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We Grow Revenue & Profits for Manufacturing, Tech, & Med Device Companies by Leveraging the Power of Pricing |
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We Grow Revenue & Profits for Manufacturing, Tech, & Med Device Companies by Leveraging the Power of Pricing |
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17 Nov 2016 GE just signed Exelon to one of its largest software deals ever, potentially unlocking $1.3 trillion in value in the electricity space over the next decade.Exelon GE just signed one of the largest software deals in company history with Exelon, signifying a huge change occurring in the broader electricity space. Under the deal announced Tuesday, GE will deploy its entire Predix software portfolio across the fleet of energy facilities owned by Exelon, a Fortune 100 company with millions of utility customers. That means Exelon will run its wind, nuclear, hydroelectric, and solar power plants on top of the Predix platform, a cloud-based operating system GE developed to help energy companies run more reliably and efficiently. GE forecasts it could help Exelon save up to 25% in maintenance and operations costs, while collecting tons of data to vastly improve the company's productivity. The two companies also agreed to co-develop applications built on top of Predix in the future. GE declined to disclose any financial details, but noted it's one of the top 3 biggest deals ever made. "It’s all about reliability and performance management, and operations optimization," GE Power's Chief Digital Officer Ganesh Bell told Business Insider. "This is a moment where the leader in the industry is signaling the digital transformation of the industry." $1.3 trillion market opportunityExelon's one of the largest utility companies in the world with a huge footprint in the electricity sector. And given how the electricity industry has historically been notoriously slow to adopt new technology, Tuesday's GE-Exelon deal underscores the potential for a broader shift in the sector. "We look at it as the tipping point of the industry where digital transformation of electricity just went mainstream," Bell said. In fact, according to the World Economic Forum, the electricity industry stands to potentially unlock approximately $1.3 trillion in value over the next decade by digitizing its infrastructure, such as platforms and devices, as well as "cloud" and advanced analytics. The enhancements in condition monitoring and predictive forecasting alone could drive an additional $387 billion in value, it predicts. "The electricity sector is ripe for realizing value from rapid digital transformation; we estimate that there is $1.3 trillion of value to be captured globally, from 2016 to 2025," the World Economic Forum wrote in a paper published in January. $15 billion software businessGE has been making a strong push towards what it calls an "industrial internet" strategy. The goal is to invest in software and technology for the industrial space, like energy and transportation, while downsizing its GE Capital business. Last year, GE launched a new division called GE Digital, and built a new office in Silicon Valley that now has 1,700 employees. It also laid out a vision to generate $15 billion in software revenue by 2020, which would make it one of the largest software companies in the world. On Monday, GE spent $915 million to buy cloud software maker ServiceMax. "GE’s really been pushing this vision very aggressively for a while now. So from a market awareness and mindshare perspective, GE's got what appears to be a significant jump in the market," Gartner's research director Chet Geschikter told us. Still, Geschikter said it's too early to say who's the leader in the space. Companies like ABB, Siemens, and Hitachi are all fighting for a piece of the market, and it's going to take a while before the rest of the industry fully catches up to all the new technology. But GE certainly seems to have a headstart. It claims one-third of the power in the world comes from GE-powered machines, and having that existing customer-base, on top of its 120-year history, gives an edge no other company has. "We think the industrial market is different and it takes much more than simple data science to understand. You need to understand the physics of the machines, the operations of the industry, and that’s why we think our approach will be very different," GE Power's Bell said. Source: Business Insider.com |
For GE, software is a critical component of its future growth and profitability. Over the past 5 years, GE has invested billions to bring to life the next big industrial evolution. Experts call this the industrial internet or the Industrial Internet of Things (IIOT). This industrial evolution is worth trillions of dollars and is powered by software, data, networks, sensors and of course, machines.
