The document discusses General Electric's digital transformation efforts to become a "digital industrial" company. Some key points: - GE is developing software operations in each business line and aims to build a $15 billion digital/software business by 2020. - GE is building an industrial operating system called Predix to connect sensors and software in factories and equipment. - A GE plant retrofitted with Predix detected an argon gas leak, saving $350,000 per year in costs. Overall automation reduced work time by 530,000 hours. - While startups emphasize minimum viable products, GE must ensure safety for products like jet engines. However, GE is encouraging engineers to experiment more and accept failure as part

1. Business strategy &
digitization
By - Vikram Bhonsle

2. Flow of Address
• A look at the Industrial revolution (IR 4.0)
• Change in investment spending and
technologies attracting the most
investments
• Technological disruptions as a source of
wealth creations
• Effects on business due to IR 4.0 and digital
• Concern areas for CEO`s
• Components needed for a “digital
organization” – Innovation, Design thinking
• “Digital Quotient”
• “Digital Maturity” & performance
• Why a digital workplace?
• “Example of GE`s “digital industrial”
company

4. • The First Industrial Revolution used
water and steam power to
mechanize production.
• The Second used electric power to
create mass production.
• The Third used electronics and
information technology to
automate production.
• Now a Fourth Industrial Revolution
is building on the Third, the digital
revolution that has been occurring
since the middle of the last
century.
• It is characterized by a fusion of
technologies that is blurring the
lines between the physical, digital,
and biological spheres.
https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/

5. 5/11
Global capital spending is shifting towards new age industries
Change in worldwide capital spending
2014-2017 forecast, percent
604020– 0204060
Energy equipment
Property
Metals & mining
Oil, gas & fuel
Chemicals
Leisure
Total
Health care
IT service
Tech hardware
Software
Internet
SOURCE: The Economist, Goldman Sachs
▪ Total corporate
capital spending is
expected to fall by
15% by 2017
▪ Energy, mining and
chemicals firms are
expected to slash
capital-investment
budgets by 20-50%
▪ Internet, software
and other tech
firms are expected
to expand
investments
by 20-50%

6. Six technology related areas are attracting
VC investments
Advanced materials
Industrial automation1
61
386
3D Printing 990
Energy storage 1,596
Internet of things 5,571
Digital & Analytics 17,394
VC capital invested globally, 2013-2016 YTD
Mn USD
2,943
1,433
192
418
108
Number of deals
2013-2016 YTD, #
37
NOT EXHAUSTIVE
Examples of VC-backed
companies
▪ Pacific Control Systems
▪ SigFox
▪ NestLabs
▪ Carbon3D
▪ Shapeways
▪ Glowforge
▪ Nortal
▪ Rethink Robots
▪ Distech Controls
▪ Cloudera
▪ Palantir Technologies
▪ ContextLogic
▪ Silicor Materials
▪ Segetis
▪ Renmatix
▪ Boston Power
▪ Green Charge Networks
▪ VionX Energy
SOURCE: PitchBook

8. Uber : World`s largest cab aggregator, own no cabs of it own. It has only 6,000 +
employees. Valued at more than 68 Billion USD.
In December 2015, Uber was valued at $68 billion, having taken just 6 years to surpass the
valuation of 100-year-old companies like General Motors and Ford, as well as “traditional”
transportation companies like Hertz and Avis
Technological disruptions
It appears that AirBnB is worth more than Marriott International with its 4,000 hotels under
management and US$13.8bn in revenue. In contrast, AirBnB which is forecasting US$900
million in revenues in 2015 and a loss of about US$150 million is raising US$1bn at
a US$24bn valuation. Marriott is valued at US$21bn (NASDAQ:MAR). Many years ago, during
and after the dot.com bust, we laughed at the prospect of companies with no physical assets
being worth more than their brick and mortar counterparts.
But let’s look at AirBnB: according to the Wall Street Journal article by 2020 it is
projecting US$10bn in revenues with an EBITDA of US$3bn.
http://www.victorandrekong.com/airbnb-vs-marriott-how-come-it-could-be-worth-more/
http://bruegel.org/2016/02/uber-and-the-economic-impact-of-sharing-economy-platforms/

9. Effects on business due to IR 4.0 & digital
• Consumers are increasingly at the epicenter
of the economy, which is all about
improving how customers are served.
• Physical products and services, moreover,
can now be enhanced with digital
capabilities that increase their value.
• New technologies make assets more
durable and resilient, while data and
analytics are transforming how they are
maintained.
• With the emergence of global platforms and
other new business models, finally, means
that talent, culture, and organizational
forms will have to be rethought.
Product
Enhancement
Organizational
forms
Collaborative
Innovation
Customer
Expectations
Consumers
https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/

