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November 27, 2012

“Industrial Internet” Report From GE Finds That Combination of Networks and Machines Could Add $10 to $15 Trillion to Global GDP

GE - the Industrial Revolution radically changed the way we use energy and make things. The Internet Revolution altered how we communicate, consume information, and spend money. A combination of these two transformations, called the Industrial Internet, now links networks, data and machines. It promises to remake global industry, boost productivity, and launch an entirely new age of prosperity and robust growth.

The authors found that in the U.S. alone the Industrial Internet could boost average incomes by 25 to 40 percent over the next 20 years and lift growth back to levels not seen since the late 1990s. If the rest of the world achieved half of the U.S. productivity gains, the Industrial Internet could add from $10 to $15 trillion to global GDP – the size of today’s U.S. economy – over the same period. “With better health outcomes at lower cost, substantial savings in fuel and energy, and better performing and longer-lived physical assets, the Industrial Internet will deliver new efficiency gains, accelerating productivity growth the way that the Industrial Revolution and the Internet Revolution did,” Evans and Annunziata write. “These innovations promise to bring greater speed and efficiency to industries as diverse as aviation, rail transportation, power generation, oil and gas development, and health care delivery. It holds the promise of stronger economic growth, better and more jobs and rising living standards, whether in the US or in China, in a megacity in Africa or in a rural area in Kazakhstan.”

The full 37 page report is here





Together these developments bring together three elements, which embody the essence of the Industrial Internet:

INTEllIGENT MACHINES: New ways of connecting the word’s myriad of machines, facilities, fleets and networks with advanced sensors, controls and software applications.

ADvANCED ANAlyTICS: Harnessing the power of physics-based analytics, predictive algorithms, automation and deep domain expertise in material science, electrical engineering and other key disciplines required to understand how machines and larger systems operate.

PEOPlE AT WORk: connecting people, whether they be at work in industrial facilities, offices, hospitals or on the move, at any time to support more intelligent design, operations, maintenance as well as higher quality service and safety

The benefits from this marriage of machines and analytics are multiple and significant. We estimate that the technical innovations of the Industrial Internet
could find direct application in sectors accounting for more than $32.3 trillion in economic activity. As the global economy grows, the potential application of the Industrial Internet will expand as well. By 2025 it could be applicable to $82 trillion of output or approximately one half of the global economy.

A conservative look at the benefit to specific industries is instructive. If the Industrial Internet achieves just a one percent efficiency improvement then the results are substantial. For example, in the commercial aviation industry alone, a one percent improvement in fuel savings would yield a savings of $30 billion over 15 years. likewise, a one percent efficiency improvement in the global gas-fired power plant fleet could yield a $66 billion savings in fuel consumption. The global health care industry will also benefit from the Industrial Internet, through a reduction in process inefficiencies: a one percent efficiency gain globally could yield more than $63 billion in health care savings. Freight moved across the world rail networks, if improved by one percent could yield another gain of $27 billion in fuel savings. Finally, a one percent improvement in capital utilization upstream oil and gas exploration and development could total $90 billion in avoided or deferred capital expenditures. These are but a few examples of what can be potentially achieved.

We believe that the second, most powerful and disruptive wave of the Internet Revolution is arriving now: it is the Industrial Internet. And the Industrial Internet is vested in productivity. Earlier in the paper we have argued that the Industrial Internet is poised to directly impact a very large portion of the global economy. And we have discussed some concrete and detailed examples of how the Industrial Internet will yield substantial efficiency gains and cost savings in a number of key sectors of the economy, from health care to aviation, from transportation to energy.

Nothing like this has been seen before. The Industrial Internet promises to optimize the speed of improvement of operation in a vast range of economic activities. The speed at which the Industrial Internet will spread will likely be boosted by a cost-deflation trend very similar to that which characterized the adoption of ICT equipment: cloud computing now allows us to analyze much larger amounts of data, and at lower cost, than was ever possible. The price of data processing is declining, helping to unlock the productivity gains.

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