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The Beauty of General Electric Company's Internet of Things Strategy

By Steve Heller - Jan 14, 2016 at 5:00PM

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The industrial giant is attacking the opportunity from two main angles.

Beyond the potential benefits the Internet of Things offers to the consumer segment, industrial uses like manufacturing, power generation, and aviation can also benefit greatly from the Internet of Things. General Electric (GE 1.96%) is leading the charge in the industrial world with an initiative it's calling the Industrial Internet -- aka, the Internet of Things for industry.

The goal of the Industrial Internet is simple: Unlock insights in real time that can be used to improve industrial productivity, where small improvements can make a meaningful difference. GE estimates that a 1% improvement in its productivity across its global manufacturing base translates to $500 million in annual savings. Worldwide, GE thinks a 1% improvement in industrial productivity could add $10 trillion to $15 trillion to worldwide GDP over the next 15 years.

Essentially, these massive numbers spell massive opportunity for GE, and they are the reason it's is attacking the Internet of Things from two main angles: from within its own factories, and by providing a solution to the industrial marketplace. It's a thing of beauty, really. 

The Brilliant Factory
What if a factory became self-aware and got better over time? That's exactly what GE's Brilliant Factory aims to accomplish. It starts with connecting a wide range of inexpensive Internet-enabled sensors to industrial machines so raw data can be ingested and analyzed, and actions can be recommended to factory operators -- all in real time.

Behind the scenes, the Brilliant Factory leverages GE's deep understanding of industrial machines and processes, big data analytics, and predictive algorithms, working in unison to look for ways a factory can improve its productivity.

Image source: GE.

Put another way, GE's Brilliant Factory is a highly sophisticated data feedback system that allows factory operators to better optimize how their factory functions. In one instance, GE adopted this "Brilliant" approach at its Greenville, South Carolina, factory and increased productivity by 25% over a three-month period.

Picture an App Store that's built on top of a cloud-based operating system. Now picture it for big industry. That's exactly what is -- an App Store for industry built on top of GE's Predix cloud operating system, which together enable industrial customers to develop apps. This brief video overviews how Predix works across a wide range of industrial applications:

Source: Xplane.

Like the Brilliant Factory, Predix also aims to improve productivity. But instead of just focusing on factory operations, Predix focuses across larger-scale industrial applications like aviation fleet management, power distribution and generation, hospital resource optimization, railroad logistics, oil and gas operations, and manufacturing.

As the following table illustrates, a small improvement in productivity can lead to staggering savings over a 15-year period: 

Source: GE.

A sizable opportunity
Out of 400 factories, GE has already converted about 100 to the "Brilliant" variety, which suggests there's still tremendous opportunity for GE to leverage the Internet of Things and continue improving its productivity. Ultimately, the long-term goal of GE's Brilliant Factory initiative is to improve its factory productivity by 20%, which could translate to billions in cost savings.

On the commercialization front, GE announced last September that it will offer the Brilliant Factory and a host of different apps for the Predix platform to the marketplace. By 2020, GE wants to grow its software and solutions portfolio from the $5 billion in revenue it expects to generate in 2015 to a $15 billion-per-year business. To be clear, this growth will largely depend on robust developer adoption on the Predix platform and the number of available apps GE can offer to the marketplace.

A thing of beauty
Ultimately, there are few companies in the world that can combine industrial expertise with a robust software solution to help itself and the industry at large get more productive. That's the beauty of GE's Internet of Things strategy -- it's attacking the opportunity as a user and supplier. If GE is successful on both fronts, it could be translate to potentially meaningful revenue and earnings growth over the long term.

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