Industry Market Trends

Are Manufacturers Ready for the Industrial Internet?

July 9, 2013

Manufacturers' business models and competencies will have to evolve to take advantage of the Industrial Internet. The rewards promise to offer tremendous value to those companies that can adapt and produce machinery and equipment for it.

Recent reports from Cisco, GE, and Wikibon have taken a closer look at the market value of the Industrial Internet. Although some thought leaders do not distinguish between the "Internet of Everything" (IoE) and the Industrial Internet (sometimes called the "Internet of Things"), it is possible to make a distinction.

Wikibon, a professional community of open-source solutions offering free advice for technology and business challenges, states in a recent report that "the main difference between the consumer/social Internets and the Industrial Internet is in how and how much value is created. For consumer/social Internets, the majority of value is created from advertisements. The value created from the Industrial Internet is much greater from the same amount of data."

Wikibon defines the Industrial Internet as "the connection of industrial machine sensors and actuators to local processing and to the Internet; and the onward connection to other important industrial networks that can independently generate value."

A recent press release from Cisco defines IoE as, "the networked connection of people, process, data, and things, and the increased value that occurs as 'everything' joins the network. Several technology transitions -- including the Internet of Things, increased mobility, the emergence of cloud computing, and the growing importance of big data, among others -- are combining to enable IoE."

How much value might be achieved? Cisco reports that while IoE is already driving private-sector corporate profits, an additional $544 billion could be realized in 2013 if companies adjust their strategies to better leverage it.

According to Wikibon, the current value of the Industrial Internet is much smaller, but is projected to reach a similar size in under a decade. Spend on the Industrial Internet is estimated to grow from $20 billion in 2012 to about $514 billion in 2020. The value created will reach $1.3 trillion by 2020, up from $23 billion in 2012. Wikibon foresees a cumulative net value of $1.7 trillion by 2020, with the ROI growing to 149 percent ROI by 2020.

What can manufacturers do to pursue the potential of the Industrial Internet? According to Jim Carroll, a leading futurist and innovation expert based in Toronto, company leaders need to begin with a new mindset. Carroll told IMT, "Some people see a trend and see it as a threat. Innovators see a trend and see it as an opportunity." He added, "People can kill their ability to try and pursue any type of new idea out of fear."

The mindset of GE CEO Jeff Immelt appears to be focused on and already vested in the Industrial Internet. In a company YouTube video from November 2012, Immelt states that the combination of intelligent machines, advanced analytics, and empowering people will be "the three pieces of GE's service offerings going forward."

An article in The Manufacturer this past June reported Immelt saying that building skills and capability in analytics technologies "will be the only way an industrial company can guarantee that the products it sells will be successful."

Wikibon identified the three fundamental drivers of the Industrial Internet:

1. Sensor technology advances. Sensor technologies are rapidly evolving into "autonomous analytical devices that perform sophisticated analytical processes." This is being driven by advancements in fields such as nano-materials. As such, new sensor technologies are coming to market that are smaller, cheaper, faster, and more energy efficient.

2. Network advances. Network technologies are advancing to allow quick and cost-effective communication of information from physical sensors, and combine that information with existing business data.

3. Business and governmental acceptance. Wikibon notes that businesses are beginning to see how this data can be used to optimize cost and delivery of industrial services. Some are also seeing opportunities for disruptive changes in their business models. "One example," the report notes, "is the opportunity for aviation engine manufacturers to offer an inclusive rental program for equipment and servicing, based on the expectation that enhanced feedback from the network of engines would lead to improved design and reduced costs in manufacturing and maintenance. Early establishment of such an offering would lead to significant competitive advantage." Governments are also promoting greater use of sensor data with an eye on avoiding power, water, and transportation infrastructure failure.

For those businesses that have qualms about whether and when to take the leap, Carroll suggested taking on a sample project, trying something out, and seeing what can be accomplished. "Like the World Wide Web in 1993, we are at the early stages with the Industrial Internet," Carroll observed. "Those who jumped on board quick [with the Web] and worked to start figuring it out usually ended up doing pretty well."