GE emalt keynote address

Ladies and gentlemen, please welcome
Chairman and CEO GE Jeff Immelt

Thank you.

You know, if you grow up in GE, you just love big iron, so I always love to see this. But the most interesting story might be exactly how the team got it in this room to begin with. But, you know, it's what I love about leading GE. Our team always takes a challenge, so thanks to them for getting it here. Thanks to all of you, our customers and our partners, and the great GE team for being with us today. Kind of the second anniversary of talking about the industrial internet and putting it in some context. So welcome to all. It's great to have you in Chicago.

So, I'm just going to start at the very beginning of our thinking: what is this all about and what is technology and performance today?

It's really the physical world of which GE has been a part of for more than 100 years—material science systems integration, designing products that can operate in harsh environments. And that is really the genesis of GE, in meeting the analytical world, which is where with the power of sensors and analytical technology, we are really allowing us to achieve higher performance levels.

It's this integration between the physical and the analytical that is going to come together to provide enhanced performance for our customers with the dream of no unplanned downtime, better asset optimization, better enterprise optimization. And that's really how we come to this. So, it's our thinking and the way we're investing to say that the separation between these two—those days are over—and that every industrial company is going to have to have a big footprint in the analytical world in order to provide real benefits and outcomes for our customers.

If you leave here with nothing else today, leave here with that thought in mind.

So, where we were a year ago and kind of what we've been executing on and where we've been thinking about just a methodical business model build-out, which is the way GE approaches initiatives and things like that. You know, kind of a deep, market-based strategy, folks focused on customer outcomes.

We're always led by what's going on in the marketplace, what's on our customers' minds, and how we can do a better job of fulfilling their needs, creating a disciplined business architecture. In other words, whatever we do in the company, we want to be repetitive. We want it to be something that customers can count on as time goes on.

We recognized early on that we cannot achieve anything in this space without partners. So we've attracted some world-class partners and some people that we think can be phenomenal as time goes on.

Consistent offerings
We already have a big service footprint. We look at this as a way to enhance our service business inside GE, where we have a big backlog and existing relationships. That is absolutely critical, and just this service transformation is really important as time goes on.

Market-backed, disciplined execution, partners are a big part of what we do, consistent offering stream, and transforming our service relationships—that's really how we thought about this a year ago, and that's how we think about it today.

Now, again, what's the industrial internet? What are the pieces that are important?

It's:

• Smart machines
  All of the technologies we have today have the context of sensing technologies that are married with the physical world.
• Bright machines
• Advanced analytics
  The power of analytics, which has rippled through the consumer space, is now very relevant and very real in the industrial space.
• People at work
  We have tens of thousands of service people. Our installed base is in every corner of the world. I just got back from a trip to the Middle East, where we took the third-largest order in the history of our power business in Algeria. So we have products and technologies in every corner of the world, and we need mobility and we need people at work.

The promise of this strategy is reducing or eliminating unplanned downtime, which I'd say to our industrial customers in the room today, whether you're a local railroad, a hospital, an oil and gas company, or an airline, this is the holy grail of operation.

It's having assets that don't fail and that operate in a very cohesive way in the world that they're in, the enterprise that they're in, to drive great outcomes. For the economy, we think this is going to generate higher productivity for our customers, more jobs, more benefits. So we think there's a macro story behind the industrial internet, just like there's an important benefit for our customers directly.

This is what we believed a year ago, and this is what we've seen accomplished and seen to be important in the world we're in today.

Business architecture, business model
How do we think about doing this in a repetitive basis? How do we make it a GE-style business and a GE-style operation?

It starts with domain.
We love these industries. We love these industries: healthcare, power, oil and gas, water, aviation, transportation. These are businesses that we've had depth in, that we've got customer relationships in, where we've got awesome backlogs and customer connections. So I always start everything with the fact that we see this as being a deep domain activity in industries and businesses that we love, and customers that we have shared interest in. So that's foundational for us.

The technology—what Bill is going to talk about in a minute—is the Predix application software, the basic building blocks that will allow us to write applications, deliver new applications and software rapidly that are going to have machine aspects, intelligence, and analytical aspects.

So, we have now a foundation, a technical foundation, that's going to allow us to increase the number of offerings we do each year, have them be high quality, user-friendly, and replicated frequently.

Strong organization
From both a technical standpoint and from a commercial standpoint, we've looked at this as a build versus buy process. We've tried to attract some of the industry's best talent, and these are people that share our interest in domain. We've found that we're able to get great talent and add them to the existing GE talent.

