While the Internet of Things and its potential to revolutionize consumer products and our day-to-day lives has garnered much fanfare in venture capital and startup circles, the Industrial Internet has received comparatively less attention, despite its potentially enormous impact. While estimates vary, a 2014 Accenture report projects that the potential value created could be as high as $15 trillion of global GDP by 2030.
The term Industrial Internet was first coined by GE, which remains its largest proponent, as it realized the need to evolve its products, services, and business models to keep pace with technological advancements. The Industrial Internet can most aptly be described as the intersection of the Internet of Things, the connectivity of machinery and equipment through networked sensors and software, and Big Data, the ability to extract actionable insights and value from the wealth of information gathered. The primary catalyst for this new opportunity is the plummeting cost of the enabling technologies, including sensors, bandwidth, cloud infrastructure, and processing power.
The Industrial Internet will continue to impact a broad range of industries, including aviation, healthcare, manufacturing, power generation, and transportation. Across these sectors, value is being created through increased operational efficiencies, improved productivity and uptime, predictive maintenance, and data driven services, as well as better informed design of equipment, systems, and business processes. These embedded smart sensors represent the nerve endings of a company, allowing it to act on continuous real-time information, which is tremendously powerful.
While the production of industrial equipment is capital intensive and sales are characterized by long refresh cycles, the development of software enabling the Industrial Internet is ripe for venture-backed startups. The efficient collection of data from disparate sources, aggregation and normalization, predictive and prescriptive analytics, cyber security, and operational applications and interfaces are all areas presenting opportunities for enterprising entrepreneurs. This is apparent in GE’s recent announcement that it will open its proprietary Predix platform to allow and encourage third-party software developers to write applications for better collection and analysis of data from their industrial equipment.
The current fragmentation of data collection and transmission standards, rapidly declining costs of underlying technologies, and concentration of OEM’s are all contributing to a unique crossroads where savvy positioning could mean tremendous upside within what has been described as the next Industrial Revolution.
Curry Sloan is a first-year MBA student at Columbia Business School and InSITE Fellow. He has a background in venture capital.