By Ted Mann and Thomas Gryta
In early 2014, the High-Impact Innovation Team in General
Electric Co.'s Connecticut headquarters received an urgent call: It
was time to present one of their apps to Jeff Immelt. The chief
executive had an expanding interest in tech, having promised an
"industrial internet" that GE would help build for the world.
It was the job of the HIIT team to develop apps for use within
the company -- such as an iPad app to connect lighting engineers
with the lighting sales force, and a web-based application for
employee performance reviews. The division's public relations staff
pitched the team's innovations to the business press.
Employees jumped at the chance to show Mr. Immelt their hard
work, reinforcing his vision of overhauling the conglomerate in the
image of a software skunk works. But in 2014 there was a small
problem: the app in question wasn't built yet. The team had digital
design files -- mock-ups of the way the program might eventually
look -- but nothing running on a real machine to show the longtime
Supervisors waved away these concerns. One employee was told it
was time to "fake and bake." Designers in Fairfield went to work
animating flat visual designs, inserting enough movement to give
the appearance, for the duration of one PowerPoint presentation for
the boss at least, of an app that worked.
Word came back the next day. Mr. Immelt loved it.
The CEO wanted GE to be known around the world for more than
just jet engines and MRI machines, power plants and nuclear
reactors. Deep costs, employee confusion and delusions about what
it would take to reposition the company for a digital future would
make it more difficult to turn Mr. Immelt's vision into a
profitable business, according to former board directors, GE
executives and employees.
A representative for Mr. Immelt said funding for the digital
business came from cost cutting elsewhere in the company and Mr.
Immelt knew building a digital business would be difficult. In
response to Mr. Immelt being shown a simulated app, the
representative said, "Jeff Immelt also doesn't know how to design a
turbine blade, but he helped build one hell of a jet engine
Mr. Immelt stepped down as CEO in 2017, as GE's stock began a
multiyear decline from which it has yet to recover. The board has
since fired Mr. Immelt's replacement in favor of a new CEO,
replaced executives and company directors, and jettisoned portions
of its industrial portfolio to focus on reviving its core
businesses, including power turbines and aircraft engines.
A GE spokeswoman, when asked to comment about this account of
GE's digital ambitions, said "we are focused on our future --
strengthening our businesses, serving our customers, and driving
long-term value for our employees and shareholders."
A Massive Experiment
To Mr. Immelt, the future of industrial companies was in
software and hard-core computing. Even now, that vision is widely
considered to be correct and other industrial company leaders,
including those who laughed at GE initially, are increasingly
following the same path.
As technological innovation shrank the size and cost of digital
sensors, they would be embedded in more machinery of every
conceivable type. Huge streams of data would be harvested, not just
from smartphones and WiFi-enabled thermostats, but from the massive
machines at the center of the developed economies around the world.
Data could be captured from gas-fired power turbines, jet engines
on passenger aircraft, MRI machines and sonograms, the rumbling
diesel-electric locomotives hauling freight across the American
plains or down the core of the Indian subcontinent from Delhi to
Mr. Immelt said GE would know best which data to gather and how
to interpret their meaning because it knew the machines. Its staff
designed and built and repaired them for decades. They knew how
they worked, and when and why they failed. Engineers empowered with
the right digital tools could begin to learn new things from their
own machines, the CEO said. "Big data" would help GE better predict
when critical parts in engines and turbines were likely to wear out
and break. These applications would run on a GE-developed software
platform called Predix, which would reside in a new division: GE
In meetings of the GE board of directors, these grand plans
received a blessing of silence, according to people close to the
decisions. The board, made up of current and retired business
executives and academics, liked Mr. Immelt and didn't like to
challenge him. They appreciated his gargantuan work ethic, his
optimistic spirit, and his eagerness to articulate far-reaching
visions about the company's strategy.
A representative for Mr. Immelt, who also served as GE's
chairman, said the board was regularly briefed about the digital
The board tacitly blessed Mr. Immelt's digital dreams and his
plans to stand up a software company inside General Electric, but
never decided -- much less voted on -- a critical question about
such a massive experiment: How much money were they going to spend
The Selling of GE Digital
The marketing of GE Digital was just as important as turning it
into a viable business, if not more so.
That job fell to Beth Comstock, who had a taste for black
leather biker jackets and a gift for lofty rhetoric that belied her
Ms. Comstock had spent her career in media relations, rising
through NBC to the corporate parent, when Mr. Immelt tapped her to
be GE's chief marketing officer in 2003. The company hadn't had
such a position for two decades. She rose to become a vice chair of
the company, molding her own brand as a change maker who was
rethinking the American icon. The digital operation was no
A series of broadcast television spots introduced a young
computer programmer, the titular Owen, who informed increasingly
perplexed groups of his friends and family that he had taken a
software coding job -- at General Electric. The Owen ads spoke to
some of the truth of GE Digital. Notwithstanding some claims that
GE was making to investors about its success in luring young
programmers away from jobs at Facebook or Apple, in fact, outside
recruiters said, the response in Silicon Valley had been not unlike
Owen's fictional brunch table.
In time, "digital" suffused the company's vast marketing
operation, the adjective having swollen to crowd out all others in
everything from Mr. Immelt's public speeches to Ms. Comstock's PR
work. The communications office revised the boilerplate attached to
every press release, the corporation's description of itself, to
pronounce GE the world's first "digital-industrial" company.
Ms. Comstock declined to comment.
