5G: democratising the platform economy 1

5G: democratising the platform economy

www.pwc.de

5G: democratising the platform economy 2

Executive Summary

5G will have a major impact across all industries and is set to permanently change current business models. The tech industry is currently led by a few large (US) companies and 5G is a chance for SMEs to catch up on lost ground. 5G provides four value drivers – low power consumption, extremely low latency, high data throughput and greatly improved network capabilities – which will enable a wide range of new use cases and make in-depth domain knowledge more important than ever before. Based on selected use cases from the fields of autonomous driving, smart factory and smart forestry, this paper explains the advantages and the impacts of 5G. These include better monitoring, a much higher rate of interconnectivity, increased flexibility and efficiency, and the opportunity to bring digitalisation to new areas. This paper also shows that use cases such as autonomous driving and car-to-x communication can only be achieved at scale with the help of 5G.

The second part of the paper addresses the growing platform economy, and the connection between 5G and the platform business. We show that 5G is the last piece of the puzzle required to digitalise complete value chains, and that it offers the chance for SMEs to create new and innovative platform solutions, leveraging their specific domain knowledge. The last generation of mobile networks brought people to the internet; 5G will bring things, machines and devices into the internet on a large scale. This will create huge numbers of endpoints, shifting the design of use cases to a new paradigm where data and endpoints are already available and use cases are built around them.

We conclude by introducing PwC’s 5G Jumpstart framework. This framework provides guidance to companies for creating and implementing their 5G strategies, value propositions and roadmaps using a fast and lean approach.

Few topics in the world of technology are receiving as much attention as 5G. Whether in consumer electronics, where 5G-compatible smartphones are being introduced, or in the automotive sector, where 5G is a key enabler of autonomous driving, the technology is already benefitting several industries. To understand the role of 5G in the society of tomorrow, it is important to understand what the technology is and how it is set to have a positive impact on the global economy. For many, it’s not just the technology that makes 5G interesting, but the disruptive potential behind it.

Examining the technological development of leading global companies reveals that the primary focus in all areas is on digitalisation. 5G enables this development by extending the possibilities of digitalisation to previously unattainable areas. The ability to transmit mobile data in real time and connect to trillions of endpoints enables new use cases and business models. This is also reflected in the enormous economic potential: it is estimated that 5G will have a market volume of $13.2 trillion1 in 2035 and will have spread to almost every industry across the globe. While industrial solutions in the context of the internet of things (IoT) and machine-to-machine (M2M) communication are some of 5G’s main business drivers, it also offers benefits to consumers,

enabling innovative methods of media consumption and paving the way for further development of mobile working.

Despite the optimistic forecasts for the global reach of 5G, the technology is likely to follow the maturity model of its predecessor, 4G mobile internet. Trend forecasts show that 5G will only account for about 50% of data traffic in developed markets and 15% globally by 2025. The leading markets for 5G technology are likely to be Asia (particularly Japan, South Korea and China) and the USA.

There is one fast-growing business model that has embraced 5G ahead of any other, with businesses already experiencing benefits from the technology – the platform business model. 5G offers the opportunity for industry players and SMEs to build platform business models as an essential building block of the digital economy, as it enables the digitalisation of the physical world in a way that was previously impossible. Accordingly, this paper will examine the ways 5G is enriching business models, opening up new revenue opportunities, and both enabling and changing the platform business. Special attention will be given to SMEs and how 5G has the potential to help close the gap between these smaller companies and leading tech players.

A key building block for an interconnected world

1 See www.qualcomm.com/media/documents/files/ihs-5g-economic-impact-study-2019.pdf

The gateway to digitalising everything

5G is not just the next evolutionary development of mobile networks: it is the start of a technological revolution. The term 5G stands for the fifth generation of broadband cellular network technology. Whereas 4G was designed as an evolution of 3G, improved capacity, user data rates and latency, 5G introduces a new method of data transmission by using different frequency ranges and wavelengths. Compared to common standards of Wi-Fi and 4G, 5G enables new and improved solutions which can be grouped into four value drivers: low power consumption, low latency, higher throughput and increased network capabilities. All of these features make new services possible, for consumers and industrial users alike.

