Can the Internet of Things help renew Rust Belt cities?

Gov. Gina Raimondo and others in Rhode Island are over the moon about last week’s announcement that GE Digital is adding 100 jobs in Rhode Island—and rightly so.

It’s been a rough 15 years for the Ocean State. Its economy stalled under its Rust Belt heritage and an influx of Chinese imports in the 2000s damaged its old-line manufacturing industries. More recently, the Great Recession hit hard in Providence.

So, the fact that GE—a storied American brand—has invested in Rhode Island, citing its strong universities, digital talent pool, and quality of life, is a huge vote of confidence and a validation of Gov. Raimondo’s strategy for rebooting the state’s economy, which has focused on attracting investments from global, advanced industry firms. This was the core of our strategy research in Rhode Island, which identified growth areas in the advanced economy and suggested steps to expand the state’s technology and digital capacity.

Yet, there’s more to be said about the Rhode Island win. Beyond the local site-selection coup, the GE announcement speaks to bigger themes about both the direction of the economy and possible ways forward for other older industrial cities.

Rhode Island journalist Ted Nesi got the first part of this right, noting that the GE deal is significant less for the number of the jobs created, but more for “which jobs these are.”  In this regard, what is noteworthy about the GE investment is that the jobs are located in the company’s GE Digital unit, billed as the company’s “industrial Internet innovator.” In that vein, the 100 software jobs are a tangible demonstration of the growing importance of the much-hyped, sometimes abstract-sounding, but legitimately epochal, “Internet of Things”(IoT), including the related “industrial internet.”

These terms reflect the rapid fusion of physical and digital business, which is leading to the digitization and interconnection of manufactured physical products—via sensors, software, the mobile internet, and cloud computing—for smarter use, servicing, and management. In GE’s manufacturing space, meanwhile, the rise of the IoT reflects the impact that software and other digital technologies have had on industrial companies, which I have written about here, and which has been explicated here and here by the Michael Porter, the Harvard strategy guru, and Jim Heppelmann, the CEO of the industrial software company PTC. Analysts at McKinsey & Co. project that the IoT could have an $11 trillion impact on the global economy by 2025. But even now, industrial companies like GE, Philips, Schneider Electric, Cisco, IBM, AT&T, and Intel are pouring billions into accelerating IoT build-out. Given that, GE’s IoT investment in Rhode Island provides one augury of where the advanced economy is heading, especially in regions like New England.

By the same token, the GE hiring in Providence hints at potential ways forward for other older industrial cities. A classic Rust Belt city, Providence possesses both strong university computer science and engineering capabilities (at Brown University and the University of Rhode Island) and a manufacturing heritage. Where those things coexist there may be opportunities. In their new book “The Smartest Places on Earth,” Brookings Trustee Antoine Van Agtmael and Fred Bakker describe how numerous Rust Belt cities have emerged as “hotspots of global innovation,” due to the confluence of manufacturing tradition and university-based technical expertise. For example, Van Agtmael and Bakker detail how Akron, Albany, and Raleigh-Durham have each leveraged and radically updated a  local tradition of production, combining materials science, nanotechnology, and other unfolding technologies built up in local universities and research centers. In each case, older manufacturing metros made themselves relevant again by merging a reputation for “making things” with genuine, cutting-edge knowledge in the right disciplines that reflect the huge convergence of the physical and the digital.

That is what Providence has done, at least to a sufficient extent to secure the GE Digital facility. And maybe it is what some other cities can do too.

Antoine van Agtmael is a trustee of and donor to the Brookings Institution. The findings, interpretations, and conclusions posted in this piece are solely those of the author and not determined by any donation.

Photo courtesy of Tony Kent.