Oct 11, 2017

AT&T and GE Digital hit IoT road bumps

Over the past few weeks, AT&T and GE have featured in the news because of issues connected to their IoT business units.

AT&T seems to be having second thoughts about its Digital Life commitments with some news reports suggesting that it might divest this business unit [1].

In GE’s case, its Digital business unit is emerging from a hard re-alignment following internal activities to stabilize its software platform and to adjust its financial targets. Now, the focus will prioritize profitability over unfettered spending [2].

So, what’s been happening to these two IoT industry pioneers and what can other companies learn from their experiences?

The news about AT&T comes from a Reuters report [3] on the need to reduce corporate debt following AT&T’s acquisition of Time Warner. What is puzzling is that Digital Life’s relatively small size means that its sale would barely dent AT&T’s debt load. Strategically, the sale would jeopardize any long-term intention to build a foundation for smart-home services. And, it’s hardly going to generate confidence on the part of smart home distribution channel partners, such as O2 in the UK, which use AT&T’s Digital Life platform.

Under its new CEO, John Flannery, GE’s troubles came to light in a reappraisal of its Digital business unit. There is now a heightened focus on profitability and cost control. Operationally, GE took a 2-month “time-out” to fix software issues in its Predix platform.

Now, the business unit has more of a software focus; previously, it over invested in the kind of cloud infrastructure where Internet giants like Amazon, Google and Microsoft hold a huge, economic-scale advantage. In the context of the IoT market and its long-term prospects, this was an avoidable detour. With all the CEO support, funding and applications-oriented opportunities on its doorstep, GE should have prioritized commercial ideas higher up the value-stack rather than investing in commodity technology.

To round out the discussion, it’s worth adding a third corporate perspective from 2012 when Telefónica set up its Digital business unit [4]. Telefónica Digital brought together a diverse and (potentially) hugely complementary portfolio of vertical services and digital businesses in a modern work environment, right in the heart of London. Telefónica’s business plan projections showed strong revenue growth goals in individual segments but paid no obvious attention to cross unit synergies or innovation. A few years later, Telefónica largely dismantled and scaled back its ‘digital’ activities.

It is fair to presume that none of these three companies would argue that they overestimated the size of the IoT and 'digital, opportunities. Timing their corporate actions to capitalize on the opportunity, however, turns out to have been the first strategic challenge. AT&T, GE and Telefónica were arguably running slightly ahead of the market. Unfortunately, they couldn’t put in place an effective implementation roadmap to make the transition between different market phases (embryonic, second to n’th generation service offerings etc.). This is important for other IoT ‘wannabes’ because the IoT is essentially a re-run of the commercial Internet but on a larger scale (i.e. many more smaller devices and information payloads). Imagine that it takes 10-20 years for the full potential of the IoT to materialize. Does it make sense to plan on a 1-2-year horizon or to accept that there will be multiple 3-5-year cycles involving business innovation and technology evolution?

The IoT today is like a toddler in comparison to the nearly 30-year old commercial Internet. This should be reflected in strategy, investment commitments and organizational change/capacity building. Inevitably, companies will make mistakes and learn through hasty-innovation [5].

Others will benefit from taking a multi-decade view [6]; planning on this basis forces an organization to address issues of strategic commitment, corporate staying power and the investment dependencies necessary for success.

Unfortunately, there is little evidence of these lessons being applied in many market segments. The mobile industry, for example, is currently putting a heavy emphasis on low-power, wide-area connectivity technologies rather than preparing to address opportunities higher up the solution stack. In the case of smart cities, the current emphasis is on point-solutions with little thought going into scalable ideas that will support not one or two but thousands of new service possibilities.

[1] AT&T reportedly mulling sale of Digital Life post-Time Warner acquisition http://www.fiercewireless.com/wireless/at-t-reportedly-mulling-sale-digital-life-post-time-warner-acquisition

[2] GE shifts strategy, financial targets for digital business after missteps http://www.reuters.com/article/us-ge-digital-outlook-insight/ge-shifts-strategy-financial-targets-for-digital-business-after-missteps-idUSKCN1B80CB

[3] A&T considers sale of home security business https://www.reuters.com/article/us-at-t-security/att-considers-sale-of-home-security-business-sources-idUSKCN1AY1FA

[4] Telefonica Digital 2012 https://www.slideshare.net/amalistclient/telefonica-digital-2012 [5] The Information Commissioner, the Royal Free, and what we’ve (Google/DeepMind) learned https://deepmind.com/blog/ico-royal-free/

[6] It pays to wait decades for a well-built grand project https://www.ft.com/content/0c6df806-c868-11e6-9043-7e34c07b46ef


  1. 15 Oct 2017 Update


    "Adopting a cloud-first strategy with AWS is helping our IT teams get out of the business of building and running data centers and refocus our resources on innovation as we undergo one of the largest and most important transformations in GE’s history," he said. "We chose AWS as the preferred cloud provider for GE because AWS’s industry-leading cloud services have allowed us to push the boundaries, think big, and deliver better outcomes for GE."

  2. 10 November 2017 update

    GE plans to lay off sales staff and other employees in its software division, GE Digital.


  3. 21 August 2018 update

    Regret, but no surprise – the market responds to the demise of GE Digital