The Industrial Internet Is GE’s Next Leap Forward

You might not want your toaster to communicate with the cloud, but that isn't going to stop the Internet of things from taking root. General Electric (NYSE: GE  ) is making a concerted push to develop the "industrial Internet," which is really just an Internet of things with a, well, industrial focus. GE thinks that sensor-embedded everything, transmitting readings to be analyzed in real time, is the way to greater efficiency across a wide range of products. To make it work, the company's committed $500 million in R&D funding a year for the next three years, according to a feature in MIT's Technology Review.

That's a pretty substantial chunk of GE's R&D budget, which was $4.6 billion last year. While the Internet of things has been talked about for some time, this appears to be the first major R&D commitment on a scale that could meaningfully accelerate its adoption. Both Texas Instruments (Nasdaq: TXN  ) and Broadcom (Nasdaq: BRCM  ) have developed simple Wi-Fi-enabled chips to connect all manner of gizmos simply and efficiently, but these chips need a reason for widespread use. GE's push could be that reason.

Everything is connected
Some of GE's goals for the "industrial Internet" project make a lot of sense to big data enthusiasts. The company's new software R&D center in California has researchers working on ways to create better and more responsive jet engines. The worst thing a jet engine can do is fail in midair, but a far more common problem is for maintenance to be performed too late, causing delays and wasted resources for airlines. Always-on sensors, embedded in critical parts of the turbine and connected to sophisticated analytics programs, could warn flight mechanics well ahead of time that it's time for a tune-up.

GE has 20,000 jet engines in operation today, and thousands more next-gen engines will be going into service as Boeing (NYSE: BA  ) delivers new 787s to customers. GE researchers have already calculated that increasing the aviation industry's average fuel efficiency by 1% would be worth $2 billion in annual savings. Although GE's current jet engines do track the changes in their states, the data is less in real time and more an average of what happens on the ground and in the air, available only after the flight's over. Averages can be skewed, of course, so it's important to identify those outlying extremes as they happen, which is one focus of the "industrial Internet."

Jet engines aren't the only GE machinery that researchers are eager to connect. GE's utility-scale turbines and other electric equipment play a huge role in global energy generation, and increasing fuel efficiency by 1% in these turbines could save twice as much as a 1% gain in aviation.

Always-on connectivity would also be a great help in addressing (and even preventing) power outages. The company's developed a sophisticated data-modeling program that can be used with Microsoft's (Nasdaq: MSFT  ) Kinect. Utility workers could move through data with hand gestures, addressing problems as the "industrial Internet," connected to electric meters and power lines, offers real-time feedback. By building a data history, utility workers could even preemptively identify areas where trees pose a risk to power lines, and cut them down before a storm takes them down. Gesture control isn't just for gaming any more.

Foolish final thoughts
There might not be a microchip in your toaster next year, but one's probably coming soon enough. Computers first took hold in the business world, so it makes sense for the next step of computing connectivity to be business-focused first. Once GE gets the hang of it and other industrial leaders see the benefit of real-time machine feedback, we're likely to see the fruits of their research bleed into the consumer sphere. Google (Nasdaq: GOOG  ) has been working on consumer applications for the Internet of things for over a year. Could a GE-Big G partnership be the next big step toward a fully connected world?

What else does GE have in store? The venerable conglomerate continues to surprise investors over a century after its founding. If you're seeking a deeper analysis of GE's many moving parts, the Fool's premium research reports will have the information you need. Our best industrials analysts will stay focused on GE, delivering important information and unbiased data, so that you can better understand where it's going and what lies ahead. Got any GE questions? Answer them -- subscribe to our premium GE research service today.


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