GE (NYSE: GE) today publishes a new report, entitled “The Industrial Internet - Pushing the Boundaries of Minds and Machines: A European Perspective”, revealing the potential business and economic impact of the Industrial Internet in Europe. The report finds that the Industrial Internet - an open global network that connects people, data and machines - could add €2.2 trillion to European GDP by 2030. In addition, industry could save billions of Euros if the Industrial Internet achieves a mere 1% increase in annual productivity growth over the next 15 years.
Marco Annunziata, GE’s Chief Economist said: “Our research has found that the productivity benefits driven by this marriage of machines and analytics are multiple and significant. We believe Europe is well-positioned to reap the gains from this new technology revolution, helping to boost its economic growth, whilst at the same time strengthening its position in an increasingly competitive global marketplace.”
The Industrial Internet will help to wipe hundreds of billions of Euros of wasted time and resources across key European industries by combining internet-connected machines, product diagnostics, software and analytics to make business operations more efficient, more proactive, predictive and strategically automated.
The report highlights the significant opportunities that the Industrial Internet offers and reveals the current waste within key European sectors:
Healthcare: Over €1.3 trillion was spent on Healthcare in the EU in 2012. Globally, it is estimated that 10% of this expenditure is wasted due to system inefficiency, of which 59% is in clinical and operations inefficiency. A one per cent reduction of clinical and operations inefficiencies translates into €11B of savings over the next 15 years.
Power: Industrial Internet-induced savings of only one per cent in gas-fired power generation alone represent €11B within Europe over the next 15 years in fuel savings.
Aviation: The European commercial airline sector is spending about €35B per year on jet fuel. If Industrial Internet technologies can achieve a one per cent saving, this would represent nearly €7B in fuel cost savings over 15 years.
Oil & Gas: A 1% reduction in exploration and production (E&P) capital expenditure in Europe can be valued at €7B of savings over 15 years.
Rail: In the rail sector a 1% reduction in capital expenditure would equate to a saving of €4.5B over 15 years in Europe.
The “Silver Bullet”:
GE’s report hails innovation as the “silver bullet” to the economic and policy debate which has been dominated by the issue of austerity. Europe is both well-positioned to reap the gains from this new technology revolution - and in need of doing so to reconcile the necessity of ongoing debt reductions with the imperative of generating faster increases in incomes.
The technological revolution and the structural reforms required in Europe are heavily intertwined. These reforms are now underway and have gone some way towards alleviating market tensions. At the same time, however, Europe faces a substantial rise in expenditures on entitlements in areas such as pension and healthcare benefits as a consequence of an ageing population. The report makes clear that although the challenge is not unique to Europe, it is one that needs to be managed both effectively and urgently.
Unique opportunity for Europe:
The €2.2 trillion that the Industrial Internet could generate is close to one-quarter of the current size of the Euro Area’s economy. It is based on a conservative assumption that Europe will be able to capture just one half of the productivity gains believed to be within reach of the US through the Industrial Internet.
However, much needs to be done to realise these gains. GE’s report highlights the “structural rigidities in markets for labour, products and services” that hindered the accelerated adoption of new technologies of the first internet revolution. If Europe is to fully take advantage of this new significant opportunity it needs to work together to build the critical mass required, develop the necessary talent bank, create a framework that facilitates the secure and easy flow of data across borders.
To realise the potential of the Industrial Internet GE’s report calls for a robust policy framework from European governments allowing for the free flow of data in a trusted and secure environment, without different rules and standards for every country and dataset. If not properly managed the report suggests that new regulation in these areas could become significant tariff trade barriers to the digital economy. With the positions of excellence that some European firms hold in global industry, they are well placed to take advantage of the Industrial Internet.
GE’s European approach:
The development of a new skills pool in Europe is critical to maximising the potential of the Industrial Internet. GE is growing its European software presence and currently has about 1,500 software engineers and data scientists, at work analysing data collected by sensors on a wide range of machines to produce efficiencies and productivity gains in sectors such as aviation, power generation, oil & gas and healthcare.
GE intends to expand its software footprint in Europe. This will include the appointment of a European Software Leader, whose role will be to mobilise teams in the region and to drive software innovation and rapid development techniques.
Examples of the GE Industrial Internet solutions already in action include:
Alitalia (Aviation): Alitalia was keen to introduce more effective operational processes by improving the understanding of fuel usage. With 145 aircraft operating 16,000 flights a month, Alitalia’s aircraft produce over 15Gb of data per month. GE’s Flight Efficiency Services has been collaborating with the airline Alitalia since 2011 in using data to identify and realise fuel efficiencies.
The results to date have been impressive. Alitalia have achieved a 1.5% saving in fuel costs within the first year – a saving of $15 million. In addition, by having a greater understanding of fuel usage, Alitalia has been able to introduce more effective operational processes such as ‘just-in-time’ refueling. It has also been able to introduce new protocols in pilot training to encourage more proficient flight procedures.
DoseWatch (Healthcare): DoseWatch is an automated dose monitoring system that controls dose levels for patients undergoing X-ray or CT scans. Undergoing X-ray or CT scans exposes patients to low levels of radiation. The radiation dose is part of a trade-off for physicians with regard to image quality. Higher radiation should lead to a clearer image, which can lead to a more confident diagnosis. A very low dose, meanwhile, may provide insufficient image quality to make a diagnosis. Controlling this strikes the right balance between dose and image quality.
Dosewatch retrieves, tracks, and reports the radiation dose administered to patients during medical exams and automatically organises the data for hospital leaders so they can easily and effectively monitor dose provision in their institution. The system collects data in different ways - by imaging device, by the individual operator or by protocol, so it can compare and contrast the dose being administered in one exam to another from the past.
“The Cage” (Oil & Gas): The GE Measurement and Control Subsea Condition Monitoring system (also known as the ‘Cage’) measures sound and electrical signals emitted from subsea equipment, often an early warning sign of developing leaks and other issues. The listening ‘ear’, an array of sensors in a 500-pound ‘birdcage’ dome that sits on the sea floor or on subsea equipment, was developed at the GE Measurement and Control site in Bergen, Norway.
The equipment detects changes in the magnetic field generated by electrical cables, pumps, motors and other electrical equipment in a subsea environment; it can also spot ground faults or defective isolation. The device sends this sound information to a seaborne control room where the data is analysed to help plan maintenance and component replacement programmes.
The system, which is already working at some 130 sites in the North Sea operated by Statoil, ENI, and Shell, and off the coast of Africa, can be 10,000 times more accurate than traditional mass balance systems that measure differences in the amount of oil and gas flowing through the pipes to detect leaks.
Notes to Editors
*GE’s European White Paper “Minds + Machines: A European Perspective” follows on from the November 2012 report:"Industrial Internet: Pushing the Boundaries of Minds and Machines," by Peter Evans, GE's director of global strategy and analytics, and Marco Annunziata, GE's chief economist. This predicts that 46 percent of the global economy, or $32.3 trillion worth of global output, will benefit from the Industrial Internet.
Marco Annunziata is the chief economist and executive director of global market insight at GE. He is 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, Marco 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.
About GE Europe
For more than 100 years GE has been investing in growing its presence across Europe. Today we employ over 90,000 people in Europe and have a footprint that covers every corner of the continent. For more information, visit the company's website at http://www.ge.com/europe/
GE (NYSE: 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 curing the world. Not just imagining. Doing. GE works. For more information, visit the company's website at www.ge.com