GE Power’s CDO is transforming his company and an industry

After a long career in enterprise software, Ganesh Bell became GE’s first chief digital officer in early 2014. Now, as CDO of GE Power, Bell is leading a transformation of this giant unit of the industrial powerhouse which, in turn, is driving change through the entire power-generation industry.

In this interview with IDG’s Chief Content Officer John Gallant, Bell talks about creating “Outcome-as-a-Service” for customers and the creation of “digital twin” capabilities that are helping GE Power customers reinvent their operations. He discussed the mission of GE Digital and how he coordinates on strategy with CDOs at GE’s other divisions. He also explored his partnership with GE Power’s CIO and explains why the CDO role is not a threat to his CIO peer.

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CIO.com: Ganesh, will you begin by talking about the overall business transformation GE is undergoing? How is GE using information and analytics to open up new business opportunities?

GE Power CDO Ganesh Bell: I’ve been here 2-1/2 years. I was in enterprise software companies like SAP and PeopleSoft and I’ve done my own startups, like CRM startup YouCentric. Why I came here is the belief that every business, every industry is being reimagined in software. In GE we’ve reimagined our businesses for more than 100 years. We’ve been primarily a hardware infrastructure provider and, as early as 15 years ago, we reimagined our business to be more services based.

In the last, I would say, decade [we’ve been] connecting machines to monitoring diagnostics and doing simple things like maintenance management and predictive [analytics] — understanding the machines and how they work. We’ve come to believe there is more to this than just connecting the machines. That data actually gives us new insight and when you connect more assets at the customer setting, even beyond our own machines, we can deliver even higher level outcomes to our customers. In the past, you could deliver outcomes on our turbine, now by connecting all the machines in a power plant we are able to provide outcomes at the power plant level. We can now help our customers truly transform their businesses.

We’re already a data obsessed company and driving that forward into thinking about how we use these analytics, how we use the data, has given us the insight that this is really the digital transformation path for GE, us becoming a digital industrial, that’s how we talk about ourselves. It’s also about every one of our industries and customers becoming digital. Because we solved the full problem of hardware, services and software, we can help our customers transform to a digital business.

CIO.com: Can you briefly talk about your path to becoming a CDO at GE?

Bell: I mentioned, I’ve been in enterprise software companies and startups, whether it’s being an entrepreneur or helping lead my last company to an IPO. I’ve grown big platform business analytics and enterprise software applications businesses in all different forms and roles and running P&Ls. When GE called me initially — this was early days of our digital journey — actually the position of a chief digital officer didn’t exist.

They were curious about my background. Can you talk to us? Can you engage? It was over a three-month period. I played back what I heard from GE and said: It’s clear you have passion around what you can do with data and you’ve got to build a platform. I said this is really about a digital business. GE has to build a digital business and GE has to become the digital industrial [company] if you’re interested in transforming your entire business. I asked the question: Where do you make most of your money? The answer was: We make most of our money in power and water. At that time, power and water was the biggest industrial business and still is the biggest industrial business in GE.

I said: Let me talk to them. At the intersection of digital or software and power and water, I said, that’s the biggest market opportunity for GE. They came back and said: I think we’re ready to hire our first chief digital officer in history. The position was shaped during that. There was no playbook. There was no definition of what this could be except the belief that at the intersection of digital and the power and utility business, there is a huge market opportunity. We could do something that becomes the blueprint for the rest of GE. Along with Bill Ruh [GE’s corporate CDO and CEO of GE Digital] I got the core right. What is the playbook for all the digital businesses and the blueprint for hiring chief digital officers in every one of our industries?

CIO.com: That’s a great segue because I want to ask you what is that structure of CDOs across GE and what does the role of a CDO encompass?

Bell: My role is twofold. As the chief digital officer for GE Power, I’m responsible for the digital transformation of our core business. In partnership with my CIO, I’m driving the digital transformation. My CIO drives the internal transformation of how we work inside GE. How our products and services become digital and how we build a digital business is my responsibility.

I report to the CEO of GE Power and the CEO of GE Digital.

