{"id":22757,"date":"2017-11-14T20:11:51","date_gmt":"2017-11-15T01:11:51","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/information-overload-ges-opportunity-for-enhanced-partnership-across-the-ofse-supply-chain\/"},"modified":"2017-11-14T20:42:26","modified_gmt":"2017-11-15T01:42:26","slug":"information-overload-ges-opportunity-for-enhanced-partnership-across-the-ofse-supply-chain","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/information-overload-ges-opportunity-for-enhanced-partnership-across-the-ofse-supply-chain\/","title":{"rendered":"Information overload: GE\u2019s opportunity for enhanced partnership across the OFSE supply chain"},"content":{"rendered":"

Digital disruption<\/b><\/strong><\/p>\n

A critical component of the supply chain for capital-intensive industries, such as oil field services and equipment (OFSE), is the reliability of business-critical equipment.\u00a0 The stakes are high: interruptions or failures in equipment functioning could result in costly downtime \u2013 or worse, loss of life, as in the case of the BP Deepwater Horizon blowout.\u00a0 Original equipment manufacturers (OEMs) like General Electric (GE) have historically provided and serviced this equipment through contracts offering emergency and routine maintenance.<\/p>\n

As lower oil prices put pressure on OFSE providers and automation technologies become more available and reliable, many companies are investing in digitalization to increase efficiency and reduce supply chain costs.\u00a0 Most are slowly climbing the learning curve, struggling to sift through the vast amounts of data being collected.\u00a0 For example, on an oil rig with 30,000 sensors, only 1% of the data are examined \u2013 and this information is used primarily to detect and control anomalies, rather than for optimization and prediction, where the greatest value lies.[1]<\/p>\n

For companies struggling under the weight of big data, the question they must answer is whether to build data analytics capabilities internally, or outsource.\u00a0 As they weigh their options, fast movers in the OEM space have an opportunity fulfill this need and become better supply chain partners for their customers.<\/p>\n

The new, digital GE: More \u201cskin in the game\u201d<\/b><\/strong><\/p>\n

GE is making a big bet on digital, shifting its business model away from its traditional heavy machinery and manufacturing focus toward one with analytics at its core.\u00a0 Recognizing the challenges of big data analytics in OFSE, GE sees an opportunity to position itself as a long-term commercial, operational and technical partner by forming performance-based alliances with its customers around digital solutions.[2]<\/p>\n

In the near-term, the new model is taking form in service agreements that enable GE to increasingly \u201cshare outcomes with our customers,\u201d aligning incentives and reducing some of the friction in the supply chain through data transparency.[3]\u00a0 For example, a 2016 service agreement with Diamond Offshore Drilling transferred full accountability for the performance of the blowout preventer systems under contract to GE \u2013 the first of its kind in the industry.[4]\u00a0 Diamond Offshore captures and shares data through GE\u2019s monitoring and analytics solutions, with which GE performs condition-based monitoring to anticipate and reduce unplanned downtime and better manage maintenance schedules and spare parts inventory.<\/p>\n

Simultaneously, GE is investing heavily in the buildout of Predix, a cloud-based \u201cIndustrial Internet of Things (IIoT)\u201d platform.\u00a0 The vision for Predix is to model an entire system of equipment, solving simultaneously for optimization of each part of the system as well as the system overall \u2013 a feat which, if successful, will transform a customer\u2019s operations to a new level of efficiency and performance.[5]\u00a0 GE has high growth expectations for Predix, having targeted revenues of $100 million in 2016 and charting a course toward $4 billion in revenue by 2020.[6]\u00a0 Further bolstering this effort, GE announced in October that it will partner with Microsoft to integrate Predix with Microsoft\u2019s Azure cloud platform, focusing initially on oil and gas and mining companies.[7]<\/p>\n

Building new capabilities and managing cybersecurity risk<\/b><\/strong><\/p>\n

To enable the shift toward its digital future, GE will need to fundamentally change its organization to build new technical capabilities.\u00a0 Recruiting and retaining top programming talent to write software for Predix has been a challenge for GE given its manufacturing heritage.\u00a0 To date, GE has relied heavily on partnerships with developers such as Tata Consultancy Services, Infosys, Wipro and Capgemini to design and write Predix software and applications.[8]\u00a0 However, for GE to fully own the Predix platform and its broader digital strategy in the long-term, it will be important to acquire and retain its own software talent, as well as re-train and develop its existing talent base.<\/p>\n

