What can revitalize the European economy? Many are asking this question as the region has stagnated economically for years. The answer lies in the wave of digital transformation enabled by the Industrial Internet. But in order to capitalize on this next industrial revolution, Europe must embrace major technological change in new ways.
At a recent Economist event in Brussels entitled “Let’s Get Europe Working,” I connected with a range of European thought leaders, policy makers, and stakeholders and immediately recognized their passion to find drivers for a new phase of growth and renewal in the continent.
Recovery isn’t enough
Europe has emerged from the latest economic crisis, but it still faces many significant challenges: Unemployment (especially youth unemployment, which according to Eurostat is hovering around 50% in Spain and Greece), aging demographics, a diminishing share of FDI since 2003, and a growing productivity gap with its competitors.
The EU-US productivity gap, in particular, is becoming wider again after years of narrowing. Add to that the high cost of energy in Europe compared to its competitors—Europe imports more than 50% of its energy requirement—and you have an even greater economic challenge. Contrast this with the US, where the exploitation of shale gas—now about a third of gas production—has caused wholesale prices to fall by two thirds.
According to the European Commission, by 2020 the number of jobs for highly qualified people will rise by 16 million, while the number of jobs held by low-skilled workers will decline by around 12 million. Fifty percent of jobs today require technology skills, and about three quarters of all jobs will require these skills within the next decade.
Creating a connected digital single market will help, and it’s one of the ten priorities from the EU President Jean-Claude Juncker. Its completion could generate up to EUR 250 billion of additional growth in Europe and create thousands of new jobs, notably for young job-seekers, and a vibrant knowledge-based society.
The Industrial Internet can be the catalyst for a new European “productivity revolution” helping to wipe out hundreds of billions of euros of wasted time and resources across key European industries. Productivity gains of even 1% will have huge impacts. But Europe needs to ensure that it doesn’t miss out on the opportunity.
The reindustrialization of Europe
One could argue that Europe failed to capitalize on the second communications revolution. In the history of communication technologies, Europe produced a great tradition of innovation in the 19th and 20th centuries. “Made in Europe” communications transformed the world, starting with radio and television right up to CD-ROMs, MP3 technologies, and the worldwide web. But most of these technologies were then commercialized in the US.
Becoming more industrially advanced today will lead to more opportunity ahead from the Industrial Internet. Europe needs to be bold and ambitious; it needs to embrace the digital transformation required to power the Industrial Internet. If it does, the Industrial Internet can unleash European competitiveness and mitigate the increased productivity gap.
We estimate that the Industrial Internet revolution could add €2.8 trillion to the GDP of Europe by 2030 – close to a quarter of the current size of the Euro Area economy. It can also create greater efficiency and speed in industries as diverse as aviation, rail, energy and power generation, and healthcare delivery while increasing European competitiveness throughout the world.
The Industrial Internet can enable energy efficiency, reducing the energy challenges that Europe faces today. GE estimates that even saving only 1% in gas-fired power generation alone represents $66B globally and $15B in Europe in fuel savings over the next 15 years. Gartner sees the value-add of the Internet of Things as a whole growing to $1.9T by 2020 with estimates coming in at $100B in value-add opportunities for utilities alone.
Driving the Industrial Internet revolution
The benefits of the Industrial Internet won’t come in vacuum. They need a framework to support the investment (private and public) required for Europe to exploit the opportunity that the Industrial Internet presents.
Read more: Industrial Internet - A European Perspective
Roland Berger stated that if Europe is to assume a leadership role in what it calls “Industry 4.0” or the Industrial Internet, it will require an investment on the order of €90B per year for the next 15 years – but the prize is great and benefits real.
At GE, we remain a committed partner to seeing this reindustrialization happen. In Hungary, we are developing GE Healthcare’s Center of Excellence for Industrial Internet Application in patient care and healthcare institution management. We are also extending our center at the EDC in Poland to develop GE Oil & Gas’s real-time measurement of equipment operations for the exploration of offshore gas fields and GE Aviation applications for air carriers on engine modules.
Standardization, a robust policy framework, and education for skilled workers are also key efforts that need to come together to enable a European Industrial Internet revolution. That is possible today. The Industrial Internet is real -- and here. Its benefits are tangible. Europe needs to reach out and grab them.