GE’s Chief Economist: Why the Industrial Internet changes everything (Part 1)
Marco Annunziata: Jeff Immelt, our Chairman, wanted somebody to help analyse what was going on in the global economy, what’s going on in the world, what are the big trends, the big risks. I was approached by GE, following time in investment banking doing research, and working as a chief economist. It’s really interesting work. Anything to do with economics touches GE directly because it’s such a diverse global company.
GEreports: What was the transition like coming from the financial sector?
Marco: What made the transition interesting and challenging in the beginning was that the Chief Economist role did not exist at GE before. It was tremendously exciting because you get to figure things out and decide how you want to shape the role, but also challenging because you interact with business leaders who are some of the best people in the industry in what they do.
GEreports: So what was the single biggest skill that you learnt in your previous roles as an economist that paid dividends in your new job?
Marco: I think it’s being able to listen and communicate.
GEreports: Not playing with numbers?
Marco: No, in a sense, as an economist, the ability to play with and understand numbers is something that you already need to have, right?
GEreports: It’s a given.
Marco: It’s a given. It’s really the ability to listen to people, to understand what drives them, what they’re thinking, what is relevant to them.
GEreports: I’ve seen your TEDTalk about the Industrial Internet, and it would seem to me that for a chief economist you know a lot about technology. How did that happen?
Marco: Learning about technology was a tremendous opportunity that I have had from working at GE. I spend a lot of time talking to people in the GE Research Centres and understanding the new technologies. So it was surprising to me when I started just relating my perspective of what these new technologies mean, and have people respond to it.
GEreports: What is your view?
Marco: My view is really marrying what I saw happening from the innovation side in the different sectors within the labs, translating into the bigger economic implications. I immediately thought, yes, this is where we are going to see the big productivity gains. If you are in any advanced economy you’re facing a problem similar to what Australia faces today – how do you generate higher productivity to generate more resources? If you are in an emerging market you have a similar problem which is how do you make growth sustainable so that you can bring one billion people to high standards of living? So I started thinking in terms of first of all how do you articulate the broad economic implications of these technologies? Not only in terms of greater productivity, but also how disruptive they can be to businesses.
"...how do you make growth sustainable so that you can bring one billion people to high standards of living?"
GEreports: You often talk about the rise of the “Industrial Internet” and its impact on how machines and industries will operate in the future. Why do you think it’s so important?
Marco: The Industrial Internet is the innovation that finally opens up for us a new dimension of data and information which is economically relevant. Information translated into insights. It’s already had a huge impact in our everyday lives of course – the way that you and I can have better access to restaurant reviews and mapping applications that help us get to the restaurant, for example. But once you apply this to the industrial world, the same technology can help machines work more efficiently. It might mean less wasted time at the airport because the flight wasn’t late, or less fuel consumption in aviation so growth in the sector is more sustainable. It means the possibility of more lives saved because the health sector is more efficient. The Industrial Internet revolution is letting us unlock the power of information in a way that was never possible before.
"..the possibility of more lives saved because the health sector is more efficient."
GEreports: So are we discovering that many of our systems and industries are not actually operating as efficiently as they could?
Marco: Absolutely, yes. What’s fascinating is you see this very clearly when you talk to our customers, those people who are around hospitals or our railroad network, or power distribution networks. Their reaction when they start to see the kind of data, the kind of information and insight that they can get from the Industrial Internet, the reaction they have every time is, “My God, we’ve been flying blind so far. We’ve been running this business knowing nothing, we have access to zero information and we didn’t know it because we didn’t realise how much information was potentially there to be harvested.”
GEreports: How did we get away with it for so long?
Marco: Yeah, as with everything, right? It’s all an issue of standards. You start off with the first round of technology and you think it’s great and then gradually you realise that hey, it was actually quite primitive.
GEreports: How well do you think governments and business leaders around the world understand the opportunities of the Industrial Internet?
Marco: We are at the very, very early stages. When you look at business leaders, some of them understand it very well, very quickly. A lot of them are intrigued, but need a lot of help to understand exactly how does it create value? This is where GE has to play a big role to talk directly with a customer and tell him or her this is how the innovation translates to value for you.
GEreports: What are the biggest challenges inhibiting the growth of Industrial Internet technologies?
Marco: The first one is the challenge of establishing confidence. Because to gather information and insights you need access to the data and customers need to feel comfortable with sharing data. So the first challenge is the security and privacy of the data – that is essential. The second challenge is the creation of a substantially broader platform that allows customers to gather value from all the Industrial Internet solutions that can be applied from different providers. Then, if you look further down the line the challenge will be human capital. So making sure that in every country the education system can supply the skills needed.
GEreports: How will GE help companies deal with the challenge of analysing reams of data collected by Industrial Internet technologies in the future?
Marco: We provide the platform that allows companies to collect the data, run it through the software and the analytics, and then provide the solutions. We’re investing in our software capabilities with the creation of the software centre in in California to combine our knowledge of software analytics with our knowledge of the machines. But you have to remember the question is actually how do you extract the right kind of information? It’s not enough to be smart with the software, you have to know which questions to ask, and for that you need to know the machines themselves, and this is where GE comes in.
The beauty of these waves of innovation is that they throw the competitive landscape upside down. So we also realise that with these new dynamics we are competing with new companies, new players that were not competitors before. But at the same time we also know that we have an advantage that comes from our strength as an industrial company. We are an industrial company taking industrial services to the next stage and we are taking it very seriously.
Click here to read Part 2 of Marco's interview with GEreports.