Reports surfaced on July 30 that General Electric (GE) has contracted an investment bank to auction off the company’s GE Digital unit.
When former CEO Jeff Immelt aimed to diversify GE into the software space to take advantage of the synergies between Internet of Things (IoT) and the company’s industrial machinery footprint, GE Digital was created. The unit got some things right. It was one of the first IoT vendors to message the importance of operational technology (OT) inside the IoT technique, emphasizing that IT vendors couldn’t do it alone. It was also one of the first companies to highlight the digital twin, allowing engineers to run simulations or see the effects of an asset via its digital doppelganger, a technique now utilized by most IoT solution companies. It also promoted the idea that almost everywhere across a customer’s organization, from light fixtures to robots on the manufacturing floor, the addition of IoT could deliver insight. The unit carved the path forward for its OT peers, most of which were fast followers that gained an advantage by first witnessing GE’s successes and challenges.
TBR believes there were a few missteps. GE Digital made one of the more fatal mistakes among early IoT companies caught in the hype wave: It advertised that it was able to provide solutions for everything from manufacturing to healthcare and from utilities to transportation. It is understandable that GE Digital wanted to mirror GE’s wide industrial reach, but it led to a jack-of-all-trades, master-of-none messaging. In actuality, GE Digital likely focused on its Oil and Gas, Manufacturing, and Energy and Utilities segments, however, TBR believes the pivot to specialization in specific industries was too late.
This phenomenon of overextending can also be seen in the mechanics of Predix, which was marketed as a broad, do-all, edge-to-cloud platform with analytics. In reality, Predix was a do-all generic platform that needed a lot of expensive customization and developer time to build tailored solutions for customers. Because of this complexity and platform breadth, GE Digital had problems messaging what it was best at and how it could help customers. We believe the company overemphasized the platform’s wide set of capabilities and underemphasized packaged IoT applications that solved real business problems. Ultimately, messaging of the platform got mired in discussions of technical features and functions, rather than the outcomes and differentiation of the company’s analytics and platform versus those of competitors such as IBM.
However, what tripped GE Digital up the most was that it wasn’t a great partner in a market that thrives on partnerships. Large IoT deployments will often have a multitude of vendors involved, all with expertise in a specific component of the holistic solution. Instead of focusing on enhancing areas where IT companies are weak, such as OT knowledge, GE Digital tried to do IT and OT. Because GE Digital wanted to do it all, it didn’t play as well as it could have with IT companies boasting deeply established roots in customer companies.
GE’s initial go-it-alone stance also had the company building from scratch, with its tools, such as analytics or cloud platforms, and feature sets always playing catch-up with IT companies that have been building these technologies for decades. For example, GE Digital initially tried building out its own cloud services mirroring Amazon Web Services (AWS) and IBM Bluemix. It ultimately ended up partnering, but we think the company’s initial focus on creating a PaaS cloud kept the company bogged down in services that didn’t add a lot of value. Ultimately, GE Digital proved to be an unattractive partner to bring into an IoT solution, and its platform failed to differentiate it enough to remedy partner apprehension. The platform was also much more expensive to build from scratch than just partnering with peers, making running-at-a-loss GE Digital look like a huge drag to GE leadership, which ultimately sealed its fate.
Where are GE’s Predix assets going? It’s hard to say for sure. As my colleague Ezra Gottheil noted, GE Digital announced it was standardizing on Microsoft less than two weeks ago. Microsoft has been looking for ways for Azure to outpace AWS in IoT and other emerging technology, and being a long-standing IT company, improving its OT expertise would make it more attractive in the industrial space. Perhaps Microsoft, or a Microsoft partner, such as Rockwell Automation or ABB, may be a purchaser.
TBR is seeing other large OT companies, such as Siemens, thrive as they focus on their strengths as OT-whisperers and enhance, not compete with, IT brethren. We are also seeing vertically specialized small ISVs pop up, in the OT and IT domains, that are focusing their expertise on a narrow set of business problems and are being brought in as essential partners. GE Digital blazed the trail for these peers, but also became a cautionary tale for those following in its wake: Enhance partners, don’t compete; be interoperable, not closed; message and provide expertise in your strengths, don’t provide a broad generic solution.