BUSINESS PROBLEM-SOLVING CASE GE Bets on the Internet of Things and Big Data Analytics General Electric (GE) wants to be known as the to more easily and quickly connect their machines world's Digital Industrial Company. It is moving to the Industrial Internet. The platform can accom- away from traditional manufacturing toward a much modate the size and scale of industrial data for every more technology-centric business strategy and busi- customer at current levels of use, but it also has been ness model that focuses on electric power genera- designed to scale up as demand grows. Predix can tors, jet engines, locomotives, and oil-refining gear offer apps developed by other companies as well and software to connect these devices to the cloud. as GE, is available for on-premises or cloud-based GE is putting its money on the technology that con- deployment, and can be extended by customers with trols and monitors industrial machines as well as their own data sources, algorithms, and software software-powered, cloud-based services for analyz- code. Customers may develop their own custom ing and deriving value from the data. GE hopes this applications for the Predix platform. GE is also strategy will turn it into a major software company. building a developer community to create apps that GE is using sensor-generated data from industrial can be hosted on Predix. Predix is not limited to machines to help customers monitor equipment industrial applications. It could be used for analyz- performance, prevent breakdowns, and assess the ing data in healthcare systems, for example.GE machines' overall health. GE has committed $1 bil- now has a Health Cloud running on Predix. Data lion to installing sensors on gas turbines, jet engines, security is embedded at all platform application lay- and other machines, connecting them to the cloud; ers, and this is essential for companies linking their and analyzing the resulting data to identify ways operations to the Internet. to improve machine productivity and reliability. In GE currently uses Predix to monitor and maintain other words, GE is betting its future on software and its own industrial products, such as wind turbines, the Internet of Things (IoT). jet engines, and hydroelectric turbine systems. In a number of industries, improving the produc- Predix is able to provide GE corporate customers' tivity of existing assets by even a single percentage machine operators and maintenance engineers with point can generate significant benefits. This is true of real-time information to schedule maintenance the oil and gas sector, where average recovery rate checks, improve machine efficiency, and reduce of an oil well is 35 percent. That means 65 percent of downtime. Helping customers collect and use this a well's potential is left in the earth because avail- operational data proactively would lower costs in able technology makes it too expensive to extract. If GE service agreements. When GE agrees to provide technology can help oil extraction companies raise service for a customer's machine, it often comes with the recovery rate from 35 to 36 percent, the world's a performance guarantee. Proactive identification of output would increase by 80 billion barrels the potential issues that also takes the cost out of shop equivalent of three years of global supply. visits helps the customer and helps GE. The oil and gas industry is also deeply affected by In early 2013, GE began to use Predix to analyze unplanned downtime, when equipment cannot oper- data across its fleet of machines. A single engine's ate because of a malfunction. A single unproductive operating data will only tell you there's a problem day on a platform can cost a liquefied natural gas with that engine. But by collecting massive amounts (LNG) facility as much as $25 million, and an aver- of data and analyzing the data across its entire fleet age midsized LNG facility experiences about five of machines, GE was able to cluster engine data down days a year. That's $125 to $150 million lost. by operating environment. The company found that Minimizing downtime is critical, especially consider the hot and harsh environments in the Middle East ing declining revenues from lower energy prices. GE and China caused engines to clog, heat up, and lose sees a $1 billion opportunity for its loT software. efficiency, so they required more maintenance. GE The foundation for all of GE's Industrial Internet found that engines had far fewer of these problems if (IoT) applications is Predix, a software platform they were washed more frequently. Fleet analytics launched in 2015 to collect data from industrial sen- helped GE increase engine lifetime and reduce engine sors and analyze the information in the cloud. Predix maintenance. The company thinks it can save its can run on any cloud infrastructure. The platform has customers an average of $7 million of jet airplane open standards and protocols that allow customers fuel annually because their engines will be more 455 456 Part III: Key System Applications for the Digital Age efficient. Predix's robust data and analytics platform risk-assessment solution combines internal and exter- made it possible for GE to use data across every GE nal factors (such as flooding) to provide an accurate, engine all over the world and cluster fleet data. up-to-the minute visual representation of where risk Predix is starting to provide solutions for GE cus- exists in a pipeline. This risk assessment tool enables tomers. For example, Invenergy LLC, North America's pipeline operators to see how recent events affect their largest independent, privately held renewable energy