SOURCE: MIT Sloan Management Review

MIT Sloan Management Review

February 18, 2016 16:21 ET

In a New Case Study From MIT Sloan Management Review, GE's Digital Strategy Anticipates the Success of the Industrial Internet of Things

A Company Known for Industrial Equipment Looks to Become a Leader in Software and Analytics

CAMBRIDGE, MA--(Marketwired - February 18, 2016) - A new case study released today by MIT Sloan Management Review offers an in-depth look at the complex management changes underlying GE's efforts to build and grow a market for its industrial internet solutions in the oil and gas sector. GE has had to grow new data and analytics talent capability and new solutions, transform its sales organization, engage a wider group of stakeholders in the sales process, and challenge competitors in the software market. 

The case, "GE's Big Bet on Data and Analytics," discusses the opportunities and challenges facing GE as it develops internet of things applications for the volatile oil and gas sector. GE's cloud-based software system lets companies predict breakdowns, assess health of machines and find efficiencies in production that can add up to hundreds of millions of dollars when applied across massive industrial systems. Because of the massive scale of industrial machinery in upstream, midstream and downstream oil and gas markets, the potential value of these applications in this space is considerable.

At the same time, some oil and gas companies have been conservative in adopting some of the new digital technologies. With energy prices down from historic highs and a glut of oil flooding commodity markets, the case explores GE's approach to selling the value of its internet of things applications in the industry by showing how it can improve asset productivity, create a real-time picture of the status of an entire operation, replace the costly loss of tacit knowledge from an aging workforce, and build an Industrial Internet platform that meets customer needs. The case notes that GE has invested $1 billion to develop a cloud-based platform to host a wide range of internet of things applications, a market that experts estimate will be worth $151 billion by 2020.

"What is really interesting about this case," said David Kiron, executive editor for MIT Sloan Management Review, "is that it offers a very detailed picture of a company that has recognized the potential of data and analytics, made a significant investment in terms of resources and strategic focus, and done the hard work to transform itself so that it can take advantage of that potential."

This new case is based on a dozen interviews with executives in GE's Oil & Gas business, GE Digital and GE Corporate. GE is comprised of the following primary businesses: Power, Oil & Gas, Energy Connections, Renewables, Aviation, Healthcare, Transportation, Appliances & Lighting and Capital. It was 8th on the 2015 Fortune 500 list, with over $148 billion in revenues.

"Taking the end-users of analytics into consideration is critical in deriving value," said Fay Shong, Principal, Ernst & Young LLP and EY Americas oil and gas strategy lead, the exclusive global insights case study sponsor of MIT SMR's data and analytics case series. "As with other analytic efforts, it takes more than stellar technology offerings. It takes understanding how to reach decision-makers and others who are adopting these business-changing systems." 

Competition in the Internet of Things space is fierce. More than $1.6 billion in venture capital has been pumped into the field, specifically to capitalize on software, data and analytics opportunities. But GE has some important advantages: its willingness to invest, its strategy to partner with companies that fill its knowledge gaps, and its "deep, established relationships with virtually every major industrial company." With these advantages, GE is positioned to lead the way in this exploding field.

Please visit MIT Sloan Management Review to read the case, or to see more on MIT SMR's content initiative on data and analytics.

Acknowledgments

MIT SMR is grateful for the investment of time by the professionals at GE. EY is the exclusive global insights case study sponsor of MIT SMR.

About MIT Sloan Management Review

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