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Marco Annunziata: Welcome to the age of the industrial internet

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Everyone's talking about the "Internet of Things," but what exactly does that mean for our future? In this thoughtful talk, economist Marco Annunziata looks at how technology is transforming the industrial sector, creating machines that can see, feel, sense and react -- so they can be operated far more efficiently. Think: airplane parts that send an alert when they need to be serviced, or wind turbines that communicate with one another to generate more electricity. It's a future with exciting implications for us all.

- Economist
The Chief Economist at General Electric, Marco Annunziata is a financial virtuoso with a passion for technology. Full bio

Einstein said that
00:13
"I never think about the future —
it comes soon enough."
00:14
And he was right, of course.
00:17
So today, I'm here to ask you to think of
00:19
how the future is happening now.
00:22
Over the past 200 years, the world has experienced
00:25
two major waves of innovation.
00:27
First, the Industrial Revolution
00:29
brought us machines and factories, railways,
00:31
electricity, air travel,
00:34
and our lives have never been the same.
00:36
Then the Internet revolution
00:39
brought us computing power, data networks,
00:41
unprecedented access
00:44
to information and communication,
00:47
and our lives have never been the same.
00:49
Now we are experiencing
00:52
another metamorphic change:
00:54
the industrial Internet.
00:56
It brings together intelligent machines,
00:58
advanced analytics,
01:01
and the creativity of people at work.
01:02
It's the marriage of minds and machines.
01:05
And our lives will never be the same.
01:08
In my current role, I see up close
01:10
how technology is beginning to transform
01:13
industrial sectors that play a huge role
01:16
in our economy and in our lives:
01:19
energy, aviation, transportation, health care.
01:21
For an economist, this is highly unusual,
01:26
and it's extremely exciting,
01:28
because this is a transformation
01:30
as powerful as the Industrial Revolution and more,
01:32
and before the Industrial Revolution,
01:36
there was no economic growth to speak of.
01:37
So what is this industrial Internet?
01:40
Industrial machines are being equipped
01:43
with a growing number of electronic sensors
01:45
that allow them to see, hear, feel
01:48
a lot more than ever before,
01:51
generating prodigious amounts of data.
01:53
Increasingly sophisticated analytics
01:56
then sift through the data,
01:58
providing insights that allow us
02:00
to operate the machines in entirely new ways,
02:02
a lot more efficiently.
02:05
And not just individual machines,
02:07
but fleets of locomotives, airplanes,
02:09
entire systems like power grids, hospitals.
02:12
It is asset optimization and system optimization.
02:15
Of course, electronic sensors
02:19
have been around for some time,
02:21
but something has changed:
02:23
a sharp decline in the cost of sensors
02:25
and, thanks to advances in cloud computing,
02:28
a rapid decrease in the cost of storing
02:30
and processing data.
02:33
So we are moving to a world
02:36
where the machines we work with
02:37
are not just intelligent; they are brilliant.
02:39
They are self-aware, they are predictive,
02:44
reactive and social.
02:46
It's jet engines, locomotives, gas turbines,
02:50
medical devices, communicating seamlessly
02:54
with each other and with us.
02:56
It's a world where information itself
02:59
becomes intelligent and comes to us
03:01
automatically when we need it
03:03
without having to look for it.
03:05
We are beginning to deploy
03:08
throughout the industrial system
03:10
embedded virtualization,
03:12
multi-core processor technology,
03:14
advanced cloud-based communications,
03:16
a new software-defined machine infrastructure
03:20
which allows machine functionality
03:22
to become virtualized in software,
03:25
decoupling machine software from hardware,
03:28
and allowing us to remotely and automatically
03:31
monitor, manage and upgrade industrial assets.
03:35
Why does any of this matter at all?
03:40
Well first of all, it's already allowing us
03:43
to shift towards preventive,
03:45
condition-based maintenance,
03:48
which means fixing machines
03:50
just before they break,
03:51
without wasting time
03:54
servicing them on a fixed schedule.
03:56
And this, in turn, is pushing us towards
03:58
zero unplanned downtime,
04:02
which means there will be no more power outages,
04:04
no more flight delays.
04:06
So let me give you a few examples
04:09
of how these brilliant machines work,
04:10
and some of the examples may seem trivial,
04:12
some are clearly more profound,
04:14
but all of them are going to
have a very powerful impact.
04:16
Let's start with aviation.
04:20
Today, 10 percent of all flights
04:22
