Forging a 'digital industrial' company

Forging a 'digital industrial' company

THE General Electric aims to boost productivity at its plants - and its customers - by transforming its engines and locomotives into intelligent devices. But the shift will expose it to stiff competition from tech groups.

General Electric's latest technology for boosting manufacturing productivity is a gadget that feels like it would be more at home in an amusement arcade or theme park than in an industrial laboratory. At the group's global research centre in Niskayuna, New York, you can enjoy the sensation of flying around its steam turbine plant in Schenectady, six miles away.

A virtual reality 3D scan of the plant, accurate to every last machine tool and piece of pipework, is projected onto a screen and special glasses. Using a PlayStation-style controller, you can move around the factory floor, swooping over assembly lines or hovering over a stack of components.

The system is a lot of fun to use, but the intent behind it is entirely practical: to allow GE's engineers to work on design, layout and workflow at its plants without actually being there. If they want to move in a piece of new equipment, for example, they can use the simulation to see if it will fit. The systems for collecting and analysing manufacturing data - fitted in at least 75 of GE's 590 plus factories - can cut costs by 15pc or more, say company executives.

The technology is just one part of a radical overhaul designed to transform the 123-year-old group into what Jeff Immelt, chief executive since September 2001, calls a 'digital industrial' company. At its core is a drive to use advances in sensors, communications and data analytics to improve performance both for itself and its customers.

GE's products such as aero engines, power generation equipment, locomotives and medical scanners are being made part of the 'internet of things' - intelligent connected devices that can transmit information and receive instructions - and the company is building new capabilities in software to understand and manage those machines.

The potential rewards for success are enormous for a group that has sold off large chunks of its business to refocus on its industrial operations.

"It is a major change, not only in the products, but also in the way the company operates," says Michael Porter of Harvard Business School. "This really is going to be a game-changer for GE."

If it fails, however, it could prove a decisive factor in hastening a further break-up of the group.

The power of the industrial internet of things is only just starting to be explored. Companies in areas from manufacturing to energy, transport, and mining collect huge volumes of data, but use only a fraction of it.

The power of the industrial internet of things is only just starting to be explored. Companies in areas from manufacturing to energy, transport, and mining collect huge volumes of data, but use only a fraction of it GE also aims to create an important new source of income from cutting costs and boosting productivity for other companies, even if they are not using GE equipment.

Entering this world, however, is also bringing GE new competition. In setting itself up as a software business that can help other industrial groups reap the benefits of the internet of things, GE will be taking on Microsoft, Amazon, IBM, Oracle and SAP.

"GE is drag-racing with the best technology companies in the world," says Frank Gillett of Forrester Research. "Kudos to them for trying, but I think they will find it harder than they think." Brian Langenberg, an industrial analyst who chairs the business school at Aurora University in Illinois, expects GE's organic sales growth from now on to be in line with global GDP, forecast by the International Monetary Fund to be 3.6pc this year.

The industrial internet, however, offers GE a hope of escaping that uninspiring prospect. The falling cost and rising power of sensors, communications devices and data processing mean that just about any product can be made capable of sending and receiving information and commands. The internet of things is best known today for consumer applications such as fridges that can order your groceries. The more important applications, however, are likely to be in industry.

By 2025 the economic benefits of the internet of things could be $11.1tn a year, according to the McKinsey Global Institute. It estimates that about 40pc of those benefits could come in factories and work sites such as oilfields, with transport and urban infrastructure accounting for a further 30pc.

Marco Annunziata, GE's chief economist, believes that as companies work out how to exploit the potential of the new technologies, it could unleash a new productivity revolution in industry. Since 2010 productivity in US manufacturing has stagnated, rising just 1pc a year compared with the annual 4pc growth in the previous two decades. Mr Annunziata says the industrial internet could help bring back those higher rates of growth.

"The first ICT revolution came in the 1990s: using computers as ways to gather and organise information. Now we are literally making machines more intelligent," he says. "This tying together of the digital and the physical is something we have never seen before."

He cites mining companies, under huge pressure to cut costs because of weak commodity prices, as an example of businesses that are keenly interested in the potential of the technology.

They already record large amounts of data - Teck Resources of Canada says it has 200 sensors on every mining truck - and if they can analyse it properly they can discover ways to improve efficiency, such as predicting more precisely when failing parts need to be replaced, reducing the time when expensive machinery sits idle.

GE says that at one of its mining customers, trucks that were previously available for use 70pc of the time are now available 85pc.

Jim Heppelmann, chief executive of PTC, a software company that works with GE and other manufacturers, says that sort of boost to productivity represents a critical competitive advantage.

"If you have a 10 to 20pc cost advantage on a product with 3--5pc margins, you're going to walk all over the competition," he says.

GE executives believe it can be in the vanguard of this revolution. The company is spending $1bn a year to boostits digital capabilities, hiring 1,000 software engineers and data scientists and setting up a new data analytics centre in San Ramon, California, just across San Francisco Bay from Silicon Valley.

In the next month, it is expected to launch Predix, its software platform for managing and analysing industrial data.

"In industry, there is a lot of stuff that people don't know how to find and don't know how it is performing," says Beth Comstock, who leads new business development at GE. "We can analyse how it is performing, [and] we can predict what will happen."

That analysis will be applied to both GE products and to those made by other companies. A modern locomotive is a 'rolling data centre', as Mr Immelt puts it. By analysing that data and cross-referencing with its rail traffic management system, and sending instructions to trains, GE can squeeze out an extra mile per hour of speed for US railway operators worth $200m per year in extra profits.

Similarly, Toshiba is working on a pilot project with GE to develop an application for installing, operating and maintaining lifts.

GE expects the use of Predix to grow rapidly, with 500,000 products under management by next year.

So far GE is the industrial company that has made the strongest commitment to the industrial internet, although other manufacturers such as Bosch of Germany and France's Schneider Electric have also been starting to explore it. Siemens, GE's main European rival, has announced only tentative initiatives.

More about

Purchase this article for republication.

BRANDINSIDER

SPONSORED

Most Read

Your daily good stuff - AsiaOne stories delivered straight to your inbox
By signing up, you agree to our Privacy policy and Terms and Conditions.