GE's Billion-Dollar Bet on Big Data

General Electric’s (GE) first research laboratory was housed in a barn in upstate New York; its newest is going up in Silicon Valley. In a vivid illustration of how the locus of U.S. innovation has shifted from the East to the West Coast, GE is pouring $1 billion into a facility in San Ramon, Calif., that will be staffed with as many as 400 people.

San Ramon will be home to the new Global Software Center

New hires for the Global Software Center, which is set to open in June, are coming from Oracle (ORCL), SAP (SAP), and Symantec (SYMC). Bill Ruh, the vice president running the venture, was lured away from Cisco Systems (CSCO) last year. The tech industry veteran says persuading developers to forgo windfalls from initial public offerings to come work at an industrial stalwart is not as difficult as one might think. “They want to be in on the Next Big Thing,” he says.

The big thing Ruh is referring to is called “big data,” the fast-growing market for information technology systems that can sift through massive amounts of data to help companies make better decisions. Just as information on millions of Facebook users is prized by advertisers, the details companies amass from their operations can be used to cut costs and boost profits. Norfolk Southern (NSC), which buys diesel locomotives from the Fairfield (Conn.) company, uses customized software to monitor rail traffic, reducing congestion and allowing trains to move at higher speeds. The fourth-largest U.S. railroad estimates that making trains run an average of 1 mile per hour faster will save more than $200 million.

The potential for such technologies is so huge that it’s impossible to come up with an estimate of how much the market is worth, according to Michael Chui, a senior fellow at McKinsey. “It’s just too big,” he says. That doesn’t mean there’s room for all comers, according to Ping Li of Accel Partners, a venture capital firm investing in big-data startups. “If you’re not getting in right now it’s hard to see how you can keep up with the pace of innovation,” he says.

GE’s annual revenue from software already is about $3 billion and on pace to grow to $5 billion in the next couple of years, Chief Executive Officer Jeffrey Immelt told investors in December. Ruh says he wants to marry big data with some of GE’s biggest businesses. He sees an opportunity in helping airlines that buy GE jet engines monitor their performance and anticipate maintenance needs, reducing costly flight cancellations. The technology could also help companies that lease commercial vehicles from GE Capital to optimize delivery routes and provide early warning that a truck may need a trip to the repair shop. “If I can begin to see that something is starting to deteriorate and get out there and fix it before it breaks, that’s a foundational change,” Ruh says. “In the end, what everybody wants is predictability.”

When it comes to big data, GE is playing catch-up to IBM (IBM). The world’s biggest computer-services company is working with energy companies to extend the lives of oil and gas fields by improving oil recovery through analytics. IBM also is working with Vestas Wind Systems (VWS) to find better locations for wind farms. Newer entrants are jumping in as well. Splunk (SPLK), a San Francisco-based startup that just went public, says its customer rolls exceeded 3,700 as of the end of January.

GE is counting on its expertise making industrial equipment—from gas-fired electrical turbines to locomotives—to give it an advantage over rivals focused on exclusively providing data solutions, says Ruh. “If you don’t have deep expertise in how energy is distributed or generated, if you don’t understand how a power plant runs, you’re not really going to be able to build an analytical model and do much with it,” he says. “We have deep insight into several very specific areas. And that’s where we’re staying focused.”

The bottom line: GE is establishing a foothold in Silicon Valley as it targets $5 billion in software sales by 2014.

Catts is a reporter for Bloomberg News.

It Doesn't Pay to Be Yourself at Work

The next time you want to speak your mind at work, it’s best to keep your mouth shut. Research by the University of Houston in Texas and the University of Greenwich in London shows that while being yourself around family, friends, and loved ones benefits well-being, being yourself at work has no bearing on life satisfaction.

The report is based on a questionnaire given to 553 participants—240 students employed part-time at the University of Houston and 313 middle-class working professionals in London. The median age was about 26. The study defines authenticity as vocalizing what you’re thinking and feeling, not making things up to impress people, and feeling confident enough to be honest and open, says Oliver Robinson, a senior lecturer at the University of Greenwich’s Department of Psychology and Counselling. “It’s not a problem to be authentic or inauthentic” at work, he says. “It just didn’t matter.”
While half of respondents report that they don’t lie to impress their parents and partners, only one-third said they don’t provide false information to people at work.
Robinson points to other research that shows that people often are expected to control what they say and to bottle emotions in the workplace. “There is an awful amount of impression management at work, that is required at work,” he says. “Being yourself at work doesn’t work because of a need to put on a front.”
While authenticity may not benefit overall well-being, other studies suggest it does benefit the workplace. “Authentic self-expression at work leads to reduced turnover and increased performance and job satisfaction,” says Francesca Gino, an associate professor at the Negotiation, Organizations & Markets unit of Harvard Business School. Still, most employers don’t value or promote authenticity as they should. “It is rare for organizations to take an authenticity perspective to socialization,” states a working paper she recently coauthored.
“All I can say is, if you’re at work and you’re not expressing yourself—not authentic to yourself—you’re in jolly good company,” says Robinson. The bright side for all us phonies: “It’s really normal and doesn’t have an adverse relationship to quality of life,” he says.

