New GE Report Finds That Industrial Internet Could Add Trillions to Global GDP
The Industrial Internet has the potential to add $10-15 trillion to global GDP by 2030
Connecting machines and the Internet could eliminate $150 billion in waste across major industries, driving a productivity revolution
Just 1% increase in efficiency can mean savings of $30 billion in aviation, $66 billion in power generation and $63 billion in healthcare over 15 years
FAIRFIELD, Conn.--(BUSINESS WIRE)-- GE (NYS: GE) today released a new report detailing the business and economic impact of the Industrial Internet, an open global network that connects people, data, and machines. The report, "Industrial Internet: Pushing the Boundaries of Minds and Machines," was written by GE's Chief Economist Marco Annunziata and GE's Director of Global Strategy and Analytics Peter C. Evans. It found that enabling Internet-connected machines to communicate and operate automatically can bring substantial efficiency gains. If the Industrial Internet boosts annual productivity growth by 1-to-1.5 percentage points in the U.S., with partial diffusion to the rest of the world and considering the power of compounding over the next twenty years, it could add $10-15 trillion to global GDP, about the current size of the U.S. economy.
"We found that the benefits from this marriage of machines and analytics are multiple and significant and 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," said Annunziata. "The full potential of the Industrial Internet will be felt when the three primary digital elements — intelligent devices, intelligent systems and intelligent automation — fully merge with physical machines, facilities, fleets and networks. When this occurs, the benefits of enhanced productivity, lower costs and reduced waste will propagate through the entire industrial economy."
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.
While its benefits will reverberate throughout the economy, the initial impact of the Industrial Internet is likely to also be felt especially strongly in advanced manufacturing, which could become a stronger engine of job creation and productivity. To achieve these benefits, there must be significant investment to rapidly transfer new software and diagnostic technologies into manufacturing equipment. Equally important will be developing a strong talent pool including 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% during 1995-2004, twice the pace during 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.
The report showcases both industry waste and the Industrial Internet opportunity:
The global cost of healthcare inefficiency is at least $731 billion per year
A 1 percent improvement in efficiency would lead to $63 billion global healthcare savings over 15 years.
Globally, $1.9 trillion is spent on energy annually
Just a 1% savings per year in power generation is equal to $20 billion annually; $300 billion in over 15 years
Globally, transportation logistics costs are estimated to be $6 trillion per year, or approximately 10% of global GDP. The commercial transportation system accounts for $300 billion of this total
Industrial Internet applications can reduce commercial transportation asset and operations management costs by 10 percent, yielding $5.6 billion per year in savings
The total cost of waste in airline operations today is $284 billion per year
In the aviation industry, a 1% reduction in jet fuel use from the Industrial Internet could yield about $30 billion in fuel savings over 15 years.
For more information please view the full report at http://www.gereports.com/meeting-of-minds-and-machines/
About the authors:
Chief Economist, GE
Marco Annunziata is the chief economist and executive director of global market insight at General Electric Co., responsible for global economic, financial and market analysis to support GE's business strategy. The author of "The Economics of the Financial Crisis," Annunziata is a member of the European Central Bank's Shadow Council and the European Council of Economists. Before joining GE in 2011, he was chief economist at UniCredit and chief economist for Eastern Europe, the Middle East and Africa at Deutsche Bank in London. Prior to Deutsche Bank, he spent six years at the International Monetary Fund, splitting his time between emerging markets and the euro zone. At the IMF, Annunziata was involved in regular consultations with the Italian government, the Bank of Italy, the European Central Bank and the European Commission, and took part in loan negotiations in several European and Latin American emerging economies. He holds a Ph.D. in economics from Princeton University and a B.A. from the University of Bologna.
Peter C. Evans
Director of Global Strategy and Analytics, GE
Peter Evans is Director of Global Strategy and Analytics at General Electric Co. and served for five years as the head of Global Strategy and Planning at GE Energy. Prior to joining GE, he was Director, Global Oil, and Research Director of the Global Energy Forum at Cambridge Energy Research Associates (CERA). He also worked as an independent consultant for a variety of corporate and government clients, including the US Department of Energy, the Organization for Economic Cooperation and Development (OECD), and the World Bank. Dr. Evans has extensive international energy experience, including two years as a Visiting Scholar at the Central Research Institute for the Electric Power Industry in Tokyo, Japan. He is a lifetime member of the Council on Foreign Relations and a Board Member of the National Association for Business Economics. Dr. Evans holds a BA degree from Hampshire College and a Master's degree and PhD from the Massachusetts Institute of Technology.
GE (NYS: GE) works on things that matter. The best people and the best technologies taking on the toughest challenges. Finding solutions in energy, health and home, transportation and finance. Building, powering, moving and helping to cure the world. Not just imagining. Doing. GE works. For more information, visit the company's website at www.ge.com.
Leigh Farris, 203-551-1863
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