General Electric’s CEO shuffle: Assessing the road to this point – and its digital future

Less than a month after becoming chairman and CEO of General Electric (GE) last year, John Flannery wrote a LinkedIn missive outlining the company’s future strategy. In short, it was full steam ahead for digital.

“We have fully embraced the digital industrial transformation, and we believe in its potential to change the world,” Flannery wrote. “For our customers, digital is bringing new levels of innovation and productivity – and they are seeing real, tangible outcomes. This is happening in each of our businesses. Now, we are taking these outcomes and transferring what we have learned directly to our customers.”

However quickly this knowledge transfer was taking place, it wasn’t quick enough. GE announced earlier today that H. Lawrence Culp Jr. would take over as chairman and CEO immediately following a unanimous vote from the board of directors.

“GE remains a fundamentally strong company with great businesses and tremendous talent. It is a privilege to be asked to lead this iconic company,” said Culp in a statement. “We will be working very hard in the coming weeks to drive superior execution, and we will move with urgency.”

Culp was CEO and president of Danaher, a provider of various healthcare and environmental products, from 2000 to 2014. GE said he had ‘led the highly successful transformation of the company from an industrial manufacturer to a leading science and technology company’, with market capitalisation and revenues growing fivefold during his tenure.

This may indicate that GE does not wish to part with its various digital initiatives just yet. At the end of July, the Wall Street Journal reported that the conglomerate had hired an investment bank to organise an auction for GE Digital, including Predix, its Industrial Internet of Things (IIoT) platform. GE had declined to comment at the time and the story appears to have since run cold.

Yet the machinations and conjecture in the business press would still play themselves out. Writing for Bloomberg Business, Brooke Sutherland argued that ‘rethinking GE Digital [did] not mean capitulation’, and that expanding current collaborations with the biggest technology players could be a feasible option.

Two weeks earlier, GE had announced its largest partnership to date with Microsoft, with Predix being standardised on Azure and being deeply integrated with Azure IoT and Azure Data and Analytics. “The partnership brings together GE Digital’s expertise in industrial data and applications with Microsoft’s enterprise cloud, helping customers speed deployment of industrial applications and achieve tangible outcomes faster, ultimately fuelling growth and business innovation,” the company said at the time.

Those who follow the industry press will be aware of all the right noises GE was making and the partnerships it was brokering. Take a promotional video published in February around GE and Office 365: “The thing that I’m the most excited about inside GE is the idea of bringing information technology together with operational technology,” explained Jim Fowler, GE CIO.

But there had been an evident long-term slide raising the hackles of investors. Last December, the company cut 12,000 jobs in its power division. In June, GE confirmed it was looking to focus primarily on aviation, power and renewable energy, spinning off its healthcare business. Its stock, traditionally one of the most solid performers, had also taken a severe beating, going from more than $30 at the start of 2017 to less than $12 at the end of last month. Most iconically, if perhaps not importantly, GE dropped out of the Dow Jones Industrial Average in June to make way for Walgreens, having been the only survivor from the original index in 1896.

Sutherland had noted in July that software and services were still necessary for other arms of GE’s business – that it could not just be severed and handed over to the first investment firm which fluttered its eyes. “Frankly, higher-margin software and services offerings are necessary to the business case for the power and aviation divisions that will be left over after its breakup, with those businesses already more vulnerable to economic downswings than the healthcare unit that’s being spun off,” she wrote.

The power division continues to cause headaches, as GE noted in its handover announcement. “GE expects to take a non-cash goodwill impairment charge related to the GE Power business,” the company said. “GE Power’s current goodwill balance is approximately $23 billion and the goodwill impairment charge is likely to constitute substantially all of this balance.”

“Digital is our future, and it’s your future, too”, Flannery signed off last September. The latter is certainly true – but whether the former proves correct appears to be dependent on more pressing concerns that Culp will need to solve.

Shares jumped 15% in the aftermath of the news. in finding out more around Industrial IoT and Industry 4.0 technologies? Attend the IoT Tech Expo World Series events with upcoming shows in Silicon Valley, London and Amsterdam to learn more.

Original article: General Electric’s CEO shuffle: Assessing the road to this point – and its digital future
Author: james