A January 2013 cover of The Economist magazine asked provocatively, “Will we ever invent anything this useful again?” The question was accompanied by an image of Auguste Rodin’s “The Thinker” sitting on a toilet – “this” referring to modern plumbing, not Rodin’s iconic artwork.

The sentiment is not uncommon. Some argue that innovation is at worst stalled and at best incremental, and that progress on the scale of the Industrial Revolution and the Internet Revolution of the late 1990s and early 2000s is highly unlikely. They acknowledge that businesses and economies have benefited significantly from past waves of innovation but are pessimistic about the potential for future growth in productivity.

I am much more optimistic. We’re perched on a new wave of productivity gains thanks to a convergence of the Industrial Revolution – machines, fleets and physical networks – with the Internet Revolution: intelligent devices, networks and decisioning. This convergence is the Industrial Internet, and it’s just beginning to profoundly transform global industry by increasing speed and efficiency across different sectors.

Why does that matter? Ultimately it’s the human benefit. Last year, I co-published “Industrial Internet: Pushing the Boundaries of Minds of Machines” with my GE colleague Peter C. Evans. In this report, we assert that speed and efficiency gains mean increased productivity, which means faster improvement in income and living standards. Even if the Industrial Internet can boost annual productivity growth by 1 to 1.5 percent, we could see a 25 to 40 percent raise in average incomes over the next twenty years – music to American ears after decades of stalled income growth. And the benefits will extend to the rest of the global economy as more and more countries join the industrial internet revolution—emerging markets, with their higher rates of investment, have an especially strong opportunity to secure faster income gains by leapfrogging to new data-enabled technologies. It is not just dollars and cents: the Industrial Internet can help deliver better health care and improve quality of life through its application to sectors like energy and transportation.

Perhaps the innovation naysayers are taking their cues from the last half-decade of economic turmoil. But just as global economic “gloom and doom” loses traction – financial market health is improving, major economic disasters like the fiscal cliff didn’t come to fruition – so the current pace of innovation should give us optimism, and optimism is in turn required for our capacity to invent.

But we won’t reach our full potential in a vacuum and we are just now arriving at a stage where prerequisites for success have come online. At a fundamental level, advancements in innovation, infrastructure and cybersecurity management will unlock the power of the Industrial Internet.

Advancements in equipment, analytics, systems platforms and business practices are all moving in the correct direction. The deployment of advanced sensors in new equipment - and the retrofitting of existing assets – are being paired right now with new analytics standards for unifying how we gather and evaluate a torrent of information. Think of this standardization process as the creation of a new language. In this context we’re just now putting the finishing touches on the grammar, punctuation and syntax of an Industrial Internet. The rapidly declining cost of sensors and of data storage and computing is the key economic enabler which is triggering an impressive acceleration to this process.

But just having the information is not enough; breakthroughs on how information is physically distributed will shape a raw resource into a reliable and useful product. An entirely new backbone will come online in the next decade to house and share this new data resource. We anticipate that by 2025 we will see a 40x growth in data processing demand – a new resource that could require a power equivalent of between 9 to 14 megacities. 

Finally, this abundance of new information and infrastructure will require thoughtful cyber security safeguards. The U.S. government continues to grapple with the right formula for state and private partnerships that protect data while maintaining wide latitude for innovation. Closer international cooperation and a move towards global standards would also be enormously helpful in this regard.

With so much of our future innovation potential taking place over a combination of private and public networks the continued cooperation of technology vendors, network operators and regulators is essential. If we fail to convince investors and the public that information is safe we could easily undermine the potential of a connected Industrial Internet.

Back to The Economist’s question on whether we’re due for another innovation explosion. I would answer unequivocally, “Yes.” The caveat is that not only do I believe we’ll invent new, useful technologies, but tools like the Industrial Internet allow us to improve the efficacy of existing ones.

Over the coming weeks, I’ll take a deep dive on the timeline of the Industrial Internet Revolution, how we size the economic opportunity, the benefits to specific industries including aviation, power, healthcare, rail and oil & gas, as well as what’s required to realize the full potential of the Industrial Internet.

Marco Annunziata is the Chief Economist and Executive Director of Global Market Insight at General Electric Co, responsible for global economic, financial and market analysis to support GE’s business strategy. Prior to GE, Marco held positions with Unicredit and Deutsche Bank and spent six years at the International Monetary Fund in Washington.

About the author

Marco Annunziata

Chief Economist and Executive Director, Global Market Insights at General Electric