GE 2015 Annual Report Download - page 12

build this to $5 billion in 2020. We are part-
nering with a great group of customers like
Walgreens, J.P. Morgan and Simon Property.
We will bring our business-building capability
to all new investments, like Alstom.
Diversification is essential for consistent fi-
nancial performance in volatile times. We
navigated our Aviation business through
the 9/11 crisis when engine shipments de-
clined 20%. Since then, Aviation earnings
have tripled and our share has grown. Our
shipments of gas turbines declined by 65%
between 2001–2004 as a “U.S. bubble” for
power generation burst. Yet we have a
stronger Power business today. Through
those cycles, the “Big GE” protected the busi-
nesses and gave them strategic flexibility.
That gives us confidence as we approach a
difficult Oil & Gas cycle. Between 2014–2016
we expect our Oil & Gas earnings will de-
cline 20–25%. Like past cycles, the strength
throughout GE is being transferred to our Oil
& Gas business. We are able to invest more
in R&D, something our competitors can’t do.
We are providing lower-cost solutions to
our customers that allow them to sustain
at current resource market pricing. And we
can invest in new assets based on favorable
economics. As in the tough times in Power
and Aviation, our investment in Oil & Gas is a
long-term proposition powered by the basics
of a vital industry.
Our portfolio is set. Going forward, we will
get more value from our market position by
leading the digital wave that is reshaping the
industrial world.
Transformation:
Creating the Digital
Industrial
We are just beginning our transformation
as the Digital Industrial Company. The Inter-
net has had a massive impact on consumer
productivity and commerce. Its impact on in-
dustrial markets is just now being realized. By
2020, 10,000 gas turbines, 68,000 jet engines,
more than 100 million lightbulbs and 152 mil-
lion cars will be connected to the Internet.
At GE, we have decided to generate and
model this data ourselves—both inside the
Company and with our customers. This is
what we mean by becoming a Digital Indus-
trial. Our Digital Industrial capabilities will
expand our growth rate, improve our margins
and bring us closer to our customers.
There was a time when every sale had a
clear endpoint, followed only by routine ser-
vice and maintenance. Now, sensors on our
products send constant streams of data,
analyzed and translated into upgrades that
drive productivity in industries where even
the smallest incremental efficiency can mean
very large gains. Capturing it will be a mission
in every one of our businesses. Our aspiration
is to offer with every GE product a pathway
to greater productivity through sensors, soft-
ware and big-data analytics.
Why GE? I assure you we didn’t wake up
one morning with “software envy.” We have
been investing in software and accumulating
data for decades. Competing will not require
big acquisitions. Rather, the technology re-
quired to compete is in our sweet spot. So, why
not us?
Our investments are aimed at delivering more
productivity for our customers and GE. The
performance, so far, of technology companies
to generate industrial productivity has been
subpar. Industrial productivity, which aver-
aged 4% annually from 1990–2010, is only
1% today. This is because pure connectivity
does nothing to create value. Operational pro-
ductivity requires domain data, physical and
digital engineering models, industrial analytics
and the ability to modify machines to achieve
different outcomes. Ask a hospital CEO how
their results have changed once they im-
plemented a new Electronic Medical Record
System, and the answer is typically silence.
They still lack the data that drives outcomes.
The “killer app” for the Industrial Internet is
GE’s Digital Twin. GE is creating living digi-
tal profiles of 500,000+ industrial machines
in the field to provide new opportunities for
customer growth and productivity. The Dig-
ital Twin is a software model of a physical
asset or process that will make it possible to
manage more precisely than we ever thought
possible and deliver better outcomes. The
Twin will create new business models and
services for GE’s customers and our business-
es. On the GE90 engine, we have used Digital
Twins to increase fleet availability while sav-
ing tens of millions of dollars in unnecessary
service overhauls. In rail, we are using Digital
Twin models of the Evolution Locomotive to
enable our customers to minimize fuel con-
sumption and emissions. The data economy
for the industrial world has arrived, and GE
is in a unique position to lead it. We enter it
bringing decades of deep domain expertise
about our industries and volumes of data
about our machines and their processes that
no one else can match.
10 GE 2015 ANNUAL REPORT