Digital B2B platforms “Made in Germany”: No monopoly formation in sight
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 2018, 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.
At the end of 2018, 67 percent of companies in industry and industry-related services were already using digital platforms in Germany. Thereby, 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.
B2B platforms are key to the long-term-viability of Germany's industry
In a recent study by the industry association Bitkom, almost seven out of ten companies stated that one of the key opportunities for operating or using digital platforms is to ensure the future viability of their own company. At the same time, companies see digital B2B platforms as both an opportunity and a risk: For more than 60 percent of companies the advantages outweigh the disadvantages when using digital platforms. However, at the same time almost every third company states that digital platforms would endanger the existence of their own company. The main reasons for this are increased price pressure, the loss of direct customer relations and an unclear legal framework for cooperating on these platforms.
In the third edition of the BDI overview of German digital B2B platforms, we present 79 examples of digital platforms. The publication illustrates both the variety of fields where platforms can be used in the B2B sector and the advantages they provide: The analysis of machine and plant data on Industrial Internet of Things (IIoT) platforms can significantly increase the availability of elevators, production machines and trains by reducing unscheduled downtime. Moreover, purchasing and sales can be made more efficient by utilising marketplaces. Digital, platform-based purchasing can generate cost savings of 41 percent. And by using logistics platforms, empty truck kilometres can be significantly reduced and the cargo space of freight planes better utilised.
B2B platforms do not tend to turn into monopolies
On behalf of the BDI, the ifo Institute has analysed the characteristics of B2B platforms. Key results of the study are:
- B2B platforms show a higher degree of specialisation than B2C platforms.
- At present, B2B platforms do not tend to become monopolies: Due to the high degree of specialisation and service orientation of B2B platforms, scalability is limited, and network effects are less pronounced than with classic consumer platforms.
- On B2B platforms, comparatively symmetrical business partners meet at eye level. Individual commercial users have a strong negotiating weight.
In short: Operators of B2B platforms operate in a highly competitive market environment. The factors outlined above favour the coexistence of several competing platforms.
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. The reason for demanding the regulation of digital platform mainly originates from the existence of the powerful market position of some online platforms, such as search engines, online marketplaces and app stores. The Federation of German Industries observes these discussions with concern, because little distinction has been made to date between the different types and use cases of platforms, especially in the sphere of pure B2B and industrial platforms.
The German industry is currently in a development phase: from traditional to digitally based business models. German companies do not need to adopt the business models of the Silicon Valleys, but rather they require a continuous willingness to actively invest in the digital transformation of their business model. Hence, it is important that national and European policymakers help in establishing an innovation-friendly ecosystem for the industrial platform environment.
In the light of the proposed introduction of an ex ante regulation of platforms within the framework of the Digital Services Act, Iris Plöger, member of the BDI executive board, therefore demands: “Pure industrial and B2B platforms must be explicitly excluded from platform regulation. Otherwise the EU Commission threatens the promising development of several origin B2B and industrial platforms in Europe. In contrast to consumer platforms, B2B platforms do not make it more difficult for new companies to enter the market. Excessive regulation and bans would be the wrong way. A diverse industrial European platform ecosystem is needed to strengthen Europe's digital resilience in global competition with China and the US. Digital B2B platforms are crucial for Europe’s digital sovereignty and the implementation of Industry 4.0".