THE global economic recovery has been slow and volatile, marred by geopolitical tensions, epidemics, and recently, declining oil prices. However, General Electric Co (GE) chairman and CEO Jeffrey R Immelt is not worried, just as he is unperturbed by Kuala Lumpur’s rush-hour traffic, made worse by the torrential downpour.
“I’ve been to KL many times, I’m used to it,” Immelt says, shrugging off his hectic schedule that has had him running around town.
“What we’ve seen [in GE] in 2014 is pretty similar to what we’ve experienced over the past few years. It’s a pretty common pattern. I’m pretty calm about the current environment. There are plenty of opportunities for a company like ours to grow.”
He also brushes aside talk of a slowdown in demand for gas turbines — one of GE’s core businesses. “The market [for gas turbines] has been flattish; it has been pretty stable. It shifts from one region to another. Asia is growing. The US is growing again. Europe is slow, but Africa is strong. We’re in 175 countries, so we ride the cycles from one region to the next.”
At the same time, Immelt says low energy prices have certainly helped stimulate the US market, where the company’s headquarters is based. In fact, it has also helped drive demand for commercial jet engines, GE’s other core business, as the aviation industry gets some relief from lower fuel costs.
Nonetheless, he expects volatility to stay and continue driving its customers to pursue the most efficient technologies available.
“Energy prices are just a moment in time. You have US$85 a barrel today, but oil has stayed within the US$80-to-US$120 per barrel band since 2006,” he notes.
With GE’s customers taking on projects and products that span 30 to 50 years, Immelt points out that it is hard to plan based on today’s oil price, which he expects to stay within the US$80-to-US$120 per barrel band in the near future.
High energy costs is the biggest driver of efficiency, and GE has been rolling out its “Industrial Internet” concept to help improve the efficiency of its machines. In a nutshell, the Industrial Internet is the integration of complex physical machinery with networked sensors and software. The sensors send readings in real-time to a data centre. Analytics is then applied to the information to help improve the performance of the machines. These machines can range from jet engines and gas turbines to compressors and MRI scanners.
“We have almost US$200 billion worth of backlog of these long-term service agreements. In a world where incremental improvements create massive economic value, if we can improve the fuel performance of GE jet engines by 1%, that’s worth US$2 billion to US$3 billion in profit annually for customers. There are a lot of low-hanging fruits like that, which we call the power of one,” explains Immelt.
He estimates that almost 70% of commercial jets use GE engines, which generate a huge amount of data that can be broken down and analysed in real time. “You get real-time data in terms of the turbine blades and fuel performance of an engine, for example. If you can model in real time how the asset is performing, you can predict failure before something actually fails catastrophically. You can predict unplanned downtime, which is of tangible value to customers and tangible to us,” he explains.
In many cases, GE underwrites the performance of these products, so if they fail prematurely, it could cost the company money. Hence, analytics has a direct tangible value to GE as well as its customers.
Immelt says the group has invested some US$500 million in developing its analytics that runs on a platform called Predix. Already, the division is generating about US$1 billion in revenue annually.
“What happens is you get real-time feedback as opposed to going 5,000 cycles on a plane, flying it in and tearing it down to see the problem. Now, it [Industrial Internet] gives you the ability to characterise each individual unit in real time,” says Immelt.
The data also helps GE understand and improve the design of its machines. “We get a tremendous amount of feedback real-time on our jet engines. We can tell the wear of a fan blade in a jet engine and we can improve the coatings that keep those blades performing longer.”
For large machines like gas turbines, this often means hundreds of sensors per machine feeding data to the data centre, which has created some 11 billion hours’ worth of operating data to analyse.
One such centre was recently launched in Malaysia. Dubbed the iCentre, it is one of three oil and gas (O&G) analytics and diagnostics centres globally that will compile massive amounts of operational data to be analysed by its Predictivity software.
“We chose Malaysia because it is a great location, has great people and is in close proximity to our customer base,” says Immelt. GE’s main clients in Malaysia include Petroliam Nasional Bhd and AirAsia Bhd. The group also has some 700 employees working in its Malaysian factories.
The dream for GE’s Industrial Internet is to achieve zero unplanned downtime, says Immelt. “It may not seem like a big deal, but if you’re a CEO of Petronas or an airline and you hear ‘no unplanned downtime’, you’d think ‘this is awesome’. That is the dream: assets that don’t fail and operate at peak performance all the time. That’s billions in economic value. It means that planes won’t be late and doctors would have better outcomes for their patients,” he explains.
This article first appeared in The Edge Malaysia Weekly, on October 27 - November 2, 2014.