Author Introduction
Wulijitu, Associate Professor at the School of Economics, Shanghai University, PhD in Economics, main research areas: industrial organization, strategic management;
Wang Jiahui, Master’s student at the School of Economics, Shanghai University, main research area: industrial economics.
Research Background
The Industrial Internet of Things (IIoT) is a product of the deep integration of new generation information technologies such as the Internet of Things, big data, and cloud computing with the manufacturing industry. It is a key driver of the digital transformation of manufacturing and has become a crucial support for the Fourth Industrial Revolution. Major developed countries such as Germany, the United States, and Japan have established promoting organizations for the industrial internet and formulated development strategic plans for advanced manufacturing, including Germany’s “Industry 4.0 Strategy,” the U.S. “Advanced Manufacturing Partnership Program,” and Japan’s “Society 5.0 Strategy.” China has also formulated “Made in China 2025,” proposing to accelerate the deep integration of new generation information technology with manufacturing as the main line, focusing on promoting intelligent manufacturing. In this era of great transformation, the emergence of new information technologies such as big data, cloud computing, and the Internet of Things is changing the external environment in which traditional manufacturing industries survive. To survive and develop, traditional manufacturing enterprises must address the following questions: ① What organizational strategies should they adopt to respond to and lead these environmental changes? ② Behind the success of organizational strategies, have enterprises broken through organizational inertia? These questions are worth in-depth study at the organizational and management levels. Therefore, this article takes the traditional industrial giant Siemens as a case study to explore the organizational strategies adopted by Siemens and their evolution, attempting to answer questions ① and ②, and based on this, provide strong academic support for the development of China’s industrial IoT industry.
Theoretical Background
With the development of information technologies such as electronics and communications, industry standards are frequently introduced in the commercial ecosystem of complex products, and platform enterprises often gain competitive advantages by establishing industry standards. In light of this situation, research on platform enterprises has surged since the early 21st century (Cusumano and Gawer, 2002; Baldwin and Woodard, 2009). The academic paths of research on platform enterprises since 2000 include studies on bilateral markets (Rochet and Tirole, 2003; Hagiu, 2006), platform architecture (Baldwin and Woodard, 2009), open innovation (Chesbrough et al., 2006), and business ecosystem research (Cusumano and Gawer, 2002), further deepening into user innovation research (Baldwin and Hippel, 2011), creating a wave of platform strategy research in an interdisciplinary atmosphere.
This article studies the specific strategic measures and strategic layout that Siemens has adopted in response to Industry 4.0. Thus, this paper studies Siemens’ industrial IoT platform strategy from the perspective of corporate strategy. Gawer and Cusumano (2014) proposed that a platform is not merely a simple intermediary service as suggested by bilateral market theory; it should have a stable and less variable core (Platform Core) that connects with external, variable complementary enterprises through certain rules to obtain complementary products, technologies, or services provided by the outside. Gawer and Henderson (2007) explored the relationship between platform enterprises, connection rules, and complementary enterprises, pointing out that platform leaders control complementary enterprises through connection rules, which is key to consolidating their competitive advantage. Hiroshi Ogawa (2007) analyzed the formation mechanism and strategic characteristics of platform strategy using Intel as an example. McIntyre and Srinivasan (2017) further explored the foundational role of platform leaders in the formation of platform rules and standards.
In summarizing the common characteristics of technology platforms from the above literature, this article draws on the capability elements of platform leaders proposed by Gawer and Cusumano (2002) to construct a “core-standard-edge” technology platform model, analyzing Siemens’ industrial IoT platform strategy. The ecosystem formed by the interaction between the enterprise’s own products and complementary enterprises is the essential difference between platform enterprises and traditional upstream and downstream value chain enterprises. The formation of industry standards is the fundamental reason for the emergence of complementary enterprises in the transaction network. Therefore, enterprises adopting platform strategies must strategically engage in actions conducive to their own standard-setting. In the technology platform model, core technology is the cornerstone of enterprise standard-setting (Hiroshi Ogawa, 2007; Gawer and Cusumano, 2002). In the model, the platform (Platform) is composed of core modules and connection rules (Interface: IF) based on product architecture (Architecture). Among them, the core module is the core technology or component that can maintain a stable state over a certain period; IF is the visible design rule that must be followed by surrounding complementary enterprises based on the core module. The platform connects complementary enterprises to form an ecosystem. The characteristics of this system are: (1) Complementary enterprises A and B connected to the platform can independently complete their respective R&D and design activities as long as they comply with the connection rules; (2) The system designer, i.e., the platform leader, controls the innovative outcomes of complementary enterprises through connection rules, significantly increasing the speed of system innovation; (3) The system can meet personalized and diverse needs while also responding to changes in the market environment through the combination of the platform and complementary enterprises. In the model, the platform can connect with complementary enterprise A, as well as with complementary enterprises B and C; complementary enterprises A and B can also freely choose their subordinate products (a, b, c) based on changes in the market environment; (4) The platform leader leads the development direction of the industry by improving connection rules.
