APPROACHING INDUSTRY 4.0

The digital view from GE

Industry 4.0 is the buzzword you hear everywhere these days, describing the rush to harness the potential of digital technology to make operations smarter, more efficient and profitable. It’s no surprise that the energy industry has been leading the pack, in the view of William Ruh, chief digital officer at General Electric (GE). Its very survival is at stake.

“The energy sector has moved pretty fast,” Mr Ruh, also the CEO of GE Digital and senior vice-president of GE, says calmly during an interview with Asia Focus.

“We see petrochemical businesses such as oil and gas companies and chemical companies, and we see utilities that are moving fast, along with renewables. Anything to do with energy seems to be moving fast and I think that’s really because they are looking for an edge and how to improve their business, because these businesses have been on a bit of a downturn.”

Mr Ruh, with 35 years of experience in the software and internet industries under his belt, says each industry is at a different stage of adopting digital approaches and applications, but those facing the challenges of a decline in prices and demand are the ones that are pursuing this next step of industrial evolution the most vigorously.

“They (energy companies) are using it to gain an edge but I believe that over the next decade, this (digital transformation) will be the centre point of value creation in the industrial world,” he says.

This is the vision of an accomplished author and a frequent speaker on such topics as emerging business models, cloud computing and agile development. Mr Ruh was a student of computer science who had a passion for the field when it was still quite new, and today he is a go-to authority on everything related to digital transformation. Still, he doesn’t think of himself as an IT person in the way that most people view the current breed of techie.

“I always wanted to be a program writer, I love computers and I did this back in the early 1980s,” he says. “It was right at the beginning of the PC era in 1983-84 and I started my career with a few years at IBM.

“I had the pleasure of just moving around and working for a variety of software and system companies and even had the opportunity to create my own company in the dot-com era, but I am not an ‘IT person’.”

A native of Oklahoma who now considers southern California home, Mr Ruh is familiar with the feverish IT environment in California because that was where he earned his bachelor’s and master’s degrees in computer science from California State University, Fullerton.

He points out that his career has been about building products and solutions for customers using software and he is “very much about what kind of product can change the world”. He has gone through the PC generation, to the unit-distributed processing generation, into Java, the early days of e-commerce and the internet, all the way to today’s world where we talk about cloud computing, artificial intelligence and beyond.

“When I look back at it, you can see this progression happening. I am fortunate to have been at the leading edge of creating products and services around each one of these trends,” he says, adding that digitisation and automation are the way for companies, industries and countries to “move fast” in the changing business landscape towards industry 4.0.

DIGITAL TRANSFORMATION

According to forecasts by International Data Corporation (IDC), worldwide spending on digital transformation (DX) technologies was around US$1.2 trillion in 2017, an increase of 17.8% over 2016. It projects DX spending to maintain this pace with a compound annual growth rate of 17.9% between 2015 and 2020 before reaching $2 trillion in 2020.

IDC believes that discrete and process manufacturers will be contributing almost 30% of this spending while the fastest growth will come from the retail, healthcare, insurance and banking sectors.

Mr Ruh has observed t hree types of approaches commonly seen in digital transformation in energy and other sectors: using technology to increase productivity, optimising processes using digital solutions to save time and cost, and finding new business models at the same time.

Many businesses today are counting on harnessing the power of the data collected from their core operations to improve efficiency or even lead to the development of new revenue streams. Mr Ruh elaborates:

“Apart from selling wind turbines, we (GE) also sell software now and that software takes all the data, dynamically controls the wind turbines, and we are saying that it can generate 5% more electricity. Five percent more electricity in a wind farm is worth 20% more profit for the operator,” he says.

“First they start optimising their machines, then they optimise their processes. In the grid, they may optimise how they do repairs by using data to figure out the most optimal things to fix first so that they can accomplish their goals as fast as they can. They are also thinking about dynamic routing and managing the grid in a different way.”

Prior to joining GE, Mr Ruh was a vice-president of Cisco where he held global responsibility for developing advanced services and solutions. He has also held executive and management positions with Software AG, the Advisory Board, Mitre Corporation and Concept 5 Technologies.

These days he gets to apply his expertise on behalf of an American icon and its customers, many of them household names in their home markets. GE has had a presence in Asean for over a century, supporting infrastructure development by providing products and services in energy, healthcare, water and transport. It also provides services in the fields of finance and media including cable channels, entertainment series and films for the region.

Founded in 1878, GE currently employs 300,000 people worldwide, including 8,000 in Asean, with a market capitalisation of $261.2 billion as of May 2017. Its major locations in the region include Jakarta, Kuala Lumpur, Singapore, Hanoi, Bangkok, Phnom Penh and Manila.

Mr Ruh joined GE in 2011 to establish its industrial internet strategy and to lead the convergence of the physical and digital worlds within the group globally. During his tenure, he led the charge to develop the first cloud-based platform for the industry. His current role as GE’s chief digital officer is to work across the company with its IT organisation to incorporate digital strategy into all aspects of productivity and help GE become a “next-generation industrial firm”, as he puts it.