My second responsibility is being the CEO of the digital business within power. As you know, GE is a collection of companies. We run every single business as a micro company so my digital business, which is the largest and fastest-growing digital business in GE, looks no different than a traditional CEO structure in a business within GE.

CIO.com: Talk about how you work with the other CDOs across GE. How do you as a group go about setting an overall digital strategy and how do you tailor that by business unit?

Bell: I mentioned GE Digital and here’s a bit of context. Initially, there were software businesses around GE in every one of our industries. There was a lot of internal development but over the last, I would say, three or four years we’ve gotten smarter about building those things that we use internally with an architecture towards how customers would use them. In some ways it’s no different than how Amazon had approached building their cloud infrastructure. They built it for themselves and then eventually they could turn it over and let other people use and access that capability.

Last year we formalized the announcement of GE Digital as a business within GE. That is still a collection of all of the digital businesses in the various industries — power, healthcare, aviation, transportation. All those businesses have software businesses that are virtually connected, they dual report into GE Digital like I mentioned. The other CDOs have the same structure. We all belong to GE Digital and belong to our respective industries.

At GE Digital we look at two things; things that we all need horizontally. There are a lot of capabilities that we need as a software company and infrastructure horizontally and at the GE Digital level we tackle that – for example, a platform like Predix. Harel [Kodesh] as CTO runs the Predix platform, it’s a common platform for all of us. In GE Digital, we also look at capabilities we need across all the various software companies whether it be a partner ecosystem or building horizontal capabilities like cybersecurity. We benefit from what we call the GE Store. Within the GE Store all the horizontal capabilities exist and GE Digital is contributing all the horizontal capabilities.

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CIO.com: I want to drill down more deeply at GE Power. Can you give more detail about the digital strategy you’re pursuing and how you’re transforming that power business?

Bell: If you look at the electricity industry, this is a model that is more than 100 years old of generating electrons, whether through gas or coal or nuclear or wind, and then transmitting those electrons to consumers. Even Edison would recognize the industry largely as it is today. Maybe not the wind turbine or solar, but he would recognize the fundamental structure. But that’s actually getting radically transformed. If we think about the world, there are more than a billion people who don’t have access to power. The world needs 40 percent more power by the end of 2030 than we have today. At the same time, decentralized power is growing.

Consumers of electricity are becoming producers of electricity. We’re also trying to decarbonize the world, which means increasing renewables. We’ve had to manage all of these complexities. The electricity industry itself is going through digital transformation. We see almost $1.3 trillion of opportunity over the next decade just by applying digital technologies. That means technologies to get more output from the machines, improve efficiencies, improve productivity, eliminate unplanned downtime, lower the operating costs.

All of these things translate to huge value for our customers. One percent efficiency could yield about $60 billion in gains over a 15-year period. We’re doing this in our machines today. I talked about that $1.3 trillion of value. Just by deploying an application solution that we call Asset Performance Management, which is really about improving the reliability and predictive maintenance and outage management of the machines, the industry can save close to $387 billion over the next decade.

CIO.com: That’s amazing.

Bell: That translates into a portfolio of solutions for us to offer our customers that [includes] providing what we call next-generation controls and edge compute. Our strategy is cloud all the way to the edge. We talk about from sensor to cloud or from cloud all the way to the edge.

Our platform Predix runs in the cloud and we have a suite of applications on top of Predix that we call Asset Performance Management, Operations Optimization and Business Optimization and at the edge we have our controls and edge compute devices that are running local analytics, local data.

For example, a wind farm doesn’t have real-time connectivity to the cloud, but you can do a lot of local analytics. It is cloud connected edge-ware devices and also cybersecurity, so almost six different product lines of Predix Edge, Compute, Cyber or a suite of applications like Asset Performance Management, Operations Optimization and Business Optimization.

CIO.com: I’ve heard you use the phrase “Outcome-as-a-Service.” What does that mean?

Bell: Software companies have evolved from selling license and maintenance to CIOs to selling Software-as-a-Service or subscription. What customers really care about are the outcomes that the software delivers. An example of that is the elimination of unplanned downtime or reducing fuel consumption or improving efficiency of a power plant. Because we understand our customers’ machines and operations deeper than just a pure software vendor can — that’s why we’re digital industrial — we truly understand the value of that software.

