This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Read our privacy policy (update in May 2018) >

Platforms for the best outcomes

Jun 13, 2017 By Huang Rantong

In vertical industries, this outcome economy will lead to a platform economy, largely because outcomes are hard to deliver through single enterprises on independent platforms. 

We predict that the future will see vertical industries supported by just a handful of platforms, particularly in industries that have a high requirement for specialists like, for example, in healthcare, where in the future only a few experts will be responsible for all gene, MRI and CT analysis, and even tumor diagnosis. Experts employed by large farms will take the form of a small number of digital systems that will understand the impact on harvests by everything from seeds, to the climate, and agricultural machinery. We will very likely see similar situations in all sectors of industry, from education to manufacturing.

In the consumer economy, people will become increasingly reliant on the leading platforms in all industries, just as they’re dependent on a handful now like Tmall and Amazon for e-commerce. It will become increasingly difficult for SMEs and innovators to carve out success if they go it alone. The SMEs of tomorrow will rely on large platforms – such as Philips' and GE's medical platforms and Monsanto's agricultural service platform – to develop innovative products and services, just as SMEs develop apps on App Store today. 

Tech-driven innovation for outcomes and value

Many enterprises are now using ICT to enhance efficiency, for example, data-driven, software-based services that in some cases on a pay-per-use basis. In the past, telcos tended to lack the confidence to focus on delivering outcomes for customers, and were unwilling to take risks, especially when promoting new services or investing heavily.

Energy performance contracting (EPC) was previously used to assure outcomes in telecoms. Equipment providers used new energy solutions, coordinated with carbon allowances, worked with multiple parties, and aimed to conserve energy and reduce emissions. And these equipment vendors shared the resulting benefits with telcos. While EPC was often applied in old telecom energy projects, this sort of approach isn't commonly used when exploring new services.

Today, however, the growth of IIoT, cloud, and big data has caused enterprises that are digitally transforming to use outcome delivery to prove that "they can". The figure below depicts four future models of development, which is based on research by the WEF IIoT working group.  

GE engines 

GE is a pioneer in exploring the outcome economy. Its businesses include an aircraft engine company and GE Capital, which provides business loans and financial services, managing trillions of dollars in assets. GE used to sell aircraft engines under a traditional sales model. Now, the aviation unit of GE Capital keeps ownership of the engines and its aircrafts, and instead leases usable time of these assets to medium and large companies. The model is based on engine runtime or aircraft flight time, which can be calculated flexibly.

It also frees up customers from having to purchase and hold assets. As GE has the capability to maintain engines as well as collect and mine aircraft data, its O&M processes are more efficient than any airline’s. 

Both GE and its customers profit from the cost savings delivered by new technology. According to the WEF, equipment suppliers usually pass on about 20 percent of savings from improved tech and maintenance efficiency to customers.

Taleris

A joint venture between GE and Accenture, the software company Taleris has taken things one step further by providing fault assurance for airlines, assuming responsibility for all equipment faults that cause flight delays or cancellations. Airlines sign a year contract with Taleris for service, which includes downtime KPIs, under a bundled payment model. Taleris bears the maintenance costs, and makes money by reducing these costs by improving operations, minimizing downtime, and optimizing equipment. In the future, Taleris will expand its services to cover non-machine faults like handling baggage carts and catering.

Taleris' service is a typical example of assuming responsibility for outcomes. It’s able to do so because its platform can connect to the systems of ecosystem partners in areas such as machinery, electronics, and structural parts, and the company fully controls all data relating to aircraft failures. This gives it the confidence to offer fault warrantees.

Competencies and support

IoT platforms for multiple sub-sectors: The outcome economy has multiple enabling factors – in particular, platforms based on smart tech have triggered this revolutionary change. The rapidly declining costs of computing and storage provide companies with the opportunity to mine data and create intelligence, because it enables big data analytics – something that was impossible and not economically viable until now. 

Expertise: An R&D chief at Audi remarked that Pareto’s principle applied to software and hardware in the automotive company, with 80 percent of engine R&D staff focusing on software and only 20 percent on hardware. But, those 20 percent and their specialized industrial skills are the most important resource. An IT company that doesn’t understand engines will find it hard to establish itself in the market, regardless of how advanced its software is.

Insurance and finance: Innovative insurance and finance models can promote new service models, stimulating sales and sharing risk. 

From specialization to platforms

Today’s Internet already demonstrates the power of platforms in the shape of Google, Facebook, Tencent, Amazon, et al. As the consumer Internet continues to evolve into the Industrial Internet, there two paths of development will emerge: One, Internet platforms will evolve into industry platforms; and two, industrial solutions platforms will coalesce once industrial companies digitize. These two forces and the technology companies and operators that support them will form a dynamic, multi-stakeholder model.

Development path of consumer Internet platforms

In the last five years, the market value of GAFA (Google, Apple, Facebook, Amazon) has been roughly double the market index and these companies’ profits have sky rocketed, a trend that will continue with the industrial Internet.

Given their capabilities in big data, cloud services, LBS, security, and payments, consumer Internet companies can already support many non-production processes. Enterprises’ service departments are destined to be the entry point for these consumer Internet companies, and their experience will be how they triumph.

Development path of industrial internet platforms

Until recently there have been few well-known large platforms for industry, with some example below: 

GE Predix: Based on cloud, big data, and AI, GE's CEO launched Predix with an initial investment of US$1 billion allocated to building an app store. The goal is to house 500,000 apps by 2020, so GE can become a top 10 global software vendor.

UPS Coyote: Tailoring different transportation solutions for different industries, the company works with 40,000 logistics companies. By operating a big data platform, Coyote seamlessly links carriers and their customers, and ensures timely delivery. Customers can solve problems with a single phone call.

Philips HealthSuite: Providing customized tools and resources for healthcare, the Philips' platform is a digital service based on a cloud ecosystem. It provides customized tools and resources for healthcare, continuous health services, and personalized care applications. On the platform, app developers can enjoy management services such as data analysis, the sharing of professional medical data, service orchestration, storage, and connectivity.

With enterprises, network equipment suppliers, operators, and semiconductor companies entering the platform development market, competition is high. Platform companies in different industries and nations can choose between different equipment suppliers, operators, and IoT and cloud service providers. As of yet, there are no defined models or alliances. Any company with a large customer base, core technology, or service capability can contribute to platform construction. And many are doing exactly that.

The opportunity for companies to use the industrial Internet to create the outcome economy has already been demonstrated, but it’s currently in a chaotic state. Players with the capability must extend their existing ICT services to the industrial Internet and establish new business models oriented toward vertical specialization and smartification. 

They must consolidate their competitive advantages; for example, telcos can leverage their enterprise customer base they have already connected and their physical resources such as leased lines. On the flip side, the customers of leading enterprises in different verticals can quickly turn specialized knowledge into business intelligence with data. Stakeholders in all domains must build platforms or sub-platforms with an open model in domains where they hold a competitive advantage, focus on customer experience, quickly establish a model platform, and build a leader's advantage.

Scan for mobile reading