Old-line industries haven’t seen much of a payoff from the Internet yet, but once they get moving they could become bigger users than either tech companies or consumers.
As tech boomed and consumer businesses like retail changed radically in the 1990s and 2000s, industrial productivity in the U.S. was only growing by about 4 percent per year, General Electric Chairman and CEO Jeff Immelt said Tuesday at a GE conference. Since 2010 growth has slowed to about 1 percent per year, he said.
IT advances have paid off for tech companies and some businesses, but heavy industries like energy and transportation haven’t been able to take part to a great extent, Immelt said. Now there are tools to help them take advantage, and CIOs in industrial firms can become business heroes, he said. GE thinks it can help make that happen.
“As an industrial company, it’s our turn,” Immelt said. “The opportunity for industrial companies is to grab this next age of productivity.”
Where Internet connections by themselves didn’t do much for vertical industries, adding streams of data and advanced analytics to the equation could transform entire operations, he said. Most can start with asset performance optimization, a technique for monitoring how equipment is working and how it’s being used. An early payoff may be ending unplanned downtime by keeping tabs on the condition of your infrastructure, Immelt said.
The scale of the industrial Internet could be huge just by the nature of the enterprises that use it. Using GE itself as an example, Immelt said the company has 400 factories, with just 100 so far taking advantage of Brilliant Manufacturing, its own sensor-powered analytics system to improve operations. And the stakes are high in connecting industrial systems, many of which are considered critical infrastructure. GE says preventing one failure of an offshore oil platform saves one of its customers $5.2 million.
“We believe the industrial Internet could be twice the size of the consumer Internet,” Immelt said.
The centerpiece of GE’s industrial Internet effort is software, especially Predix, a platform that’s designed to run basic functions from GE as well as third-party applications for vertical industries like health care, transportation and manufacturing.
One area that’s ripe for gains through IT is the electricity business. New renewable energy sources and distributed generation — think homes with solar panels — are making life more complicated for utilities. At the same time, things like smart meters and cheaper equipment sensors can help utilities understand their operations even better. GE wants to help power companies take advantage of these trends through its Predix-based Digital Power Plant, announced at Tuesday’s event.
Exelon, a large national energy provider in the U.S., has signed on to use Predix across all its generation facilities. Exelon hopes to do things like get 2 percent more energy out of its wind farms. Railroad operator BNSF, consumer products vendor Proctor & Gamble and oil producer BP are also using GE software for industrial Internet deployments.
As industrial companies turn to the Internet and data analysis for savings and market gains, CIOs are more important players, Immelt said. At GE’s businesses, CIOs have gone from software buyers to application creators and leaders in revenue growth.
“The nature of the CIO has really changed dramatically,” he said.