Wong is an associate editor for Bloomberg Businessweek.

Why There Are No Bosses At Valve

Earlier this week, Valve Software—the company behind the Half-Life, Counter-Strike and Portal video game series—released its employee handbook to the public because, according to Valve co-founder Gabe Newell, somebody asked. “I’d mentioned the handbook on a podcast and one of the listeners contacted us and said ‘Hey, can I get a copy?’ So [designer] Greg Coomer sent him a copy and all of a sudden it got posted online,” he said. The handbook attracted a lot of attention because, in addition to offering company massage rooms and free food, Valve has a unique corporate structure rarely seen at such a large company. Valve has 300 employees but no managers or bosses at all. Newell talked to Bloomberg Businessweek about his company’s environment and how it works.

Why did you create a workplace with no managers?
I was at Microsoft for 13 years and one of the things I did was go out and talk to customers. I ended up being exposed to a bunch of different organizations that had very different process models. As a result, I ended up thinking about organizational choices more than I probably would otherwise. It became pretty obvious that different type of organizations were good at different kinds of things.
When we started Valve [in 1996], we thought about what the company needed to be good at. We realized that here, our job was to create things that hadn’t existed before. Managers are good at institutionalizing procedures, but in our line of work that’s not always good. Sometimes the skills in one generation of product are irrelevant to the skills in another generation. Our industry is in such technological, design and artistic flux that we need somebody who can recognize that. It’s pretty rare for someone to be in a lead role on two consecutive projects.
Why is that?
The terminology we use internally is “individual” and “group” contribution skills.  A group contributor’s job is to help other people be more productive, and in doing that you sacrifice some of your own productivity. It’s a higher stress job and you get interrupted a lot more. People will do that for one project. They’ll say, “I really want to do this game!” and everyone will say “Ha ha ha, you’re stuck with it now.” At the end of the project they’re like, “Gee, that was really interesting but I want to go back and work individually on the next thing.” Some of the highest compensated people at the company are relatively pure individual contributors.
Was there a specific company that inspired Valve’s model?
At Microsoft, we had very little visibility into the actions of our customers. You know how a lot of computers came with Microsoft Office pre-installed? There was concern among people who were working on Microsoft Office that people would buy computers and reformat their hard drives and install MS-DOS instead of Windows. So said well, let’s go look at what our customers have on their PCs.  We weren’t going to just ask them. It was a really expensive thing to do. The good news that came out of that was that I think at the time, 20 million people in the U.S. were using Windows.
But what was so shocking to me was that Windows was the second highest usage application in the U.S. The number one application was Doom, a shareware program that hadn’t been created by any of the powerhouse software companies. It was a 12-person company in the suburbs of Texas that didn’t even distribute through retail, it distributed through bulletin boards and other pre-Internet mechanisms. To me, that was a lightning bolt. Microsoft was hiring 500-people sales teams and this entire company was 12 people, yet it had created the most widely distributed software in the world. There was a sea change coming.
Today at Valve, we don’t have that traditional marketing or sales organization. Each developer’s responsible for thinking about how to measure and optimize customer satisfaction.
And this is actually more efficient?
Well, you need the right people. Instead of looking for the cheapest people to do a job, we sort of joke that we look for the most expensive. Take someone like Jeremy Bennett, who was working in the film industry on the Lord of the Rings trilogy and King Kong—he was something like the fourth person on the credits to King Kong—and who’s insanely good at what he does. If we put him at Valve, we’ve taken away studio overhead, he doesn’t have to go to meetings anymore, there’s no PR agency to sit between him and our customers. We’ll be more efficient at taking advantage of his skills.

Rupert Murdoch Not Fit to Lead News Corp., U.K. Lawmakers Say

News Corp. (NWSA) (NWSA) Chairman Rupert Murdoch is “not a fit person” to lead a major international company, U.K. lawmakers said, after his U.K. unit misled Parliament about the extent of phone hacking at its News of the World tabloid.

