A recent publication by the German Federal Ministry for Economic Affairs and Energy (BMWi) sheds light on the evolution of the global platform landscape while also providing data on local open platform adoption.
According to the study, the ongoing hype surrounding platform services is part of a continuum. And while platform models initially emerged in the B2C sphere, the ongoing trend is pointing towards increased B2B platform adoption.
Looking at the industrial landscape in Germany, the study offers some basic metrics including industry distribution, geographical spread, and revenue models. The majority of platforms are in the travel, transport, and logistics segment. These are followed by the retail and consumer sector as well as the automotive sector. The latter sees the largest platform adoption in vehicle connectivity and fleet management solutions.
As far as revenue models are concerned, the largest portion of platform services focuses on commission payments, as well as subscription and pay-per-use models. There is an ongoing trend towards increased adoption of usage-based payment options among platforms. In terms of market orientation, B2B has been identified as the focus area of platform services. More than 50% of the platform services follow a B2B or a mixed B2C approach.
What Makes Platforms so Popular?
Platforms are bundled offerings designed to orchestrate an ecosystem of actors, services, and resources to foster scalable growth. The main idea behind platforms is that they operate as gathering hubs. There, various actors are brought together and this togetherness generates value.
Platforms as Multi-sided Bundles
Interaction between different types of participants in the platform ecosystem and the generation of network effects are at the core of a platform offering. Because of the enhanced interaction capabilities of platforms, each user interacting with others on the platform directly raises the value of the product and contributes to making it better. This is where we speak of multi-sided platforms.
The level of flexibility that platforms can demonstrate is a decisive driver of both network effects and open platform adoption. This means that platforms should be open to third-party actors such as third-party developers building applications.
According to the study, only 16% of the reviewed platforms were both multi-sided and open. The majority of the surveyed platforms did allow for multi-sided interaction. However, they did not offer an open interface or allow for integrations with third-party offerings.
This study establishes that many IoT applications that are currently marketed as platforms do not live up to the task. Often, they do not allow for interaction between different cloud platform users leveraging a given IoT application. Nor do they support the interoperability of legacy machines built by different manufacturers. The authors go as far as to state that the business models of many of those IoT applications actually stand in the way of innovation and scalable growth.
Platforms as Creators of Value
Companies in Germany offer a growing variety of platforms spanning all leading industries. Services range from advanced device connectivity solutions in industrial settings to C-part procurement optimization. According to the study, however, only a fraction of these companies are making full use of the platform business model.
Typically, the customer interface is heavily protected against both competitors and collaborators. Open source adoption is still far from becoming the norm; open-source projects and use cases remain fringe phenomena when looking at the bigger picture of vendor dominance on the marketplace. Against this backdrop, the open source community has not gained sufficient momentum to turn the tide in its favour. And then again, on the user side, we have fear of the cloud, sentiments against cloud adoption and the very use of cloud computing. This hinders the network opportunities of the platform offering. And the lack of third-party services and integration capabilities, together with a focus on proprietary software, dampens the user experience.
The study identifies a prevalent mindset of “platform protectionism”. Overemphasized risk aversion, according to the study, is a key factor in current difficulties to endorse future-oriented business models.
To access BMWi’s study “Germany’s Evolving Platform Landscape”, see here.
When it comes to creating value, the leading participants in value networks for multi-sided platforms are the platform operators, the end-users, as well as third-party developers. In B2B within Germany, industry-specific and domain-specific knowledge are key. The study suggests that this might be the reason why companies have been slow to join competitors’ platform ecosystems.
To foster open platform adoption, companies are encouraged to put more emphasis on interoperability, open-source software and OSS adoption, enhanced connectivity across value chains, and the creation of data exchange channels between different actors in the platform ecosystem.
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