The table below compares these features of 5G to 4G and Wi-Fi standards.

Fig. 1 Comparison of 5G to 4G and Wi-Fi 6

LatencyDelay between sending and receiving data

20ms 30–50ms 1–10ms

ReliabilityEfficiency of data transport without packet loss

99.99% 99.99% 99.99%

ThroughputThe amount of data that enters and passes through a communication channel per time unit 9.6Gbps 300Mbps–1Gbps 10–20Gbps

Connection densityNumber of connected devices per unit area 8 per part 12 per part/100k

connections per km2

100 per part/1m connections per km2

EnergyComparative power consumption level of network

Medium High Medium

Source: PwC 5G in manufacturing – How the new wireless standard can accelerate automation, 2020.www.pwc.de/de/technologie-medien-und-telekommunikation/5g-in-manufacturing.pdf

Wi-Fi 6 4G 5G

5G: democratising the platform economy 3

5G: democratising the platform economy 4

Value driver I: low power consumptionThe volume of data being transmitted and the number of connected devices are expected to rise exponentially with 5G. Therefore, it is important that 5G is more energy efficient than previous mobile generations. A joint study by Telefonica and Nokia expects 5G-based mobile networks to be up to 90% more energy efficient per traffic unit than current 4G networks2. Combined with steadily decreasing hardware prices, this makes it feasible for companies to install and operate interconnected endpoints at every step along the value chain. 5G will thus enable new use cases which require longer battery life and constant connectivity. With devices running for longer and with less impact on the environment, 5G will help meet sustainability targets – both in terms of combatting climate change and in terms of organisations looking to build more sustainable business models.

Value driver II: low latencyThe low latency of 5G enables it to be used for digital applications which require real-time data transmission, such as smart healthcare applications, smart city applications, autonomous driving and other use cases with similar requirements. “Real-time” has no universal definition, as it varies depending on the application. However, “real-time” in industrial applications is often assumed to mean a latency of 1–50ms, as this is required for most high-performance applications. 5G – with a latency of just 1–10ms – meets requirement and is comparable to fibre-optic networks.

Value driver III: higher throughputAs well as enabling faster data transmission, 5G will also allow larger quantities of data to pass through communication channels. By allowing parallel data transmission instead of sequential data transmission, 5G can achieve much faster upload and download rates than current standards. For example, video recordings or high-resolution image files can be transmitted without any delay. Unsurprisingly, applications that depend on the transmission of large quantities of data packages are very likely to come to rely on 5G networks. One example of this value driver is the transmission of medical images, such as CT scans or MRI scans. Another is VR events, which can be streamed live without any interruptions or buffering using 5G.

Value driver IV: increased network capabilities5G uses an approach known as massive multiple-input, multiple-output (massive MIMO), which allows multiple signals to be handled simultaneously on a single frequency and multiple connections to be made with a single cellular network tower. This has the potential to revolutionise M2M communication – for example, it enables full interconnection of all systems within a production chain, including connection to both on-site and off-site logistics and warehouses.

In general, 5G has a higher signal quality than older standards thanks to beamforming – a technique that enables a wireless signal to be targeted towards a specific receiving device, instead of the traditional method of

spreading a signal in all directions from a broadcast antenna. This means that the location of a device and an antenna can be calculated, and the transmission between both gets optimised.

While enabling a wide variety of use cases, 5G also places increased demands on mobile networks. This is where network slicing comes into play. In 5G networks, network slicing refers to dividing physical network infrastructure into virtual network partitions, each with different properties. The various network slices provide specific functions and performance features for different use cases. For example, slices can be created that enable particularly high transmission rates or particularly low latency, depending on the use case in question.

5G: a driver of new business modelsThese four value drivers enable 5G to open a whole new palette of use cases, and the technology is set to have an enormous impact on future operating models, revenue streams and business models. 5G will lead to both an increase in the number of connected devices, and to higher-quality transmission due to its low latency and high transmission rates. The possibilities this creates are almost endless. Imagine being able to create a digital twin in real time or establishing the internet of everything (IoE). This is all possible with 5G – regardless of the quantity and location of data that needs to be transmitted.

