The Power of Networking: The Global Rise of Industrial Electronic Platforms
With the extensive use of technology in economic growth and sustainability across countries and societies, the phenomenon of establishing virtual markets, primarily based on digital platforms, has emerged as one of the main players in this electronic ecosystem. At its core, these platforms represent the power of networking and economic coordination and raise the question: How can they create added value in the global economy?
In this context, Professor Ulrich Dolata published a research paper in January 2024 at the Leibniz Institute for Social Sciences in Germany, titled “Industrial Electronic Platforms: A New Form of Economic Coordination.” The paper analyzes the nature and characteristics of these platforms and explores the differences between digital industrial platforms and those oriented toward consumption or communication. It also delves into the potential to create a classification map of the different platforms and the contributions specific to each industrial platform.
The Nature and Types of Platforms:
The paper considers electronic platforms a research area that intersects sociology, economics, and technology, especially as these platforms rely primarily on the internet and automation for their operation. Accordingly, electronic platforms can be defined as complex, software-based systems organized algorithmically, designed to harness the tremendous technological advancements in various areas, such as creating virtual markets unbound by physical space.
The structural system of platforms is hybrid, consisting of a vast network of relationships between its participants that range from hierarchical to contractual; thus, it is a newly developed model that combines the governing features of institutions and markets alike. Therefore, platforms are expected to contribute to societal and cultural changes. The social impact of platforms, particularly social platforms, can be evidenced by their continuous influence on collective consciousness and prevailing culture in societies, sometimes even leading to significant political changes driven by the exchange of opinions and views through these platforms.
The paper points out that economic analysis has so far addressed the platform phenomenon from a narrow perspective, focusing solely on economic operations and value creation processes. This may be due to considering these platforms as a natural technological extension of the market, making it less likely to have a significant social role. This explains the massive boom in economic activities and value creation processes resulting from the use of network platforms, which has drawn the attention of most economic researchers to study this phenomenon and identify the factors driving this boom, with the aim of applying these lessons to emerging platforms.
The paper divides electronic platforms into two main types: consumer and communication-oriented platforms and industrial electronic platforms. Consumer and communication platforms are defined by the services they offer, providing a wide range of consistent services and possessing extensive technological social network infrastructure. Their services extend beyond individuals to include businesses and government institutions, with prominent examples being Alphabet, Amazon, and Meta.
On the other hand, the second type focuses on offering specific, specialized services, such as ride-hailing, travel bookings, room rentals, and shopping portals, which are particularly consumer-oriented, or communication-focused platforms like Twitter or TikTok. Platforms, regardless of their type, monitor user behaviors and interactions, analyze and process this data, and later use it to inform their future marketing campaigns.
Types of Digital Industrial Platforms:
The term digital industrial platforms refers to complex, algorithmically organized digital systems, primarily aimed at leveraging technological advancements to serve processes related to the industrial sector. The paper categorizes digital industrial platforms into four models, according to the contributions of the actors involved in these platforms, as follows:
Infrastructure Platforms: This term refers to cloud service providers that are primarily focused on building and expanding digital infrastructure by offering a wide range of tailored digital services, analytics tools, and various development resources. These platforms play a key role in the growth and support of industrial platforms, as not all platforms can afford the infrastructure required for their activities due to the high costs. Therefore, it is not surprising that this field is dominated by a limited number of players, such as Google Cloud and Microsoft Azure in the Western world, and Huawei and Alibaba in China.
Industrial Internet of Things (IIoT) Platforms: The Internet of Things (IoT) refers to connecting and integrating objects with the internet, including everyday devices, screens, electric vehicles, complex industrial tools, smart cities, and more, using low-cost computing, microchips, and analytics. IoT plays a critical role in the industrial sector by integrating complex industrial tools into the production process, enabling optimal machine usage, and even predicting and preventing machine breakdowns (preventive measures) while ensuring worker safety. Actors in this field are rare, and many have faced closure, such as Google discontinuing its IoT services and shutting down IoT-Cloud in mid-2023, advising its clients to switch to other service providers. The U.S. boasts several leading companies in this area, including Amazon Web Services (AWS).
Business-to-Business (B2B) Platforms: This term refers to the trading of various industrial goods and services between businesses via platforms. This type of platform is the most widespread and prominent, emerging in the early 2000s and achieving significant growth in fields like mechanical engineering, chemical industries, and automotive manufacturing. Unlike retail platforms that cater to consumer needs, transactions on B2B platforms occur exclusively between corporate entities, and no single platform dominates or monopolizes the sector. Nevertheless, there are giant platforms like Amazon Business and Mercateo.
Innovation Platforms (Supporting R&D): These platforms aim to utilize research to innovate production methods, services, or technologies that enrich the production process by reducing costs or improving quality. Innovation platforms often adopt various approaches to achieve their goals, such as informal collaboration with other innovative platforms in an open environment supportive of innovation, purchasing specialized research and studies from other companies, or even acquiring another platform to benefit from its innovative resources, including its available expertise.
However, the most significant driver in this sector is contractual collaboration between large platforms and their counterparts, between platforms and emerging entities, or between platforms and specialized government bodies. A major challenge to the growth of this sector is the difficulty in determining the extent of information openness on innovation platforms, as companies need to maintain their competitive advantage. Hence, contracts are the preferred form of collaboration between platforms, ensuring intellectual property rights are protected and preventing any infringement. Leading platforms in this field include GitHub and Siemens Healthineers.
Key Features:
The research paper identified several characteristics that distinguish digital industrial platforms from digital platforms focused on consumption or communication. The findings are summarized as follows:
Limited Spread: Digital industrial platforms are still in their early stages of expansion, growing gradually. This is especially true when compared to consumer-oriented digital platforms, which have established their presence over the past decade. However, there has been a notable boom in B2B platforms, with manufacturers and wholesalers increasingly utilizing online stores and digital marketplaces. For example, in Germany in 2021, B2B e-commerce generated revenues of €352 billion.
Complexity of Operations and Procedures: Due to the diversity of fields these platforms aim to serve, fragmentation often occurs, making it difficult to establish standardized procedures or models. This complexity in turn complicates interactions between platforms and their clients when attempting to market products or convince customers to purchase them, unlike the relative ease found in consumer-oriented or communication platforms.
Pure Economic Focus: The sole and primary goal of these platforms is economic efficiency, whether through profitability or expansion. This contrasts with the second type of platform, which is influenced by and affects social aspects, and can even shape the ideas and attitudes of entire generations. A clear example of this is the impact of social media, which extends beyond economic aspects into tangible cultural and societal outcomes.
Barriers to New Entrants: Industrial platforms are characterized by exclusivity, where new entrants into the field do not depend solely on their own choice but must comply with rules established by current actors to maintain their position. These governing frameworks include data security, intellectual property rights protection, reliability of potential partners, and the risks of unmonitored knowledge leakage or competitive conflicts. These challenges hinder the entry of new players into the market.
Conclusion:
The researcher argues that there is no alternative but to explore the field of electronic industrial platforms through research, monitoring, and understanding their nature, to ensure these platforms’ role in achieving the desired economic development goals in various nations and societies.
Source: Leibniz-Institut für Sozialwissenschaften, Industrieplattformen: Eine neue Form der Handlungskoordination in der Wirtschaft, Dolata, Ulrich, January, 2024.
