Three Lessons From Germany’s Platform Economy

The rise of disruptive platforms like Alibaba, Airbnb, and Uber — coupled with Beijing’s Made in China 2025 plan to transform its manufacturing sector into a global high-tech leader — has forced industrial companies to rethink longstanding business models. In B2B markets across the world, companies are now looking beyond just selling products and are building platforms that enable others — including their customers, suppliers, and partners — to create value.

This shift in strategic thinking is significant, especially for companies with 100-year legacies making a product and then controlling the pipeline that delivers that product. But as B2B offerings become ever more commoditized, platforms offer a way to diversify and avoid becoming obsolete. Platforms can generate new revenue streams even after a product is sold, in the form of data-fueled “smart” services.

To better understand this new competitive reality for B2B companies and discover best practices, we studied one geographic market with leading global B2B companies — Germany. We looked at the top 370 companies in that country, by revenue, and found that more than half are taking advantage of platform business models. The bulk of those business models have either a B2B focus or a dual B2B/B2C focus, with many centered on the industrial internet of things (IoT).

These initial findings seemed impressive at first glance. But upon closer inspection, we discovered that many companies are actually discounting the power of network effects — the theory that the more platform participants, the greater the value produced. In fact, only 16% of the platforms we studied in Germany are being run as open, networked ecosystems that connect multiple players. The rest are either one-sided — that is, serving only one user category, such as a mobile app-powered network of electric-vehicle charging stations that only serve electric-vehicle drivers — or closed, meaning, walled off from third-party software developers; some are both.

Platforms that are one-sided or closed greatly limit their network effects. Take Amazon — the tech giant started off as one-sided (selling its own products to customers) and closed (developing its own software), but has become an open, multisided platform. Amazon now connects buyers with third-party sellers while also permitting third-party developers. This is a classic case of maximizing network effects: Platforms become more useful as other people also use the platform.

Yet, while multisidedness and openness are now accepted tenets of B2C platforms, our research suggests some B2B platform owners are reluctant to follow the same blueprint. Network effects are just as important for B2B platforms as they are for B2C, so B2B platforms can be just as useful and valuable to their users. These effects just need to be pursued and managed differently for B2B platforms. To that end, we’ve identified three imperatives for B2B platforms that will help them grow, remain competitive, and stave off digital disruptors.

1. Think creatively about the value network. (Hint: It’s not winner take all.) Consider B2C platforms like iOS and Android. Their power lies in global ecosystems of producers, consumers, and others creating and sharing in value. B2B products, unlike the iPhone and the Samsung Galaxy, can be very niche and targeted, which prevents the kind of winner-take-all global dominance we see with smartphone operating systems. A manufacturer of ball bearings won’t become the next iOS or Android, with a similar diverse and sprawling ecosystem, but B2B platforms can still create network effects — on a different scale. The key is to think beyond industry value chains and imagine new industrial networks.

That’s exactly what Siemens and Calvatis did. It started when Calvatis, which produces and distributes cleaning detergents and disinfectants, was approached by a large meat processor company with a problem: Making food is messy, and keeping production facilities clean is costly. The client wanted to know how it could save money and make efficient use of its resources (in this case, machines, food ingredients, water, and cleaning chemicals) while keeping its factories clean.

At that point, Calvatis went to Siemens, and together the two companies engineered a solution. Siemens would connect the meat processor’s industrial washing systems to MindSphere, its IoT operating system, and then gather all sorts of data (such as how much water and detergent are being used at any given time).

Armed with this information, the meat-processing company would be able to make better use of resources. Calvatis, meanwhile, would be able to create new preventive maintenance and resource management services for its customer. Finally, Siemens would be able to make inroads into the food-industry cleaning sector and expand the ecosystem of industrial manufacturers using MindSphere. Through the platform, the meat processor has reduced its use of cleaning fluid by 6% and seen its manufacturing downtime drop by 10%.

In the end, by turning its customer, Calvatis, into an ecosystem partner and cocreator, Siemens demonstrated the power of open platforms to create new value for all participants.

2. Institute platform openness in the spirit of glasnost. A second important driver of network effects is the degree of openness, or glasnost, to third-party contributors. If platforms are closed off, an ecosystem of value creators will never grow. Thirty-one percent of the platforms we studied in Germany were both one-sided and closed to third parties. On the other hand, some companies are not only building open platforms, they are making openness a part of the value proposition.

Consider ADAMOS (Adaptive Manufacturing Open Solutions), an industrial IoT platform for the mechanical and plant-engineering industry. A group of industrial and software companies created ADAMOS in 2017 as a neutral, open, nonproprietary platform. These companies had a history of working in a fragmented market, where they tried to establish their own closed platforms and aggressively guarded their intellectual property. But with ADAMOS, they embraced openness and collaboration in a common platform, seeing the value of sharing resources and technological knowledge so everyone benefits.

According to its managing director, Dr. Marco Link, the platform’s value comes from “strong partners [that] cooperate on an equal footing to advance digital networking and set a standard in mechanical and plant engineering.”

3. Take control of your data fears. Consumers generally have no problem giving up their personal data in exchange for something free, such as membership in a social media network or an email newsletter. But B2B platform participants tend to closely guard their data, which might be proprietary or competitively sensitive. As a result, most B2B data-driven services are limited in scope. Without access to data on platform transactions and interactions, the B2B platform owner is blind to the next opportunity — what “smart” service could augment the experience for users? That’s why having a strategy for how data will be collected, valued, priced, and monetized is critical. Help from neutral third parties is critical, and we’ve outlined starting points for a sound data strategy below.

• Turn to a data marketplace. Deutsche Telekom’s Data Intelligence Hub, for example, provides an overview of the data available for free or for sale on the market. Companies can turn to the hub for data that will help them track arrival times of container ships carrying perishable foodstuffs, and cities can find data that will make them “smarter” about traffic flows, waste collection, and street lighting.
• Ensure your data is protected. For good reasons, companies are hesitant to go open source. The International Data Spaces Association based at Germany’s Fraunhofer Institute, with 90 members in 18 countries, allows companies to exchange information while staying in control of their data. The data remains with the owner and is exchanged securely on demand — and only if requested by certified, trustworthy partners.
• Take advantage of data partnerships. Airbus’ Skywise brings together data (work orders, fleet configuration, flight schedules) from multiple sources into one secure, cloud-based data platform. The goal is to improve operational performance and business results in the aviation industry.

The Tipping Point of Opportunity

German platforms are far from perfect. But the growth of the platform economy in Germany speaks to the tipping point of opportunity, especially for economies dependent on manufacturing. The lessons we abstracted from leading platforms there can be particularly helpful and instructive for executives contemplating a platform business model.

For B2B companies, the key for succeeding in the platform economy is to avoid taking an absolutist approach. If you’re looking to launch a platform, don’t assume you can’t learn anything from Uber or Amazon. At the same time, don’t think all the rules of B2C platform leaders apply in your B2B network. What made YouTube the world’s leading video-sharing site might not work for a 100-plus-year-old company. The answer will vary by industry and company, but all should be guided by the basic platform question: “How do I help others create value?”