2 See www.nokia.com/about-us/news/releases/2020/12/02/nokia-confirms-5g-as-90-percent-more-energy-efficient.

5G: democratising the platform economy 5

Interconnected solutions for real added value

In today’s world, two distinct spheres exist: the analogue world and the digital world. On one hand, there are the high-value internet platform companies, led by American players such as Google or Amazon and their Asian competitors such as Alibaba. On the other hand, there are companies from the old economy, which are strongly anchored in the physical world but are also increasingly focusing on digital skills to exploit digital services-based business opportunities. These companies are now increasingly realising this potential with their first attempts at digital twins and new digital services. However, 5G will open up many more opportunities and will begin to blur the lines between these two worlds. There are two reasons for this. Firstly, the value drivers that 5G offers will drive digitalisation in domains which have so far been left untouched. Most of these domains are very specialised, so digitalising them will result in a huge number of new digital use cases, which need to be understood and categorised. Secondly, standalone use cases are only of limited value. To leverage the potential of the data generated by these new use cases, an overarching platform to interconnect data and solutions is essential. Platforms enable knowledge and skills to be combined across a variety of sectors, and therefore create the opportunity to build comprehensive solutions which offer real added value.

New world

Analogue world

Digital world

Fig. 2 5G will increasingly blur the lines between today’s analogue and digital worlds

Autonomous driving will only be possible with 5GOne of the most well-known use cases related to 5G is autonomous driving. Original equipment manufacturers (OEMs) often make it sound as if it’s just around the corner – but in actual fact, further technological development is required before self-driving vehicles can become mainstream. Also, the current infrastructure in Europe does not allow extensive use of self-driving vehicles: there is no stable network for secure real-time data transmission. But a fully developed 5G network can provide that.

Fig. 3 Expected development of applications based on technological factors such as reliability, latency or speed, and on 5G coverage

2019 2020 2021 2022 2023 2024 2025

Fixed wireless access

Enhanced mobile

broadband

Public safety communications

Consumer AR/VR (retail)

Energy and utilities

Widespread IoT (smart cities and

agriculture)

Fleet/inventory management and

tracking

Smart home

AR/VR in health-

care

Real-time banking

• Speed: 1–5Gbps• Latency: < 20ms

• Speed: 10Gbps• Latency: < 10ms

• Reliability: 99.99%• Latency: < 5ms

• Reliability: 99.99%• Latency: < 1ms

• Battery life: > 10 years

• Devices: up to 1 million/km2

Self-driving cars and smart

forestry

Dense urban Urban/suburban Selective rural

Coverage

Smart factories (real-time

remote control)

In the case of autonomous driving, 5G will overcome current barriers such as the latency. Solving these problems is essential to ensure quick reactions (1–10ms), to meet safety requirements and to realise the use case. Another challenge is the large number of endpoints – for example, a 5km traffic jam contains around 2,500 cars3 demanding service, and parallel mobile phone requests will easily double this demand.

In inner-city traffic, ultra-low latency and high network capabilities are even more important to ensure constant endpoint connectivity. This refers to both car-to-x communication and x-to-x communication – the Internet of Everything. Cars, traffic lights, public transport, mobile phones and businesses all need to communicate, which means that both data throughput and the number of endpoints will increase rapidly. In contrast to older technologies such as LTE, 5G meets these new requirements.

3 See https://plattform-digitale-netze.de/app/uploads/2016/06/151109_PF1_007_FG3_Vision_5G_lang_Ansicht.pdf.

5G: democratising the platform economy 6

Source: WEF, The Impact of 5G: Creating New Value across Industries and Society.https://www.pwc.com/gx/en/about-pwc/contribution-to-debate/wef-the-impact-of-fiveg-report.pdf

Together with decreasing IoT hardware prices, the rise of 5G makes it possible for businesses to significantly improve their digital twinning capabilities and move their business models almost entirely into the digital world. The technical capabilities of 5G allow the entire value chain to be digitalised. MIMO, network slicing and ultra-low latency enable processes to be both accelerated and separated from one another: this may initially sound like a contradiction, but it opens up a new way of operating. Digitalisation of the entire value chain and the freedom offered by high-performance wireless internet allow the value chain to be broken down into the smallest possible units, which can then be rearranged and consolidated as required.