In many ways, this is very much about great human resources, both commercially and technically, and we've been very diligent in ways to do that. Adding that to the great GE foundation, ultimately in our center of excellence, we'll have a thousand scientists and technologists, but they then become part of almost 10,000 GE software engineers that are working across our many domains.

So strong technical talent with broad domain talent, we think, is key.

Ecosystem
The ability to attract good partners, the ability to work with good partners, and the ability to maybe enhance our own technology with startup companies that are working outside our space. Again, we think this combination of domain, discipline, technical execution, attracting core talent, and being a great partner—these four things are what we think ultimately makes this a GE initiative in a GE context and where ultimately we plan to be successful.

I want you to get a sense that this is a very disciplined business process, a business build-out that we're doing here in strong GE fashion.

Now, I talked about world-class partners, and many of them are in the room here today, and we appreciate their activity. Because, again, technically, we need good partnerships.

In the case of Intel, Intel is innovating around devices and chips that are really going to enable our products to have this deep analytical core in a mobile setting, and so Intel is going to be a great partner of ours.

Pivotal, where we have an equity stake, is really doing the next-generation architecture on which analytics are going to be built, and we think Pivotal is going to be a dynamic partner for us as time goes on.

Cisco has been a long-term GE partner and will continue to be that in the industrial internet with networking and routing around deep domains. They are great at that.

Kaggle is a company that we've worked with last year and will continue to work with to do kind of outside pursuits and allow other people to get access to our big initiatives inside the company.

 

We love Kaggle.

At AT&T, we are going to be really at the forefront of allowing us to do this in a mobile setting. This absolutely is key to have a kind of a universal SIM, and for global businesses like ours, this is a very powerful technology that we're going to partner on with AT&T.

Amazon for the cloud is going to be a key partner as we continue to build this out. In Accenture, from a systems integration standpoint and a partnering standpoint, we launched Telarus a year ago with Accenture, and we think Accenture brings both domain and systems integration expertise.

We want to be known as a good partner because I think, to solve customers' problems, it’s going to take more than just one company to really get in there and drive across the entire enterprise. So we look forward to working with these folks.

In the end, results count. It's nice to talk about things, but delivering on new technologies is what really counts. We started last year with 10 launches; today, we're announcing another 14. On a run-rate basis, we'd like to do maybe twice that amount on an annual basis, and we're building the foundation to do that.

In the last 12 months, we've gotten $400 million in orders from the launches we did a year ago. We’ve got 14 launch customers for the 14 offerings we have today. These are real; they're going to be put in practice. What our customers are seeing are real outcomes.

In the world today, productivity is everything. Speed, productivity, and outcomes are what people really measure. We want to be known as a company that delivers outcomes for our customers, and that’s going to show up in more revenue, less downtime, better capability, and improved enterprise operations.

I’m not going to go through all the offerings today, but if you look at the drilling eibachs and oil and gas, you've got this incredible piece of technology that's going to go a couple of miles beneath the ocean floor. There are 30 sensors on a blowout preventer that will take a couple of hundred thousand pieces of data continuously.

What we’re trying to build with our customers in the oil and gas space is the ability to model these parameters from a control system standpoint and be able to watch this in real-time to see how the asset is operating, what kind of surges it’s seeing, and extend maintenance cycles, making them more meaningful. We want to have an overall comfort in how the assets are operating from a remote standpoint.

In the entire oil and gas industry, particularly with these assets that are in the subsea space, the ability to optimize performance and take these great assets that are operating in harsh environments, watch them in real-time, and model performance is key. That’s going to show up in the drilling eibachs in the oil and gas space, really built around controls.

Over here is a CT scanner. What I’ll talk about here is the cloud imaging that healthcare is doing. These things are creating an immense amount of data—more than 150 million different pieces of data. They’re so powerful that it's hard for radiologists to use the power of the technologies that we have.

One of the big technologies from an operating standpoint is to do a post-processing step so that radiologists, after they do the imaging procedure, can model the data and the image in a way that helps them make better diagnostics. It’s key to do that post-processing in a cloud setting so that they can constantly download applications and get the most out of this asset over time.

This is an enterprise operation that will help the entire radiology suite. Whereas the iBox is really going to help that blowout preventer operate at its maximum potential. This notion of asset optimization and operations optimization—how do you make the asset run better? How do you make the entire enterprise run better?—that’s where our launchers will continue to be sold through our service operations. It’s all about the customer and outcomes.

Here are just a couple of customers that we’ve worked with in the last year.