risk and make real-time decisions about where field provider is implementing GE Asset Performance Man- service crews should be deployed along the pipeline. agement reliability management software on 13 tur- The risk assessment tool visualization and analytics bines at six gas-operated thermal plants in the United capabilities run on Predix. States. The software is based upon Predix and will Weather has a sizable impact on risk for pipelines in perform predictive analytics on turbines that produce areas prone to seismic activity, waterways, and wash- an operating capacity of 3,159 megawatts, enough to outs. Checking weather patterns along thousands of power a half-million homes. The software will help miles of pipe for rain or flood zones, and integrating plant technicians more accurately predict and diagnose those data with other complex pipeline data sets is equipment failures before they occur in order to avoid very difficult to perform manually. But by bringing all unplanned outages. During preliminary testing, the relevant data together in one place, GE gives pipeline system identified a turbine journal bearing experienc- operators easier access to information to help them ing early-stage vibration. A failure could have damaged address areas with the greatest potential impact. the turbine and produced an unplanned outage, but GE expects customers to benefit immediately from Invenergy technicians were able to detect and repair having all of their data integrated. But it wants them to the malfunction three months before it would have be able to do more. In addition to being able to examine occurred. The GE system will also help Invenergy bet- all current risk, pipeline operators would benefit from ter manage its assets to achieve the optimal solution for a "what-if" calculation tool to model hypothetical sce- reducing cost, managing risk and improving availabil- narios, such as assessing the impact of adjusting operat- ity and reliability ing pressures or addressing particular areas of corrosive British oil and gas company BP ple had been using its pipe. GE would give them the tools for a color-coded own software to monitor conditions in its oil wells but view of how those actions affect pipeline risk. decided to get out of the software business and became GE wants to go beyond helping customers manage a GE customer. By the end of 2015, BP equipped 650 the performance of their GE machines to managing the of its thousands of oil wells with GE sensors linked to data on all of the machines in their entire operations. Predix. Each well was outfitted with 20 to 30 sensors Many customers use GE equipment alongside of equip- to measure pressure and temperature, transmitting ment from competitors. The customer cares about run- 500,000 data points to the Predix cloud every 15 sec- ning the whole plant, not just GE turbines, for example, onds. BP hopes to use the data to predict well flows and 80 percent of the equipment in these facilities is not and the useful life of each well and ultimately to obtain from GE.If, for example, if an oil and gas customer has an enterprise-wide view of its oil fields' performance. a problem with a turbo compressor, a heat exchanger GE identified pipeline risk management as a major upstream from that compressor may be the source of challenge for the oil and gas industry. There are 2 mil- the problem, so analyzing data from the turbo com- lion miles of transmission pipe throughout the globe, pressor will only tell part of the story. Customers there- moving liquid oil or gas from its point of extraction to fore want GE to analyze non-GE equipment and help refining, processing, or market. About 55 percent of them keep their entire plant running. transmission pipeline in the United States was installed If a customer purchases a piece of GE equipment before 1970. Pipeline spills are not frequent, but when such as a gas turbine or aircraft engine, GE often they occur, they cause serious economic and environ- enters into a 10-to 15-year contractual services agree- mental damage as well as bad publicity for pipeline ment that allows GE to connect to and monitor that operators and energy companies. Pipeline operators machine, perform basic maintenance and diagnostics, are always anxious to know where their next rupture and provide scheduled repairs. GE receives a bonus will be, but they typically lacked the data to measure payment for keeping the equipment running at a pipeline fitness. Operators had no way of integrating specified threshold. GE may now be able to apply multiple sources of data into one place so they could such outcome-based pricing to coverage of non-GE see and understand the risk in their pipelines. machines. GE developed a pipeline-management software suite GE CEO Jeffrey Immelt wants GE to become a top for accessing, managing, and integrating critical data 10 software company by 2020. In order to do this, GE for the safe management of pipelines, including a risk needs to sell vast amounts of applications and Predix- assessment tool to monitor aging infrastructure. GE's based analytics. Although few businesses have the Q1: How is GE changing its business strategy and busines model? What is the role of information technology in GE's business *Please write at least at least 130 words to achieve high marks. Q2: On what business functions and level of decision making is GE focusing? *Please write at least at least 130 words to achieve high marks. Q3: Describe three kinds of decisions that can be supported using Predix. What is the value to the firm of each of those decisions? Explain. *Please write at least at least 130 words to achieve high marks