One in three companies in Germany will increase investment in platforms in 2020

By Hamidreza Hosseini and Holger Schmidt

One in three companies in Germany will increase investment in platforms in 2020

Von Hamidreza Hosseini und Holger Schmidt

German companies continue to view the platform economy ambivalently: 40 percent of companies see platforms as an opportunity, but just as many companies have not yet used platforms, shows a representative survey of 502 companies in Germany conducted by Bitkom. Bitkom President Achim Berg believes this hesitation is dangerous. "Every industry and every company must deal with digital platforms. The importance and especially the opportunities of digital platforms are still underestimated in the German economy." After all, 55 percent of companies have increased their investments in platforms this year, and a third plan to invest more money in this digital business model in the coming year as well, despite the economic slowdown, the survey shows.

Figure 1: Investments in platforms in Germany

Although around two-thirds of companies see more advantages than disadvantages in platforms, 27 percent expect platforms to jeopardize their existence. The reasons for the negative attitude lie primarily in easy market entry for new competitors and tough price competition on platforms. However, both effects will tend to please customers, who are shifting ever larger parts of their consumption toward platforms such as Amazon, Zalando or About You. Ignoring platforms reduces the addressable part in many consumer markets by a few percent every year.   

Figure 2: Benefits/dangers of digital platforms

Around one-tenth of the world's gross domestic product has now shifted to the platform economy. 7 of the world's 10 most valuable companies now operate under this model. In the B2B markets, the importance of platforms is also rising rapidly, as trade and industry platforms are being established all over the world in particular. Accordingly, German companies continue to attach an important role to platforms in 10 years' time, the survey shows. Incidentally, three quarters also see the growing importance within their own companies. At present, however, it is still difficult to establish platforms in the B2C environment.

Figure 3: Importance of platforms in 10 years' time

However, the companies are well aware of the need to catch up. The majority of respondents therefore call for more commitment from policymakers in setting up the platforms. Four out of five companies are in favor of a more active role as platform operators (and not just as providers or demanders on a third-party platform). However, a quarter of respondents believe companies should focus on their core business and not be distracted by platforms. In crisis industries, this attitude could be heard more often again in the future. The view of the 66 percent of non-users who want to stay away from platforms is also exciting. Here it becomes clear that, depending on the industry or business field, the potential danger is ignored in order to sustainably secure business interactions for the future.

Figure 4: Increasing engagement for platforms

Certainly not all linear business models will be attacked by the platforms or shifted to the platform market layer. Nevertheless, the attitude regarding the lack of relevance of the 39 percent of respondents (see Figure 5 below: 30 percent regarding irrelevance and 9 percent regarding lack of use) seems to contrast with the results regarding the threat to the existence of companies (see also Figure 2: 27 percent of respondents see a threat). 

Platform users cite data protection requirements (64 percent), IT security requirements (55 percent) and lack of qualified personnel (54 percent) as the biggest barriers to using digital platforms. By contrast, insufficient budget (19 percent) or lack of economic benefit (11 percent) play only a minor role, but these are weighty obstacles for non-users of platforms: 60 percent cite lack of expertise, 52 percent lack of economic benefit and 39 percent insufficient budget as reasons for not using platforms.

Figure 5: Relevance of platforms for German companies 

The advantages of a platform are seen above all in a broader range of products and services, the acquisition of new customers, and securing future viability. Awareness and innovations also benefit from platforms, expect the companies surveyed. Here, a possible indicator emerges where it becomes clear that possibly the knowledge about platforms is not sufficient. As a rule, the term platforms is defined in different categories such as technical platforms, trading platforms, e-commerce site or marketplace. This usually leads to a possible individual interpretation of the benefits of a platforms - depending on the perspective and understanding of how the term was defined or interpreted.

Figure 6: Expected benefits of the platforms

When it comes to the expected disadvantages, it is clear that many companies feel anxieties about the power and influence of platforms, which also exist in the traditional or analog markets. For example, 65 percent of respondents stated that it will be easier for new competitors to enter the market, 55 percent believe that pricing pressure will be increased, and 55 percent stated that direct customer relationships will also be lost. All these factors also occur in traditional and/or analog markets. Thus, there seem to be different perspectives on the disadvantages of the platforms (similar to the advantages) due to the individual interpretation.

Figure 7: Expected disadvantages of platforms

One in two companies believes that in the long term only one platform can survive on the market for one purpose, thus creating a monopoly. "But the story of the platform monopoly is a fairy tale," says Achim Berg. In the e-commerce market, where the development of platforms can be easily tracked, there are only a few global players with a large market share. Behind them, however, a whole series of national providers have emerged, and a large number of platforms also occupy larger or smaller niche markets. Says Berg, "There is room for more than one digital platform in each market. And the cards are constantly being reshuffled in the digital world - even today's leading platforms can be overtaken by new competitors in a few years." The growth figures confirm his thesis: Many new competitors such as Pinduoduo, Wish or About You are growing much faster than the global players Amazon or Alibaba.

Figure 8: Growth in e-platform trading volumes

It is clear from the study that the topic of platforms has now arrived in the companies. The picture here is quite heterogeneous in terms of know-how, individual views and any opportunities and risks with regard to platforms. In order to overcome the obstacles mentioned, such as the requirements for data protection and IT security as well as a lack of qualified personnel, the formation of a platform initiative in a separate environment or separate company is usually unavoidable (among other things, in order to set up legally compliant new IT and data protection guidelines for the platform company or to cooperate with start-ups or with an ecosystem). Classic internal policies are usually too rigid to meet the requirement in terms of operational readiness of platforms and dealing with dynamic ecosystems and flexible alliances.

This also applies to the statements made by non-users of platforms with regard to barriers: 60 percent cite a lack of expertise, 52 percent a lack of economic benefit and 39 percent an insufficient budget as reasons for not using platforms. There are also approaches here, for example, to create a knowledge transfer in a mix of internal employees and external experts, to examine the business idea in advance with regard to the economic benefit, and finally to increase the budget after success (similar to what startups manage). However, it must certainly be noted that not every smaller company can actually raise the budgets. Here, for example, a start-up approach (design business idea, build prototype or minimum viable product and look for investors) can be a possible path.

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