Development of Industrial Internet Platforms Towards Industry 5.0

The term “Industrial Internet” has been frequently mentioned in the industry in recent years, corresponding to the “second half” of the Internet. Another similar concept is “Industrial Internet,” both of which are translated as “Industrial Internet” in English. Interestingly, the concept of “Industrial Internet” was proposed by the United States Industrial Internet Consortium, composed of several world-renowned companies, which officially changed its name to the Industry IoT Consortium in 2021.

“Made in China 2025” also repeatedly mentions the Industrial Internet, positioning it as an important lever to promote the deep integration of information technology and industrialization and to achieve intelligent manufacturing. This positioning is similar to the concept of “Industry 4.0” proposed by Germany and “Advanced Manufacturing” proposed by the United States, emphasizing a manufacturing method based on the interconnection of digital technology and physical systems. By sharing real-time data along the value chain and making intelligent decisions, production efficiency and quality can be improved.

The terms “Industrial Internet” or “Industry 4.0” have relatively clear connotations, so why is there still a need to mention “Industrial Internet”?

We believe there are two main reasons. On one hand, whether referring to “Industrial Internet” from the perspective of the “Consumer Internet” or emphasizing the “Industrial Ecology,” it attempts to move beyond the limitation of “smart manufacturing driven by technological change” and focus more on the transformation of the entire industry. The issue of industrial transformation needs to consider factors such as industrial structure, formal and informal institutions (such as norms and practices in the industry), and the needs of different stakeholders in the industrial ecology (such as employees, consumers, society, and the environment).

On the other hand, the theoretical and policy fields also recognize the limitations of this phenomenon: focusing only on improving efficiency through the automation and intelligence of specific links in the industrial chain neglects related social development issues such as social equality and sustainability. A decade after the concept of “Industry 4.0” centered on smart manufacturing was proposed, the European Union officially introduced the concept of “Industry 5.0” in 2021. Based on “Industry 4.0,” it incorporates the value needs of stakeholders such as employees, society, and the environment, transitioning from a “more efficiency-oriented” to a “more fairness-oriented” approach, aiming to promote the construction of an industry system centered on people, sustainability, and resilience, guiding the establishment of a new paradigm for industrial development.

This article focuses on the “Industrial Internet.” After clarifying its basic connotation, it preliminarily discusses the characteristics of industrial internet platforms and key issues in their construction process, and looks forward to the development of industrial internet platforms towards “Industry 5.0,” hoping to provide new ideas for practical exploration in building industrial internet platforms.

1. What is the Industrial Internet

1.1 Industrial Internet vs Consumer Internet

When people mention the Industrial Internet, they often directly associate it with the Consumer Internet. This is closely related to China’s recent Internet industry development practices, primarily focused on the user end. Consumer Internet platforms, represented by Alibaba, have recently connected consumers directly with various distributors downstream of the industrial chain, gradually extending upstream in the industrial chain and changing the traditional industrial ecology. From this perspective, consumer internet platforms focus more on economies of scale on the demand side. When extending to the back end of the industrial chain, they face significant challenges brought by the complexity of participating entities and industrial resources. Thus, the concept of the Industrial Internet was born, focusing more on the reconstruction of the supply-side industrial ecology.

Academics such as Zhang Jianfeng, Dean of Alibaba’s Damo Academy, emphasize in their book “Consumer Internet and Industrial Internet: Dual-Engine Driven New Growth” that the Industrial Internet focuses more on the reconstruction of the value chain from the supply side (see Figure 1). Senior Vice President of Tencent, Tang Daosheng, and Professor Zhu Hengyuan from Tsinghua University also pointed out in their book “The Chinese Path of Industrial Internet” that the Industrial Internet is “an ecosystem deeply integrated with traditional industries, connected by the Internet,” emphasizing its “ecological” attributes.

