Why CIOs and Companies Should Disrupt Themselves

Contributor: Heather Levy

“It’s our recognition that if you go to bed as an industrial company, you’re going to wake up as a software company,” declared Jeffrey Immelt, Chairman and CEO of General Electric (GE), adding that digitization of the giant industrial company is the single most important initiative he’s been involved in during his 33 years with the company.

In an interview with Mark Raskino, Gartner analyst and co-author of Digital to the Core, at Gartner Symposium/ITxpo in Orlando, Mr. Immelt discussed how GE plans to disrupt itself, and why CIOs must become, “active leaders demanding a seat at the table” in their organizations.  He acknowledged that the key to GE’s success has been a healthy paranoia during its 120 year history that has fueled such bold moves as its recent divestiture and downsizing of the consumer appliance division and GE Capital Finance; and the creation of the GE Global Software Center to build the “industrial internet.”

Focus on core industrial knowledge

Drawing on his early experience in sales, Mr. Immelt said organizations and leaders should focus on using digital business to solve real customer problems. “When I would meet with our customers, they just wanted productivity and better outcomes. It became clear to me it would be through better analytics, not physics,” Mr. Immelt said. He suggested that GE’s longstanding industrial experience gives it a critical advantage in helping its customers build the necessary smart technology into their products and services.

“We’ve been making jet engines for 75 years,” he said, noting that GE understands the unique profile of how industrial products work ,and when to add information and analytics to improve efficiency for its customers. Predictive maintenance, he said, is also worth tens of millions of dollars in savings to their industrial customers.
“This is a massive paradigm shift. Our products are smart, our customers want outcomes, and analytics are the grail,” he said.

Buy vs. build

Mr. Raskino asked Mr. Immelt to explain the company’s rationale for building its own software center rather than making a “tecquisition.” “There are a lot of things we shouldn’t do, but when it comes to technology and science, if we said we weren’t going to do it on our own, Thomas Edison [GE’s founder] would come out of the grave and kill me,” Mr. Immelt said. He noted that the company has acquired talent to develop its software and digital competencies, and it would continue to hire capabilities from the outside where necessary.