Mr. Immelt proclaimed in 2015 that GE would be a "top 10
software company" by 2020, with $4 billion in annual revenue from
its new Predix software alone. GE Digital reported revenue of $3.6
billion in 2016, largely from operations in its industrial units,
and targeted $15 billion by 2020. But the pledge to turn General
Electric into a major software company was slightly more
challenging than Mr. Immelt had made it sound.
Some executives at the company thought the obvious answer was to
form a partnership. There were already massive, global companies
that for decades had been building a software infrastructure to
host and influence virtually every aspect of human life,
communication, and business. Google. Oracle. Microsoft. Amazon.
GE's knowledge of the machines it made and the needs of its
customers was unmatched, but that didn't make it the most obvious
candidate to construct the scaffolding of code on which the
"industrial internet" would rest.
GE first launched Predix in 2013, calling it a
"first-of-its-kind industrial strength platform that provides a
standard and secure way to connect machines, industrial big data
It was perhaps telling that as GE rolled out a product it
claimed would change the way industrial machinery and major
economic sectors operated, the company's executives couldn't even
agree on how to pronounce it. Mr. Immelt extolled the potential of
a product he pronounced as "Pree-dix," sometimes then turning over
the microphone directly to an executive whose version sounded more
like the verb "predicts." GE Digital was on track to spend $5
billion by 2016, according to people close to the operation -- a
massive sum even by GE standards, equivalent to about half the
R&D budget for a new, clean-sheet jet engine.
Saluting the Flag
GE didn't just pour money into Predix -- it smothered the
project with cash. But without a coherent strategy and
well-thought-out processes, the product development path was a
wasteful one, according to former executives at GE Digital and
corporate headquarters. GE's plan to move fast, produce a viable
product, and then perfect it in the field got bogged down partly
because of the size of the effort. GE hired armies of new employees
and gave them all the resources they wanted to build its vision. It
was like an auto company building an assembly plant, hiring
workers, and leaving them standing on the production line, waiting
for the vehicle to be designed.
Instead of charging a small team with developing the best
product and then letting the operation grow with the product's
evolution, GE set up a huge organization that wasn't quite needed
yet. Development was often paused or delayed to start the process
over entirely or just to stabilize the systems. Leading executives
said the digital operation was designing custom software for
individual customers -- inverting the usual industry model of
engineering a single piece of software that can then be sold and
resold, recouping the cost of its design and reaping profits.
Inside GE, there was pressure from corporate management to use
the software and to show results. While some divisions were
hesitant to commit to adopting a software program that needed a lot
of work, others were quietly going in a different direction to
develop their own software tools. Mr. Immelt pushed back on those
business leaders, exhorting them to stop complaining. As one
executive said, "There was a lot of talk of saluting the Predix
Naturally the marketing and sales teams were concerned that
potential customers would see that GE wasn't even using its own
software. A representative for Mr. Immelt said he "felt GE could
only be successful by reducing duplication and building scale."
Squadrons of salespeople had been deployed to sell the vision,
but what customers wanted to see was the proof behind the concept.
However, there was little to show. Once again, the marketing was
ahead of the product. In fact, the sales teams weren't even
entirely confident about what their product could do, according to
former executives. Instead of hawking GE's lineup of products and
services for a given market they knew, they pitched customers on a
deep analytic software platform that was hard to understand and
harder to explain.
No Turning Back
As the problems deepened, it appeared to executives that no
turning back would be allowed. In a meeting of GE senior
executives, one questioned whether it even made sense to move
forward with Predix. Mr. Immelt fumed at the suggestion of
abandoning the work and quickly nixed the proposition, making it
clear that the direction wasn't up for debate and the marching
orders were still the same: go build it.
GE wanted the system to work with everything, so customers
around the world could just connect to GE equipment and go.
Engineers were concerned, however, that even though Mr. Immelt and
upper management were sold on the Predix idea, management's lack of
understanding of software development would hold back its growth.
GE also planned to build its own data centers.
The idea was to have a GE-owned and -operated cloud for its
customers' data, but building such an operation from the ground up
would be hopelessly slow to achieve and wildly expensive. Besides,
companies like Amazon and Microsoft were already pouring billions
into providing just such services to other businesses. Why would
GE, arriving late to the business, try to duplicate their
There was also the simple problem of trying to put a lot of
things on the same platform. Engineers found that the tiny sensors
in GE's machines produced tons of data, but since they used
distinct coding on systems spread throughout GE's global
businesses, putting everything on the same platform made the
functioning of the apps excruciatingly slow.
At the same time, GE's venture capital operation bought stakes
in companies that developed various tools that could be used with
Predix. The deals added new capabilities to the division, but they
also made the conglomeration of Predix's code even messier. The
result was software with plenty of bugs, a difficult user
interface, and none of the requested features.
Finding itself unable to compete, GE would eventually shift its
strategy. After Mr. Immelt left GE in 2017, new CEO John Flannery
quickly declared that GE Digital would be more focused and only
work in industries where GE was present. Mr. Flannery was fired in
2018 and his successor Larry Culp sold part of the business and
named a new CEO to turn it around.
The company doesn't currently disclose financial results for the
unit. Earlier this year, Mr. Culp said the digital business was
"getting close to break-even."
Adapted from "Lights Out: Pride, Delusion, and the Fall of
General Electric," written by Wall Street Journal reporters Thomas
Gryta and Ted Mann. The book is to be published by Houghton Mifflin
Harcourt on July 21. Copyright (c) by Thomas Gryta and Ted Mann
(END) Dow Jones Newswires
July 18, 2020 00:14 ET (04:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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