cancellations and delays
04:25
are due to unscheduled maintenance events.
04:27
Something goes wrong unexpectedly.
04:30
This results in eight billion dollars in costs
04:32
for the airline industry globally every year,
04:35
not to mention the impact on all of us:
04:37
stress, inconvenience,
04:39
missed meetings as we sit helplessly
04:42
in an airport terminal.
04:44
So how can the industrial Internet help here?
04:46
We've developed a preventive maintenance system
04:50
which can be installed on any aircraft.
04:52
It's self-learning and able to predict issues
04:54
that a human operator would miss.
04:58
The aircraft, while in flight,
05:01
will communicate with technicians on the ground.
05:03
By the time it lands, they will already know
05:05
if anything needs to be serviced.
05:07
Just in the U.S., a system like this can prevent
05:10
over 60,000 delays and cancellations every year,
05:13
helping seven million passengers
05:17
get to their destinations on time.
05:19
Or take healthcare.
05:22
Today, nurses spend an average
05:23
of 21 minutes per shift
05:25
looking for medical equipment.
05:28
That seems trivial, but it's less time spent
05:29
caring for patients.
05:34
St. Luke's Medical Center in Houston, Texas,
05:36
which has deployed industrial Internet technology
05:39
to electronically monitor and connect
05:42
patients, staff and medical equipment,
05:44
has reduced bed turnaround times
05:47
by nearly one hour.
05:50
If you need surgery, one hour matters.
05:51
It means more patients can be treated,
05:54
more lives can be saved.
05:57
Another medical center, in Washington state,
05:59
is piloting an application that allows
06:02
medical images from city scanners and MRIs
06:03
to be analyzed in the cloud,
06:07
developing better analytics
06:09
at a lower cost.
06:11
Imagine a patient
06:14
who has suffered a severe trauma,
06:15
and needs the attention of several specialists:
06:17
a neurologist, a cardiologist,
06:20
an orthopedic surgeon.
06:21
If all of them can have instantaneous
and simultaneous access
06:23
to scans and images as they are taken,
06:26
they will be able to deliver better healthcare faster.
06:29
So all of this translates into better health outcomes,
06:34
but it can also deliver substantial economic benefits.
06:37
Just a one-percent reduction in existing inefficiencies
06:40
could yield savings of over 60 billion dollars
06:44
to the healthcare industry worldwide,
06:47
and that is just a drop in the sea
06:50
compared to what we need to do to make healthcare
06:53
affordable on a sustainable basis.
06:55
Similar advances are happening in energy,
06:58
including renewable energy.
07:00
Wind farms equipped with new
remote monitorings and diagnostics
07:02
that allow wind turbines to talk to each other
07:07
and adjust the pitch of their
blades in a coordinated way,
07:10
depending on how the wind is blowing,
07:14
can now produce electricity at a cost
07:16
of less than five cents per kilowatt/hour.
07:18
Ten years ago, that cost was 30 cents,
07:21
six times as much.
07:23
The list goes on, and it will grow fast,
07:25
because industrial data are
now growing exponentially.
07:28
By 2020, they will account for over 50 percent
07:30
of all digital information.
07:33
But this is not just about data, so let me switch gears
07:36
and tell you how this is impacting already
07:39
the jobs we do every day,
07:42
because this new wave of innovation
07:43
is bringing about new tools and applications
07:45
that will allow us to collaborate
07:48
in a smarter and faster way,
07:50
making our jobs not just more efficient
07:52
but more rewarding.
07:55
Imagine a field engineer arriving at the wind farm
07:57
with a handheld device telling her
08:00
which turbines need servicing.
08:01
She already has all the spare parts,
08:04
because the problems were diagnosed in advanced.
08:05
And if she faces an unexpected issue,
08:08
the same handheld device will allow her to
08:10
communicate with colleagues at the service center,
08:13
let them see what she sees,
08:15
transmit data that they can run through diagnostics,
08:17
and they can stream videos that will guide her,
08:20
step by step, through whatever complex procedure
08:22
is needed to get the machines back up and running.
08:25
And their interaction gets documented
08:27
and stored in a searchable database.
08:29
Let's stop and think about this for a minute,
08:34
because this is a very important point.
08:36
This new wave of innovation is fundamentally
08:37
changing the way we work.
08:39
And I know that many of you will be concerned
about the impact that innovation might have on jobs.
08:42
Unemployment is already high,
08:47
and there is always a fear
that innovation will destroy jobs.
08:49
And innovation is disruptive.
08:52
But let me stress two things here.
08:54
First, we've already lived through
08:56
mechanization of agriculture,
automation of industry,
08:58
and employment has gone up,
