Platform Economy needs
International Action

Henning Kagermann
Global Representative Plattform Industrie 4.0

4th RRI International Symposium
Tokyo, October 19, 2018

Context-Specific Interpretations of Platforms

Organization

Computer /Architecture

DigitalInfrastructure

Bringing together various stakeholders,e.g. Plattform Industrie 4.0,
Nationale Plattform Zukunft der Mobilität, …

Hardware platform,
e.g. Sony PlayStation, Microsoft Xbox,
Rasperry Pi, …

Prerequisite for multi-sided markets,
e.g. IaaS/PaaS/SaaS of Amazon Web Services, …

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Digital Platforms: Self-reinforcing Growth Engines▪ Multi-sided markets with network effects– With more users, the platform becomes more attractive to potential new users(e.g. social networks)– The more users on side of the platform, the more attractive the platform becomesfor users of the other side (e.g. smartphones)▪ Dynamic digital ecosystems are critical to success– Provide complementary data, services, products and competencies– New growth opportunities for SMEs and Startups▪ Cloud-based: Fast scaling on a global level with low investments
 Platform enterprises are more powerful than traditional enterprises.

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Multisided Digital Technology Platforms Enabling
Interactions between several Interaction Groups
Two-sided Platforms:

Three-sided Platforms:

ServiceServiceUsers
anbieteranbieterServiceServiceUsers
anbieteranbieter

Platform

Platform
Data

Developers
Hersteller

Hersteller

e.g. Apple iOS

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Data

HardwareServiceServiceManufacturers
anbieteranbieterDevelopers
Hersteller

Hersteller
e.g. Google Android

Digital Technology Platforms have Existed for many Years…
:

Publisher 3
Publisher 2
Publisher 11SourceSell…
Deliver:

Consumer (n)Consumer 3
Consumer 2
Consumer 1…

Business (m)

BUY

…
…
Source: Österle et al. (2000), p. 65.
4 | 4th RRI International Symposium | October 19, 2018…

• Books are only delivered if sold• Market and user info

• Cooperation with regional booksellers• User profile: allows proactive actions• Customer focused• Completeness of service

When a Platform Enters the Market, it mostly Wins…
revenues

EchoFire TV

$100B

80

Echo
Spot

Expansionof inventory
to CDs & DVDs

Prime InstantVideos

AmazonKindle

60
Amazon.com
launches
as a bookseller

40Amazon Basics

Amazon Web Services& clothingAmazonStudios

Toys, games,electronics
video games

Amazon Prime(USA)20
IPO$511,000 $16M $148M $610M

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: The company/The Wall Street Journal/finance.yahoo.com.
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The most Valuable Companies in the World are Platform
Companies – but there is a Regional Imbalance
USAEuropeAsia(share: 66% [2015: 67%])(share: 3% [2015: 3%])(share: 30% [2015: 28%])

Africa(share: 2% [2015: 2%])

 B2C is dominated primarily by USA & China.

 Competition in the B2B sector has not yet been decided. This creates opportunities for Japan and Germany.
Source: Netzoekonom.de/idea: Peter Evans.
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Business Models of the Digital Economy…are based on Smart Services
Business Model
Value creation architecture
How is value created?

+Value proposition
What value is created?

+Profit formula
How are revenues /profits created?

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• Smart data
→ independent value generator• Digital platforms→ scalable & repeatable business• Dynamic ecosystems → attract developers of complements• Smart talents→ individualized qualification on the job• Individualized product-service-bundles on demand• Superior user experience / real-time responsiveness• “Everything-as-a-service”, low switching costs• Flexible pricing model:– usage-based (time)– output-based (piece)– value-based (profit sharing)

How are Smart Services Created?
In Dynamic Digital Ecosystems on Digital Technology Platforms
Superior
user experience

Data-centric
disruptive business models

Basis for the distributionof Smart Services

From Big Data toSmart DataMediaProductionRetailTransport Healthcare

FinanceConvergence

Smart Products
generate Big Data

Source: acatech (2017), Wegweiser Smart Service Welt.
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 Data-driven platform economy

New Opportunities with Artificial Intelligence (AI)AI-based context anduser modelingSelf-learning Smart Services andAI-based Chatbots