Current Research Status at Home and Abroad
Platforms are a new organizational form of enterprises that emerged against the backdrop of modular product architecture, becoming a hot research topic in economics and management since the early 21st century. Research on platforms abroad can be roughly divided into two aspects based on their research objects and content. One is bilateral market research. This research mainly focuses on internet platform enterprises such as Apple, Amazon, Google, Facebook, Alibaba, and Tencent, studying their pricing strategies, profit models, and competition models, which later extended to ecosystem and user participation research. As internet platform enterprises have expanded in scale, bilateral market research has also developed a new branch of research—now known as multi-sided market research. The second aspect is the study of enterprise platform strategies. In this area, Gawer and Cusumano (2002) conducted pioneering research on the competitive strategies and platform formation mechanisms of platform enterprises using Intel, Microsoft, and Cisco as case studies, identifying four capability elements that platform leaders should possess: ① Determine the scope of business both internally and externally, i.e., decide whether to produce complementary products internally or encourage the development of complementary enterprises; ② Determine the scope of product technology. To what extent should products be modularized, and should product interfaces be open or kept confidential? ③ Manage relationships with complementary enterprises. How should companies balance their relationships with complementary enterprises, i.e., decide the degree of cooperation and competition with complementary enterprises; ④ Manage the internal organization of the company, i.e., take strategic and organized measures in response to ①-③.
Research on enterprise platform organization in China mostly focuses on the organizational transformation of Haier. For example, Jing Runtian et al. (2016) analyzed the relationship between the mechanism design of Haier’s platform organization and micro-entrepreneurship; Hu Guodong and Wang Xiaojie (2019) explored the structure and operation mechanism of platform organizations; Wang Fengbin et al. (2019) investigated the internal innovation and entrepreneurship impact of platform organizations from the perspective of ultra-modularity.
Innovative Points of the Research
Although both bilateral markets and technology platforms belong to platform research, Gawer and Cusumano (2014) pointed out that platforms should have a stable and less variable core (Platform Core). However, existing research has not clearly distinguished the structural differences between the two in terms of models and characteristics. The “core-standard-edge” technology platform model constructed in this paper expands platform theory research in the following two aspects: first, it analyzes the intrinsic relationship between core technology, standards, and ecosystems, revealing the structural differences between technology platforms and bilateral platforms; second, it explores the sources and motivations for forming competitive advantages for platform enterprises and explains the “holistic” characteristics of the “core” of technology platforms.
Prospective Issues in Related Fields
The Industrial Internet of Things is a product of the deep integration of new generation information technologies such as the Internet of Things, big data, and cloud computing with the manufacturing industry. Since the 1990s, the formation of international standards has become the norm, and platform strategies have also become the main strategic choice for platform enterprises to gain global competitive advantages. Platform enterprises strategically expand standards globally, leading to significant changes in industrial structure—accelerating the international division of labor and the formation and development of global value chains. With the further development of digitalization and intelligence in manufacturing, platform enterprises will inevitably have a broader and deeper impact on regional industrial development and global industrial structure. Therefore, research on platform organizations not only needs to cover in-depth studies of internal platforms but also urgently requires strengthening research on the structural system, formation mechanisms, and practices of technology platforms to better serve the national strategy of “Manufacturing Power”.
Original Citation
Wulijitu, Wang Jiahui. Development Path of Industrial Internet of Things: Siemens’ Platform Strategy [J]. Nankai Business Review, 2021, 24(5): 94-104.
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Editor | Li Xuan
Reviewer | Liu Xiao