09:01
because innovation is fundamentally about growth.
09:03
It makes products more affordable.
09:05
It creates new demand, new jobs.
09:07
Second, there is a concern that in the future,
09:10
there will only be room for engineers,
09:13
data scientists, and other highly-specialized workers.
09:15
And believe me, as an economist, I am also scared.
09:18
But think about it:
09:21
Just as a child can easily figure out
09:23
how to operate an iPad,
09:26
so a new generation of mobile and intuitive
09:27
industrial applications will make life easier
09:30
for workers of all skill levels.
09:32
The worker of the future will be more like Iron Man
09:35
than the Charlie Chaplin of "Modern Times."
09:38
And to be sure, new high-skilled jobs will be created:
09:41
mechanical digital engineers who understand
09:44
both the machines and the data;
09:46
managers who understand their industry
09:48
and the analytics and can reorganize the business
09:50
to take full advantage of the technology.
09:53
But now let's take a step back.
09:56
Let's look at the big picture.
09:59
There are people who argue that today's innovation
10:01
is all about social media and silly games,
10:03
with nowhere near the transformational power
10:05
of the Industrial Revolution.
10:07
They say that all the growth-enhancing innovations
10:09
are behind us.
10:12
And every time I hear this, I can't help thinking that
10:14
even back in the Stone Age,
10:17
there must have been a group of cavemen
10:19
sitting around a fire one day
10:21
looking very grumpy,
10:23
and looking disapprovingly
at another group of cavemen
10:25
rolling a stone wheel up and down a hill,
10:27
and saying to each other,
10:29
"Yeah, this wheel thing,
10:31
cool toy, sure, but compared to fire,
10:34
it will have no impact.
10:36
The big discoveries are all behind us."
10:38
(Laughter)
10:41
This technological revolution
10:43
is as inspiring and transformational
10:44
as anything we have ever seen.
10:47
Human creativity and innovation
have always propelled us forward.
10:49
They've created jobs.
10:52
They've raised living standards.
10:54
They've made our lives
10:55
healthier and more rewarding.
10:57
And the new wave of innovation
10:59
which is beginning to sweep through industry
11:00
is no different.
11:02
In the U.S. alone, the industrial Internet
11:04
could raise average income by 25 to 40 percent
11:06
over the next 15 years,
11:10
boosting growth to rates we
haven't seen in a long time,
11:12
and adding between 10 and 15
trillion dollars to global GDP.
11:14
That is the size of the entire U.S. economy today.
11:18
But this is not a foregone conclusion.
11:23
We are just at the beginning of this transformation,
11:25
and there will be barriers to break,
11:27
obstacles to overcome.
11:29
We will need to invest in the new technologies.
11:31
We will need to adapt organizations
and managerial practices.
11:33
We will need a robust cybersecurity approach
11:37
that protects sensitive information
and intellectual property
11:40
and safeguards critical infrastructure
from cyberattacks.
11:44
And the education system will need to evolve
11:47
to ensure students are equipped with the right skills.
11:49
It's not going to be easy,
11:52
but it is going to be worth it.
11:54
The economic challenges facing us are hard,
11:57
but when I walk the factory floor,
12:00
and I see how humans and brilliant machines
12:02
are becoming interconnected,
12:05
and I see the difference this makes
12:07
in a hospital, in an airport,
12:09
in a power generation plant, I'm not just optimistic,
12:11
I'm enthusiastic.
12:14
This new technological revolution is upon us.
12:15
So think about the future —
it will be here soon enough.
12:19
Thank you.
12:22
(Applause)
12:25

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About the speaker:

Marco Annunziata - Economist
The Chief Economist at General Electric, Marco Annunziata is a financial virtuoso with a passion for technology.

Why you should listen

Marco Annunziata is the Chief Economist of General Electric, responsible for the global economic analysis that guides GE’s business strategy. A member of the European Central Bank's Shadow Council and of the European Council of Economists, Annunziata has been featured on Bloomberg, CNBC, and in The Financial Times and The Wall Street Journal.

Annunziata arrived at GE in 2011 with a long track record in the financial sector, previously working at Unicredit, Deutsche Bank and the International Monetary Fund, where he researched emerging markets and the Eurozone. Annunziata confesses that he is "childishly proud" of his first book, The Economics of the Financial Crisis (Palgrave MacMillan, 2011). The book traces the global fiscal crisis back to a failure of common sense, in which so many of us played a part, and offers guidance for learning the right lessons from the outcomes.

More profile about the speaker
Marco Annunziata | Speaker | TED.com