Synopsis: Programmable Controls – Finding and Leveraging Market Forces for Growth
In the early 1980’s General Electric was a very weak player in the PLC (programmable logic controller) marketplace, with about a 2% share. GE had founded the PLC industry years earlier, but had sold off the business. The business that GE sold was now the market leader with about 35% market share of a $300 million market that was expected to grow up to one billion dollars over the next ten years. Allen Bradley, the number two supplier had about a 35% share and Texas Instruments had about a 15% share of the market. In light of these entrenched competitors, GE made the decision that PLCs, as part of factory automation, had become a strategic business. This translated to a market share goal of at least 25%.
After reviewing the product line, sales organization and technical support organization, GE realized it was in trouble. The product line was old; the development efforts for the next generation product were going to produce at best a me-too product.
Somehow GE had to find a way to gain market share.
GE’s research team conducted a detailed market study. The study focused on talking to present users of PLCs to find out what product performance requirements they needed, how they purchased the product and what barriers existed to adopting a new PLC. The research consisted of lengthy conversations with process and production engineers and plant managers.
Two key findings came out of this phase of the research. The first was that there was a large installed base of competitive equipment that would be very difficult to trade out. The second was that companies who were moving to using PLCs received their first PLCs as (OEM – original equipment manufacturer) components of new manufacturing, material handling or packaging equipment.
The research shifted to OEMs. How could GE do business with OEMs? Discussions with OEM product developers led to product performance requirements that were not being met by competitors and had not been heard by the GE team before. The project team brought OEM engineers into direct conversation with GE engineers to determine the exact specifications of a potential new product. Identified this PLC product need of the OEM equipment manufacturers that none of the competitors were offering, was the first big breakthrough for the GE PLC business.
The second breakthrough came as a result of the research done into the buying behavior of OEMs. It turned out that GE as a corporation is a major supplier to the OEMs and systems integrators who produce the manufacturing, packaging and material handling equipment which required this new PLC product. Likewise, the OEMs did not have the installed existing supplier problem that large end users had. OEMs would entertain new suppliers for new product releases as well as retrofits into existing product designs.
From this research GE identified the forces it could leverage in the market. The first force was the OEM’s need for a small entry-level PLC. The second force was GE’s inherent market presence and ability to capture customer mind share through its traditional OEM sales force. Leveraging both of these forces enabled GE to achieve impossible results. Within less than three years of the market study, GE reached and 18% market share.