• PSEG is one of the big public utilities on the East Coast. We did the Flex Advantage, which allowed them to get more output and more efficiency, contributing dollars to the bottom line.
• Gol, one of the biggest airlines in Latin America, worked on fuel and carbon solutions. We modeled how they could use fuel more efficiently. If you looked at the GE-installed base of jet engines, a 1% advantage or 1% gain in fuel savings is $2 billion of profit for our airline customers every year.
• St. Luke's is a hospital where we've made great strides in hospital operations, reducing wait times, improving quality, and becoming one of the preeminent hospitals in the region.
• CSX Trip Optimizer has also worked on fuel savings, saving tens of millions of dollars in their settings.

The bottom line is more productivity, more speed, higher quality, and more revenue. Each one of our customers is seeing this activity, and ultimately, we think this is the future of our service business. It’s all about outcomes in the end. That’s going to be the tale of the tape with this initiative.

Now, I would say each individual customer can benefit, but we also think there are opportunities for the industrial internet and broad systems. This kind of shows a context called "Brilliant Machines," which is really wind turbines with advanced controls that have remote monitoring and diagnostics integrated into a system that gets electricity into the grid.

Some of the more recent projects with wind turbines in the United States have been able to quote under $5 a kilowatt hour. When we acquired the wind business 10 years ago, this was $0.30 per kilowatt hour. Now, you're getting quotes under $5 per kilowatt hour. This is pure economics. It’s because you can optimize the wind sweep. We can actually have wind turbines that talk to each other and can real-time change the shape and curve of the wind blade.

We can optimize how to get that on the grid. One of the big issues that wind energy has is that it doesn’t blow all the time, so you have to get it on the grid in an orderly fashion. We can make sure it has maximum uptime because it’s very difficult to fix, given you're going up a football field in the air to fix it.

And you can get more revenue. As we've applied the industrial internet into big systems, we're seeing economic benefits that are game-changers in terms of how our customers operate and where they go.

On the customer side, I want to emphasize again that outcomes, systems, asset optimization, and enterprise optimization are how we reinvent the service business.

Here is our service business. We have a massive installed base of industrial assets and win-win relationships already with our customers. We’ve got a $160 billion backlog and about a $45 billion business.

The way we measure success is going to be in demonstrable customer benefits. We want this to be a place where we create win-win relationships with our customers, growing revenue per installed base and executing long-term service agreements where we have real execution goals for our customers in terms of uptime and fuel performance.

The reason why we’re doing this is that we don’t see GE becoming a software company per se. This is all about how we enhance our customer relationships. The industrial internet is a step along the way to being a more valuable supplier, providing better solutions and analytics as a method in that approach—not an end game in that approach.

That’s why we do this, why we’re here, and what we want to generate. This is a big asset, and it’s important to our customers. We have win-win relationships with our customers, and ultimately, that’s how we can be successful over time.

It’s really about the big thought on the industrial internet, the big system thought on industrial internet, brilliant machines, and analytics mobility. We’ve built a business model that we think is robust and repeatable.

We are a first mover in terms of partners. We’ve got some world-class partners that we’re proud to be associated with. We have a constant flow of offerings—10 last year, 14 this year—and we would like to do more than that every year. We’ve created a win-win relationship between our customers and GE, and that’s ultimately what we want to do.

Lastly, I want to put this in context of where I think productivity is going in the future and some of the things that are important to the U.S. business, to what every company is working on in some way.

We look at the industrial internet in a bigger context of things GE is working on. We are a leader in the gas energy transition that’s happening globally. We see an immense number of fines, energy being robustly developed, and gas being in the lead. Moving gas to the places that need it the most is a big part of where GE is investing and has invested.

We’re big believers that manufacturing is going to be digitized, decentralized, and democratized. We see lots of these currents of technology impacting the manufacturing base, and in many ways, our manufacturing assets are more important today than ever before. We see a lot of investment in manufacturing and the industrial internet where we think we can create great productivity strides for our customers and benefit in our business as well.

So, we’ve got a great day planned. We’ve got a fantastic day with our customers, and we’ve got breakout sessions this afternoon. You’re going to hear from a lot of our partners and customers this morning. Please use this as a learning session. From a GE standpoint, this is a step on the way. We’re still learning as a company, and we’ve still got a long way to go.

But I think if you start with the premise that the physical world and the analytical world can no longer be separated—they have to be integrated—if that’s the premise you live with, GE is positioned to be a key partner in that way.

Thanks for your attention. Thanks for coming. I look forward to a great day.