10. The Digital
organization

11. The components of a
digital organization
The “workplace of the future,” the
“digital workplace” and the “digital
employee experience” are all
concepts emerging as mega
trends

13. Innovation
• Innovation Center &
Competence Center at
Ferrovial established to
provide optimum solutions to
business by promotion
innovation throughout.
Manage an innovation
budget. Generate
commercially viable business
solution
• 2 Competence centers setup
to commercialize innovative
solutions

14. Race to an innovation economy
• In the last year
innovation was
adding further
ingredients to the
mix - mobile, cloud,
social media and big
data. What we see
today is, that these
innovations come
together to build a
perfect symbiosis
• We are leaving the classical industrial era and entering an innovation-
based economy. The changes ahead will be as big as the changes from
an agrarian society to an industrial one, as we leave the structure,
markets and business processes of the industrial age.

15. Innovation in practice at Ferrovial
• Innovation Center &
Competence Center at
Ferrovial established to
provide optimum
solutions to business by
promotion of innovation.
Dedicated innovation
budget. Set up to
generate commercially
viable business solution
• 2 Competence centers
setup to commercialize
innovative solutions

16. Innovation in practice at Ferrovial
Promoting innovation by “Zuritanken” drive and internal innovation contest at Ferrovial
Zuritanken is a
word invented at
Ferrovial to
represent “the
connection
created between
those who have an
idea and those
who believe in it.
It defines the
excitement of
being witness to
while also being a
part of an
important change”

17. Design Thinking
• What gives any product or service that ‘wow’
factor and sets it apart from others?
• The answer, as companies like Apple and
Google and even some startups have
discovered, lies in an approach called ‘Design
Thinking’, which is what drives their
competitive edge.
• Some call it a ‘problem-solving protocol that
helps you achieve big results by focusing on the
solution’, others say it is a ‘core strategy that
creates an organisational culture focused on
solving problems for the end user.
• Winning companies, such as Apple, Virgin,
Toyota and others, innovate continuously
because of their culture of design thinking –
integrating the needs of people, the
possibilities of technology and the
requirements for business success.

18. Digital Quotient
• From 1965 to 2012, the
“topple rate,” at which
companies lose their
leadership positions,
increased by almost 40
percent as digital technology
ramped up competition,
disrupted industries, and
forced businesses to clarify
their strategies, develop new
capabilities, and transform
their cultures.
• McKinsey research shows that
companies have lofty
ambitions: they expect digital
initiatives to deliver annual
growth and cost efficiencies
of 5 to 10 percent or more in
the next three to five years. Source : http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/raising-
your-digital-quotient

19. What is Digital Quotient
• Given that “Digital” lends itself to various
interpretations, many organizations risk
misguided efforts, piecemeal initiatives in
the guise of digitization.
• Therefore to achieve “digitzation”, one
must gauge the “Digital Quotient”
• Mckinsey conducted an indepth
diagnostic survey of 150 organizations
across the world. By evaluating 18
practices related to digital strategy,
capabilities, and culture, a single, simple
metric was developed for the digital
maturity of a company—what might be
called its Digital Quotient, or DQ.
• Mckinsey`s assessment called Digital
Quotient® (DQ™) measures an
organization's digital maturity and
capabilities and to examine how they
drive financial performance.

20. Digital Maturity
MIT and Capgemini divided the companies into different categories depending on
their maturity in both digital technologies and leadership capabilities. Some
companies are what we call the “Digirati.” They have the digital maturity not only to
build digital innovations, but also to drive enterprise-wide transformation. And they
benefit from their actions. Digirati have significantly higher financial performance
than their less digitally-mature competitors.
Digital Beginners : Executives see threat in digital transformation but less opportunity than
other industries do, perhaps because of regulation. Many are building capabilities in analytics
and worker enablement, but most firms are just beginning, leaving many opportunities
untapped.
Digital Fashionistas : These had a six per cent better performance in revenue generation
efficiency than their peers, but were 11 per cent less profitable.
Digital Conservatives : Conservatives were down 11 per cent in revenue generation efficiency
to their competitors, but were more than nine per cent more profitable than their peers.
Digirati / Digital Masters : “Digital masters" had significantly better financial performance than
the average performance of all large firms in the same industry, both in terms of revenue
generation efficiency (nine per cent higher), and profitability (26 per cent higher).
The_Digital_Advantage__How_Digital_Leader
s_Outperform_their_Peers_in_Every_Industr
y

