The massive digital impact on the industrial companies, economy and job market

We are already moving from an Outcome-based Economy (connected ecosystems, platform enabled market place, pay-per-outcome) to an Autonomous Pull Economy (continuous demand sensing, end-to-end automation, resource optimization, waste minimization and workforce transformation).

Key digital enablers

Digital transforms physical industries through connected products, systems, processes, people and artificial intelligence:

-          Cloud with its inexpensive & abundant storage enables aggregation of data streams from a large variety of sources.

-          Advanced Analytics offers descriptive and increasingly prescriptive decision support leveraging algorithms, automation, deep domain expertise such in material science, electrical engineering, etc.

-          Real-time Analytics enables real-time response to cyber physical systems.

-          Ubiquitous connectivity extends to physical products, infrastructure and all types of things.

-          Machines, devices, facilities, fleets and networks connect through intelligent sensors, software applications and controls.

-          New technical data standards and technical architecture bring together the different players across the ecosystem.

-          Data-driven decision making (DDD) – research indicates that companies, which use it considerably more competitive and profitable

The opportunities to aggregate and optimize

The learning experience of each machine can be aggregated into a single information system that accelerates learning across the entire machine portfolio and even entire network of the overall organization. Learning exponentially increases.

An aggregate view across machines, components, sub components and even materials enables optimal products, parts and other inputs delivered, at the right time to the right location, in the most efficient way.

With big data and new data compression techniques plant managers can track massive data streams of all devices continually and correlate diverse data from different devices & source to generate valuable insights for improvements formerly impossible. New visualization abilities, growing knowledge banks, etc. further improve decision making.

The cloud allows to overcome traditional information & data silos within organizations. It allows enables to bridge former boundaries among organizations, industries and locations.

Real-time diagnostics and predictive analytics will reduce maintenance costs and prevent machine breakdowns before they occur, avoid capital damage, revenue loss and accidents. Engineers can question systems on irregularities and receive intelligent response within seconds. Fleet and logistics will be optimized in real-time, improving the entire supply chain.

Everybody speaks about the Consumers, but the impact on the industrial companies is at least as big!

Industrial Internet advances will enable enhanced asset reliability by optimizing inspection, maintenance and repair processes. It will improve operational efficiencies across all operations down to the very device level.

GE has done a tremendous work on analyzing the impact of digital to the industrial sector. They estimate the potential benefit of digital (they call it Industrial internet) to the global economy worth $80 trillion by 2025, approximately one half of the entire global economy!

Just a one percent productivity increase in the commercial aviation industry, for example, would translate to $30 billion over 15 years. And this only counts fuel cost savings!

A one percent productivity gain in the global gas-fired power plant fleet could yield $66 billion savings in fuel consumption. Health care savings could amount $63 billion. World rail networks $27 billion. Similar savings and productivity gains apply to all industries…

Manufacturing becomes important again

Research proves that Services becomes the major GDP contributor and driver in developing countries. Among the leading nations it is between 72 percent (Japan) and 80 percent (USA).

However, manufacturing is important to sustain wages and living standard of the overall population. Industrial nations need to revisit this issue and re-build their manufacturing sector.

The Industrial Internet allows again to effectively compete with developing nations’ low manual costs.

Important success drivers

Security

Robust cyber security is essential to manage vulnerabilities and protect sensitive information and intellectual property as well as personally identifiable information (PII). It must cover the devices, networks and the cloud with vulnerability lifecycle management, end-to-end protection, intrusion detections/ prevention systems, firewalls, logging and network visibility, and sufficient security training for engineers, management and users.

Data needs to be encrypted on the devices as well as in the transmission of data.

Every player in the ecosystem has a role to play: Technical vendors (product design, supply chain, embedded security features), Asset Owners/ Operators (secure facilities and networks, cooperate with regulators and law enforcement), Regulators & Policymakers, Academics (train specialized people such as digital-mechanical engineers, data scientists, etc.)

Data Centers

The data is increasingly exponentially. From 2012 to 2025 the data will multiply by perhaps 40 times! The majority of data centers to process it in 2025 have yet to be built.

Job losses and new roles

Digitalization will bring an unprecedented change in the global job market. Many traditional professions and positions will be taken over by programs, robots and other emerging technologies. Automation will eliminate many people in the low skill levels. But also very educated people will be affected. (Read my blog on IBM Watson and the health care industry).

With the elimination of jobs new roles are emerging: Next generation engineers (blend traditional engineering skills with informatics & computing to serve as digital engineers), data scientists (who can blend statistics, data engineering, pattern recognition, advanced computing, uncertainty modelling, visualization) and user interface experts (industrial design of human-machine interaction, operation through gesturing and facial recognition, etc.)

The difference between Industrial revolution and the Industrial Internet

The instrumented industrial machine systems have connected with the physical & human networks and entered into a continuous cycle of communication, exchange and mutual learning.

While the industrial revolution focused on resources and physical objects, the Industrial Internet focuses on innovation, knowledge, software and intelligent systems & devices.

Network, fleet, asset and facility optimization happens through intelligent devices, systems and decision making.

Potential Problems & Challenges

The Industrial Internet promises us operational improvements across all industries worldwide. Based on the benefits of the Internet we can extrapolate the positive outcomes of the Industrial Internet:

-          Cost-deflation (similar as when companies adopted ICT equipment)

-          Labor productivity growth (1996 -2004 it generated 3.1 percent on average)

-          Average GDP growth could be 25 to 40 increase (based on a productivity increase of 1 percent)

However, all calculations are based on the assumption that labor and capital would accumulate at the same pace. That is not realistic, given that perhaps 20 to 25 percent of jobs may become obsolete by 2025. And it is simply not sensible to believe that shop keepers, manual labor workers and other less skilled people can be up-skilled enough to stay competitive. What to do with these people?

 This article incorporates thoughts, research & content of GE as well as of other thought leaders


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