1.2 Industrial Internet vs Industrial Internet

The construction of industrial internet platforms is also significantly driven by leading enterprises and startups rooted in industrial practice. Leading enterprises, represented by Haier Group’s Caos platform, rely on their industrial resources and digital transformation experience to continuously attempt to establish industrial internet platforms to reconstruct the industrial ecology.

Startups address industrial pain points through continuous industrial digital transformation and digital industrialization applications, gradually building industrial internet platforms that may, to some extent, reconstruct the industrial ecology, such as Junfang Technology’s fiber platform in the chemical fiber industry and Huoguan Technology’s glass platform in the glass industry.

Additionally, the government has become an important promoter of the construction of industrial internet platforms. For example, Zhejiang Province’s development strategy of “Industrial Brain + Future Factory” attempts to connect production and consumption, integrating government and market sides, empowering enterprises’ digital transformation, industrial ecology construction, and government economic governance.

This type of practice is more of an expansion based on the basic logic of constructing the “Industrial Internet” (see Table 1). In the recent Chinese manufacturing-related policy document (“Guidelines for the Construction of a Comprehensive Standardization System for the Industrial Internet (2021 Edition)”), the Industrial Internet is defined as “a new type of infrastructure, application model, and industrial ecology deeply integrated with new generation information and communication technology and the industrial economy, constructing a new manufacturing and service system covering the entire industrial chain and value chain through comprehensive connections of people, machines, materials, and systems, providing pathways for the digital, networked, and intelligent development of industries and even the entire industry.” From this definition, it is clear that the Industrial Internet emphasizes a technology-oriented approach, focusing more on improving the efficiency of specific links in individual enterprises and/or industrial chains, while the Industrial Internet emphasizes an industry-oriented approach, focusing more on the reconstruction of industrial ecology and the value propositions of different stakeholders within the industrial ecology.

We believe the “industry” in the concept of the Industrial Internet expresses connotations similar to the organizational field in new institutional theory, referring to an ecological system composed of various resources and organizations along the industrial chain. Based on this, the Industrial Internet can be defined as a new institutional structure formed by connecting and reconstructing various resources and organizations along the industrial chain through digital technologies (including IoT, cloud computing, artificial intelligence, cyber-physical systems, cognitive computing, etc.) to enhance industrial efficiency and meet the value demands of different stakeholders.

2. Industrial Internet Platforms Towards Industry 5.0

Combining the concept of the Industrial Internet mentioned above, we define industrial internet platforms as comprehensive digital platforms that reconstruct the connection methods of various resources and organizations along the industrial chain based on digital technologies, providing interaction support for diverse and interdependent stakeholders in the industrial ecology and technical support for developing complementary solutions among different organizations in the ecology. This definition is closely related to the orientation of “Industry 5.0.” Under the framework of “Industry 5.0,” the construction of industrial internet platforms needs to incorporate human needs and social interests into the design and implementation of system architecture, achieving a sustainable, human-centered, and resilient industrial system (see Table 2). Based on this, industrial internet platforms towards “Industry 5.0” may have five typical characteristics (see Figure 2).

First, industrial internet platforms are based on a digital technology architecture. Industrial internet platforms serve as the quasi-digital technology infrastructure of the industry, and their technical architecture can be decomposed to some extent, allowing modules to coexist independently. The technical architecture of industrial internet platforms generally consists of a bottom-layer infrastructure platform, a middle-layer data platform, and an upper-layer application platform. The bottom-layer infrastructure platform includes the industry central node and the industry middle platform required for application development. The industry central node serves as a fusion area for various data, while the industry middle platform mainly includes data middle platform and AI capability middle platform. The middle-layer data platform addresses issues of data aggregation, data standardization, data analysis, etc. Data sources come from internal enterprise ends, supply chain ends, market demand ends, government ends, and public resource ends. The upper-layer application platform consists of application modules aimed at industrial and enterprise scenarios and various portals and interfaces. Industrial application modules mainly focus on business needs around industrial chain mapping and policy services, while enterprise application modules provide solutions for enterprises around new intelligent manufacturing technologies, common technologies, and transaction services.

