Wednesday, 31 July 2019

Second Wave of Digitalization: From Plastics Machine Manufacturer to Platform Provider?

Second Wave of Digitalization


Thinking back to the last K-Show held in 2016 in Düsseldorf, Industry 4.0 and Industrial Internet of Things (IIoT) were all over the booths. This year at the K-Show we will see a lot about topics such as sustainability, circular economy, and recycling.

However, how did the Industry 4.0 story continue?

In the past three years, machine and equipment manufacturers, tool makers and plastic convertors connected their devices and started collecting data while making their products. This data allowed them to gain insights into their operations and make them more profitable. A major step stone was the introduction of Euromap 77 in 2018. This allowed data exchange between plastics converting machines e.g. injection moulding machines and manufacturing execution systems (MES). In this way, Euromap 77 enables a standardized way of connecting the entire production chain. Altogether, this first wave can be summarized under the term “efficiency innovation”. This was mainly driven to streamline internal processes and obtain cost reductions.

How does digitalization follow up?

Starting last year already, the second wave of digitalization [2] has arrived in Europe. In this second wave, investors focus on three main topics:
1. Artificial Intelligence (AI)
2. Platform based business models („platform economies“)
3. Mobility solutions

Artificial intelligence is the main game changer and impacts major traditional sectors such as banks and funds management. Adapting and changing your operations is major key to remain in business. For example, the most successful hedge funds managers, Ray Dalio with his Bridgewater Associates and Jim Simons with Renaissance Technologies have used sophisticated algorithms since the founding of their businesses. Now, the utilization of AI has enabled them to reach new levels of profitability.

Platform-based business models where profit is made by matching customers and producers belong to the most successful business models in the New Economy. There are several platform companies which are close or have already a stock valuation of 1 trillion USD. Microsoft (1.08 trillion Dollar) is the most valuable platform business followed by Amazon (961 billion Dollar), Apple (956 billion Dollar) and Alphabet (865 billion Dollar) [5].

Especially the third point “mobility solutions” is pushed by companies such as Amazon, which clearly places effort on having more vertical integration operations. For example, Amazon invested in the startup FlexPort to optimize its logistics so that the end consumer can be reached faster [3].

How is the plastics industry reacting to these three major drivers?

Plastic Industry 4.0 was and is all about making the use of things more efficient following the moto “faster, better, and cheaper.”
Apart of the efficiency steps, we see now first steps toward platform business models. For instances, the plastics machine manufacturer company, KraussMaffei, based in Munich set up his own market platform to tap into the material manufacturer pond. The platform is called “Polymore”. It represents a B2B marketplace to support sustainability in the plastics industry. It focuses mainly on compounds, recyclates and post-industrial waste, which serves plastic processors as well compounders. It will be launched at the K-Show in October later this year [1]. Although KraussMaffei is not producing resins or compounds, it can link polymer manufacturers and plastics convertors together and profit of the exchange. A similar platform is made by the company Matmatch (also Munich-based) which named its platform matmatch.com [4].

My interim conclusion

Plastics converting companies did not show exponential growth rates either, since fundamentally there was no change in their business models. Time will tell us, how the KraussMaffei approach will shake up the plastics industry. Creating a marketplace which not only offers materials, but also more and more plastics machinery, moulds and services combined with smart logistics and AI for sure hits the trend of second digitalization wave. With such platforms, companies gain access to customers and can leverage material capacities of other companies without having to own them. Market trends can be faster anticipated and customers better served. Traditional companies all along the plastics supply chain need now to re-think their business models.

Thanks for reading!

Till next time!

Best regards,
Herwig Juster

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Literature:
[1] https://www.polymore.com/en/home
[2] https://www.netzoekonom.de/2019/03/27/endspiel-um-die-digitalmaerkte/
[3] https://www.cnbc.com/2019/02/21/softbank-leads-1-billion-investment-in-logistics-start-up-flexport.html
[4] https://go.matmatch.com/materials-marketing-platform?utm_source=linkedin&utm_medium=paid+social&utm_campaign=Supp_Demo_SuppListsAll_EuropeNorthAmerica
[5] https://www.netzoekonom.de/plattform-index/

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