New technology in industry is creating a platform economy

Twenty years ago, product-centric companies dominated a list of the most valuable companies in the world. The list was a Who’s Who of automotive, manufacturing, oil and gas, and brick-and-mortar retailers. Today, platform-based businesses rule. This new economy forces product-centric manufacturing companies to rethink how they transform digitally to survive and thrive in a data-rich market. It’s no secret that new technology and new approaches eventually supersede the old.

We’re witnessing one of these periods now. As manufacturers look for ways to radically redefine processes through the hype of the sharing economy, online platforms, the end of money and all the other buzzwords people use today, digital twin evolution will lead to platform economy, a state Viktor Mayer-Schönberger foresees in his book Reinventing Capitalism in the Age of Big Data.

Digital twins, which evolve from decades of simulation and analysis in engineering, are high fidelity models for actual physical objects such as a product or production process. Using computer aided-design, model-based system engineering and multiphysics simulation tools, a designer or engineer creates a digital representation for a physical object or process.

The digital twin is no longer science fiction. For example, NASA used this approach to design, engineer and produce two Mars rovers: Curiosity and InSight. Since you can’t build a Mars environment on earth, you simply bring Mars to the computer and digitally test your Mars rover. Just imagine how the world would change if the aerospace vehicle design practices are widely adopted by most manufacturers for products suchs as cars, aircrafts, ships, home appliances, smartphones, conveniences and so on.

This might be a comprehensive model spanning over multiple layers, including integrated circuit (IC), printed circuit board (PCB) systems, to a system of systems, to optimize often conflicting performance objectives such as weight, space, structural strength, fluid dynamics, thermal features, electromagnetic interference and even aesthetics. This also might consist of a simulation model for how a robot functions in a factory or how a multi-step manufacturing process, say for custom-designed shoes, takes place. A digital twin of a robot guides how it works by simulating the digital geometry and telemetry required for tasks. This allows a manufacturer to validate that a plant or process will deliver the desired results before ordering expensive machinery, devices and software.

In both cases, digital twins have the potential to radically change the way we design, manufacture and use products in much more efficient and controlled manner. It allows manufacturers to meet growing consumer demands for individualization, delivery speed and price in a world of uncertainty.

Rethink the five building blocks of an enterprise-as-software platform

In a platform-based economy, whether the focus is producing a 3D-printed car or space vehicle—or allowing a customer to design a pair of sneakers and receive them in a few days—the common theme is a need for fast and flexible orchestration. This is only possible with the digitalization of five building blocks of an enterprise in any manufacturing ecosystem.

The five building blocks include:

• • User

• • Maker

• • Product platform

• • Interconnected plants, and

• • As-operated products.

User behaviors are stored in digital user profiles, which continuously “learn” what users need and want. A digital assistant oversees trade-off analysis, design space exploration and the optimization of multiple objectives. Within this framework, all products become a software platform; plants are interconnected and connected with makers and users; and a product-in-use owns its online health system. This makes it possible for the system to automatically send data to the manufacturer via the Internet of Things.

The five building blocks interact and form a platform to enable a digital platform economy where rapid iterations of product orchestrations and flow production with a lot size of one are made possible. Novice small enterprises and new, alternative business ideas will prevail. Present stakeholders should fear loss of predominance and influence. The way of doing business in the near future will be dramatically different from today: fewer intermediaries, many, many more diverse markets, and digital services for your digital self.

Shining3D, a startup based in Hangzhou, China that makes 3D printers and scanners, works with us and leverages our digital twin toolbox to offer a platform for makers, including high school students. Makers can log onto the platform, build a reference geometric model by consulting peer makers online or scanning any physical objects, personalize their design as they wish in a video gaming-like environment, print them out, and a 100 percent personalized product is born. If their designs are too complex to print at home, makers may send it to a central factory which will take over to make it and ship it back to the makers. Platform-based economy is at work for them.

Start the digital transformation journey to prepare for a platform economy

“It’s hard to see the picture when you are inside the frame,” said engineer and venture capitalist, Eugene Kleiner. We are amidst the revolution of the digital twin, and all our individual and social interactions are being redefined by its irresistible force. It’s a big mistake to adopt a wait-and-see approach toward digital twins because this framework is a big digital disruptor, and consulting firms like Gartner agree.

Building digital twins requires a fast, flexible, cloud-based IT framework that extends across an organization and into a supply chain. There’s also a need to embrace an open source framework. Some view this as a threat to intellectual property and trade secrets. A new merit system based on participant contributions along the supply chain may be required.

For businesses that get the digital twin concept right, the initial results can be transformative. It’s possible to explore product options and factory configurations like never before—using Scrum, Lean, DevOp process or fast iteration. This makes it possible to understand how and where to invest in technology—and how to get the most out of digital technologies.

To extract the maximum value from this platform economy framework enabled by digital twins, business leaders must fundamentally rethink their business model, their product architecture and their supply chain. It’s vital to change some basic assumptions about how to design factories and create products. Once most manufacturers master digital twins and offer digital services rather than products via a pervasive computing IoT platform, the era of platform economy will emerge.

About the author
Based in Beijing, Dr. Frank Fang is the greater China CTO of Siemens Industry Software. With extensive experiences in industrial engineering and IT, he has spent 12 years with Siemens and previously spent 12 years with IBM in its Philadelphia and China offices. A highly regarded speaker in his field, Frank has published four books in China on Industry 4.0 in Action, the Digital Factory, Smart Manufacturing Practices, and the Chinese edition of Virtually Perfect.