H. Kagermann (President, acatech),
J. Wanka (Fed. Minister of Education & Research),
S. Abe (Prime Minister, Japan),
A. Merkel (Chancellor, Germany),
R. Neugebauer (President, Fraunhofer)
Source: acatech (2017), Wegweiser Smart Service Welt.
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Intelligent multi-sensor fusion,
AI-based data curation

Digital Projects of the German Government
Ensure Competitiveness in the Digital Economy
I– IT/OT-Convergence

Industrie 4.0– SmartX, Ad-hoc connectivity, decentral

AIKI

Rethink production processes and workplaces

IISmart Service Welt

– Business model of the digital economy– XaaS, data driven, platform basedAIKI

Rethink business models and ecosystems
III

Autonome Systeme– At home, at work, on the way– XBots & ‘moral algorithms’AI
KI– Ubiquität:
zu Hause,
am Arbeitsplatz,
unterwegs
Rethinksocial, legal,
and ethicalimplications
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The digital Transformation requires a Broad Foundation
Plattform Industrie 4.0 and Plattform Lernende Systeme
Reference
Architectures,Standardization
and Norms

TechnologyandApplication
Scenarios

Legal
Framework

Work,
Education
and Training

1

I

Industrie 4.0

4Security ofNetworked
Systems

23Digital Business
Models in
Industrie 4.056

Research Council

II

Smart Service Welt

Services
Steering Committee

Model
4 Business
Innovations

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Hostile-to-life
EnvironmentsSecurity, Privacy,
3 ITLegal& Ethical Framework

Health Care, MedicalTechnology, Careof Work and2 Future
HMI

Mobility and Intelligent
Transport Systems

III

Autonome Systeme

Managing Office

Enablers
5 6 7
1 Technologicaland Data ScienceFirst Insights into the Platform Economy in Germany

Ecosystem

open▪ Multi-sided
Half of the platforms
analyzed
are oneand open
platforms
sided and closed to content creation
Scalable→→e.g.
DriveNowgrowthand Car2Go operating their own
fleetsthroughare not utilizing
theeffects
power of network effects,network
limiting themselves to linear growthclosed▪ One-sidedOnly one fourth
the platforms
analyzed
andofclosed
platforms
are multi-sided and openLimitation
to linear
growth→→e.g.
platforms suchas 365
FarmNet utilize
networks
effects
and allow
for scalable growth
without
network
effects
one-sided

multi-sided

Source: WG 6 of the Plattform Industrie 4.0.
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New Forms of Cooperation
Platform-based Business Ecosystems
Business Ecosystems
Definition

Benefits of Ecosystems▪ Different players▪ Better access to markets▪ Providing higher value than
one can achieve alone▪ Scaling & bundling effects▪ Mutual dependencies &complementary relationships▪ Shared innovation
risks & costs▪ Not completely controllable byone actor▪ Co-innovation between
complementary partners▪ Lower transaction costs„No one can do it alone“

Source: Robert Bosch GmbH / Matischok (2018); acatech (2017), Wegweiser Smart Service Welt.
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Critical Requirements for Digital Platforms that needInternational Cooperation
Platform
Governance

Cyber- &IT-Security

CriticalRequirements

Regulation

Standards &Interoperability

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DataSovereignty

Legal Certainty &Liability

Platform Governance
New Regulatory Challenges▪ Tendency towards concentration:– Network effects and economies of scale▪ Avoid lock-in effects:– Interoperability und portability– Problem: Hampers differentiation of platforms▪ Platform neutrality:– No preference for the platform operator’s offers– Problem: Who assesses neutrality and how?
▪ Trustworthiness:– Win-win-situation for all partners in the ecosystem
vs. occupation of the customer interface
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ServiceServiceServiceprovider
anbieteranbieterIntermediary
Data

Manufacturer
Hersteller
Hersteller

Cyber- & IT-Security▪ Increasing risks of attacks–

by ad-hoc networking–

by direct data exchange–

by cloud-computing (isolation)

Communications andTrust Relationships in Industrie 4.0
Enterprise B

Enterprise A

MachineComponent

MenschMenschMaschine

ProductComponent▪ Necessary prerequisites and success criteria ofIndustrie 4.0–

Legally binding communication between partners
in a value network–

Traditional machine suppliers have to develop corecompetencies–

Establish trust in situative ecosystems

AdministrationShellMensch
HumanMensch
MenschAdministration
Shell

Daten
Data
ProductIndustrie 4.0

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Processes

Enterprise C

Industrie 3.0

Source: Plattform Industrie 4.0.

