Headlines that GE is planning to sell off pieces of its digital division spread like wildfire across Wall Street and the tech community. The rumors are part of an ongoing narrative for GE, as it attempts to become part software company.
GE’s digital ambitions started in 2011 under Jeff Immelt’s direction, and the shift to software has seen its share of fits and starts since the launch of GE Digital in 2015. But rather than debate whether the latest rumors are true, CIOs should be taking notes on the digital transformation master class unfolding before their eyes.
GE’s turnaround CEO, John Flannery, is attempting to achieve a delicate balance that right-sizes the company, but does not give up on the company’s push to disrupt the industrial space with digital technologies.
Indeed, tech experts believe the rumors about GE Digital — true or not — illustrate how hard it is to create a digital strategy and build a digital culture.
“Not every company is going to be a software company for the majority of its revenue. But every company has to be a technology company at heart,” said Nigel Fenwick, an analyst at Forrester Research. “And that means figuring out what kind of changes, culturally, companies are going to need in order to adopt a digital mindset.”
The recent rumors about GE Digital triggered a response from Flannery, who quickly published a piece that highlighted the company’s commitment to digital, to the industrial internet of things and to its technology platform Predix. And it would be surprising if GE planned to abandon its investment in the industrial internet of things, as the impact that IoT and digital devices will have on every industry will be profound, according to Alfonso Velosa, an analyst at Gartner.
“Everybody is starting to see this. The problem is, it’s still early days,” he said.
For CIOs charged with digital transformation, one takeaway from the GE rumor mill is unambiguous. To succeed, CIOs will need to think through difficult questions, such as how to integrate the technology into business processes and customer processes, as well as when to build technology internally and when to work with trusted partners.
Developing a blueprint that addresses questions like these requires a clear set of strategic objectives from senior leaders, or what Velosa called “strategic clarity.” Otherwise, companies risk taking their eye off what they see as the ultimate prize, Velosa said.
Case in point: GE’s original idea was to implement data centers for customers. “At a certain point, they realized that wasn’t their differentiation,” he said. “But investing in either a data center and/or a [colocation] strategy took resources and people’s attention away from what was really the core problem.”
Chip Childers, CTO at Cloud Foundry Foundation, an open source cloud computing project based in San Francisco, recommended that CIOs of more traditional companies — be they manufacturing or not — also look at talent when taking on a digital transformation project. He said they should take stock of the technical skills they have on hand and how those skills can support product development.
If talent gaps exist, Childers suggested CIOs seek out domain experts they can train “to go build the software, systems and applications that are going to be valuable to the enterprise customer.”
Getting a seat at the product development table may not be feasible for all CIOs, especially those who face the antiquated perspective that IT is a cost center, rather than a strategic partner. In those cases, a CIO’s best strategy is “to figure out how to be an amazing service provider to the product team,” Childers said.
A digital culture
Technology and strategy aside, the bigger digital transformation barrier for GE — and for most companies — is culture, according to Forrester’s Fenwick.
“Culture comes down to how to prioritize what to do next, how do you determine where to invest your dollars, and how do you determine how to recognize innovation inside the company,” he said.
A company like GE, which builds products to 99.99% perfection, also has to figure out how to enable its employees to fail fast inside the company. And that’s no easy task, according to Fenwick. “They’ve learned how to build a successful foundation to develop products that work right the first time. Then, you try to change that culture,” he said. “That’s a very difficult, uphill battle.”
Nigel Fenwickanalyst at Forrester
A good way for CIOs to start chipping at the entrenched culture is metrics — what Fenwick said is the low-hanging fruit for establishing a digital culture.
“Metrics drive behavior,” he said. “And the behavior of employees is a key part of culture.”
Rather than align IT metrics to business metrics, IT metrics should be the same as business metrics. CIOs should look to business units or marketing and create metrics that hold IT professionals accountable to business goals, such as revenue, profitability and customer impact.
Companies that are successfully driving digital transformation see customer metrics such as net promoter score or customer satisfaction as critical to their longevity.
“They believe that the revenue of the future will follow these customer metrics,” he said.
While common metrics may seem small, Fenwick said it’s an important step for IT and for the enterprise as a whole. A shared set of goals can, for example, help create a common language for the company, which can reduce friction between departments and get everyone focused on the same goals, according to Fenwick.
“Getting that focus and making sure everyone in IT understands the reason they’re paid to come into work every day is not to write software. They’re paid to come into work every day to create value for customers, and they do that by writing software,” Fenwick said.