A recent article in The Economist caught my eye – firstly because the tag line referred to digitization being a threat to the industrial leadership of Europe’s largest economy, and secondly because it brought to mind Karl Marx’s words from over 150 years ago.
The article, “Does Deutschland do digital?” talks about how German manufacturing companies, long focused on engineering and precision, are now trying to transform themselves (slowly) into data and software companies. The trend is nothing new – here in the States, we have been seeing provocative headlines like “Domino’s Becomes A Tech Company That Happens To Make Pizza” for years. The premise is companies are using the latest advances in mobile, cloud, big data and analytics to improve their business models – and get more revenue from improved services.
So what is so different in the Deutschland? Enter Karl Marx, who in Das Kapital talks about commodities being the fundamental units of capitalism. Commodities, according to Marx have two values – a “use value” – what it does in the way of satisfying needs and wants – and an “exchange value” – the relative value of the commodity in relation to another commodity.
The article talks about a German company founded in 1923 called Trumpf – who is now trying to re-establish itself as a software provider – “Trumpf’s roots in metalworking and other hardware stand in stark contrast to what it is trying to achieve next: building a new business purely based on software and data. Unveiled last month, its online offering, called Axoom, connects machines built by Trumpf and others, and uses the data it collects from them to help customers organise their production—for instance, to warn them when they are running out of material or to order it directly from the supplier. Much like smartphones, Axoom will be able to run “apps” from other providers, such as software to schedule workloads, or to predict when machines will need a spare part”.
But here, we are talking about information as a commodity which has an “exchange value”. When would sharing information between apps become a “loss of sovereignty”?
“Apple and Google are pressing carmakers to install the operating systems they have designed for cars’ entertainment systems, which in practice will suck up all sorts of other data about the car and its occupants. Carmakers are realising that to give up this territory would risk their “sovereignty over the data” generated by their vehicles, in the words of Wilko Stark, Daimler’s strategy chief. They could end up like Samsung, whose profits from smartphones are limited by the fact that it depends on Android, Google’s mobile operating system”.
So how do we get past the fear of sharing?
One way is by looking to bureaucracy – the “Open Data Initiative” of several governments has put a lot of data (albeit mostly mundane) in public domain – which can then be used by startups like Zillow to create apps which can monetize the inferences from this data. Other good examples cited in another article in the same issue of The Economist are around corruption – “Making data public can also fight corruption. Last year IMCO, a Mexican think-tank, found over 1,400 teachers apparently born on the same day in 1912, prompting a purge of the “ghosts” from payrolls. British and Nigerian officials have used property and company registers published by several governments to investigate money-laundering…”
The other way could be revenue sharing – where the platform company acts as a trusted broker for the monetized data – providing various participants their proportionate share of the revenue stream or utility. The first step, a la Google or Apple, would be to build the right platform for that industry sub-vertical, where companies would want to share data and use shared data (remember Marx’s “exchange value“?)
Take an example of Navistar – a manufacturer of commercial and defense vehicles, which has not been profitable since 2011, in addition to being sued for violation of the Clean Air act.
They use sensors, big data and analytics today to offer efficiency solutions to their customers: “ Navistar is analyzing data pulled from OnCommand Connection, a remote diagnostics system the company launched in 2013 to monitor performance of more than 150,000 trucks in Navistar’s fleet, including its own international brand, as well as Freightliner, Kenworth, Peterbilt and Volvo makes. The software builds 20 million records a day, measuring fuel economy, geolocations, idle times and potential failures, and recommends corrective measures. Such visibility enables fleet customers, who can monitor the metrics from smartphones or tablets, to schedule maintenance, reducing unplanned repairs and downtime by as much as 30 percent. For example, rather than changing oil based on time or miles logged, the diagnostics software will alert customers when new oil is required.”
This is exciting – but more exciting is the vision around “platform” of their CIO – “ Navistar will eventually build an online portal that integrates telematics data with additional GPS data and parts inventory information, allowing fleet owners to locate the nearest dealer service location where the necessary part is in stock, as well as service locations that have available technicians and bays. The company is also considering offering an analytics service that would enable smaller fleets to acquire operational data about their without ponying up the cash to build their own systems”.
This is where Navistar could be the trusted partner for partners like parts manufacturers or service locations – sharing revenues from the monetized data for the greater good of all the partners subscribed to the platform, while adding more data from partners to extend the exchange value.
I believe we just scratching the surface of new business models to come. As the Economist article states, “It is impossible to predict where the open-data revolution will lead. In 1983 Ronald Reagan made America’s GPS data open to the world after a Soviet missile brought down a South Korean airliner that had strayed into Soviet airspace. Back then, no one could have guessed that this would, one day, help drivers find their way, singles find love and distraught pet-owners find their runaway companions…”
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