The GE report contends such benefits will reverberate throughout the economy, but will be most strongly felt in advanced manufacturing
FAIRFIELD, Conn.—Enabling Internet-connected machines to communicate and operate automatically could add $10-15 trillion to global GDP, according to research conducted by the General Electric Co. (GE).
Written by GE’s chief economist Marco Annunziata and GE’s director of global strategy and analytics Peter C. Evans, Industrial Internet: Pushing the Boundaries of Minds and Machines, says the economic impact of such an Industrial Internet would boost annual productivity growth by 1-to-1.5 percentage points in the U.S. with partial diffusion to the rest of the world.
Considering the power of compounding, the benefits would add up to about the current size of the U.S. economy within 20 years.
“We found that the benefits from this marriage of machines and analytics are multiple and significant,” said Annunziata. “In today’s challenging economic environment, securing even part of these productivity gains could bring great benefits at both the individual and economy-wide level.”
He says the full potential of the Industrial Internet will “propagate through the entire industrial economy” when intelligent devices, intelligent systems and intelligent automation fully network with physical machines, facilities and fleets.
The Industrial Internet will help eliminate hundreds of billions of dollars of wasted time and resources across critical industries by combining Internet-connected machines, product diagnostics, software and analytics to make business operations efficient, proactive, predictive and strategically automated.
The report contends such benefits will reverberate throughout the economy, but will be most strongly felt in advanced manufacturing, which could become a stronger engine of job creation and productivity.
But getting there won’t be easy. Significant investment to transfer new software and diagnostic technologies into manufacturing equipment along with developing new roles that combine mechanical and industrial engineers into new “digital-mechanical engineers.”
The report cites that the first wave of the Internet and Communications Technologies (ICT) revolution boosted U.S. labor productivity growth to an average annual rate of 3.1 per cent from 1995 to 2004, twice the pace of growth seen in the previous quarter-century.
If the Industrial Internet revolution could recapture and maintain this 3.1% productivity growth, by 2030 this could translate to an average income gain of $20,000 per person over the current trend.
Here are some Industrial Internet opportunities:
Energy—Globally, $1.9 trillion is spent on energy annually. A one per cent savings per year equals $20 billion; $300 billion in over 15 years.
Transportation—Globally, transportation logistics costs are estimated to be $6 trillion per year, or 10 per cent of global GDP. Commercial transportation accounts for $300 billion. Industrial Internet applications can reduce commercial transportation asset and operations management costs by 10 per cent, or $5.6 billion in savings.
Healthcare—The cost of healthcare inefficiency is at least $731 billion per year globally. A one per cent improvement in efficiency would lead to $63 billion global healthcare savings over 15 years.