Plans for the Platform

Digital platforms have a disruptive potential that can change the machine manufacturing sector from the ground up in only a few years. WEISS is already preparing for the markets of tomorrow in order to increase customer benefits and develop new business opportunities.
 

Platforms are the most successful business model of the digital economy. Within only a few years, disrupters like Amazon, Spotify, booking.com and Tesla have successfully turned traditional B2C markets upside down and are dominating more than just online retailing.

In comparison, the platform economy in the industrial sector is still in its infancy. In 2020, only six billion euros were generated through digital platforms in the European machine and plant manufacturing sector – less than one percent of total revenues. Until now, sales platforms in particular have not had nearly the same disruptive effect on the value creation processes of the sector as they have in B2C. This is because industrial goods like machines and components are too complex and too specific to purchase with a few clicks.

Unbeatable success factors
However, it would be naive to assume that disruption will pass by the industrial sector. The likely scenario is that more and more platforms with data-based business models will enter the market, where they are expected to have a formative influence on value creation activity. After all, the more completely machine, plant and component manufacturers develop their business with digital services, the more important platforms for fulfilling, scaling and monetizing the accompanying transformation will become.

For this reason, it is increasingly important for companies to think about the opportunities and benefits of platforms early on in order to position themselves successfully. Unlike B2C, the growth potential for platforms in the “uncharted waters” of B2B is particularly high right now – not only because they can leverage success factors that are lacking in traditional markets:

• Platforms reduce transaction costs by standardizing communication, data exchange and contract components. The transparency of supply and demand is increased, while automated contract- and payment-related processes reduce costs.
• Platform business can be scaled as needed because digital products and services can be reproduced as needed without significant additional costs or having to take supply bottlenecks and supply chains into consideration.
• Platforms benefit from the network effect and therefore the more users on a platform who purchase a product or service, the more valuable it is – increasing demand exponentially. This means that platform providers experience disproportionate returns while marginal costs constantly decrease.
   

Two platform types are relevant for machine manufacturing
Although skeptics remind us that machine manufacturing is a small-component, heterogeneous market and its platforms will never achieve comparable volume and scale effects to those of Amazon, for example, their disruptive potential has long been recognized in the B2B world as well. Basically, two different platform types are significant for machine manufacturing:

1. Transaction-centered platforms
Transaction-centered platforms enable exchange and trade with industrial or virtual goods among actors in a uniform digital environment. AI-based matching tools that bring supply, demand and potential partners together as well as standardized transaction tools for processing business transactions are important services here. Normally, platform operators only act as marketers. Typical forms of transaction platforms are B2B retail marketplaces like Mercateo or XOM Materials and production, logistics or networking platforms like MAX from ThyssenKrupp.

2. Data-centered platforms
Data-centered or IoT platforms like MindSphere from Siemens or ADAMOS, an alliance of machine manufacturers and Software AG, facilitate the development of smart services. The operators of these platforms provide a digital infrastructure in the cloud for offering their own services and using third-party services. The focus is on developing a digital ecosystem with a broad range of applications that support companies along their entire value chain.

IoT platforms are supplemented by standardized networking technologies, a development environment and AI-supported data preparation. They offer providers the opportunity to develop new forms of customer loyalty, along with new revenue sources and business models. At the same time, plant operators benefit from integrated service components for optimizing their overall equipment effectiveness (OEE) and lowering their operating material costs.

Stringent sector requirements for platform operators and models
In the race to be the most successful operator model, transaction platforms have been in the lead. However, market observers* estimate that the contribution of IoT platforms to value creation in machine and plant manufacturing is higher than that of transaction platforms. The reason is that IoT platforms provide the opportunity to offer digital services that are more affordable and easier to implement. This leads to higher customer benefits faster. Accordingly, the market research institute IDC assumes that platforms will dominate the business of major manufacturers in around two years and generate up to one-third of their income.

It still remains to be seen whether medium-sized enterprises can anticipate a comparably thorough transformation of their business activities. This also applies to an innovative company like WEISS, which has been active on platforms like the ISG TwinStore and andugo.io for quite a while.

“We absolutely see lots of potential, which is why we are creating the necessary data structures and positioning ourselves to be modular and scalable. We want to be leading players in the marketplaces of the future,” states WEISS. “Currently, there is no platform that meets all the requirements of machine manufacturing.” Upon reflection, WEISS is sure that the platforms for making business connections and procurement currently offer basic functions at most. “But engineering has a long way to go before service or after-sales can be integrated. In that respect, machine and plant manufacturers – and we as component manufacturers – have to serve other processes and deliver other types of added value.”

Maintaining a presence in different marketplaces
At least theoretically, the situation could change overnight if a tech giant like Amazon partners with one of the sector leaders to develop an infrastructure that combines platform know-how with the process and domain knowledge of machine manufacturing. In this case, many component manufacturers could be facing enormous problems. “Particularly the ones who have not yet collected their data and information in the required quantity and quality. They will be too slow. On the other hand, the companies that have already taken care of this aspect will be able to jump on the bandwagon relatively easily and scale to the ecosystem without much extra effort”, underlines the automation specialist.

The scenario of investing lots of money and know-how in reorganizing the current B2B platform cannot be excluded, but right now it is pure speculation. Due to the high saturation of platforms in B2C, investors are putting their capital into developing B2B platforms, whose number is predicted to grow from the current 300 to 1,000 by 2025.

For this reason, as part of its platform strategy, WEISS is creating the conditions to enable it to be present on multiple platforms. The preparations include collecting all relevant data, synchronizing it across all channels and systems and maintaining its consistency. Further, seamless processing on all channels requires uniform end-to-end processes.

Enabler and driver of digital business models
At WEISS, there is no clear preference for a specific type of platform. Both are important. In the case of interchangeable products with low levels of individualization, well-made transaction platforms will ensure that customers lose their direct connection to manufacturers or not establish one in the first place. This is why WEISS must be present there.

The situation is no different for IoT platforms. In WEISS’s opinion, they could be important drivers and enablers of digitalization in machine manufacturing because they support networking, simplify communication and enable additional gains in efficiency in production through intelligent data analysis.

 

*Roland Berger in cooperation with VDMA: Link

*Lünendonk & Hossenfelder: Link