We can model that outcome economically and create a business model for customers to subscribe to the outcome. They’re getting the software but they’re also subscribing to the outcome so we can deliver this Outcome-as-a-Service. If we don’t meet it, we’ll refund our subscription to the customer but in almost all cases we meet and exceed, in which case they are paying and gain sharing for that outcome with us.

CIO.com: When we chatted briefly before, you had talked about the idea of a digital twin. What is a digital twin?

Bell: These business models like Outcome-as-a-Service, where we’re really confident about what we can do for our customers and the economic value that we can create by deploying digital technologies, are actually rooted in something we call a digital twin. That is technology that allows us to basically meter, model, simulate, run, operate, do what-ifs on every physical asset in the real world being metered in the cloud or metered in an appliance at the edge.

A simple analogy: I tell people, that if you played a racing car videogame in the early 2000s vs. today, they’re much more real now because the physics engine in them has gotten really sophisticated. Imagine a gas turbine. We can do a really deep model — thermal model, physics model, predictive model, material science model — and we can connect all of these analytic models and take all the operational data from the machines and simulate the running of the actual machine in the cloud or in our platform. Because of that, we can do a lot of what-ifs. We can go back in time and try to understand exactly what happened but more importantly, we can go forward and predict output, failure, outages.

Therefore, we can eliminate all the unplanned downtime and increase or lower the operating costs. That technology is what we call a digital twin and we’re now creating that across all of our machines and extending that not just to our machines but all the environments of our customers. We can create digital twins of an entire power plant, wind farm or grid operation and optimize that and continuously learn from the data that’s enriching that.

CIO.com: How does GE, in general, and how do you, specifically, measure the success of these digital transformation efforts?

Bell: There are many ways to measure this. We have talked [publicly] about our targets for digital. By 2020, we’re targeting more than $14 billion from digital, $10 billion of it from applications and about $4 billion from the platform itself. Last year we did about $5 billion and this year we’ll do north of $6 billion. More than half of it is in the Power space.

We also measure in terms of assets under management internally, how many devices we’re connecting and the value we can create from that for our customers. Also, there are about 8,000 developers across our partners and customers that are using our platform today. We expect to hit about 20,000 by the end of the year. We’re measuring it in terms of our business, we’re measuring it in terms of our customer outcomes that we can drive as well as partners who can build and extend solutions on top of our applications.

CIO.com: How are you working with customers so they understand this vision and then how do you work with them to actually help them change their own businesses? I imagine there must be some political or other hurdles along the way.

Bell: I would say there is an education complexity right now just like when Software-as-a-Service became available. It was education to the buying centers. You had to educate the heads of sales that there was a software solution they could buy and deploy right away. We’re bringing CIOs to the table where they had never been part of the conversation, at least in the power industry.

There is an education that is happening on what is possible with digital. But more interestingly, our customers start the journey with us in terms of outcomes. I’ll give you some examples. Maybe that would illustrate this transformation happening. A2A Energy, which is a large multi-utility Italian company, had a power plant in Chivasso that they had mothballed, meaning completely shut down. It was not competitive in the European ancillary seller’s market because they had over-capacity of power in Europe and renewables are still growing and so they had to force some of the gas power plants that are not competitive to be shut down.

We began discussions with them about what we can do with digital in a completely different context. We said: Can you give us the operations data from the power plant for the last couple of years? We looked at the data and when we modeled it in a digital twin we understood that the power plant was operating nowhere near its theoretical potential. They deployed our software and we brought back the power plant to life.

All the jobs are coming back to the power plant and they have been successful in dispatching that power into the grid and being profitable. That is an outcome [illustrating] what our software can do and that creates believers within our customers. Those kinds of stories get relayed to other customers. That’s what’s possible with software.

[ Related: GE CIO says IT leaders need to focus on customers’ revenue ]

CIO.com: Before we run out of time, I want to shift over and talk about how you work with Clay Johnson, your CIO colleague at GE Power. Can you talk a little bit about that relationship and how you intersect on these digital transformation efforts?

