EP022: Finding the Right Path to Market - An Interview With GE Digital's Mike Dolbec
This is an episode of the "Ventures in Industrial IoT" series brought to you by GE Ventures. In the series we explore success factors and challenges in Industrial IoT markets with CEOs, investors and experts.
IoT Spotlight Podcast introduction:
The IIoT Spotlight Podcast shines a light on Industrial IoT solutions that are impacting businesses today. Every episode we interview an expert about a specific IoT use case. Our goal is to provide insight into the planning and implementation of IIoT systems, from new business models to technology architecture selection to data ownership and security. The IIoT Spotlight is produced by IoT ONE, an information platform that provides market insight, partner development, and go-to-market support for technology providers, end users, and investors. Don't forget to follow us on twitter. You can contact me directly at email@example.com.
The Industrial IoT ecosystem globally is comprised of hundreds of organizations, standards bodies and consortia all working together to better serve end users and drive adoption of the Industrial IoT. Having said that, startups need to evaluate for themselves if it is more meaningful for them to join a standards body or just work directly with a particular company such as GE.
In the seventh installment of the "Ventures in Industrial IoT series" brought to you by GE Ventures, Michael Dolbec, Managing Director of venture investments and M&A at GE Digital is back in the third and final part of his discussion with us on how GE is not just financing but also providing strategic direction as well as ecosystem support to startups.
Learn more GE Digital: www.ge.com/digital
Learn more about GE Ventures: www.geventures.com
Michael Dolbec is the Managing Director of Digital Strategy, Venture Investments and M&A at GE Digital. He is also an investor with Alchemist Accelerator and with i3 Equity Partners as well as a board observer on Foghorns Systems, DataTorrent, Mocana, MAANA and Ayasdi.
Michael is passionate about transforming big ideas into successful innovations, products and services. He develops partner eco-systems around technology platforms and helps companies grow via partnerships, investments and acquisitions.
GE Digital is working with more than 10,000 software engineers across several of their business divisions to ensure that their customers in all sectors can tap into the power of the Industrial Internet. Their approach is built around a common software platform, agile development and shared services. By combining the nimbleness of a Silicon Valley startup with the strong pedigree of GE’s global expertise, GE Digital stands alone.
"I would say good luck I need to meet another company because things are moving so rapidly that waiting for standards at this point I think is just not a good strategy for startups."
"I think the ecosystems [startups] are joining are the ones that they're creating. I mean they're trying to discover the commonality between the customers they discover and efficiently create the solution there."
"A lot of startups have interesting technologies but lack the sales channels or the capability to effectively get these out to market."
"The companies that we work with are either building an application on top of the [GE Predix] platform to solve a particular business need or they're part of the plumbing to build an application on top of a part of the platform as an additional service."
Welcome back to the industrial spotlight. I'm joined today again by Mike Dolbec managing director of venture capital and M&A at GE digital.
Today we'll be covering the third and final segment of our discussion with Mike. We'll be looking at the topic of partnering and beyond funding and how companies like GE are working with startups not just on financing but also to provide strategic direction ecosystem support and other support that a large enterprise like GE can provide to a smaller company.
Thanks for joining let's kick off. GE obviously is in a lot of ecosystems and ecosystems are very valuable because you are working with assets that are very complex and have dozens potentially hundreds of stakeholders who might be providing technology into it or we're using in or interacting with it at some point in time. Mike talk to me a bit around your thought process when you're advising Let's look specifically at startups when you're advising companies that you invest in and helping them to think out there which ecosystems did they want to participate in and how we could look at this as vertical organizations around a particular industry. We could look at it in terms of horizontal organizations like the industrial Internet consortium or around less structured ecosystems which are a company might try to develop by themselves or develop in partnership with GE or another company.
That's a really broad question. Can you give me an example of what you're thinking or another example.
Let me give you an example from IoT ONE. You know from our perspective we participate in a couple of ecosystems in the industrial Internet consortium because our company focuses on the Industrial IoT more horizontally we don't focus on specific verticals. And the IIC has kind of a similar match there so we find it quite valuable to work with them and look at how technology applies horizontally across industries in China in particular we work with the Alliance of industrial Internet which is driving the agenda around made in China 2025. And so that's more of a regional organization that we're participating with here to help you know increase our understanding of how policy is is directing behavior in China. And those I would say obviously there's regionally in China and globally hundreds of other organizations standards bodies and so forth which we would have an interest in companies that we work with are members of them either you know for for a business purpose or for an educational purpose. It would make sense for us to participate in them. But every company has to. From their perspective make decisions around where to allocate resources. My personal perspective is that it's very important to in the industrial IoT space to have a stance in in an ecosystem where you or your influence in a group of companies and you have a structured way to stay informed in terms of how a particular group of companies is interacting or how decisions are being made around new technology development. Testbeds and so forth but it's also very important to be selective because of the wide array of alternatives. And so I'm interested you know maybe as a starting point do you have discussions with companies that you're investing in around where they allocate their resources their time when they're choosing how to not just get involved on a point basis with particular companies customers or technology partners but participating more broadly in existing organizations that are trading ecosystems or or towards developing their own their own ecosystem where they're acting as a focal point among a number of companies.
