welch.
It’s indicative of the importance of the industrial internet to GE that Immelt feels it’s the most important project in his decade-and-a-half as CEO.
The scale of the opportunity is clearly important to him, and one of the reasons he’s decided to take it on. As recently as 2004, GE was the most valuable company on the planet, with investors prepared to pay an extraordinary premium for the personality cult of Jack.
Under Welch, GE traded at a monstrous multiple of 50-60 times earnings, with half the company’s earnings coming from a finance business.
The collapse of Lehman Brothers in 2008 permanently erased the pre-crisis halo of non-banks, leading to GE significantly underperforming the market over two business cycles.
Immelt, however, is developing a spring in his step, with GE stock up about 20 per cent since the start of the year compared to a flat industrials sector.
Not surprisingly, he sees the recent emergence of activist shareholder Nelson Peltz, who shelled out $US2.5bn for a 1 per cent stake in the group, as validation of GE’s industrial internet strategy.
Peltz’s Trian Fund Management has never made a bigger investment, and it now ranks as a top-10 GE shareholder.
“We like long-only investors who know the company; he underwrote GE for what we are,” Immelt says.
“I’m absolutely certain now that there’s going to be immense value created out of the industrial internet in the next five-10 years.
“But now the focus is back on us, which means I have a different fear. “A few years ago I was spending all this money thinking: ‘Is this a good idea?
“The challenge now is: ‘How do we win?’”