Our podcast, The Optimistic Outlook, explores the power of optimism and the potential for change through the lens of America's infrastructure. Recent episodes have explored the power of public investment as the Bipartisan Infrastructure Law is deployed. In this most recent episode, I explored a bigger, overarching trend that promises to change everything: a platform revolution.
A decade ago, you might have read a famous Wall Street Journal op-ed proclaiming that software was eating the world. Well, in the best-selling book “Platform Revolution,” published in 2016, co-author Marshall Van Alstyne provided us with an update: Yes, software is eating the world, but really… platforms are eating pipelines.
The pipeline approach describes the longstanding way that companies have been successful: focusing on economies of scale and getting more efficient on the supply side to win in the marketplace. Well, the platform economy involves a very different approach. It leverages powerful digital technologies to tap into demand-side economies of scale in order to generate valuable interactions between producers and consumers. Think Uber and Airbnb and Amazon. Think about the rise of a technology industry that has completely remade the consumer world.
Are infrastructure and industry next?
We think they are with the release of our new open digital business platform, Siemens Xcelerator. And to explore this question further, I was joined on The Optimistic Outlook by Marshall and Peter Koerte, the chief technology and strategy officer at Siemens.
Here are some highlights from the conversation.
The power of network effects
We want to leverage the platform model to create a powerful ecosystem of partners who can jointly accelerate digital transformation. Participants in this ecosystem benefit from what are called network effects, and I asked Marshall to define the term for us.
Network effects, Marshall said, are “simply a product or service that becomes more valuable to the existing user base as more people use it. Classic examples are things like operating systems, search and social networks, but there are also some good industrial examples” such as Amazon Web Services. With AWS, the more developers using the platform, the more merchants want to participant.
How Xcelerator makes digitalization fast, easy and at scale
Turning to Peter, I asked our CTO to tell us more about Xcelerator’s partnership model.
Peter noted that digital transformation is complex and that nobody has all of the solutions. “And that's where we realized that Siemens very often already held the key with regards to having some of the critical components already – but not all of them.”
Xcelerator not only brings all of the critical digitalization components together – the service providers, the software partners and especially the hardware – it also provides both technical governance and interoperable solutions. “So, when you follow these design principles and provide these solutions,” Peter explained, “it's like Lego blocks where you very easily assemble and disassemble, and you just pick what you need. You really can get to these easy, fast and scalable solutions for our customers.”
New approaches to infrastructure projects
Robust infrastructure funding has spurred a discussion about the importance of rethinking the traditional project development approach. I asked Marshall if he saw applications for platform models in this space, and he shared two interesting comments:
First, on the power of having a “city as a platform”:
“In some ways, too many people think of simply smart cities, which is the automation of things,” Marshall said. “But I think what we need to do is to mix the best of standard governance along with platform governance … so we use it to help match businesses to supply chains and help match consumers to businesses and consumers to government and city services. The city platform borrows a lot of the ideas and the wealth creation properties of platforms themselves, makes them available to cities. But I think we need to run ideas in both directions. Cities can borrow ideas in platforms, even as platforms probably should be valuing borrowing the voting rights of governments, of cities, involving the citizens more in the design of the ecosystems themselves.”
Second, on the power of leveraging data: “What I think is interesting,” Marshall continued, “is that one of the impediments to B2B [business-to-business] platforms has been [that] we haven't had the frequency of interaction we've had in B2C [business-to-consumer] platforms.
“So, in search and social work, there's old fat, massive amounts [of data], but, as we move toward infrastructure, all that's going to change. Machine to machine, device to device is going to dwarf the number of interactions among people. And so, I think we should absolutely anticipate huge transitions towards these platforms and these models, especially in infrastructure. And I think the firms that get there earlier are going to be better positioned to capture the value that's created within that new infrastructure.”
The 10-year outlook
As we closed out the episode, I asked Peter to look a decade into the future and tell us how our customers will have benefited from Xcelerator.
“The 10-year outlook [is that Xcelerator] has set the benchmark when it comes down to simplicity of transactions, enabling technology and giving technology to anybody who needs it at any given point in time,” he said.
“Today, we know how cumbersome [digitalization] is, and we always know that the B2C environment … is usually a decade ahead of the B2B environment. So, think of your transaction today [with] online shopping – exactly that simplicity.
“Imagine a world where you go online, you find exactly already what is needed. As a matter of fact, it is being recommended to you, because we know it. Because of all the machines talking to each other, we already can tailor the solution to the respective B2B environment. It can be all automatically deployed.”
Our launch of Siemens Xcelerator came on the 15th anniversary of the iPhone release. The iPhone was only made possible because of so many enabling technologies being developed over decades. And yes, the last decade was about building the internet of people. But this decade is all about people building the internet of things.
We now have both the technologies and the platform to build this world together.
Published: June 30, 2022