Component

Stronger inIndustrie 4.0

Data Sovereignty
Data is a key resource of Business Model Innovations
Blockchain▪ Data transparency▪ Sovereignty over own data
▪ But data must be shared in the digital economy▪ A network of trusted data for all industries▪ Support ‘architectural plurality’▪ Addresses the most important concerns(IP-protection, loss of control, …)▪ …

▪ Multi-source, but single truth –redundancy of data creates one single truth▪ ‘Trust by design’ – security, rooted in technology▪ Decentral architecture – equality and integrity ofthe participants▪ Smart contracts for M2M-collaboration▪ …

→ Trustworthy data transport
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Legal Certainty & Liability (I/II)
Currently, legal regulations are directed toagreements between people§§

There is need for…

▪ legally secure interoperability, even for ad hoc networking and across country´s frontiers▪ legally secure behavior of autonomous systems & Smart Devices▪ Verification of machine contracts & service provision in case of liability▪ Guaranteed IT-security & informal self-determination

TechnologicalEnablers

 Blockchain or trustworthy intermediary Smart contracts
 IDS to safeguard the informal self-determination

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Legal Certainty & Liability (II/II)
Example: Responsibility in the context of autonomous driving
V2X-Communication
V2I-Communication
V2BackendCommunication▪ Manufacturers and operators ofsupport technologies have to beinvolved in questions of liability▪ How much safer does a technicalsystem have to be statistically?
10▪ How much plasticity in self-learning
systems?

V2V-Communication▪ Rules for the transfer of control and‘overruling’ Traceability in case of damage

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Standards & Interoperability (I/III)
Administration Shell & Reference Architecture Model RAMI 4.0
Asset Administration Shell▪ Unique ID and nesting▪ Structuring according to views▪ Standardized mandatory properties▪ Free, manufacturer-specific properties▪ Considering aspects of informationsecurity▪ Possible accessibility via apps (SOA)

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Standards & Interoperability (II/III)
From Connected Products to a Digital Economy
Connected
Business Networks

Connected
Products

Connected
Production

Connected
BusinessDigital
economyOrchestrating
network partners
Production environmentfor Smart Services

Digital image of the realfactory

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 Platform
interoperability(across sectors andcountries)

Standards & Interoperability (III/III)
Example of Platform Interoperability: e-Roaming for Electromobility▪ Aim:– Non-discriminatory ad hoc-charging
for all e-vehicles in europe– Competition of serveral service platforms▪ Measure:– Europe-wide standardization (CCS)– Minimum requirements on charging process▪ Result:– Open competition of different platforms– Better prices, better servicees– But: Political protectionism

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Regulation
Example: Trust Law in the Context of Industrie 4.0
Abuse of market power• Fast shift of market power through I 4.0
challenge
approach• Adaption of the existing Framework“Cartels of robots”

Market power through data• Competitive relevance of big data
challenge
approach• Assessment on a case-by-case basis

How isantitrust law
changing?

Platform regulation

approachapproach• “Compliance by Design”

Permitted cooperations in Industrie 4.0• Regulation, driven by B2B-experiencechallenge• Antitrust-related decisions by machines
challenge• Higher importance of cooperation
challenge• Tailored to B2B-requirements

Source: Plattform Industrie 4.0.
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approach• New types of cooperation

International Cooperation Today
Germany’s International Initiatives for Cooperation
JapanUSA• Industrial Internet Consortium

Plattform Industrie 4.0 &Robot Revolution & Industrial IoT Initiative- Cyber Security - internat. Standardization- SME-Promotion - internat. Regulation• Interoperability: RAMI 4.0 & IIRA

Australia
Alliance Industrie du Futur +Piano Nazionale Industria 4.0
Joint Road Map

Source (Images): Plattform Industrie 4.0;
luzitanija – stock.adobe.com;
BMWi/Janssen
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• Made in China 2025
• Internet Plus

Czech
Republic• Narodni Iniciativa
Prumysl 4.0China• Memorandum ofUnderstandingCritical Requirements for Digital Platforms that needInternational Cooperation✓Platform
GovernanceRegulation

Cyber- &IT-Security✓CriticalRequirements✓

Standards &Interoperability

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!

Data
Sovereignty

Legal Certainty &Liability

Thank you very muchfor your attention.