Business processes tied to the Industrial Internet (part of the Internet of Things) are projected to deliver efficiency gains of at least one percent. So far, measured implementations have been delivering 20 times that original hoped-for result.
That's the word from GE, which is building out the Industrial Internet in a big way. In the long run, "the value of the Industrial Internet will dwarf that of the consumer Internet," states Marco Annunziata, chief economist at GE. Annunziata, who recently made the case for the "Industrial App Economy" in a new white paper, explains that there likely will be no big bang from the Industrial Internet, but rather, millions of tiny advances that will add up. "Most of the value created by Industrial Internet solutions is additive to what already exists in the economy. A power plant will generate more electricity. A hospital will treat more patients. An airline, reducing delays and cancellations, will transport more passengers."
Annunziata also predicts a resurgence in the production side of the economy as the Industrial Internet powers the production of a large and growing share of goods and services. "Industrial Internet innovations will revitalize manufacturing," he says, noting that this will potentially turn around the manufacturing sector's sluggish productivity growth -- "averaging a a meager 1.4% over the past five years – nearly three times lower than in the previous two decades."
Manufacturers may be lagging, but this is about to change. "The rapid spread of digital innovation will reboot manufacturing productivity growth through a wide range of efficiency-enhancing solutions," says Annunziata, predicting that a "new breed
of digital-industrial companies will innovate and grow at a much faster speed" than the consumer Internet. Even with just a one-percent jump in the efficiency of connected machines and advanced analytics, "the sheer scale of industrial operations across the globe would translate into substantial aggregate economic gains, valued in hundreds of billions of dollars."
In fact, across many industries over the past two to three years, there have been performance gains of at least 20% as a result of sensors embedded into devices and systems. These are being delivered by applications that are helping wind farms produce more clean power; helping airplanes consume less fuel; and helping doctors diagnose patients with more precision and fewer unnecessary tests, Annunziata states. "Assuming that Industrial Internet solutions will continue to deliver at least the 20% performance gains that GE’s solutions are today bringing across industries, they would translate into approximately $8.6 trillion in value on an annual basis." However, he adds, "more work is needed to fully understand and more precisely quantify the impact of all these transformations."
There are at least three ways the Internet of Things will deliver value to these organizations, write Paul Daugherty, Prith Banerjee, Walid Negm and Allan Alter in a recent report out of
Daugherty and the Accenture team provide some guidelines for fully leveraging the Industrial Internet:
Think of products as platforms for information delivery. "Look for models that create value for customers as well as your company in unconventional ways," the Accenture team writes. For example, manufacturers can treat their products as platforms, "enabling third parties to create information services that are used with their equipment." For example, Michelin offers a service that includes sensors inside vehicles that "collect data on fuel consumption, tire pressure, temperature, speed and location. This data is then transmitted to a cloud service of a Michelin solutions partner, and that’s where the human touch begins. Michelin solutions fuel experts analyze the data and make recommendations to the fleet manager and Michelin solutions instructors train drivers in how to use less diesel fuel when driving." As a result, "truck fleet managers can save two liters of fuel for every 100 kilometers driven. Michelin has become more than a tire manufacturer—with the launch of the Michelin solutions business, it’s also a fuel savings partner."
Be the most valuable information provider. "For manufacturers, information services can increase customer preference for a product," the Accenture team observes. Such services "are also an entry point for competitors to get between your company and its customers. "Sell products and your customers interact with you only when they want to fix or prevent problems. Sell services and you gain multiple opportunities to create customer touch points, build trust and establish customer loyalty." The authors also recommend bringing in partners to facilitate this.
Share equipment data with partners. Products may be generating data, but manufacturers have always been wary of sharing operational information, even with their closest partners, the Accenture team states. However, the digitization of the supply chain is opening up these relationships. The Industrial Internet "can give companies much greater control over their supply chain and their processes than ever before," they state. Information pertaining to planning, forecasting and productivity can be shared between partners within ecosystems.
Treat services as R&D for products. Designing, prototyping and testing new products has long been an expensive proposition. Having an information-rich ecosystem based on the Internet of Things provides an inexpensive avenue for trialing new approaches. Enterprises "can quickly test features to uncover the capabilities customers find most valuable and continue to offer the ones customers like best." For example, they cite, the climate technology unit of an industrial equipment manufacturer "discovered that sensors in its refrigeration compressors provided a stream of potentially useful data. After speaking with clients about their industrial cooling needs, executives identified an even larger opportunity: providing continuous temperature monitoring services for produce during transport."
Think boldly about value. The Accenture team suggests that companies consider new product-service hybrids, and look at partnering with company types or industries they may not have considered alliances with in previous days. For example, consider an ecosystem "between farm equipment, fertilizer and seed companies, weather services, and the suppliers needed to provide IT, telecom, sensors, analytics, and other products and services."
