Digital B2B platforms: Towards a sustainable and digital economy “Made in Germany“
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 Germany's industrial strength: B2B platforms secure the future viability of German industry
German industry contributed more than 24 percent to the gross domestic product in 2021. Building on this very strong industrial base, the platform landscape in Germany is also completely differs from that in the USA or China. In recent years, German companies – from start-ups to small and medium-sized enterprises (SMEs) to multinationals – have increasingly invested in building their own platforms and are now including them in their product and service portfolios. These platforms are specifically geared to the needs of companies.
At the end of 2018, 67 percent of companies in industry and industry-related services in Germany were already using platforms. According to pre-COVID estimates, by 2024 digital platforms will contribute at least three per cent of added value to the manufacturing industries. In addition, according to a study by the industry association Bitkom, almost seven out of ten companies consider one of the central opportunities of operating or using digital platforms to be the preservation of their own company's future viability. Currently, buying products or services from other companies is the main use case of B2B platforms.
B2B platforms intertwine digitisation and sustainability in industry
In the fourth edition (in German only, see here for the 3rd edition in English) of the BDI overview of German digital B2B platforms, we present 110 selected examples of digital B2B platforms “Made in Germany“. Digital B2B platforms, are digital intermediaries that connect two or more commercial players via a digital solution. A rough distinction can be made between data-centric and transaction-centric approaches: Platforms with a data focus generate, collect and/or store machine-generated or user-generated information and in some cases offer an infrastructure for its exchange, analysis and evaluation. In this way, they enable the development of new data-based business models and services. In contrast, platforms with a transaction focus enable or simplify exchange and trade between companies in a uniform digital environment – e.g. for buying and selling or logistics.
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.
But there are also ecological advantages to be gained from the use of digital B2B platforms: For example, the use of logistics platforms can significantly reduce empty kilometres of trucks and better utilise the cargo space of freight aircraft. In addition, millions of paper documents can be saved annually. Fashion e-commerce platforms can also reduce overproduction of fashion and textiles - the same is possible for spare parts for machinery and equipment via industry-specific solutions.
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 published in 2020 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. Calls for a stronger regulation of digital platform mainly emanates from the powerful market position of some B2C 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.
German industry is currently in a transformation 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 of industrial platforms.
During the negotiations for the Digital Services Act, Iris Plöger, member of the BDI executive board, therefore demanded: “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".
In order for companies to exploit the opportunities of the B2B platform economy, regulatory barriers and uncertainties must be removed. For example, 85 per cent of companies state that "grey areas under data protection law" are an obstacle to greater economic use of data. We urge the European legislator to introduce a clear distinction between personal data and machine data in the General Data Protection Regulation (GDPR).