Putting on another cap, Mr Ruh is also the CEO of GE Digital, a $6-billion business of General Electric which provides digital software solutions and services. Its industrial internet applications range from asset performance management and operations optimisation to platform-as-a-service, cloud and cyber security services.

“It’s a business that creates products which enhance and work with our traditional products to deliver a new kind of digital experience,” he explains.

Mr Ruh sees the company as one that builds “products that really do two things”. Number one is to take a machine such as an aircraft engine or gas turbine, pull out the data from that machine, and analyse it using AI and other techniques to find out how its functions and operations can be improved, whether through better maintenance or “getting more out of the machine”.

The second thing that GE Digital products do is to use all the data that has been collected and combine it with insights and analysis from its skilled people to improve services or automate services around how people perform their jobs.

“So our product lines will either enhance machines or enhance people and work best when they do both simultaneously,” says Mr Ruh.

In his view, the most interesting aspect of digital transformation at the moment is how industries and companies are coming up with new business models.

“For the grid in the power space, for example in the United States, solar at home is becoming more popular with the rise of the ‘prosumer’. These are consumers who are generating electricity and putting it back on the grid,” he says.

“That’s become a new business model for utilities because they are not only the generator but they are beginning to be the manager of all generation and must distribute it in an economically viable fashion.”

Industrial revolutions start with businesses that optimise their machinery and operations, but what everybody really wants is to optimise their business model and this “will be the change” in the world of Industry 4.0, he says.

“Whoever optimises their business with digital is going to be one who really controls the market,” he says. “There’s going to be a battle between the old and the new, just like what we have seen in the advertising business and the retail business.”

DIGITAL WINNERS

In the US, GE Digital is working with the New York Power Authority (NYPA), the largest stateowned power generator in the country, which markets itself as “the world’s first digital utility company”. Mr Ruh says such claims are no longer a Silicon Valley or a US phenomenon but part of a global phenomenon that can happen “anywhere”.

Globally, the company is now working with Brazil-based Gerdau, the largest producer of long steel in the Americas, in helping it compete with other steel manufacturers on a global basis. It is also working with South 32, an Australian mining and metals company headquartered in Perth, which is moving toward autonomous operations in a big way and this is “really where it is all going”.

In Asia, GE Digital sees Japan as a great opportunity. It is working with NEC, a multinational provider of IT services and products, and Lixil, a Tokyo-based manufacturer of building materials.

Thailand is an “interesting market” where GE has signed a memorandum of understanding with SCG (Siam Cement Group), the country’s biggest industrial conglomerate. Mr Ruh believes the agreement holds the potential for developments as advanced as those being pursued with NYPA and Gerdau.

“All the best companies in the world are trying to figure out how to be digital and you can see it happening in all regions, all markets, and that’s what makes it interesting,” says Mr Ruh, who recommends that small and medium businesses also seek help from capable partners in this endeavour.

“The big companies like GE started this seven years ago when nobody was doing this and we have invested billions of dollars in our knowledge and technology, and a few others have done so as well, but only big companies can really afford to invest and develop a lot of their own capability,” he acknowledges.

“What that means for SMEs is that they have to find friends and partners who have the capacity and capability to help them. … The hard part is to figuring out who can be your friends to do that.”

Asean’s industrial sector is not playing a catch-up game with the US and Europe yet but it will be in the next couple of years if it does not start now on the road to digital transformation, he says. Nevertheless, there are some markets — Singapore, Vietnam, Thailand and the Middle East — that are moving as fast as Europe or the US and even faster in some cases.

“They (Asian and the Middle East markets) are looking to leapfrog. Sometimes having too much old technology becomes a barrier to adoption (of new technology),” explains Mr Ruh.

“In Asean, what I see is that low cost has been a focus where this technology is going to leapfrog low-cost labour because we are going to move to fully autonomous, automated systems. We are going to move to an environment where machines tell people what to do rather than people telling machines what to do.”

SMEs often think that low-cost labour is the only way to compete, but the future is going to be about automation, which will be cheaper than low-cost labour. Government policies can support smaller companies through regulations and investment assistance that can help them achieve the capability they need to compete with bigger players.

“The German government has come up with a policy around Industry 4.0. China, which was built on low-cost labour, has developed a policy around the internet-plus and the industrial internet,” says Mr Ruh. “We see this in Japan and in Thailand where Thailand at the government level is also encouraging an Industry 4.0 policy, and you want to see this move faster.

“Those countries that have a few strong industries that are moving fast, that have government support to help the SMEs come along, they are going to be the winning countries. They are the ones whose GDP is going to grow the fastest and they are the ones that are going to compete better on a global basis.”

Our product lines will either enhance machines or enhance people and work best when they do both simultaneously