Rebuilding GE into a digital powerhouse

LONDON – An aircraft powered by one of its engines takes off somewhere in the world every two seconds. In the United States, six of its light bulbs are sold every second. It employs more than 300,000 people in 175 countries.

And it is the only company to have been a member of the Dow Jones index of the US’ 30 biggest companies since its inception in 1896.

General Electric — born from Thomas Edison’s first electric-light company in the late 1880s — is one of those companies most people have heard of, but few could tell you what it does.

GE is the original conglomerate, a sprawling industrial behemoth whose tentacles stretch into almost every sector imaginable, from making railway signals to designing MRI scanners, from producing wind turbines to helping drinks companies make their production process smarter.

So why then was Mr Jeff Immelt, GE’s chairman and chief executive, standing on a stage in San Francisco early last week, telling an auditorium of digital natives that GE is on track to become a top 10 software company?

The answer lies in the way that 59-year-old Mr Immelt has been working to transform GE since taking the helm at the Connecticut-based company in 2001, a transformation that has been spurred by the financial crisis and his attempts to diversify GE yet further.

The digital project began five years ago, he recalls during a half-day visit to London a few days before the Minds and Machines event in the Californian city last week.

“I didn’t go to bed one night and wake up and say ‘We want to be Oracle’,” he laughs. “It’s happened over the last five years, so it hasn’t been sudden.”

The thinking, he explains, is that as the industrial world and the digital world increasingly collide, so GE should be at the centre.

“We’re believers that you’re going to get this intersection between the physical world and the digital world, it’s going to happen in the industrial space, and we want to be the leader in that.

“There are 100 sensors in a jet engine, there are 500 sensors in a locomotive, pulling in an incredible amount of data,” he explains.

“To be a successful industrial company, you’re going to have to be good at software and analytics. So, we put our stake in the ground and invested massively to build our own capability.”

And build it has. Mr Immelt, whose father used to run GE’s aviation division, used last week’s conference to unveil plans to launch an app store by the end of the year. Not the sort of app store that Apple runs, but one that will distribute apps to help manufacturers and companies understand the machines they use.

At launch, Mr Immelt is hoping to have 5,000 apps available, but is targeting 50,000 in the medium term.

Those apps will include a new technology to reduce unplanned downtime in machines by between 10 and 20 per cent, and a firewall technology for gas, steam and wind turbines.

“It will mean we’re completely connected to our customers. We’ll be much faster in terms of our culture and it will mean that we’re not self-contained, as we’ll be part of an eco-system that contains our customers and maybe even our competitors as we go forward,” he said.

Rather than build its digital skills via major acquisitions — as many large companies have tended to do — Mr Immelt insisted it should be largely built from the ground up.

GE employs 15,000 software engineers — just 5,000 shy of the number employed by Google — and this is a figure Mr Immelt is keen to see rise.

He knows he has put GE in competition for talent with the mainstream technology giants and the plethora of start-ups for software engineers that are also looking for talented developers. But Mr Immelt says this isn’t as big a problem as it might seem.

“We can always do well hiring mechanical engineers for a jet engine. But in the space of analytics, it’s a war for talent, and talent won,” he smiles.

“You’ve got to be working on science and technology that (the engineers) want to be part of. In California, we’re actually getting people from great high-tech companies like Google and Facebook who are intrigued by what can be done in healthcare, as one example. We can recruit by doing neat things,” he said.

Culturally, this has meant changes. Given it is a company with 123 years of history, GE is known in the business world for its management layers, and Mr Immelt’s predecessor Jack Welch famously brought in the Six Sigma management process to cut errors and deliver near-perfection in its products.

However, Mr Immelt says the digital revolution is changing the way it works. “You’re going to have to train people to write applications from the moment they walk in the door — finance people, IT people, almost everyone,” he said.

“Culturally, it means driving more simplification. To me that means fewer layers, everything fast, market rules and broadly democratised information within the company, to get ourselves ready to be the kind of digital industrial company we want to be in the future.”

At the same time, Mr Immelt is refocusing the company on its roots of research and development, which are at the centre of the digital push.

“I want GE to be a place that does technology at scale. It is absolutely what makes the company distinguished and better. We do hard technological things like jet engines and gas turbines and MRI scanners, and I wanted to really emphasise that inside the company. It’s core to our competitive advantage.”

And what of Mr Immelt himself? Although he has been at the helm for 14 years, having taken over just days before the 9/11 terror attacks, it is still six years less than his predecessor, Mr Welch, and that was 10 years shy of modern-day founder Charles Coffin, who ran the company for 30 years.

“To drive meaningful change at a company of this size takes time,” he said, when asked why GE’s chief executives seem to stay at the top more than those of rival industrial companies. “Philosophically, there’s always been a sense that GE benefits from thinking long term. All that being said, the board can fire me whenever they want.”

He refers to the digital “pivot” as the “most important thing” he’s ever worked on. “I’m totally juiced about the changes,” he assured, giving no indication that he’s going anywhere just yet. The Telegraph