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"Great analysis, unique metric to use for pricing and deliverables that allowed other product teams to follow in our footsteps" Cody Bunce, Global Marketing Director, IIoT Services at GE Digital
Why IIoT Nerds Need
Pricing Nerds The industrial IoT space is quickly becoming the next great land rush. There will be winners and losers. Who will be the most resourceful and agile pioneers to stake their claims? Creating Value Through Partners Creating powerful IoT solution requires some serious integration between machines, sensors, networks, mobile apps, cloud-based software, routers, IoT platforms, and more. This means lots of solution architecting, code engineering, system integrating, data extracting and testing. Today, there is no single player that can provide an end to end solution that delivers the full value potential of the "Industrial Internet". Vendors pushing the boundaries of IoT recognize the need to establish strong partnerships with multiple technology partners to bring their vision to life. The role of the pricing nerd is to develop a solid understanding of the value that each partner brings to the table. Then piece together product offerings utilizing a range of solutions that provide varying levels of value. The goal is to align your offering capabilities with customer value, budget and willingness to pay. Delivering Value Through Co-creation Another critical success factor for IoT pioneers is their ability to establish strong collaboration with customers. Technology is changing fast and both suppliers and customers must work together to uncover value and bring successful solutions to market. Customers clearly are looking for solutions to their challenges and look to strong suppliers that can meet their needs. In fact, for most customers, the speed of technology adoption is largely dependent on the level of trust they have in their strategic suppliers. This trust is created by having a common vision of the benefits and value that technology will deliver to their business. Increasingly, customers are open to sharing their specific needs or goals for the business and expect vendors to provide whatever technology is necessary to accomplish it. The role of the pricing nerd is to quantify the value of achieving improved customer outcomes. In the new wave of IoT technology, vendors must be able to prove their value through pilots and result-driven case studies. In the other hand, customers must have the confidence that you can deliver on your value promise. Capturing value numbers on paper and having constructive conversations on value assumptions, dollars and outcomes with your customers is in a word, priceless. Capturing Value Through Price Coordinating between partners and customer and managing the complexity of implementing breakthrough technology is never easy. With so many moving pieces it is hard to strategically think about how to capture a fair portion of the massive value that IoT technology can deliver. The role of the pricing nerd is to set and manage prices that result in a win, win, win for partners, suppliers and customers. Nothing more and nothing less. The Challenges Ahead The IoT transformation requires new ways of thinking about pricing models that seamlessly align with customer value. In some cases, it could mean charging a monthly subscription fee per output produced, or per cost avoided. Tying your pricing to customer outcomes is critical but also adds complexity. It is the role of suppliers and partners to simplify the buying process for customers. I ran into an interesting statistic from a major research organization that claimed there is a "62% greater chance of closing the deal when the purchase process is easy." Vendors make the buying process easier for customers when there is clear communication upfront on value, ability to execute, a clear implementation plan and the investment (price) to turn vision into reality. Managing customer communications require finesse and confidence. In the world of IoT, the pricing nerd is not simply the person who slaps a price tag to cover costs, the pricing nerd is the choreographer of value. Who is your pricing nerd? |
HOW GE CREATES & Captures value
in the industrial internet era This week GE is busy showcasing their latest "Industrial Internet" advancements at their annual Minds + Machines conference in San Francisco. At the conference GE announced their biggest software deal yet, and although terms were not disclosed the deal ranks on the top 3 in GE's history. On its way to closing this blockbuster deal, GE had to work hard to prove the value of its new technology. You can just imagine the level of scrutiny that executives at Exelon went through before signing the deal that would put GE's Predix software in all 91 of their power plants. So how did GE do it? It is all about value, quantified value. I personally feel privileged to have played a small but important role in helping GE's marketing and sales teams leverage value-based frameworks to dollarize the value they deliver. About 18 months ago, we supported GE's value quantification efforts by developing value models for customers in the power industry. These value models would later become the foundation of a pricing strategy designed to enable GE to capture the value they were able to deliver. Selling Value GE's impressive industrial internet software technology could not just be sold to the IT department, they had to sell it to the plant owner. We are able to put pen to paper on what drives value for customers in the power industry. Through this effort it became clear that GE is selling efficiency, transparency, and intelligence and their impact on business outcomes. To close successful deals, GE recognized the need to understand and quantify the dollar value that their solutions deliver to customers. New Pricing Models The world is chaging. Increasingly, customers are now setting a specific need or goal and the vendor provides whatever technology is necessary to accomplish it. In the new wave of IOT technology, vendors must be able to prove their value through pilots and result-driven case studies. Technology is not only accelerating change in the production floor but also in how customers evaluate and purchase solutions. To deliver outcomes vendors do not just sell individual sensors, software, machines, circuit breakers, or transformers, or even the services to put them in. This creates complexity and the need for collaboration. So to capture value, vendors like GE must align their price with how customers make money. In the case of a power producer, it may mean charging a monthly fee per MW of energy produced. These outcome-based pricing models are still being refined but technology is driving us towards an "as-a-service" world. Are you ready? |