GE makes the case that a more business-oriented 'Internet of things' will spur a productivity boom. Not so fast.
Here's a stat sure to become PowerPoint porn in the months ahead: General Electric predicts that the "industrial Internet" could add $10 trillion to $15 trillion to the world economy in the next 20 years.
Indeed, $15 trillion is a "wow, that's big" number sure to be dropped into many a presentation, but it's not the most important part of GE's major new report on its industrial Internet vision. The most important part is why GE would bother to calculate this projection and issue such a report. The reason -- beyond the marketing value -- is that GE needs a whole lot of help from other vendors, regulators, financiers and users of technology before this vision and its $15 trillion payoff can come true. This report looks like an attempt to rally an ecosystem.
GE describes an industrial Internet where the machines it makes, such as jet engines, power plant turbines and MRIs, constantly gather data and send it along over the Internet for analysis. The data might alert people to take action, like replace a part that's close to wearing out, or tell a machine to automatically take an action, like slow down a turbine that isn't needed. The idea's more broadly discussed as the "Internet of things."
GE created the report in part because the whole idea of Internet innovation is under attack, says co-author and GE chief economist Marco Annunziata, and "we thought it was important to challenge this view." The report cites Northwestern University professor Robert Gordon for his view that the "innovations of the Internet Revolution are simply not as transformative as those of the Industrial Revolution." People think of the Internet's impact as centered on entertainment and social networks, Annunziata says. That's why GE spends much of the report trying to quantify the industrial Internet's potential in terms of economic and productivity growth.
But this industrial Internet needs a lot of technical and regulatory pieces to expand at the scale GE envisions. Based on my reading of the report, my interview with Annunziata, and InformationWeek's reporting on the Internet of things throughout this year, I think the following changes must happen for GE's growth vision to become reality.
This is No. 1 on Annunziata's list of required technology advancements. The cost of sensors is dropping, and the reach of wireless and wired Internet is expanding. It's getting cheaper and easier to gather and transmit data. Data analytics capabilities must improve "to make sure the data that comes available can be used in a productive way," Annunziata says. In GE's report, he describes this capability as "harnessing the power of physics-based analytics, predictive algorithms, automation and deep domain expertise" to know how machines and systems operate.
Startups and established vendors are developing big data analytics to make sense of the Internet of things, and do so quickly enough to make a timely business decision. GE's own software unit is among them. In an article earlier this year, here's how we described one technology problem GE software is working on, that of combining real-time data and what-if scenarios:
What GE wants to offer is the ability to ask, "Has any machine in our entire system ever had X, Y and Z factors, and what happened four hours later?" GE's systems today would take about 30 days to answer that question -- if they could even answer it. GE's working to combine its data management and analytics software with Hadoop-based data processing to deliver an answer in 30 seconds.
Automation Must increase
As companies collect more data from more sources and then try to make faster decisions with it, the complexity soon exceeds humans' ability to keep up, Annunziata says. People must continue to oversee the process, he says, but more machines need to automatically take actions. Automation requires more embedded technology and, back to analytics, better decision-making software. Automation also points to the dark side of the industrial Internet: Doing it right means destroying a lot of manual jobs and betting that economic growth creates enough new ones.
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