Second, industrial internet platforms encompass various organizations and resources. The nodes connected by industrial internet platforms may be suppliers upstream of the industrial chain or specific equipment from suppliers, or they may be complementary enterprises that connect to core components of the industrial platform for the development of complementary products and services. They may also be research institutions, financial institutions, and government agencies involved in the value creation, transmission, and capture process, or end-users who realize value transformation. These different nodes contribute different data to the industrial internet platform and derive different values from it. At the same time, the interests of different platform participants vary. For example, suppliers hope to leverage the industrial internet platform to connect with a large number of end consumers to quickly reach target markets and commercialize products; complementary enterprises hope to gain insights into product and service innovation opportunities by utilizing the abundant data and core components of the industrial internet platform, thereby effectively developing complementary products and services and benefiting from the prosperity of the industrial internet platform; end-users seek to obtain efficient integrated solutions through the advantages of integration and supply-demand matching offered by the industrial internet platform. Therefore, platform owners need to coordinate and integrate the resource and capability advantages of different participants, creatively designing a set of integrated solutions for complex tasks that effectively meet the interests of different participants.

Third, industrial internet platforms are evolving meta-organizational forms with ecosystem characteristics. Industrial internet platforms connect a large number of participants, and different types of participants form interdependent relationships based on unique complementarities (one component cannot function properly without another) and super-module complementarities (the more one component is present, the greater the value of the other component). Due to this loosely coupled relationship among participants, industrial internet platforms can quickly respond to end-users’ needs. When end-user demands change or new needs arise, various participants in the industrial internet platform will automatically form new connections to meet these needs through new value creation methods. Therefore, industrial internet platforms are a meta-organization akin to an ecosystem, that is, an “organization of organizations.” Industrial internet platforms need to connect multiple organizations, participants, activities, and interfaces around specific value propositions, establishing a complete governance mechanism to coordinate and integrate various participants, seeking “collaborative consistency” among diverse participants to achieve value co-creation.

Fourth, industrial internet platforms combine the value creation methods of market intermediaries and innovation platforms. On one hand, industrial internet platforms can empower participants to develop complementary solutions by providing standardized core components, interfaces, and boundary resources. For example, the Fiber Platform provides standardized credit assessment services for financial institutions lending to the chemical fiber and textile industries by aggregating data from within and outside the industry, provides price forecasting services for spinning and textile enterprises, and offers data services to intelligent fabric inspection equipment companies for product development. On the other hand, industrial internet platforms can also provide a trading market to facilitate interaction among ecosystem participants and reduce transaction costs. For instance, ShunYun Interconnection provides centralized procurement services for participants on its platform, helping small and micro enterprises reduce raw material procurement costs.

Fifth, industrial internet platforms need to consider their impact on people, the environment, and society. Industrial internet platforms should design human-centered applications that support human-machine collaboration, taking labor welfare, ecological benefits, and social development into account. For example, in the glass industry, the upstream production of raw glass is highly concentrated (less than 200 companies nationwide), while the downstream circulation is extremely fragmented (hundreds of thousands of companies), resulting in significant waste during processes such as glass inventory, cutting, and transportation. The Glass Platform addresses this issue by utilizing digital technology to establish systems for direct procurement, facilitating transactions, optimizing glass logistics, and empowering factories with smart technology, significantly reducing its environmental impact.

3. Key Points for Constructing Industrial Internet Platforms

Given the complexity of industrial internet platforms, how can one successfully build them? Based on the characteristics of industrial internet platforms and some explorations from typical industrial practices in China, we preliminarily summarize five key points for creating industrial internet platforms according to the “strategic design – implementation” approach (see Figure 3). At the strategic design level, a strategic blueprint must be drawn to clarify value propositions. At the implementation level, platform functions should be designed based on value creation methods, and a regenerative technology architecture should be established to stimulate data network effects and build a governance system to coordinate various participants. These measures contribute to building a human-centered, sustainable, and resilient industrial ecology.

