The internet of things (IoT) is one of the more exciting secular themes just starting to reshape many industries across the global economic landscape. At Young Research we follow developments in the Internet of Things to remain current on the emerging threats and opportunities to the companies we advise for both our Intelligence Report subscribers as well as clients of Richard C. Young & Co., Ltd’s white-glove managed account service.
You might expect that a cutting-edge Silicon Valley startup would have the drop in the IoT, and while that is likely true to some extent, old economy companies like General Electric have also been quick to embrace the IoT. Here The Economist reports on the work that GE is doing in the Internet of Things.
The two industrial giants aren’t so much showing off as signalling transformation. Both firms are going through the most profound change in their corporate histories, attempting to switch from being makers of machines into fully digital businesses. GE’s chief executive, Jeff Immelt, says the plan is to join the world’s top ten software firms with sales of programs and services worth $15bn as early as 2020.
Data have long been crucial for manufacturing and industrial goods. Siemens digitises its customers’ factories; a typical GE jet engine contains hundreds of sensors. But now the data are no longer binned when the widget comes out of the factory or the plane has landed. Thanks to faster internet connections, cloud computing and clever algorithms, information can now be easily collected, stored in huge “data lakes” and sifted for insights.
That technology allows manufacturers to create what David Gelernter, a pioneering computer scientist at Yale University, over two decades ago imagined as “mirror worlds”. GE wants to build a similar, “virtual twin” of every category of physical asset it sells, from locomotives to wind farms. This would allow engineers to test products before they are built and also let them feed the virtual model with real-world data to improve performance. “A digital twin is not just a generic model but based on the exact conditions in the real world,” explains Ganesh Bell, chief digital officer at GE Power.
Not so byte-sized
Although the efficiency gains for a single product may be relatively small, they can add up to billions of dollars in savings for customers over the lifetime of equipment. More broadly, linking the physical and the digital worlds via the “internet of things” (IoT) could create up to $11trn in economic value annually by 2025, estimates the McKinsey Global Institute, a think-tank. A third of that could be in manufacturing.