Interesting that just as I was planning my trip to San Francisco to attend GE Digital’s Minds + Machines conference a publicist representing Simon-Kucher, a German-based pricing model consultancy, pitched me an interview with Adam Echter, Senior Director.
First, some context. In our community, we view GE Digital as a supplier. Although GE makes PLCs and other control equipment, it is known for software—Cimplicity, iFix, Proficy, Predix. The company, though, in reality makes its money from large assets—locomotives, power generation, jet engines, and the like.
As Jeff Immelt restructured the company jettisoning some of Jack Welch’s favored, but losing, investments. GE became less of media and finance returning to its roots in industrial manufacturing.
Searching for a better sales and profit model, GE famously began selling thrust rather than jet engines. Or it sold uptime rather than equipment. To do this, it needed to develop its own Industrial Internet of Things ecosystem.
The pricing model is known as consumption-based.
Echter sees us living in a time of transition where the IIoT, which was once the controlled domain of a limited number of ultra-large multinational corporations, will blossom into an uncontrollable ecosystem providing Billion dollar opportunities for hundreds of companies. As the complexity of the IIoT continues to explode and demands for complicated specialties emerge, large players like GE are seeing their pricing power diminish and a plethora of market participants emerging with new and disruptive monetization models. GE monetized their pricing power because they controlled all layers of the system; capital equipment, sensors, communications, data processing and storage.
GE was able to lock all inputs into flat pricing models, then sell their output on an open-ended consumption model. As the complexity of the IIoT scales, it has become increasingly difficult for manufacturers of this first-moving technology like GE to retain control.
What he means by the complexity is that other suppliers are getting into the act. They want to sell through GE the same way GE is selling to its customers. This will take a potentially big bite out of profits.
Meanwhile, Immelt has been replaced by the board.
What are you seeing from suppliers? Or, what are you demanding? Ecosystems? I spent considerable time explaining the ecosystem that MIMOSA is proposing that is totally based on standards. The Linux Foundation, promoted by Dell Technologies and others, has developed an open source ecosystem for the IIoT.
Is this the future?