That's a really nobody's ever asked that question. That's an interesting question. And so my answer is I'm shooting from the hip and it may not be so thoughtful was that working with GE and its breath of customers and partners and channels is itself an ecosystem unto itself.
Just figuring out how to take Foghorn they have at least half a dozen different engagements with different businesses and different sets of customers different requirements. Some of what they're doing at a technical level but certainly the same because their is to say what the features and requirements that are on being asked to in the roadmap are different based on the requirements of each of us customer sense.
I'd say that a couple of my companies as investments. So speaking as an investor not as a CEO of a startup like companies occasionally join different standards bodies or consortia or perhaps what you mean by an ecosystem, they all engage with GE or else they wouldn't be talking to them. So that's the first ecosystem I generally get to talk with. And most of the time I don't encourage them we don't have to join anything. It's just occasionally they make that choice themselves. I think in terms of standards you know if a company came to me and said This is wonderful business plan I'm just waiting for the rest of the standards to be set so that I can play my part in the layer cake of the stack here.
I would say good luck I need to meet another company because things are moving so rapidly that waiting for standards at this point I think is just not a good strategy for start ups. You know it might be for a larger company because they get a lot of leverage from standards and the way they helped orchestrate things but things were it super early in the market so I think that people who are extraordinarily innovative get an advantage somehow and then run like hell after that to capitalize on it or doing much better than those that are waiting for standards. Somehow they've struck a reasonable balance and are in business to continue to innovate but also participate in the standard as long as it doesn't slow them down. We know consortium the various consortia are great. I think they tend to mostly benefit the largest companies who are members. And so far my companies haven't seen.
I mean they're when they join these consortia it's more like I want to keep an eye out in my rearview mirror and face the surprises happening that I should pay attention to but I don't think that they think that's a short way to acquire more customers in the least most of them.
I think the ecosystems they're joining are the ones that they're creating. I mean they're trying to discover the commonality between the customers they discover and efficiently create the solution there. So the same thing to mobile customers and we all are looking for something different. But they're trying to figure out what the lowest the minimum viable product is for a reasonable customer set. I don't see then surely they talk about other players and other customers. Most of them are extremely focused on engaging with customers directly rather than talking to each other. This is not I don't think this is what you ask but we actually bring together the leaders of startups in various forums. Not a formal consortium but it's more of a people share best practices maybe learn how to scale a business on a very small startup deal with some of the issues of scaling. But that's not the ecosystem that's more leadership development.
You know this is something I've also heard from quite a few startup founders is that it is tempting to participate in the standards bodies and alliances a consortium and so forth but it's quite challenging to make make that impactful right just because of limited resources and also because your organization doesn't necessarily have the same timeline as these organizations in terms of how decisions have to be made in that it can be more useful to work with particular companies that would be keystone in your development. I think you already gave a good example with foghorn around how you know GE as an example is helping to match solutions to pain points that you're aware of and help them to guide their development to an extent. What about it.
Oh I'm going to say We met Foghorn two years before we invested in them. We met them when they were you know it was a PowerPoint presentation in an incubator in Palo Alto. It was a good idea because we were also pursuing the same idea and we recognized it right away. So and then we watched how it evolved and they developed it and they built a team around it and executed later later that we invest best when the momentum became very attractive to GE to partner with well we didn't need them for a consortium as my point. We met them because we were out looking for anybody with good ideas.
Aside from helping to match pain points on the technology licensing and transfer. Is this an area where you are also active in in guiding companies or or facilitating relationships because obviously a lot of startups have interesting technologies but lack the sales channels or the capability to effectively get these out to market.
I have to remind you, what GE Digital has built a platform-as-a-service (PaaS) which people develop Industrial IoT applications on top of for and then they that service services consumed by our customers. And so the companies that we work with are either building an application on top of the platform to solve a particular business need or they're part of the plumbing to build an application on top of a part of the platform.
Additional Service. So in that sense the commercial relationships we often wind up having with the companies are ones where we license what they do on an OEM basis and then we allow we make it part of our service and provide it as some kind of consumable service to a micro service often to people who are building a larger solution. That's exactly how Foghorn would work but that's certainly the case. And other companies we have invested in a Israeli company that's extremely good an anomaly detection actually makes most of the player right now to anti-money laundering for banks.
But they're anomaly detection. They made their anomaly detection.
They turned their mouth into a micro service which is available to anybody who uses Predix. And it's the ultimate business model is where we buy from them wholesale and sell it to somebody else retail or usage basis.
Can you explain this a little bit more in detail because I think what most people would think of is is that kind of an AppStore environment where you are you're a marketplace to an extent but with an industrial solution as we discussed earlier proof of concept is is often part of the sales process. And it's it's going to be often a more involved relationship between the companies before a sale is closed and so working through GE Predix the platform. How is the relationship structured between the technology providers on the platform and GE. And then the end user or the technology. Is it transactional where they're able to just tap through the you know access the technology through the platform I suppose in some cases it would be but in other cases it's going to be more of a project based engagement.