Murdoch “turned a blind eye and exhibited willful blindness to what was going on in his companies and publications,” the House of Commons Culture, Media and Sport Committee said in a report published in London today. “This culture, we consider, permeated from the top throughout the organization and speaks volumes about the lack of effective corporate governance at News Corp.”
The report increases the chances that U.K. regulator Ofcom deems News Corp. unfit to hold a broadcasting license and could ask the New York-based company to reduce its 39 percent stake in British Sky Broadcasting Group Plc. (BSY) The phone-hacking scandal prompted News Corp. to abandon a 7.8 billion-pound ($12.6 billion) bid for the rest of BSkyB, the U.K.’s biggest pay- television provider, last year.
Three executives at the News International unit -- Les Hinton, Tom Crone and Colin Myler -- gave misleading testimony to the committee in 2009, the panel said. The company failed to disclose documents and made statements that “were not fully truthful,” and Murdoch, 81, and his son James must ultimately take responsibility, the lawmakers said.

Cover Up

The 11-member committee has been working on its report since July, when the Murdochs were summoned to testify about their roles in the scandal. They told a media-ethics inquiry last week that underlings, particularly Crone and Myler, were to blame for their failure to detect any wrongdoing at the now defunct newspaper.
“The News of the World and News International misled the committee about the true nature and extent of the internal investigations they professed to have carried out in relation to phone hacking,” the panel said. “Their instinct throughout was to cover up rather than seek out wrongdoing.”
BSkyB shares rose 0.8 percent to 683.50 pence in London trading as of 12:18 p.m.
Six lawmakers of the committee voted for the verdict that Rupert Murdoch is “not a fit person” to lead a major international company and four voted against it. Louise Mensch, a member of Prime Minister David Cameron’s Conservatives, said she and other Conservative members of the committee had opposed the verdict on Murdoch’s fitness to run a company.
“We all felt that was ultimately outside the scope of a select committee,” she said.

‘Powers of Recall’

The committee said that, had Murdoch been “entirely open” with shareholders and lawmakers, the extent of the hacking scandal would have been discovered months earlier.
“In his testimony and also the Leveson Inquiry, Rupert Murdoch has demonstrated excellent powers of recall and grasp of detail, when it has suited him,” the committee said.
News Corp. said today it is reviewing the report and will respond shortly, adding that the company “fully acknowledges significant wrongdoing at News of the World and apologizes to everyone whose privacy was invaded.”
U.K. telecommunications regulator Ofcom has said it will draw upon the report for its decision as to whether News Corp. is fit to hold a broadcasting license. Ofcom last week asked News Corp. to provide documents from civil cases involving phone hacking as it decides whether the matter has compromised the company’s ability to run BSkyB.
Ofcom said today it will assess the new and emerging evidence.

‘Containment Approach’

Police probes into phone and computer hacking and bribery have led to about 45 arrests, including former News of the World editors Rebekah Brooks and Andy Coulson, once Prime Minister David Cameron’s communications chief. News Corp. closed the Sunday tabloid in July after revelations that the newspaper listened to voice-mail messages on the phone of a murdered schoolgirl.
After the hacking scandal first became public in 2006, with the arrest of a reporter, Clive Goodman, and a private investigator, Glenn Mulcaire, the company’s “containment approach” was to blame the crime on one “rogue reporter,” the panel said. It then shifted blame to “certain individual,” including Myler and Crone, “whilst striving to protect more senior figures,” notably James Murdoch, News Corp.’s deputy chief operating officer.

‘Huge Failings’

Myler and Crone ‘cannot be allowed to carry the whole of the blame as News Corp. has clearly intended,” the committee said. “The whole affair demonstrated huge failings of corporate governance.”
Myler and Crone, summoned before the Culture Committee last September, denied having misled it in 2009. Written evidence later sent to the committee and to the Leveson Inquiry showed that both had been told of claims that hacking had been more widely practised. Two years later, when James Murdoch accused them of keeping evidence from him, they replied that they had both known about it and showed it to him.

Hinton didn’t tell the truth about payments to Goodman and the extent of his knowledge of the voice-mail allegations, the lawmakers said today. Crone misled the panel about the significance of the first legal settlement with a victim of hacking, while he and Myler lied about their knowledge of the participation of other News of the World employees in criminal activity.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

To contact the reporters on this story: Anthony Aarons in London at aaarons@bloomberg.net; Robert Hutton in London at rhutton1@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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