Hahn: These are some of the world’s most valuable enterprises — and they conduct their core business on platforms. For the most part, they have moved away from traditional pipeline business models that see companies organized in a linear value chain to purchase materials, and manufacture and sell products. Instead, they have adopted a relatively new type of business model under which they no longer cover the entire value chain, but depend on providing the customer with the right product at the right time.
And they don’t necessarily have to manufacture the products they sell anymore. In extreme cases, like Uber, the product is a service offered by vehicle owners. The platform simply connects service providers and customers.
But the important thing to remember is that both the service provider and the consumer are customers of the platform operator.
These household names are all based in the U.S. There are a few other big names in Asia but we rarely hear about any European-based platform. Why is that?
Hahn: There are a few European platform companies as Peter Evans noted in a 2015 report that analyzes the global platform economy. His findings suggested that around two-thirds of enterprises with platform business models are in the U.S. The remaining third are based in Asia, home to the likes of Alibaba and Tencent, which runs WeChat in China. Evans did identify one big player in Europe: SAP. And there are lots of smaller ones too, such as Spotify in the B2C market.
Why is that the case?
Singh: Spotify is a great example, but generally B2C companies are having a hard time getting into the platform business in Europe. That has a lot to do with data protection, which is of course fundamental. But companies in the U.S. have been faster at developing and adopting platform models in this market. Uber, for instance, is still struggling to gain a foothold in Germany.
Do developments such as GDPR complicate the situation even more?
Singh: That’s where opinions differ. Some say yes, others say that Europe is taking the right approach. We believe it is only a question of time before companies in the U.S. and China have to strengthen their focus on data protection.
How active is SAP in the platform economy?
Singh: We have a few solutions in our portfolio that have a platform business model. SAP Ariba, for instance, is a marketplace that connects buyers and customers. SAP Concur and SAP Fieldglass operate in a similar way. You could even argue that SAP’s development and consulting ecosystem with its external partners is a platform, and is helping SAP grow. SAP Community, a network through which customers, partners, and experts exchange ideas, is another platform.
Hahn: What most people think of when they hear ‘SAP’ and ‘platform’ is SAP Cloud Platform. For two years now, Niraj and I have helped run a hackathon at the Sloan School of Management at MIT, which gives students the chance to tackle some of the real challenges that businesses face. While we were there, some high-profile researchers specializing in the platform economy invited us to MIT’s Platform Strategy Summit. At the top of its agenda were the business models that underpin the technologies and not the technologies themselves. That was when we realized that Europe didn’t have any similar forums. We need to give businesses, scientists, and politicians on our side of the Atlantic a wake-up call and show them just how important this topic is. So we decided to import the platform summit concept to Europe.
How can SAP help spread the platform message?
Singh: We want to draw on SAP’s experience and standing to boost awareness. At MIT they told us that Europe was ahead of the game on data protection and advised us to see this as an opportunity rather than a disadvantage. This is an asset that we can use to develop new platform business models. What’s more, Europe is strong in the B2B sector. There are lots of hidden champions in the pharmaceutical and engineering industries, for instance. Two examples are Trumpf and Winterhalter, both among the best in the world in their niche markets. The question now, though, is whether we in Europe can become global leaders when it comes to new business models in the B2B arena. We believe that B2B is an emerging market for platform business — and is still up for grabs.
How can manufacturers that are structured as traditional pipeline businesses advance in new digital platform markets?
Hahn: That will require a change in mindset, which has already started. A restaurant, for example, can now install an industrial dishwasher without having to buy it. The manufacturer’s pay-per-wash business model enables the restaurant owner to pay for each wash online.
Sing: Every manufacturer needs to think about how it wants to serve new markets. Is a brand that stands for high-quality manufacturing and stability compatible with a dynamic platform business model? Only time will tell.
Let me give you an example of how innovative platform concepts can do more than standard business models: German startup apic.AI installed cameras near beehives to record the number of bees leaving and returning to each hive. This data helps beekeepers manage honey production and recognize threats to the bees. But we could also use it to observe weather patterns and identify early signs of climate change. So we see a new data platform emerging here, useful for manufacturers, scientists, and various organizations.
What can you tell us about the European Platform Economy Summit?
Singh: The goal of the summit is to give insight into models used by platform businesses and highlight innovation opportunities. That’s why SAP, Deutsche Bank, and Accenture brought representatives of successful platform companies, scientists, conventional manufacturers, industry experts, and startups together at the first European Platform Economy Summit. It isn’t purely about networking; we also want to recognize opportunities and address risks. It also involves the latest technologies such as blockchain, artificial intelligence (AI), and the Internet of Things (IoT).
How do you think SAP’s platform business will evolve?
Hahn: More and more customers from diverse sectors are coming to us with platform business models. They want to find out how SAP can help them make these models a reality. SAP works with associations such as Industry Business Network 4.0 e.V. to systematically determine where the opportunities are, what the necessary networks look like, and how SAP should position itself.
We have to ask ourselves whether we just want to be a technology provider that offers SAP Cloud Platform to customers, or whether we want to go into the platform business ourselves. We already have SAP Ariba in the market — is that enough? We currently have several options. We need summits like this one to make sure we make the right decisions.
After all, one thing is clear: There’s more to this market than just selling technology. Events such as the European Platform Economy Summit enable us to bring key players together and move SAP’s own business forward as well.