GE Digital CEO Shares Insights On Digital Transformation In Industrial Markets

Every company must be digital-driven to thrive

For publicly traded companies, it’s difficult to build a digital transformation strategy that spans years when investors are looking for quarterly results. To understand how large industrial companies are addressing these challenges, I spoke with Bill Ruh, the CEO of GE Digital. When asked how GE was approaching digital transformation, he replied with a simple, yet powerful statement. “If you can’t master the idea of digital inside your analog business you open the door to commoditization.” Therein lie the challenge and the opportunity for an established company in an increasingly digital era.

GE is widely credited with creating the Industrial Internet of Things (IIoT) term that describes how the industrial sectors could deliver new value by embracing digital components in a physical industry. The company has also been focused on making this vision a reality by building products in this sector for several years. For example, GE saw an opportunity to reimagine every aspect of the electrical value chain.

During GE’s recent Minds and Machines conference, the company described how its customers, such as the New York Power Authority, are changing their businesses by infusing digital technology into a physical product market such as utilities. The New York Power Authority, with the help of GE technology, now calls itself the world’s first digital utility. It has worked with GE to create a real-time digital replica of its assets and automate many back-office processes. New York Power Authority views itself as the orchestrator of a network of power generation. In other industries, such as aviation, Ruh said GE’s customer could rethink who repairs the engine, how to repair the engine and who will give advice on how to fly them. So not only are companies updating technology, GE’s customers are changing their businesses.

Your client’s business outcomes drive the transformation agenda

The previous examples led to an interesting discussion on how companies need to perceive the process of digital transformation. For GE, Ruh shared that creating an Industrial Internet product isn’t as simple as a vendor redesigning its products with new digital bells and whistles. Delivering new business outcomes for your customer is at the center of how any company should view its digital transformation efforts. For example, at GE designing technology that enables a zero-downtime environment can save a liquid natural gas plant owner up to $100M per day in lost revenue. This type of return on investment changes the value of the vendor within the network and the customer’s overall market opportunity.

For the business to business (B2B) markets, such as the industrial industries, it’s important to understand how your products will ultimately help your customer meet its end consumer’s need. A great example of this occurs in the solar market where you need to supply technology that allows the supplier to keep its costs low while providing features that deliver value to the end customer, such as information on energy consumption.

Another key take away from the conversation is digital transformation requires a catalyst because change for change sake is too hard. GE Digital has multiple business units, but its business units don’t necessarily all operate at the same pace of change. There are industries, such as energy, where the customers have an acute pain point such as falling product prices. In the areas where there is an industry catalyst, change happens faster. Find your catalyst and build solutions for that problem.

Maximizing and growing talent: A key component of any transformation strategy

To close our discussion, Ruh shared that digital transformation at GE isn’t simply a matter of just updating the technology within a company. The key to any company’s success, including GE’s, is creating the right culture and talent. A company must build a culture that brings its people along, making certain everyone makes the digital transition. It requires rethinking jobs, providing training and potentially advancing the company culture in new directions.

As Ruh said, every large company needs to be digital because established firms will never outrun startups. While a large business can’t easily compete on speed, it can compete on scale, assuming it can leverage the benefits of its size — such as brand and customer base. A company needs to bolster internal innovation by growing digital talent within the company, hiring where available and acquiring where necessary. Finally, digital transformation never ends, because leading organizations always strive to make their products easier and more efficient.

Digital Transformation: A View To 2020

Digital transformation (DX) initiatives are on the top of ever CIOs agenda. CEOs from four technology vendors shared their perspective on challenges and best practices in digital transformation during a panel session moderated by Bob Egan of The Sepharim Group at the most recent ET Exchange Summit. The panelists represented companies that provide solutions for IoT, mobility, application enablement and security. Several best practices shared during the session include:

  • Designing security from the outset to fuel DX growth. Security is a significant inhibitor of many transformation efforts. While securing the enterprise isn’t a new trend, it’s clear that security concerns have grown as companies run outdated software and connect new hardware. For example, 82 percent of the companies Lopez Research interviewed strongly agreed with the statement “security concerns have stalled our IoT deployments.” Eric Simone from Clearblade and Daniel Potts from Cog Systems highlighted the opportunity to minimize future security vulnerabilities by securing IoT hardware, middleware and software at the initial design of the solution. Sapho also noted that companies should evaluate their vendor’s security policies to prevent security breaches that could come from compromised systems at the vendor. Of course, it’s clear that companies should also be reviewing security at every layer of the technology stack from the devices through the application.
  • Modernizing and mobilizing applications and workflows for efficiency and differentiated experiences. PowWow Mobile and Sapho described how digital transformation requires companies to update existing applications and processes. Kia Benhia from PowWow Mobile said application strategies fit into one of four Rs that include retiring, refactoring, rewriting and replacing applications. First, a company should retire apps with limited utilization. Refactoring allows companies to modernize the front end without recoding the entire app. In other cases, delivering the best application experience requires rewriting the application to support new workflows and experiences. Companies should also consider replacing apps with more modern off the shelf solutions such as Software as a Service apps for CRM and finance. The challenge for every organization is to categorize, prioritize and design a plan that spans dozens to hundreds of apps.
  • Defining your DX journey. Fouad ElNagger of Sapho noted that DX means different things to different organizations but classified two broad approaches to transformation. The first class of transformation focuses on how to use technology to drive productivity gains. The second area focuses on how to build a modern enterprise for modern employees. Examples of the second type of transformation experience could include scheduling conference rooms with iPads, digital signage, improved collaboration and new customer-facing experiences. Both strategies allow a company to improve its bottom line. In fact, significant numbers are at stake even when focusing on productivity gains. For example, EINagger noted that a half a percentage increase in productivity could be worth as much as $800 million to Conoco Philips’ business.
  • Building bridges to the past. Successful DX strategies recognize that you can’t rip and replace all of the underlying systems that run the business. Modernizing applications and services requires a company to build new systems that can connect with legacy protocols and systems of record. Companies need tools such as APIs, Mobile Backend as a Service and specialized middleware platforms. DX has to incorporate standardization and integration of legacy systems. Cog Systems also noted that it’s important to lean toward automation to improve the user experience.
  • Rethinking the boundaries. Everyone agreed that successful companies must embrace change and define a broader vision of what the company than what it is today. The panel shared examples of how Ford Motor Company views itself as in the transportation business versus solely and automotive manufactured. Meanwhile, Dominos Pizza views itself as an IT company instead of simply a food purveyor.
  • Garnering executive support. Successful transformation requires change agents and evangelists at all levels of the organization. However, DX effort won’t be gain traction until the executive team commits to new projects, increasing the firm’s risk tolerance and ensuring there’s appropriate funding for transformation projects.

One thing is certain. To thrive in such a dynamic landscape, a company must have a strong digital discipline regardless of the industry they’re in.

 

This article was originally posted on Forbes.com