Where it all began…
GE, one of the largest industrial companies in the world, is about to divest itself of its water business, ending a journey it started in earnest 14 years ago in 2002. The process is well underway with ‘tickets to the dance’ being allocated to short-listed suitors.
To understand why GE is getting out of water, one has to first go back to the start of the story and understand why they decided to get into it in the first place. As many others have found, the possibility of helping to solve one of the world’s biggest problems through technology holds an allure that is hard to resist.
Former GE CEO Jack Welch is quoted as saying ‘if you want to be big, get into big things’. At a corporate board level, water is perceived as a ‘big thing’. Water is in fact an industry of ‘many small loosely connected things’; but this is a plot spoiler and usually only reveals itself later on in the story.
GE and Siemens, both industrial giants, decided to get into water. Siemens through US Filter (via a brief stop-over at Veolia), and GE via its own series of seminal acquisitions including Ionics, Osmonics, Zenon and Betz Deerborne.
Based on a review of BlueTech’s Corporate Profile of GE Water, we can see that the combined value of GE’s four cornerstone acquisitions – Osmonics, BetzDearborn, Ionics and Zenon – amounts to $3.84 Bn. There were many other smaller acquisitions along the way that built out the business.
The current turnover of the GE Water business is in the region of $2.5Bn and would be expected to sell for somewhere between $2Bn and $3.5Bn.
Like Mary Shelley’s fictional character, businesses that are pieced together from various bits and pieces can have a Frankenstein-like quality to them initially. They lumber along somewhat clumsily at the start, as they figure out how to move their various limbs in synchronicity with one another. To follow the analogy, eventually these man-made entities evolve like AI, developing a mind of their own and ultimately all going well, their own unique identity.
This was certainly the case for the GE Water business which had really started to find its groove over the past few years. It is tapping into two key elements of the zeitgeist of our time, the internet of things (IoT) and low energy wastewater treatment, linked to the ‘circular economy’ mega trend.
2012-2016: GE Water finds its mojo
The business was innovating organically from within and had rekindled the latent spark of entrepreneurial creativity that was there in the Zenon business.
This first became apparent at Singapore Water Week in 2014 when GE presented two papers defining its vision for low energy wastewater treatment. This was based on work by Pierre Côté and key team members Jeff Peeters and Glenn Vicevic. It had all the feeling of a ‘getting the band back together’ moment with many of the original Benedek motley crew from the Zenon challenger brand ready to once again challenge a paradigm.
The papers presented well thought-out alternative flow-sheets that utilized rotating belt sieve (RBS) technology with membranes bioreactor (MBR) technology and a membrane aerated bioreactor (MABR), Zeelung.
This was accompanied with the announcement of the acquisition of an anaerobic treatment technology company, Monsal, in summer of 2014. This took GE further into the area of energy-neutral wastewater treatment by providing anaerobic technology. Roll on to WEFTEC 2015 and there were papers on anaerobic membrane bioreactors (AnMBR) combining Zenon membranes with anaerobic biological treatment.
There was a very clear vision to get into low energy and energy neutral wastewater treatment.
The GE Water business has not been without its challenges; there were bumps along the way and mistakes made that GE is quite open about. An example was a decision to down-size the sales team in Betz Deerborn as it didn’t fit the GE model. This led to a loss of customer connection and applications expertise that was hard to re-build. There were also learnings in thinking that chemical sales teams could also be used to sell technologies. They are two very different businesses. Despite what was at times a rocky road, the business is innovation-leading in certain areas and market dominant in others.
Tapping into digital water
Separate to this, there was the whole area of digitization and IoT. GE Water was uniquely placed to take a leading position here in water technologies. It’s Predix Platform and global monitoring centres were clear examples.
All of these pointed towards some key strategic directions. They seemed to have found their mojo.
Value chain shifts favor the solutions provider
In addition to the things that GE Water was doing right, other macro-level trends that BlueTech has identified were also conspiring to help the business along. In particular there is currently a general shift in the water industry value chain to concentrate value and move it toward the solutions provider. Contributing factors include:
• Operational automation and remote monitoring are enabling transfer of operational revenues to the solutions provider.
• The provision of integrated systems moves value from the consulting engineer and EPC contractors, towards the solutions provider.
The epilogue
Some fundamental structural elements of the water sector were always going to be a challenge for a business like GE, which tends to like and is suited to, capital intensive markets with a high barrier to entry, where they occupy a pole position in the Top 3. The fragmented nature of an ‘industry of many things’ means that one can’t be the top dog in an area like biological treatment. Although GE has succeeded in being one of the top three in areas such as zero liquid discharge and electrodeionization.
To be a viable business unit that makes sense in GE, you need scale. GE had created a new business unit structure in the past year, GE Water and Distributed Power. The Distributed Power piece was essentially the Jenbacher reciprocating gas engine P&L. The Jenbacher reciprocating gas engine fitted in with the move into anaerobic treatment and the generation of energy from biogas. The alignment was somewhat artificial and was also partly driven by a need to create a business unit with P&L above a certain size.
For those wishing to delve into this, the BlueTech Corporate Water Profile for GE is a useful launch point.
Download the GE Corporate water profile here.
This summarizes areas where we feel GE is innovation-leading and market-leading, and provides an analysis of key patent technology areas. This is complimented by reviews of specific technology reports on Zeelung and IPER, patent portfolio overviews and selections of recent Papers GE Water has presented. As always our team of experts is on hand to help answer questions and provide insights and expertise on particular elements of the business.