3.1 Draw an Ecological Strategic Blueprint

Industrial internet platforms have ecosystem characteristics, which means constructing them requires a guiding ecological strategy emphasizing symbiosis and win-win cooperation. Therefore, the first step in building an industrial internet platform is to clarify the ecological strategic blueprint, as the saying goes, “measure twice, cut once.” The basic implication of an ecological strategic blueprint is to gather various participants, such as customers, suppliers, manufacturers, competitors, and governments, based on the principle of symbiosis and win-win outcomes. As a leading enterprise in the electric motor industry, Wolong Group’s ShunYun Interconnection industrial internet platform “adheres to the ecological cooperation concept of shared value, working hand in hand with partners across various industries and fields to achieve iterative user experience and dual value circulation of value addition for all parties in the ecosystem.”

How to draw an ecological strategic blueprint? First, systematically assess the current state of the industry and envision its future. Industry leaders and experts can be invited to discuss and clarify industry development trends, accurately depicting the grand blueprint for the industry’s future. This is the starting point for constructing an industrial internet platform. Only by clearly understanding industry development trends can enterprises successfully guide and promote industry development, enhancing the probability of success for the industrial internet platform. Second, clarify strategic goals. After determining the future blueprint of the industry, platform enterprises need to clarify the strategic goals for constructing the industrial internet platform, i.e., what role the industrial internet platform should play in the future industrial landscape, what functions it should perform, and what goals it should achieve. Finally, plan strategic paths. Based on the strategic goals for constructing the industrial internet platform, design appropriate strategic implementation paths to achieve these strategic goals step by step.

3.2 Clarify Core Value Propositions

While drawing the ecological strategic blueprint, the core value proposition of the industrial internet platform should also be clarified. What is the value and significance of the industrial internet platform to the industry? This is an important question that needs to be clarified when initiating the construction of the industrial internet platform. Only by clarifying the value proposition of the industrial internet platform can it gain vitality from the industry and attract various participants (end-users, suppliers, complementors, value supporters, value investors, etc.).

A common approach to identifying core value propositions is to systematically identify the core pain points of the industrial ecosystem. For example, common pain points in the white tea industry include unclear base conditions, frequent counterfeiting, and difficulty in managing agricultural inputs. To address these pain points, the white tea industrial internet platform sets its value proposition as “a map of the white tea industry, a ledger for production supervision, a mark for brand protection, an integrated future farm, and one-stop white tea services,” implementing measures such as mapping the industry, establishing digital IDs for tea gardens, installing monitoring devices, and uniformly managing the distribution of Anji white tea production areas (tea garden area, ownership, planting varieties, etc.), significantly alleviating industry pain points. For specific industrial pain points, a practical and effective business model should be designed based on available resources and capabilities, integrating the value of the industrial internet platform into responding to industry pain points to quickly realize market value.

3.3 Design Platform Functions

Empowering transactions and innovation are the two basic ways for industrial internet platforms to create economic value, while empowering government governance is an important aspect of creating social value. In terms of transaction empowerment, industrial internet platforms have market intermediary functions, providing participants within the platform ecosystem with an efficient trading market. For example, industrial internet platforms can automate transaction processes (automatically matching buyers and sellers, automatically processing orders, etc.), thereby speeding up transaction processes; by analyzing large amounts of transaction data, platform enterprises can accurately predict market demand and trends, helping supply-side enterprises make more informed decisions, thereby improving transaction success rates and efficiency. The Glass Platform focuses on the transaction cost issues caused by the upstream concentration and downstream dispersion in the glass industry and has developed into a comprehensive transaction and service platform covering the entire industrial chain, including “glass + internet + finance + logistics + technology + services.”