21. Digital Maturity
Digital Beginners do very little with advanced digital capabilities,
although they may be mature with more traditional applications such as
ERP or electronic commerce. Although companies may be Beginners by
choice, more often than not they are in this quadrant by accident. They
may be unaware of the opportunities, or may be starting some small
investments without effective transformation management in place
Digital Fashionistas have implemented or experimented with many sexy
digital applications. Some of these initiatives may create value, but
many do not.
Digital Conservatives favor prudence over innovation. Conservatives
understand the need for a strong unifying vision as well as for
governance and corporate culture to ensure investments are managed
well. However, they are typically skeptical of the value of new digital
trends, sometimes to their detriment.
Digirati truly understand how to drive value with digital transformation.
They combine a transformative vision, careful governance and
engagement, with sufficient investment in new opportunities
The_Digital_Advantage__How_Digital_Leaders_Outperform_their_Peers_in_Every_Industry

22. Digital Maturity & financial performance
The_Digital_Advantage__How_Digital_Leaders_Outperform_their_Peers_in_Every_Industry
Fashionistas
Beginners Conservatives
Digirati

23. Digital Maturity & financial performance
The_Digital_Advantage__How_Digital_Leaders_Outperform_their_Peers_in_Every_Industry
Fashionistas
Beginners Conservatives
Digirati

24. Digital Maturity & financial performance
The_Digital_Advantage__How_Digital_Leaders_Outperform_their_Peers_in_Every_Industry
Fashionistas
Beginners Conservatives
Digirati
The Tobin's Q ratio is a ratio devised by James Tobin of Yale
University, Nobel laureate in economics, who hypothesized that the
combined market value of all the companies on the stock market should
be about equal to their replacement costs.
Price-to-book value (P/B) is the ratio of market price of a company's
shares (share price) over its book value of equity. The book value of
equity, in turn, is the value of a company's assets expressed on the

25. Digital Maturity by industry
The_Digital_Advantage__How_Digital_Leaders_Outperform_their_Peers_in_Every_Industry

26. Why a Digital Workplace ?
• Why adopt a digital workplace strategy?
• If the risks of inaction are not sufficient
motivators, the benefits of adopting a digital
workplace make a compelling business case.
Consider the gains in:
• • Talent attraction: 64% of employees would opt
for a lower paying job if they could work away
from the office.
• • Employee productivity: organizations with
strong online social networks are 7% more
productive than those without.
• • Employee satisfaction: organizations that
installed social media tools internally found a
median 20% increase in employee satisfaction.
• • Employee retention: when employee
engagement increases, there is a corresponding
increase in employee retention by up to 87%.
• • Communication tools: information workers
prefer newer communication tools, particularly
instant messaging, over more traditional
4 The digital workplace: Think, share, do

28. GE`s digital Transformation
• Many industries see digital threats, of course. Yet, the
scope of the challenge is magnified at GE, a 124-year-old
company and the US’s largest manufacturer, with more than
300,000 employees worldwide
• General Electric Co. is developing software operations in
each of its business lines with the goal of building a $15
billion franchise under Chief Executive Officer Jeffrey
Immelt’s plan to create a “digital industrial” company.
• Today, one of San Ramon’s most important projects is to
build a computer operating system, but on an industrial
scale—a Microsoft Windows or Google Android for factories
and industrial equipment. The project is central to GE’s
drive to become what Immelt says will be a “top 10
software company” by 2020.
• Employees companywide have been making pilgrimages to
San Ramon for technology briefings, but also to soak in the
culture. Their marching orders are to try to adapt the digital
wizardry and hurry-up habits of Silicon Valley to GE’s world
of industrial manufacturing.
http://www.supplychain247.com/article/ge_15_billion_digital_transformation
What’s the Matter with Owen? – “Hammer” - GE

29. GE`s digital Transformation
• GE Greenville’s own equipment has been a Predix guinea pig. The
machinery and factory were retrofitted with data-generating
sensors and the software. Matt Krause, the plant manager, said that
last winter, when a snowstorm shut the factory for a day, the sensor
network detected that the plant had consumed 450kg of argon, an
inert gas used in coatings for parts. The leak was fixed, saving
$350,000 a year.
• “We can see things we never did before,” Krause said. Overall, 60
of 200 steps in design and production have been automated or
eliminated, reducing work time by 530,000 hours over three years,
GE estimates.
• Not all the start-up ideas that GE is trying to breed translate
comfortably to heavy industry. Lean proponents urge companies to
come up with “minimum viable products”, particularly test versions
of software programs. But no one wants a minimum viable jet
engine or power generator. Yet in Greenville, engineers in the
design stages are encouraged to move faster in smaller steps,
conduct more experiments, and be willing to fail and try again. It
amounts to a sea change in the engineering culture of heavy
industry.
• “As an engineer, not getting it right the first time, I find painful,”
said Bill Byrne, an engineering manager. “It’s uncomfortable. But
it’s been incredibly liberating.”
• The old ways, said Lammas had merit. Each step and rule was
logical on its own. But the emphasis on flawless execution and
perfection fostered a fear of failure. “Overcoming that culture was
probably the biggest challenge,” he said.http://www.supplychain247.com/article/ge_15_billion_digital_transformation