The POWER Interview: New Directions for GE Digital
Credit to Author: Sonal Patel| Date: Thu, 12 Dec 2019 14:14:45 +0000
The post The POWER Interview: New Directions for GE Digital appeared first on POWER Magazine.
In a recent conversation with POWER, GE Digital CEO Pat Byrne discussed why GE made key changes to the lucrative business, streamlining it to focus on four key markets, including electric utilities and power generation.
(To learn more about how digitalization is transforming the power industry, register now to attend POWER and Chemical Engineering’s upcoming Connected Plant Conference, which will be held Feb. 25–27, in Atlanta, Georgia.)
GE has been at the forefront of the innovation in the energy sector since Thomas Edison formulated the essential requirements for an electrical distribution system and formed the Electric Light Co. in 1878. Leveraging foundational technology changes that have characterized modern history, and driven by material value creation and a sustained competitive advantage, the company has shaped some of the basic machines and components that power plants house today.
That’s why it is no surprise that by the start of 2010s, the company was already contemplating how the age of industrial internet of things (IIOT) would reshape key markets. The company’s own transformation into a “digital industrial” company came soon afterwards, when it began investing in digital capabilities and pursuing new business models. In 2011, for example, it announced a $1 billion commitment to develop industrial software and analytics, and in 2013, it launched Predix, its first software platform for IIOT.
In 2015, though overshadowed by its massive acquisition of Alstom’s power and grid business, it formally created GE Digital in an effort to bring together all of the company’s digital capabilities, including GE’s Software Center, its global IT, and commercial software teams. And by 2016, the business had amassed more than 1,500 employees at its head offices in San Ramon, California, swelling to accommodate a series of acquisitions, including of asset performance management (APM) software and services company Meridium, data intelligence company BitStew Systems, machine learning firm Wise.io, and cloud-based field service management company ServiceMax.
But in 2017, even as the buzz around digitalization in the sector amplified, owing to weak earnings, GE stripped spending on Digital. By July 2018, media outlets were reporting that GE was on the lookout for a buyer for the business. Finally, in December 2018, in an effort to give the fledgling business a lift in a fast-moving and highly competitive market, GE announced it was considering plans to establish a “new, independent company” focused on building a full IIOT software portfolio. GE intended to furnish the company—which it would wholly own but equip with its own identity, equity structure, and board of directors—with $1.2 billion.
But this July, GE again shifted direction, moving instead to retain the business as part of GE. As its first order of business, it put Patrick Byrne, a digital industry veteran and former Fortive executive, at the helm of GE Digital. As Byrne told POWER in mid-November, the lucrative business will sharpen its transformative potential and keep its focus on four key markets, including electric utilities and power generation. The directional shift will give the GE a “clear market focus” and position the company to use it strength of “deep industrial domain knowledge to deliver compelling value,” he said.
GE Digital CEO Pat Byrne
The interview, edited for clarity and conciseness, follows.
POWER: You just wrapped up your first 100 days as the head of GE Digital in what has clearly been a transformative period for the business. What have you been focusing on?
GE Digital CEO Pat Byrne: Yes, I joined on July 1, and I’ve been spending a lot of time with customers and with employees learning the business, understanding the key opportunities, working on strategy, putting in place the organization, focusing on execution. Really, I wanted to make sure I understand customers’ priorities, both short and long term—what are some of the challenges customers are facing, how are they prioritizing their digital transformation.
There’s no question, as I talk to customers, just how strong the GE brand is. GE, of course, has tremendous brand equity and value with customers that go beyond Digital. We’re a powerhouse of engineering capabilities. We’ve been in these energy markets for decades, and we really bring tremendous technology, talent, commitment, innovation, [and] long-term contribution.
So, as I go out to see these customers and I understand where they’re going on their digital business, it’s really clear: Every customer I talk to has a digital transformation agenda. They are working at how to use digital technologies to improve their operations, to enable them to optimize their business more effectively, get themselves better data so they make better decisions. And so, digital is on the agenda of everybody that I talked to—and I’m talking to everybody from people that are operating power plants, people operating grid networks, and executives in those organizations. It’s clear, also, that GE is a key partner for these customers, and as I’ve let the team know, of course, we’re staying inside GE and retaining the name GE Digital. It’s a strong name, and GE is really the right place for this business.
POWER: GE Digital recently announced a streamlined focus on key markets. Why was this important?