Bell: Clay is responsible for all IT inside power. That’s all internal IT applications like ERP, CRM, etc. Also, how we work has to become digital and I partner with Clay on how we work internally, meaning I work with him in setting the vision and the strategy and Clay and his team own the execution of that. That’s all internal IT.

How our products and services are being transformed digitally is a whole new digital business for us, whether it’s Software-as-a-Service or Outcome-as-a-Service and that is my business to go run. How we market, sell and engage is also transforming digitally. That is primarily my responsibility to drive that and Clay supplies the infrastructure for that.

When I talk about working closely with Clay, just like Clay buys ERP from enterprise software vendors or CRM from Salesforce for us to run our business internally, he buys the Asset Performance Management software from me. He is actually one of my best customers, not just an internal customer, because our monitoring and diagnostic centers across power operate our APM software. When I talk about operations optimization, our own services teams are starting to use the components of that software. He is also using Predix to connect all the factories that he is helping automate and digitize to a Brilliant Factory.

There is a partnership where we are setting the strategy for digital internally and there is a partnership because Clay is also one of my customers. He is buying the same solutions to run our own internal services business or monitoring and diagnostic centers for the factories.

CIO.com: I think in some cases CIOs view CDOs as competitive, a view that, in essence, the CIO has failed to drive digital transformation and the company needs a CDO to do that. How do you make the relationship work with Clay?

Bell: Our metrics and measurements are clear. The definition of a chief digital officer means different things in different companies. In some companies there are people with a chief digital officer title which is basically just chief marketing technologist. They’re just doing digital marketing. That’s good but not good enough in terms of a digital transformation. You’ve got to go deeper than that. There are companies where it’s really about just purely internal productivity, in which case it’s the IT CIO stepping up to be the chief digital officer. That is still massively important. But in industries where we are, we’re trying to build an as-a-service business model, building a software business, it’s a whole different skill set.

When you think about chief digital officers as CEOs of software businesses, that’s a very different skill set than traditional CIOs. Our metrics are also very different. Clay is measured on how we drive productivity internally using IT, whether it’s consolidating our IT environment or driving productivity within our services businesses using software. Some of the software that he uses is from me. I am measured on growth, profitability, revenue, assets under management, value delivered to customers — a very different set of metrics than what a CIO is measured on.

We’re very clear on what we’ve got to partner on and very clear on the focus of both internal — where we partner digitally — and external, with digital being a business that’s very different.

CIO.com: I have one last question which is what are the keys to making digital transformation successful? You’ve been involved with this for a while and your company is clearly a leader when it comes to digital transformation. What makes it work?

Bell: Digital transformation has to be led right from the top by a very strong believer. I’m seeing it not just in GE but across the industry. With GE, it is Jeff Immelt, our chairman, and Steve Bolze, the CEO of power and the other CEOs. They are believers. They have a very strong vision, optimism, mixed with a healthy bit of paranoia. When digital happens in an industry, yes, productivity happens, yes, improvement happens but there is also a new landscape, new battle lines that are drawn. Whenever digital enters an industry there are a few big winners and destruction also happens. You’ve got to have believers at the top.

The second is you’ve got to have a culture that’s transformed in the company. It’s not just the culture of bringing in new DNA and new talent. It’s also transforming existing talent. For example, at GE we rolled out something we call FastWorks. We brought in people like Eric Ries, who is the leader of the Lean Startup movement. We codified what that means for even non-software people inside GE. There was a time when GE was known for Six Sigma. I truly believe GE will be known for FastWorks, meaning how we apply lean methodology across various disciplines, whether it be manufacturing a part in a jet turbine or quickly modeling new business models with our customers. It’s permeating the ideas from digital culture like Lean Startup, Agile, Design Thinking, FastWorks, into your culture.

The other is changing even your culture of beliefs. In the past, we had a 40-year-old bonus system that we valued people around. We take all that for table stakes. We introduced a new incentive program. We changed our cultural value system to what we call the GE Beliefs and you also had to create an environment for innovation. Our move to Boston is a signal of the fact that we want our headquarters to be in an innovation economy. It is things like that as well as driving a different set of metrics. Many of these apply to any industry to run a good digital transformation playbook.