Lessons learned from GE's Digital Transformation Failure
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What happens when digital transformation fails?
It’s a grim statistic you’ve likely heard more than once: 70% of digital transformations fail. Organizations spend millions if not billions of dollars, not to mention countless man-hours, digitizing and reimagining their business for the digital-age only to see few of those investments paying off.
Despite the inherent risk digital transformations carry, few could have foreseen the epic consequences of General Electric’s own digital strategy failure. Once a titan of American industry, in November 2021, GE announced that in order to survive after pouring billions of dollars into its unsuccessful digital strategy, it would split into 3 separate companies: GE Aviation, GE Power and GE Healthcare.
GE’s Digital Beginnings
For years GE leadership saw the writing on the wall: the future of business is digital and GE must find their place in that world or else. With that in mind, GE launched its first major digital product, Predix, “a first-of-its-kind industrial strength platform that provides a standard and secure way to connect machines, industrial big data and people” in 2013.
Two years later, to support Predix and its other forays into digital such as a GE-owned and -operated cloud for its customers’ data, GE formed a new, digital-first enterprise, GE Digital.
There’s no doubt about it, GE was onto something when they launched GE digital. They had a promising vision, but what they lacked was a strong product to rally around and a cohesive roadmap to success. As a WSJ post-mortem explained, “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.”
They spent millions hiring sales people, factory workers and engineers when they couldn’t even agree on how to pronounce the core product, “pree-dix” or “pred-ix” with a hard “e” like “predicts.” GE leadership wanted the system to be a large-scale, one-stop-shop solution, capable of doing everything for everyone. As that same WSJ piece explained, “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.”
To complicate matters further, GE digital was also tasked with centralizing and optimizing the company's vast IT operations. Though GE was likely able to digitize and automate many of its business processes to generate savings, achieving that next level of value where processes are reimagined to support a new, digital-first business model remained out of reach.
In the end, once it was clear GE digital, as it was originally envisioned, was no longer viable, parts of the business were sold off while the rest was wrapped up into GE power.
GE on the Rebound
Since GE announced it’s split in the fall of 2021, the company has still faced a number of major challenges brought on by the pandemic. While GE Aviation generated $4.4 billion in 2019, it barely broke even in 2020 due the pandemic-induced disruptions to air travel. In addition, supply chain disruptions and shortages continue to impact its renewable energy business. As a result, the company has continued to restructure itself and shed its smaller lines of businesses.
Instead of trying to build large-scale digital products that do everything, each entity will focus on producing more targeted, industry-specific digital products. For example, In November 2021, GE Healthcare unveiled 60 “innovative technology solutions spanning the healthcare spectrum including patient screening, diagnostics, therapy planning, guidance, and monitoring.” These included everything from AI-powered imaging solutions to scheduling software.
As for GE Digital, in the past 3 months, they’ve announced a number of interesting partnerships pointing towards a second life as a green tech company:
- GE Digital has partnered with Applied Informatics and Research Inc. to build new analytics software designed to only to increase flight safety, but fuel efficiency as well
- GE Digital acquired Opus One Solutions Energy Corporation (“Opus One”), a software company that helps electric utilities optimize energy planning, operations, and market management.
The lesson here? Well there are many but one of the most resonant to us is the importance of adopting a product-first mentality when it comes to digital transformation. The goal is to build a product that is so great, customers (whether internal or external) will automatically be attracted to what you have to offer.
Secondly, successful digital transformations don’t happen all at once, especially at large companies. They often start small, are aggressively iterative and build momentum off of early successes.
