GE’s Jeff Immelt on digitizing in the industrial space McKinsey Company

Summary

The transcript discusses the digital transformation of industrial companies, using the example of a jet engine with sensors generating massive data. The company's decision to embrace analytics as core to its future is highlighted, akin to material science's importance in the past. The speaker emphasizes the need for internal change, including hiring data scientists and altering business models to compete in the industrial internet space, aiming to capture value from digitization and drive productivity.

Takeaways

• 🌐 **Evolutionary Digitization**: The company's shift to digital was not a sudden decision but an evolution driven by the industries and technologies they serve.
• 🚀 **Data-Driven Industry**: Modern industrial equipment, like jet engines and locomotives, generate vast amounts of data, making industrial companies part of the information business.
• 📈 **Analytics as Core**: The company views analytics as a core competency, just as material science has been over the past 50 years, and plans to integrate it deeply into their operations.
• 💡 **Business Model Transformation**: The company is considering changing its business model to better leverage the data and analytics, similar to how IT companies operate.
• 🔄 **Decision to Go 'All In'**: They have decided to fully embrace analytics rather than outsourcing, aiming to be at the forefront of the industrial internet space.
• 🛠️ **Building In-House Capabilities**: Instead of acquiring or partnering, the company chose to build its own analytics capabilities, starting with a center in California.
• 🚆 **Impact on Customers**: For instance, increasing the velocity of locomotives by just one mile per hour can significantly impact profits for rail companies.
• 💼 **Internal Changes**: The company is focusing on internal changes, including hiring new talent, altering business models, and embracing a digital culture.
• 📊 **Revenue from Software**: They have seen revenue growth from software applications, aiming for a digital thread from engineering to the installed base.
• 🌟 **Dual Strategy**: The company is pursuing being both a platform and an application company, offering a platform for customers to build their own applications.
• 👥 **Cultural and Talent Shift**: Recognizing the need for a different type of talent, including product managers and salespeople, and the importance of blending new hires with the existing team.

Q & A

What is the significance of digitization in the industrial world according to the speaker?

The speaker emphasizes that digitization in the industrial world is not a choice but an evolutionary necessity driven by the technology and industries they serve. It's about leveraging data from sensors in machines like jet engines or locomotives to optimize performance and efficiency.

How much data can a single flight between New York City and Chicago produce?

A single flight between New York City and Chicago can produce a terabyte of data, highlighting the vast amount of information generated by modern industrial machinery.

What is the company's stance on handling the data and analytics in-house?

The company has decided to be 'all in' on analytics, treating it as core to the company's future as material science has been in the past. They aim to evolve their business model and service agreements to share outcomes with customers, similar to how IT companies operate.

What was the company's approach to building its analytics capabilities?

The company chose to build its analytics capabilities internally rather than through acquisition or partnership. They brought in talent from outside, built a center in California, and started developing applications with customers.

How does the company plan to integrate digital technology into its service business?

The company is integrating digital technology into its service business by building applications that can improve efficiency and productivity. They aim to push these applications back into the company to improve internal operations as well.

What is the potential impact of improving locomotive velocity by one mile per hour for a company like Norfolk Southern?

Improving the velocity of a locomotive by just one mile per hour, from 22 to 23 mph, could be worth $250 million in annual profit for a company like Norfolk Southern, demonstrating the significant financial impact of analytics in industrial operations.

What is the company's strategy regarding its digital platform and applications?

The company is pursuing a dual strategy of being both a platform and an application company. They have developed a platform called Predix and are building applications on top of it. They are also opening up their platform to customers to encourage them to develop their own applications.

How has the company's approach to hiring and talent acquisition changed due to digitization?

The company has significantly increased its hiring of data scientists and other technology professionals. They are also changing their product managers, salespeople, and on-site support to align with the new digital focus, and are recruiting differently, including looking for different skills when hiring from college campuses.

What internal changes is the company undergoing to adapt to the digital age?

The company is undergoing a cultural simplification, reducing layers, processes, and decision points. They are embracing Silicon Valley tools like fast works, and are democratizing information within the company with contemporary IT tools and a mobile-first approach.

How does the company view the importance of digitization in the current era for industrial CEOs?

The company views digitization as the most critical issue for CEOs in the current era, suggesting that failing to embrace it could lead to significant competitive disadvantages and missed opportunities for value creation.