Beyond managing its talent base, GE will need to manage the cybersecurity risk associated with its cloud platform Predix. \u00a0Given that Predix will be collecting data from and communicating with heavy machinery around the world, the stakes for a cybersecurity attack are quite high.\u00a0 GE has already incorporated a number of security measures to protect the Predix infrastructure and its users, though these will need to be regularly scrutinized and upgraded on a continuing basis.[9]<\/p>\n

Will OFSE embrace the new GE?<\/b><\/strong><\/p>\n

As GE invests heavily in digitalization to better partner with OFSE providers, potential obstacles loom: Given the industry\u2019s intense focus on safety, how much control and oversight of their equipment will they be willing to give up \u2013 particularly in the early days when GE is \u201cworking out the kinks\u201d?\u00a0 What happens when operators disagree with the recommendations of GE\u2019s predictive analytics?\u00a0 The answers to these questions will determine whether uptake is fast \u2013 as GE predicts \u2013 or slow.<\/p>\n

(783 words)<\/p>\n

 <\/p>\n

References<\/b><\/strong><\/p>\n

[1]<\/a> McKinsey & Company, \u201cUnlocking the potential of the Internet of Things,\u201d June 2015, https:\/\/www.mckinsey.com\/business-functions\/digital-mckinsey\/our-insights\/the-internet-of-things-the-value-of-digitizing-the-physical-world, accessed November 11, 2017.<\/p>\n

[2]<\/a> \u201cDiamond Offshore and GE Oil & Gas Enter into Industry\u2019s First Performance-Based Subsea Blowout Preventer Service Agreement,\u201d PR Newswire<\/i><\/em>, February 8, 2016, https:\/\/www.prnewswire.com\/news-releases\/diamond-offshore-and-ge-oil–gas-enter-into-industrys-first-performance-based-subsea-blowout-preventer-service-agreement-300216265.html, accessed November 11, 2017.<\/p>\n

[3]<\/a> McKinsey & Company, \u201cGE\u2019s Jeff Immelt on digitizing in the industrial space,\u201d October 2015, https:\/\/www.mckinsey.com\/business-functions\/organization\/our-insights\/ges-jeff-immelt-on-digitizing-in-the-industrial-space, accessed November 11, 2017.<\/p>\n

[4]<\/a> \u201cDiamond Offshore and GE Oil & Gas,\u201d PR Newswire.<\/i><\/em><\/p>\n

[5]<\/a> Dan Woods, \u201cWhat Is GE Predix Really Building?\u201d Forbes,<\/i><\/em> September 28, 2016, https:\/\/www.forbes.com\/sites\/danwoods\/2016\/09\/28\/what-is-ge-predix-really-building\/#6c807e613c5b, accessed November 13, 2017.<\/p>\n

[6]<\/a> Steve Lohr, \u201cG.E., the 124-Year-Old Software Start-Up,\u201d New York Times,<\/i><\/em> August 27, 2016, https:\/\/www.nytimes.com\/2016\/08\/28\/technology\/ge-the-124-year-old-software-start-up.html, accessed November 12, 2017.<\/p>\n

[7]<\/a> Alwyn Scott, \u201cGE, Microsoft to announce deeper industrial internet partnership,\u201d Reuters,<\/i><\/em> October 25, 2017, http:\/\/www.reuters.com\/article\/us-ge-digital-microsoft\/ge-microsoft-to-announce-deeper-industrial-internet-partnership-idUSKBN1CU2BH, accessed November 13, 2017.<\/p>\n

[8]<\/a> Lohr, \u201cG.E., the 124-Year-Old Software Start-Up.\u201d<\/p>\n

[9]<\/a> GE Digital, \u201cPredix: The Industrial Internet Platform,\u201d (PDF file), downloaded from GE website, https:\/\/www.ge.com\/digital\/sites\/default\/files\/predix-platform-brief-ge-digital.pdf, accessed November 12, 2017.<\/p>\n","protected":false},"excerpt":{"rendered":"

As OFSE providers install new automation technologies, they are becoming inundated with more data than they can use \u2013 and GE is moving quickly to position itself as their digital partner in supply chain and operations management.<\/p>\n","protected":false},"author":10009,"featured_media":22813,"comment_status":"open","ping_status":"closed","template":"","categories":[475,2532,2123,2029,1716,480,3538,157,3537],"class_list":["post-22757","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-cloud","category-digital-oil-fields","category-digitalization","category-digitization","category-ge","category-oem","category-ofse","category-oil-and-gas","category-oil-field-services","hck-taxonomy-organization-general-electric","hck-taxonomy-industry-energy","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nInformation overload: GE\u2019s opportunity for enhanced partnership across the OFSE supply chain - 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