How GE Exorcised the Ghost of Jack Welch to Become a 124-Year-Old Startup

Under CEO Jeff Immelt, GE has shed its apppliance and GE Capital business, and is making a long bet on imbuing intelligence into its lines of industrial equipment – aka the Industrial Internet, or Internet of Really Big Things.

GE’s ambitions were greeted with skepticism in the Valley. In 2012, when Immelt promoted the software venture in San Francisco during a company-sponsored event with Marc Andreessen, the star venture capitalist and a friend of Immelt’s warned that it would be difficult for a hardware company like GE to assemble a team of data scientists that could perform the kind of tasks that GE had in mind. “It’s hard to be really good at that,” Andreessen said. “It’s really complicated.” (Bloomberg LP, which owns Bloomberg Businessweek, is an investor in Andreessen Horowitz.)

Jennifer Waldo, GE’s head of human relations in the San Ramon office, says recruiters had a hard time just getting people to come in for an interview. Nine out of 10 software developers they contacted had no idea GE was in the business or that it even had operations in California. Nor were they necessarily interested in learning anything more: Almost all had jobs and couldn’t see any upside to working for an East Coast microwave oven manufacturer. In 2013, Waldo appealed to Immelt for help when he visited San Ramon. “I walked him through all those issues,” she says. “I needed to compensate differently. I needed to in-source my recruiting team. We were competing in a marketplace where we’re not even a recognized player.” A former GE recruiter says the company offered stock options to job candidates, but not actual stock, the norm in Silicon Valley. There were also no nap rooms, no on-site child care, no dogs wandering around the office.

Waldo and her team found they could make headway by telling prospects that they would have a chance to develop trains and power equipment rather than some inconsequential social-networking app. “I had a candidate in the early days,” she recalls. “She came in and said, ‘I’m sitting there trying to figure out how to put a Pinterest button on something, and I get this phone call from GE, and you’re talking about making aircraft engines fly more efficiently.’ ” (A GE spokeswoman says the company now includes stock in its compensation for software developers, too.)

GE also targeted startup veterans who’d spent years putting in hours for low pay hoping to be the next Mark Zuckerberg. “They went around to guys who were in their second and third startup and had been eating ramen noodles for eight years,” says Nick Heymann, an analyst at William Blair. “They said, ‘Look, how would you just like to have a normal lifestyle, live an hour outside the Bay Area, make a quarter of a million bucks a year, and give your kids a really good education?’ ” At the end of 2013, GE had 750 people working in San Ramon.

The recruitment paid off.

Head count at the San Ramon office is 1,300, including some refugees from Google and Facebook. It already has aviation customers using Predix applications to monitor the wear and tear on their jet engines and calibrate their maintenance schedules based on that data rather than an average for the entire fleet. It’s created smart wind turbines that tell each other how to shift their blades to catch more wind, which GE says can increase their power output by as much as 20 percent.

GE is developing Predix, an operating system for the Industrial Internet.

GE says it’s beginning to sell Predix-based services to customers who design their own industrial equipment. Pitney Bowes is using Predix on its mailing-label machines and letter-sorting devices in corporate mailrooms; Toshiba is using it on elevators. “The Industrial Internet is going to be the dark matter of the Internet,” promises Harel Kodesh, chief technology officer for GE Digital, which is what the company now calls its software division. “It’s something you don’t see, but it is actually the bulk of what’s happening on the Internet. Other than porn, I guess.”

[How GE Exorcised the Ghost of Jack Welch to Become a 124-Year-Old Startup / Devin Leonard Rick Clough  / Bloomberg Businessweek]