And when you use things that are part of the Amazon web service and you understand that not everything has been created by Amazon right.
In some cases state of licensed technology they're hosting it on behalf of you and you're consuming it and your you in ways you are you're paying for it because you know when you use Pinterest you know the file somewhere there's like somebody back in through and it's getting a royalty for a small part they played in probably intelligently interpreting the images that you stored somewhere.
So it's a very common model where if you're hosting a service that's merely a collection of micro services you might not have provided all those have created all those services yourself you might be in some sense. They can differ with when you're pay your mobile phone bill and you pay for minutes that you talk to or messages that you sent some of the equipment. In fact all of the equipment that the company is using to serve provide the service to you. They bought from somebody else or they and or they license on an ongoing basis. So the money comes in when you pay your phone bill.
But they have to figure out OK a small piece goes to these guys because they help enable that service you consumed that we have a service we have a way to mediate.
How much. What kinds of micro services various people use. Or we can use that to determine. And it depends on how we license technology
We license stuff from companies we make that part of our service and when other people who write applications consume those services just like they were they would with AWS. Occasionally, Part of what gets consumed creates a royalty which goes back to the key either directly or through a different kind of contract. So it's rare that we just license something from one guy and then turn around and hand it to the customer with our label or what happens to it.
It's more of a SaaS model than a physical that we can transfer rights to use somebody else owns.
And I guess the difference I would see or at least from my perspective with AWS is that there would be often at this stage more of a role for system integrators or more of a need to customize solutions. Then there is with a typical I.T. product just because of that stage of development. For a lot of IoT applications so is this something that GE would then typically be providing this service or would you maybe an on capabilities basis decide whether this was something that GE should be supporting with or whether the technology providers or an external third party SI should be the the company to help with any customization work.
It happens all of those ways. So we'd love to earn the right to create the entire solution for our customer and sometimes we do.
In other cases where the name the name a systems integrator and you'll probably get somebody who's creating a solution for an industrial customer that also gets lives on top of Predix that's enabled by Predix
And the third way is they may deal directly with somebody who's writing and not a systems integrator but somebody who is a solution provider and that person may essentially write an app in the App Store but only specifically for that one customer. So it's all three of those are models that are happening today.
Huge step forward towards low headache adoption or deployment of IoT solutions as platforms like Predix continue to develop. I think this is going to be very helpful for the industry as a whole for companies to be able to engage through and through common platforms as opposed to individually with each technology provider. Mike last question how can companies get in touch with you whether they're looking at potential partnerships or startups that are wanting to introduce their technologies. What's the best way for them to reach out to you or to your team.
Well I'm on LinkedIn and I'm on the GE Ventures website so you can find me on LinkedIn to my email is.
firstname.lastname@example.org. I promise to try and respond. But you know sometimes I have to answer questions from people at work at GE as well so I eventually get everybody's everybody's answer and I also I try to hold myself to helpful response.
So a no without any context isn't very helpful but a no and here's why I was no and you know I may be sort of a certain thing. I'm looking for right now. But here's why. No as right now or. Best wishes. I think you're building a great company but it's just not right for us.
Not know our strategy at this point but we try and make ourselves very easy to find. And I think that we're open for business all the time. So hasn't really I don't think it's been hard for people to find us so far.
When a company first introduces themselves to you you or your team what do you prefer or do you prefer it to a one page executive summary. This is what we're doing or do you prefer them to send over the most detailed introduction that they're comfortable to share.
Yeah that's a good question. I tell you what I don't like I think because you have to respect that we're all very busy so people who try and get my attention and say we should meet but don't explain why for any reason I just ignore because I don't have time. There's multiple probably a dozen of those a day. So help me understand where you sit and why what you're doing solves somebody's problem. Hopefully somebody that has a lot of money and a lot of problems and I'm lukewarm about people that describe a problem you know the technical thing they do and assume that I think that's great because I'd rather that you show you've thought through why somebody has a problem in that.
Ok that's why I set out to build a solution for that problem because I think it's valuable and I can get paid doing that. You know connect the dots for me that's all that doesn't need to be a thesis but it I'd like to see that you put some thought into it and knew you should expect that I don't want to make the investment to try and understand what the hell your thinking because I can't read your mind and that's help me.
Help me understand. There's plenty of websites that describe this often. You know a very short overview helps as long as the overview covers what I just described. Whose problem do you know who has the problem. You know how big is the problem and what are they willing to pay for it and what's the solution. Those are very important because then we can you know we can agree to disagree sometimes too. I often will say boy that's that's an important advance you're making.
It's just not that relevant to us because we already have that base covered or it's just not something you know it's not our traditional customers so we're less interested now.
But you know maybe you could talk to this guy or that guy Mike will put your contact in the show notes and we'll make a note of the point we just discussed So please and reaching out to Mike explain your problem explain your solution and explain the relevance. Mike thanks so much for taking the time to speak with us today.
Yeah it's my pleasure. Thanks very much for asking such thoughtful questions.