GE Just Ended the Second Inning of IoT for Industrial/ Commercial Equipment Markets
Pre-Game Warm-Up Took More Than a Decade. First Inning: 30 Months. Second Inning: 6 Months.
Many people love the baseball analogy when describing IoT. They talk about it as being a nine inning game. We are in the X inning of a nine inning game they say. We are going to use that analogy.
At INEX, we think the second inning just ended.
Some of your impatient peers lost their minds in the marathon that was the first inning of IoT.
That period that stretched from Q4 2011 to Q1 2014. It was kicked off by Jeff Immelt and John Chambers declaring that IoT – or Industrial Internet and Internet of Everything, respectively – would be the futures of their companies; and by implication, their legacies. That period ended with two blink-inducing deals: Google’s $3.2 billion for NEST and PTC’s $130 million for Thingworx.
It almost felt like those deals – and a hundred others – were the result of as much frustration as strategy. You can almost hear decision makers pounding tables: We need to do something!
This is not to say that either of those deals were bad. Not at all. They just read, felt, seemed … urgent.
And that is how I would characterize the second inning: urgent. For if the first inning dragged on, with every batter getting to the plate 2 or 3 times even, it seems like the second inning was 3 batters up, 3 batters down. Change sides. And then on to the third …
Some of your sleepy peers have lost their initiative in the sneeze that was the second inning of IoT. Yes, ‘was’ – for it is just about over. The second inning was so intense and so fast, that I simply cannot explain it in this post. It would take a book. But not one that I could write for much of the work that INEX does is not available to the public. However there is a crucial case that INEX was not involved in, and that is in the public domain, that I think effectively ended the second inning.
GE and Appliances.
What did they do in that blink of-an-eye second inning? A ton. But one only needs to consider three things they did in appliances to know what the second inning was all about, and to start to hurt your hair thinking about what might be coming in the next inning.
Back to the second inning. In three specific moves, GE showed the world how it thinks about the future, and you might/ should/ need to also.
You may disagree with my interpretation or analysis, but, the moves are fact. Public record.
- Partnering with Quirky. Fortune 10 GE partners with upstart industrial design hot-shop Quirky. Among the results of this partnership are evidence of GE’s vision, commitment, reach into the edge(s) of innovation … and a smart, connected egg tray that tells your smartphone when you are low on eggs.To say that product was panned is an understatement. Most IoT developers, deployers, investors, analysts and potential customers rejected it.
But GE proved those points. It was not afraid to experiment. With small companies. On risky ideas. In public. Repeatedly.
Oh yeah, and people were really digging the connectivity thing … even if not for egg trays.
- Selling the GE Home Appliance Division. GE sold one of its ‘hallmark’ brand collections. White goods for the home. Most analysis, and some GE commentary painted it as GE tightening its focus on industrial markets. Sorting its portfolio to higher margin businesses. Exhibiting ‘discipline’. Sure. Why not.But Quirky was part of the Electrolux buy-side team. That same Quirky that worked with GE on connectivity projects for home appliances.
Have you heard anything from Electrolux about their connectivity strategy before this?
GE proved another point: That in at least one mass market – and perhaps others – GE was placing value on the data that could be derived from connectivity in home appliances, but not the metal and plastic that made up the physical products themselves.
GE was not getting out of the home appliance business. They were getting out of the old-line, unconnected, physical products segment of the home appliance business.
- Launching FIRSTBUILD. GE announced it was participating in a JV with Stratysys, a large scale 3D printing systems supplier, with ties to the venerable Oak Ridge National Labs, and Local Motors, one of the most interesting companies in the world, we think, with a vision of a decentralized, diverse, and superior manufacturing future that they are approaching by combining a number of strategies to create a hybrid proprietary, merchant-source, and crowd-source business model.FIRSTBUILD wants dozens, hundreds, thousands of people to come to FIRSTBUILD and dream up – wait for it – the future of home appliances. Among other initiatives.
GE was proving the point that they believe the home appliances business could be a good one, just not the way it, including their old one, was constructed.
To put a fine point on it: One month after a number of people thought GE was getting out of the home appliance/ home automation business, they launched a new one.
Two years ago one luxury appliance brand was dead-set against connecting their appliances – unless you were a service tech with a hard wire, or a customer with proof that you licensed a third-party home automation platform, with indemnification. And now …well, they issued a press release the month about connectivity embedded in their appliances.
About the Data …
In case you are missing my point: It is about the data. The intelligence that data can enable. The value that intelligence can help create. And if you are really creative and enlightened, the targets for that value creation go far beyond the customer that owns the appliance, or the OEM that built. In a transparent, distributed network, that intelligence can be made available in various forms to limitless authorized entities.
Note the words transparent and distributed. Did I mention secure?
I was humbled to follow Jeff Immelt’s speech at the Colorado Innovation Network Summit last month when he sharpened his message from nearly three years ago.
He told the crowed about GE’s $110 billion in physical asset businesses; $350 billion in financial asset businesses; and a big question market about the potential value of a digital asset/ analytics business.
I think the whisper goal for that digital assets/ analytics business is $500 billion. Or more.
Will GE start buying some of those startups that come to FIRSTBUILD? I have no idea. I am not sure that it matters. What GE – and most other leaders in IoT — is interested in is accessing, applying and enabling existing and entirely new ecosystems to exploit this intelligence to create the future.
Note the absence of the words own or control.
A future that transforms broken health care into effective and affordable population health systems; delivers energy that is clean, affordable and abundant; secures water and agricultural resources while enhancing access in places where it is stressed.
Try this take. While most will focus on the 3D printing as the key to FIRSTBUILD, I think there is something equally powerful in the human and intelligence networks that are coming into and emanating from FIRSTBUILD.
The Maker community is evolving and its population of commercial venture seeking practitioners is growing. They are more than hobbyists. Many of them are what we used to call ‘consumers’. And they are not as aware, or loyal, to many of the dominant brands being offered them. Perhaps, including, in home appliances.
Makers used to be confused with socialists. We better get used to them for their intellectual, professional and social pursuits now include making money.
At the same time, I think GE’s primary goal is to be the intelligence engine for all those new home appliances, coming from all those new home appliance brands. And maybe their supplier of other goods and services, too …
If FIRSTBUILD is the dawning of the next industrial revolution – or the third inning – you would want to be there at the opening too …
Starting To Sum It Up
As Peter Thiel would say: You must choose your business: atoms or bits but not both. In this case, it appears that GE is choosing bits.
And I think Peter Thiel is wrong. Many of the best business in IoT will be atoms AND bits. But that is a post for another time …
Every physical product or service business in the world will see this kind of activity happen to, or through the incumbents in those spaces. Defense and intelligence technology? Yep. Infrastructure? Coming. Industrial? You read it here. Retail? That horse has already left the barn – they might be closer to the bottom of the 6th inning.
Is this the end of the second inning for industrial/ commercial equipment OEMs and IoT? At INEX we think so. We think it might be for their service provider partners as well.
GE is not abandoning appliances. Or physical products. They are not migrating whole-hog to an analytics business. They are going to go for ‘AND’ – bits and atoms. In this case, I would say bits first and then atoms. If atoms at all.
If this is what we are claiming – the end of the second inning in IoT — what might be in store for the third inning?
Drop me a line, we can talk, for my opinion would be case-dependent. For IoT is fragmented and just as one business model will not serve all markets, neither will one projection.