General Electric Company (NYSE:GE) may be an industrial giant, but it's always had a gaping hole in its competitive advantage: it has left user-friendly innovation to others. But with the Internet of things upon us, General Electric is reinventing its products in ways few of us have ever thought of. Here's what you need to know.
Earlier this month, General Electric made a quiet announcement that has the potential to turn every one of its appliances into a proactive and reactive home companion. The company has partnered up with IFTTT, which is "a service that allows users to connect Internet services and their devices using a simple statement formation — if this, then that (IFTTT)." For some perspective, here are a few formulations that General Electric has already created for its users:
- If the oven is preheated, then send me a text message
- If the oven is done cooking, then flash living room lights
- If I leave the house, then turn off the oven
- If smoke is detected, then turn off the oven
"Owners can create recipes that suit their lifestyle and integrate GE's connected appliances into the rest of their Internet-connected lives," said Logan Garrett, a member of the Wi-Fi connected appliances team at GE Appliances, in a statement. "We think this is the beginning of a new way for consumers to interact with their home appliances."
And the possibilities don't end with a simple if-this-then-that command. At a recent GE co-sponsored MakerBot Hack-a-Thon, teams were tasked to "think inside the icebox." One of the more interesting ideas to emerge was "Pavlov's fridge," a Wi-Fi enabled lockbox in your refrigerator that unlocks snacks only upon completion of wearable technology-verified tasks like working out.
A genius move for GE?
For most General Electric investors, the highlight of 2015 will be the company's decision to sell off its GE Capital business and return more than $90 billion to shareholders by 2018. This move only allows GE to focus on what it does best. A partnership with IFTTT is a deliberate decision by GE to do what it does best even better than before.
Tweeting ovens may seems like a long way off, but whoever creates a support system for the Internet of Things will be the ruler of our new networks. Consider the classic gold rush example. When millions of men rushed west to seek gold, it was those that decided to sell pick axes and blue jeans (ever heard of Levi?) that truly raked in the riches. The modern-day gold rush has millions of men (and women) rushing West again, except this time it's to work for megatech companies like (you guessed it) Facebook, Twitter, and DropBox.
If General Electric plays its cards right, its appliances division will sell the pick axes and blue jeans of the Internet of things. Google (NASDAQ:GOOG) (NASDAQ:GOOGL) has already made headway into its own Internet of Things with its connected "nest" thermostat, smoke detector, and security camera. But General Electric Company is the undisputed leader of home appliances. It sold $8.4 billion worth of goods in fiscal year 2014, pulling in $1.1 billion in profit. That's equal to a sizable 6% of the company's overall sales and 7% of its profit.
A move like this may seem meaningless, considering GE announced last September that it would sell its appliances division to Sweden-based Electrolux for $3.3 billion. But GE is looking long-term. The network effect doesn't stop with home appliances, and GE's focus on industrial businesses goes hand-in-hand with its Internet of Things explorations.
The home is the first hurdle, but subsequent build-outs will eventually enable data and demands to feed across all systems. One can imagine a day when GE is creating its own internal IFTTT statement that goes something like, "If 50% of Americans set their ovens to preheat at 6 p.m., prepare natural gas turbines to respond to peak power demand." That sort of information flow is unthinkable, but it's the sort of progressive predictive power that GE is preparing for before handing things over to Electrolux.
So grab a Twitter account and get cooking.
Justin Loiseau owns shares of Facebook, General Electric Company, Google (A shares), Google (C shares), and an oven that still can't bake a perfect meringue. The Motley Fool recommends Facebook, Google (A shares), Google (C shares), and Twitter. The Motley Fool owns shares of Facebook, General Electric Company, Google (A shares), Google (C shares), and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.