(2018-08-20) Why Ge Digital Failed

Alex Moazed: Why GE Digital Failed. The cloud of negative news surrounding the company these days stands in stark contrast to this grand vision. GE has hit a rough patch in the past few months after missing earnings. And John Flannery, the new CEO, has indicated a new set of priorities for the 100-plus-year-old industrial giant. Does this mean that the efforts of GE Digital, the business unit in GE responsible for digital transformation, have failed? Yes, unfortunately, it does.

GE's digital transformation efforts have been ongoing for many years, dating back to 2013 with references to Predix, which GE intended to be its software platform for the industrial internet.

In 2015, GE announced the creation of a new business unit, GE Digital with a CEO, Bill Ruh, who was previously the VP of GE Software

Despite its grand aims, in practice GE Software was created as an internal development shop.

Much of the revenue GE Software was generating came from billing other GE business units, not external customers.

Yet at the same time, GE Digital was given a P&L and had to make quarterly commitments on performance.

So when Predix integrated with a new partner, the focus was usually on generating short-term revenue and not long-term value to GE's end customers.

GE Digital started selling its services to outside industrial companies, offering to help them on their own digital transformation journeys. GE Digital also became a consulting firm. Returns on these efforts were reportedly mixed

True digital transformation is about rethinking your current business model for the 21st century. The process is not just about adding technology to the existing model

Even more challenging, true digital transformation will almost always fail if executed from within the organization. Why? Because the change is so disruptive that the existing organization chokes it off.

Making GE Digital its own business unit was a step in the right direction, but it also inherited the roles and responsibilities of GE Software. Digital transformation initiatives don't need thousands of people. They need a small team with very little time and very little money

For another example of this failing approach to digital transformation, see Walmart's initial Walmart.com Marketplace.

Lastly, digital transformation initiatives need to start small.

What's next for GE?

A platform business could gain a lot of traction in two particular areas: health care and the smart factory

For these initiatives to succeed, GE Digital will need to be unchained from its current structure. Shackled to a quarterly P&L, it will continue to be unable to make the kind of long-term investments and strategic decisions needed to capitalize on these opportunities.