Industrial internet promises economic benefits for Europe

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

Europe could be on the verge of reaping the huge benefits of the next industrial revolution – what is called the industrial internet. This exciting phase of industrial transformation will be technology driven, writes Hendrik Bourgeois.

Hendrik Bourgeois is vice president of European Affairs at General Electric.

The prize for Europe is indeed big. A new report just published by GE, entitled The industrial internet – Pushing the Boundaries of Minds and Machines: A European Perspective”, reveals that the industrial internet (an open global network that connects people, data and machines) – could add €2.2 trillion to European GDP by 2030.

That is the equivalent of about one-quarter of the current size of the euro area’s economy. In addition, industry could save billions of euros if the industrial internet achieves a mere 1% increase in annual productivity growth over the next 15 years. And these estimates are relatively conservative.

The industrial internet could also be the catalyst for a European productivity revolution, helping us to wipe hundreds of billions of euros of wasted time and resources across key European industries by combining internet-connected machines, product diagnostics, software and analytics to make business operations more efficient, more proactive, predictive and strategically automated.

The report highlights the significant opportunities that the industrial internet presents and reveals the current waste within key European sectors. For example, over €1.3 trillion was spent on Healthcare in the EU in 2012.

While globally, it is estimated that 10% of this expenditure is wasted due to system inefficiency, of which 59% is in clinical and operations inefficiencies. A modest one per cent reduction alone of clinical and operations inefficiencies would translate into €11 billion of savings over the next 15 years.

In the energy sector as well the industrial internet can bring significant savings – for example a one per-cent efficiency improvement in gas-fired power generation alone represents €11 billion within Europe over the next 15 years in fuel savings. And throughout industrial sectors we have many examples which demonstrate the potential power and benefits of the industrial internet.

Clearly, the case for the industrial internet is a compelling one for Europe and for the future competitiveness of the European Union in an increasingly globalised economy.

But it won’t happen in a vacuum. Companies, like GE are prepared to invest but the EU and member states need to create the enabling conditions which will act as a catalyst to investment and growth.

Given the scale of the opportunity that the industrial internet presents, Europe will be best placed to maximise its gains by acting together in realigning investment to rapidly incorporate new technologies into its capital stock, building and developing the necessary talent bank, and creating a framework that facilitates the secure and easy flow of data across borders.

No one country will succeed alone. Acting in a joint fashion, working to complete the Single Market, will have three related advantages – it will ensure harmonisation of the relevant institutional and legal systems.

This will in turn maximise the economies of scale that have been at the very core of European economic and financial integration. And it will help reduce growth and macroeconomic imbalances across European countries – imbalances which have been a significant factor in the recent economic crisis.

Policymakers need to move beyond their respective geographies and thinking when planning Europe’s industrial internet strategy. Instead, they should focus on the interdependence of countries and industries.

So how can we create the conditions to ensure we capitalise on this next revolution?

Firstly we need a robust policy framework from European governments allowing for the free flow of data in a trusted and secure environment, without different rules and standards for every country and dataset. If not properly managed new regulation in these areas could of themselves become significant tariff trade barriers to the digital economy.

The report also outlines a series of initiatives to help drive investment in the development of the industrial internet in Europe including; smart purchasing and public procurement which will facilitate investment in technologies and skills development which optimise long term impacts, re-orientating existing funding mechanisms, creating a European venture capital framework for investments which have a cross border focus, and putting in place incentives (regulatory and financial) to promote private sector investment.

The report highlights the issue of the available talent pool which as a significant challenge for Europe. Estimates say that, at current levels, there will be a deficit of 700,000 qualified technicians and engineers the high tech sector by 2015. The industrial internet will be built on new technology but it will rely on the availability of adequate talent and skills.

To maximise the potential of the industrial internet in Europe will necessitate the nurturing of a new skills pool not only by training more people in sciences, engineering and data science, but also by developing a new set of skills that combines expertise in software and in different branches of engineering. It also requires the need for a cross border framework which helps facilitate this including greater mobility of skilled labour.

In short Europe could be on the cusp of a new era of growth but that’s not going to happen in a vacuum – let’s make sure we don’t waste this opportunity.

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