Byrne: So, the other thing that I really looked at in the first 100 days was what markets are we particularly advantaged in, where should we be focusing our efforts. One of the key things about the way this business works is the deep domain expertise. As I interact with customers, the first thing on their mind is “Do you have domain expertise? Do you actually know these markets? Do you know how I think about digital transformation if I’m a customer?”
So, I think domain expertise really matters. In examining our deep domain expertise, there’s really four markets [in which] we have deep domain expertise. The first one is power generation. Of course, we have a large gas turbine business, but we have steam, coal, nuclear—we’ve been in these businesses a long time. We know a lot about power generation. We’ve invested a lot in digital twin technologies in this area. We have a significant installed base, both at the asset level, as well as at the balance of the plant level in generation. So this is a clear area of focus. We have a strong team that works very closely with the larger generation businesses in GE.
The second place we have a strong position is in grid operations, and really deep domain expertise. It actually comes from both the Alstom acquisition and GE, and it’s really created a capability and technology [centered] on operating grids. We have a really good business and many customers who’ve been with us for decades. The third is in oil and gas. We have an engineering team and a sales team that really came up through the Meridium acquisition—we’ve brought them back in the business from Baker Hughes when that business split, and we have a strong team focused on oil and gas. We think that’s a significant opportunity for asset performance management (APM) going forward—to operate and analyze and optimize those assets.
And then the fourth market we have a strong position in is basically digital manufacturing—the digital plant. Underlying each of these markets is our strength in the Predix platform. It’s deployed in three of those four markets. Grid doesn’t have Predix deployment other than through APM, but the other markets are all supported by our platform investments.
As I’ve tried to examine the strategic strength of this business, I’ve been trying to understand where their real strategic density [lies]—where you get the combination of factors that creates an advantaged position. I believe our advantaged position—where we are really very strong—is in a combination of this deep domain expertise: We know the vertical markets, we know the assets, we know the workflows, we know the business processes. The second thing is, we have the ability to deploy these solutions for the customer at what I would call the “point of impact.”
Customers are going through this digital transformation where they want to apply digital technologies into their operations. And so, a winning company needs to be able to engage with those customers in their operations and effectively deploy the technology. And customers are looking for partners like us who can, with speed and simplicity, integrate it to their workflows, and with scalability, actually get the technology to work in their operations. [That’s why] that combination of deep domain expertise plus a deployment capability on a global basis is a very power combination. The third thing that we really add is scaled software. This software that we’ve got has been tested in operations really for years now, with hundreds of customers, and therefore it’s a very proven and scalable software base.
POWER: We often talk about digital transformations as sort of a phased process, defined by this idea of the “digital journey.” Where are your customers on that journey today?
That’s important to understand. Are we at the beginning, the middle, or is it mature? Who are the people who are just now starting and where are they located. And what’s really compelling about digital transformation? Also, what are the barriers to digital transformation?
I think we’re still early in digital transformation. We’re in the first part of the market. There are hundreds of customers in our markets on that journey, but we’re still relatively early in terms of the maturity of their operational capability to take advantage of the data. The second thing I say is that you see people across different spectrums investing in this, and the thing that I’m seeing is both large- and medium-sized companies are still relatively early in their journey. Some, of course, are more mature than others.
There’s some real leaders here—but it’s still relatively early. One of the barriers, and the thing that I’ve seen is that most customers believe that the digital transformation is taking longer than they want it to. It’s taking several years, they’re wanting to get a hard return on investment (ROI) in a matter of less than a year. They’re really looking for somebody like GE to come in and help them templatize, create policies, create standard work that can be adopted. So to the extent that we can help them adopt the technology and generate a return and reduce the operating costs, improve the asset lifetime, in a way, is very practical. Because I think what we’re seeing is that there’s people that have adopted digital technologies but really haven’t gotten the ROI they would have wanted—and a lot of it is because of their own organizational capabilities.
That’s not to blame our customers—they are busy and have limited resources as well. Lots of customers are looking for a partner like GE that can come in with our technical capability, with our domain expertise, and really accelerate digital transformation. It’s a broad-based opportunity for all the reasons of lowering operating expenses, approving asset lifetime, being able to do outage planning more effectively , being able to take advantage of upgrades in the generation marketplace. These are all places where digital is entering and making a difference.
POWER: What does a company who has reached “maturity” in their digital transformation look like?