In terms of product innovation empowerment, industrial internet platforms gather various data across the horizontal industrial chain (from innovation creation to commercialization, from product production to product transactions) and also accumulate various data in the vertical direction (such as production equipment or transaction links). By leveraging big data analysis and artificial intelligence, industrial internet platform enterprises can analyze the vast amounts of data gathered to provide standard core components, interfaces, and boundary resources to third parties within the ecosystem, helping platform enterprises and ecosystem participants deeply explore user needs and providing strong support for product development and innovation. In terms of empowering government governance, industrial internet platforms have natural advantages in reaching industrial enterprises, aggregating industrial data, and monitoring industrial operations. Therefore, legally and reasonably opening part of the data and interfaces to government governance departments to help the government effectively govern the industry is also a value creation approach. Through data sharing and information integration on the platform, the government can gain a more comprehensive understanding of the state of industrial development and formulate more scientific and reasonable policies. At the same time, platform enterprises can also promote the implementation of policies through cooperation with the government, assisting in healthy industrial development and transformation.

For example, the electrical industry internet platform in Leqing enhances transaction efficiency by constructing a data center for the electrical industry chain through its platform trading center, speeding up transactions and reducing transaction costs. It also empowers product innovation through the provision of intelligent devices, connecting research and design with smart production, enabling enterprises to better understand customer needs and enhance their product innovation capabilities. Finally, it empowers government governance by implementing a three-level deployment and application system across provinces, cities, and counties, supporting various levels of units in real-time access to big data from the electrical industry chain and improving carbon profiling and carbon governance modules.

3.4 Strengthen Regenerative Technology Architecture

The realization of industrial internet platform functions relies on the digital innovation capabilities of platform enterprises to activate data network effects, which is also a core task of strengthening the regenerative technology architecture. Digital innovation capabilities include three aspects. First, data generation capability. Industrial internet platforms disrupt traditional industrial patterns and paradigms to meet the value demands of different participants through new methods, processes, and models. To reshape the supply-side industrial chain, it is necessary to generate and accumulate key data from new methods, processes, and models. Second, data aggregation capability. Industrial internet platforms connect numerous participants, industrial enterprise devices, and process detection sensors, so platform enterprises also need to aggregate this data. Third, data application capability. Industrial internet platforms generate and aggregate vast amounts of data. On one hand, they need to leverage data network effects, utilizing data mining methods such as machine learning and model training to extract value from data at specific links or nodes; on the other hand, they also need to employ advanced data fusion tools (such as AI large models) to obtain value from the fusion of diverse, related data.

For example, the Fiber Platform built by Junfang Technology has accumulated a wealth of transaction data, covering capacity, preferences, regions, popular transaction varieties, industry supply and demand conditions, transaction volumes, and prices for tens of thousands of enterprises in the industry. At the same time, Junfang Technology, leveraging its strong reputation and influence in the industry, easily acquires a wealth of detailed, even non-standard industry data and internal information. Additionally, it gathers data from the futures, stock markets, and spot commodities (such as petrochemicals, polyester, spandex, nylon, yarn, etc.) across the web. By integrating this data, Junfang Technology provides the industry with a chemical fiber industry transaction prosperity index, product price trend forecasts, and daily market operation reports.

3.5 Improve Platform Governance System

An effective governance system is key to the sustainability of industrial internet platforms. Building a complete governance system for industrial internet platforms involves three important tasks: first, standardizing interoperability standards. Establishing interoperability standards for industrial internet platforms, including strengthening the standardization of platform interfaces and developing specific access, regulation, and termination rules, as well as formulating data migration standards and guidelines. Such standards not only help to continuously expand and optimize the functions of industrial internet platforms but also contribute to building a fair, orderly, and open platform environment. Second, enhancing security guarantees. A vast amount of industrial data constitutes the wealth of industrial internet platforms, but it also poses security risks for their sustainable development. Strengthening data security backups, enhancing data leakage protection, and optimizing transaction data anonymization are crucial aspects of the security work for industrial internet platform enterprises. Third, promoting open, multi-party governance. Industrial internet platforms are open platforms, and participants are diverse. The interests of platform enterprises and various participants are tightly coupled and complex. A single governance model may be adopted during the early stages of construction, but in the long run, it is necessary to open governance rights and establish a multi-party governance mechanism and model, transforming the industrial internet platform into a quasi-industrial infrastructure.

