The second platform revolution: Digital B2B platforms “Made in Germany”

Machine and smartphone

© Adobestock/zapp2photo

43 percent of Germans are booking the most beautiful time of the year on the Internet. Today's travel catalogues are websites of different providers offering hotel rooms or private apartments. The website acts as a platform – an intermediary between provider and customer. Recently, numerous German industrial companies have developed their own digital platforms for business customers (B2B). Despite being ubiquitous, BDI urges governments not to overregulate platforms.

Platforms have become a dominant business model of the digital economy. According to the Association of the German Mechanical Engineering Industry, digital platforms can be defined as intermediaries using digital technology to connect two or more market participants via the platform and simplify or even enable their interaction. Today, seven out of the ten most valuable companies in the world use platforms as a core component of their product and service portfolios. So far, platforms have been predominantly active in the B2C sector. Meanwhile, German industry is also on its way to exploit the advantages of the platform economy.

Building on German industrial strength: Establishing B2B platforms

In 2017, German industry contributed more than 30 percent to GDP. Building on this very strong industrial base, the platform landscape in Germany is also completely different from those in the United States and China. In recent years, German companies have increasingly invested in setting up their own platforms and are now including them in their product and service portfolio. Companies, such as Bosch, SAP, Siemens, Deutsche Telekom and Volkswagen as well as numerous medium-sized companies and start-ups have established their own platforms. At the end of 2018, almost seven percent of the value added in the industrial sector and industry-related services in Germany already depended substantially on the use of platforms. This corresponds to 112 billion euros.

There is a wide range of applications for platform solutions in the B2B sector: from IIoT-platforms for more efficient use of machines and systems to logistics platforms and marketplaces. Numerous companies, especially in the mechanical and plant engineering industry, the logistics sector, the fashion and textile industry and the aerospace industry, use innovative business models to achieve efficiency gains and offer value-added services to the customer.

Digital platforms are increasingly being used in industry: According to a study by the Association of Bavarian Industries, at the end of 2018, 67 percent of companies in industry and industry-related services were already using digital platforms in Germany. There are three main reasons for using platforms:

  1. Sales to corporate customers
  2. Purchase of products
  3. The creation of products and services together with third parties

From an entrepreneurial point of view, it is also positive to note that the use of platforms leads to additional sales for around 71 percent of companies.

Digital platforms are ubiquitous! – Do they need to be regulated?

There has been a heated public debate concerning the question of stronger regulation of platforms both on the national, European and international level. However, the public debate has not distinguished so far between the different types and purposes of platforms.

In late June 2019, the European legislator issued a regulation to increase transparency and fairness in the platform-to-business relationship. With this legal act, the EU aims at improving fairness and transparency of these services, in particular in relation to business users who offer products and services to private customers via these platforms (P2B2C relationship).

The BDI welcomes the fundamental objective of the EU Commission. Any market distortions must be compensated for. However, self-regulatory measures by companies should remain the first choice – alongside ex-post control by competition law. In general, criticising companies for being very successful thanks to attractive offers contradicts market principles. But successful companies should also reflect on their self-image, non-discriminatory competition and possible abuse of their economic (data) power.

German industry is currently in a transformative process: from traditional to digitally-supported business models. This does not require a German Silicon Valley but rather the willingness of numerous companies to further invest in the digital transformation of their business models. The German government should establish an innovation-friendly ecosystem rather than nipping the development of innovative platform solutions in the bud through excessive regulation.