Byrne: Clearly customers are prioritizing things to invest in and they have a roadmap [that essentially focuses on three things:] to be able to operate, and then analyze, and then optimize. [To achieve that, a company] would need to have predictive analytics to be able to operate the assets effectively. That foundation has to be in place. Then you have to be able to analyze those [assets] to be able to make better decisions on asset lifetime, on planning for outages, on really deciding on how to run the assets. For example, a lot of generation assets now are really in a world where there’s more and more renewables on the network, and they have to be peaked more. It could be a real challenge in terms of being able to analyze that. Then they want to get to optimization, [which entails asking,] how do you optimize the overall plant performance? How do you optimize your workforce? How do you optimize your business? So, for example, you could take the data and use it to look at the next day’s energy demand and really be able to plan the next day’s operations based on the analytics that you have about how the assets are running. Companies are doing some of those things. They’ve got pilots and are working on those things.
The other sign of maturity is you can leverage the data outside of just running the asset. You can leverage it across your enterprise, and you can use it for other departments, and that’s I think going heavy down the roadmap. But I believe the starting point—the way to think about this is the frame we’ve talked about—is to operate, analyze, optimize, and that’s the journey on which a lot of customers are in their roadmaps.
POWER: Last year, GE mulled creating a new independent digital company to take advantage of the fast-growing digitalization market. Does the decision to keep GE Digital within GE, and its sharpened focus on the four key industries, limit its customer base to GE customers?
Byrne: Well, these four industries are more than GE customers. Let me be specific. Grid customers are largely GE customers, although some some customers are outside areas where GE may not have as big a footprint. The power business is very aligned to GE’s assets, but we’re operating above the asset in Digital. … So, think about this as, yes, it’s the same customers in that space, but the digital footprint goes beyond GE assets. And you really couldn’t really ask for a better business card to call on the power market than a GE business card. I think we’re in all the power markets we wanted to be in because of GE’s footprint.
Turning now to oil and gas, this is a market GE used to be in with Baker Hughes—but it’s a big market. That’s a market GE isn’t in, but we are with our digital business. The digital manufacturing business is all outside GE customers: those are consumer packaged goods companies, automotive companies, for example. So I would say that in several of these cases, we’re selling beyond GE’s assets, and we really like these markets. I believe if you’re going to count on domain expertise being an advantage, then you really need to understand where your domain expertise is strong, and these are four markets we think are strong, and where we think we can build and sustain a strong business. And they give us plenty of runway to grow.
POWER: GE’s own digital journey has come a long way since its launches of the Predix platform in 2013, and the Digital Power Plant in 2015. What is GE Digital focusing on today as it relates to the power industry?
Byrne: We’re investing a lot in our APM—asset performance management—technology. It’s really the cornerstone of our offering. We’re investing, for example, in what we call APM integrity, which really is focused on inspection planning and auditability, compliance management. When I go talk to customers, having a system of record that supports audibility and compliance in a regulated environment is important to them. As I said, we’re investing in the ability to templatize and create policies customers can adopt—and these are service offerings where we can go in, really go into an operation, a whole plant, and help customers build the model for reliability from the underlying assets. It could be making hardware sensor measurements, or using predictive analytics, or it could be taking other data or usage data, and incorporating that to an overall model that allows people to be able to do asset reliability in health analytics way beyond what they’ve done in the past—far more accurately, and far more comprehensively. What this does is that it reduces the time it takes for customers to get value from APM.
We’ve done work on APM strategy, where we enable customers to use their analytics to be able to do nextday operations planning. We really believe the APM platform is really strengthening that in terms of capabilities. Its enabling it to be deployed more effectively. Leveraging the dataset to allow for optimization is really the cornerstone of where we continue to innovate.
We’ve also done a lot of work on grid analytics. For example, we’ve done storm readiness analytics, where we can predict, based on seven years worth of data, how a storm will form in an area, and customers can then use that to plan the most likely vulnerabilities and plan where the trucks need to roll. We’ve also done some really great analytics on inertia management on the grid—we call that one “Effective Inertia.” And the third one is network connectivity, which is really helping customers understand, at a higher level, how their network is connected and how it recovers, and be planned for peaks in demand. And so this portfolio of analytics offerings … is really highly innovative for grid operators.
—Sonal Patel is a POWER senior associate editor (@sonalcpatel, @POWERmagazine).
The post The POWER Interview: New Directions for GE Digital appeared first on POWER Magazine.