The aforementioned five key points present a basic closed loop for constructing industrial internet platforms. Drawing an ecological strategic blueprint and clarifying core value propositions focus on strategic formulation, while designing platform functions, strengthening regenerative technology architecture, and improving platform governance systems belong to the execution of strategies. It is important to emphasize that designing platform functions, strengthening regenerative technology architecture, and improving platform governance systems are a co-evolutionary process, not a one-time effort. Industrial internet platforms need to continuously enhance their applications in addressing industrial pain points, consistently improve the ability of industrial participants to benefit from the industrial internet platform, and strive to occupy the “bottleneck” links in the industrial ecology, establishing themselves as the quasi-infrastructure of the industry to truly build competitive advantages for industrial internet platforms.

4. Outlook on the Development of Industrial Internet Platforms Towards Industry 5.0

Current practices in responding to the core essence of “Industry 5.0” are far from sufficient. Under the framework of “Industry 5.0,” the construction of industrial internet platforms needs to further incorporate human needs and social interests into the design and implementation of system architecture, achieving a human-centered, sustainable, and resilient industrial ecosystem.

First, the future construction of industrial internet platforms needs to transcend information-physical systems, moving towards a human-information-physical system where people integrate deeply with technologies such as big data, IoT, and artificial intelligence in industrial applications. Current industrial internet platforms emphasize “machine replacing humans” based on “substitution logic,” focusing primarily on the construction of information-physical systems; future industrial internet platforms need to emphasize “human-centered” based on “enhancement logic.” In the entire industrial ecosystem, how humans and machines collaborate, how humans can focus on more creative, long-term, and high-value work, and how to achieve mixed augmented intelligence through human-machine collaboration, as well as issues related to safety, privacy, and personal development brought by intelligent manufacturing, need further discussion.

Second, the future development of industrial internet platforms needs to pay more attention to the concept of “human-earth-prosperity,” balancing economic benefits, human welfare, and the sustainable development of the planet. Some existing industrial internet platforms have already made reducing environmental impact an important consideration. Future industrial internet construction needs to further integrate the 17 Sustainable Development Goals (SDGs) from the United Nations’ “2030 Agenda for Sustainable Development.” For example, as industrial infrastructure, how can industrial internet platforms empower the green and innovative development of small and medium-sized enterprises in the industrial ecology, reducing the industry’s impact on the environment? Additionally, how can industrial internet platforms contribute to larger social issues such as poverty alleviation and climate change?

Finally, the future construction of industrial internet platforms needs to focus more on the resilience of the industrial ecosystem to respond to various disruptions and crises. The construction of future industrial internet platforms needs to transition from a past focus on “end-to-end” full value chains to resilience value chains based on reliability, responsiveness, and agility.

In summary, “Industry 5.0” signifies a more sustainable and resilient industrial future. By promoting the construction of human-centered, sustainable, and resilient industrial internet platforms, we will usher in a better society, which requires the joint efforts of governments, enterprises, and all sectors of society.

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Development of Industrial Internet Platforms Towards Industry 5.0

Author Biography:Dr. Liu Yang, a researcher under the “Hundred Talents Program” at Zhejiang University, doctoral supervisor, and director of the Discipline and Research Center of the School of Management. His research interests primarily focus on innovation management and strategic management in the context of transitional economies, with recent research concentrating on the innovation strategies, internationalization strategies, ESG strategies, and digital innovation strategies of manufacturing enterprises. His work has been published in important domestic and international journals such as Management World, Technovation, Journal of Business Ethics, International Journal of Technology Management, and Journal of Business Research, and he has authored books such as “Digital Innovation” and “Asymmetric Innovation Strategies: Leapfrogging for Chinese Enterprises.”

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