Is the Amazon of manufacturing closer than we think?
24 May 2018
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Driven by organisations such as Uber, Amazon, and Facebook, platform economics is having a profound impact on many industries. When it comes to manufacturing, however, this new business model remains unchartered territory. For forward-looking SMEs, this represents a huge opportunity.
Platform economics is widely associated with the big tech enterprises – the likes of Google, Apple, Facebook, and Amazon. Few would consider it synonymous with the manufacturing industry. Platforms geared towards the realisation of Industry 4.0 will play a central role in changing this notion.
Platform economics remains a mystery to many
Only a fifth of business owners and executives in the manufacturing sector are familiar with the terms ‘platform economics’, ‘platform markets’, and ‘digital platform’. This is according to a Bitkom study carried out in early 2017.
This lack of awareness could lead to disruptions in the market – as seen in retail, transport, hospitality, and many more industries. "Platforms can bring about fundamental changes in existing markets," says Bitkom CEO Dr. Bernhard Rohleder. "If an established enterprise fails to grasp the value of digitisation, it risks losing its market share to a new company from a completely different sector."
Steeled for disruption
Quick to recognise the trend, steel and metal distributors Kloeckner & Co. took a proactive stance. In fact, the company’s CEO Gisbert Rühlist visited Silicon Valley several years ago, seeking inspiration for how to ‘disrupt’ his business.
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He returned to his home country of Germany with an exciting new strategy. At the heart of this approach is an online service platform allowing customers and partners to access tools and data. One by one, all market players – suppliers, manufacturers, and buyers – are expected to move over to the platform. For this reason, Kloeckner is gradually opening it to companies that will add to its product catalogue. A marketplace function that promises to bring together offerings from multiple competitors is also in the pipeline.
The ultimate goal is the digitisation of the steel and metal industry’s entire supply and value chains. This would enable everyone involved to share information on materials, products, and pricing. It would also mean fewer production errors and material shortages.
To this end, Kloeckner is deploying a clever, ‘vertical’ strategy. Rather than entering into direct competition with providers of horizontal, cross-sector B2B platforms like Alibaba, the organisation is developing a platform for industry-specific offerings. While the two approaches have their individual merits, each one complements the other – and both look set to maintain their share of the market in the long run.
Industrial transformation just around the corner
The organisations behind the top platforms set the rules. As such, they will continue to lead their respective industries. These companies possess the data and control the transaction and communication channels. This yields extra profit through commission on business and marketing activities.
The supplier market is expected to disperse. In the end, the only enterprises left standing will be those that digitised their processes early on and understand how online business works. Speed is crucial, as establishing a platform community takes time. A look back over the recent evolution of other sectors shows that it is yesterday’s digital pioneers that now rule the roost.