Currently, coherent manufacturing sites with fixed processes are required for cost-efficient operation. Machinery is connected by wire, has only one point of connectivity, and depends on a particular sequence of process steps. In contrast, 5G can both segment and distribute production, coupled through flexible processes and the further expansion of automation. This is made possible by having wireless access to all machines and the option to connect them to different network carriers with the same requirements (network slicing) in real time while simultaneously achieving energy savings of up to 90%7.

Industrial use of 5G – the smart factory approach

To enable a comprehensive smart city approach, an orchestrated platform is neededExamining this complexity makes it clear that it isn’t just the technology itself which will enable use cases like this. To orchestrate data and solutions, platforms are needed to connect all endpoints into one comprehensive solution, especially in inner-city traffic. OEMs, municipal utilities and network providers need to work together to define standards, to build up central capabilities for orchestrating connections, and to optimise and develop further added value from a top-down perspective.

Rapid expansion of 5G infrastructure and an open platform approach are therefore in the best interests of all stakeholders. Otherwise, there will be a risk of developing products that fail to meet future customer demands and/or that cannot be integrated into an overarching platform. Some OEMs are already working to overcome this challenge by partnering with carriers and providers. Those that are too hesitant to react may miss their opportunity to shape future business models and secure their place in the platform ecosystem.

Urbanisation is increasing at a global level – by 2050, 12.2% more of the world’s population will live in cities than it was the case in 20204. If we take this trend and the associated problems in metropolitan areas into account, it soon becomes clear that cities and municipalities will be dependent on 5G. But urban mobility is only the tip of the iceberg: new approaches to smart and clean energy solutions need to be developed, in addition to infrastructure

for meeting general demand. Growing urban populations require cost-effective and efficient use of resources, which will only be possible with an interconnected infrastructure. This infrastructure will produce a huge amount of data that needs to be transmitted, processed, and sent back and forth between different devices. The benefit of 5G, in this case, is the opportunity to create a scalable, fully digital and reliable platform, which enables new applications and use cases that were previously impossible. While it is true that smart cities will primarily rely on IoT, it is equally true that IoT will rely on 5G to operate in this new age.

An example of how this can be approached shows the currently running project Connected Urban Data in the German city of Freiburg which consisting of various local pilot projects which are being implemented and interconnected step by step. The approach here is to use open standards and specifications to guarantee transferability. The project currently includes solutions for mobility, road safety, connected social participation and city simulations, and may be expanded to other solutions at a later date5. At the same time, OEMs such as Mercedes-Benz are piloting car-to-x solutions, working together with other OEMs and communities6.

As we move into the future, the key question is how value can be created across all these domains. As mentioned above, these solutions will inevitably be operated using platform models, so let’s take a look at the types of platform that currently exist and how 5G will open up new opportunities for incumbents in the platform business.

4 See https://de.statista.com/statistik/daten/studie/870960/umfrage/prognose-zum-anteil-von-stadt-und-landbewohnern-in-den-weltregionen.5 See www.smart-city-dialog.de/wp-content/uploads/2020/10/BMI-Bericht-Modellprojekte-2020.pdf.6 See www.mercedes-benz.com/en/innovation/connected/car-to-x-communication.

7 See www.huawei.com/en/publications/winwin-magazine/37/building-worlds-first-smart-5g-connected-factory.

5G: democratising the platform economy 7

5G: democratising the platform economy 8

Fig. 4 Further industrial processes affected by 5G

Production optimisation

Modular factories

Human-machine interface

Supply chain integration

Preventive maintenance

Safety

Enterprise connectivity

Processes affected

by 5G

When factory processes are digitalised, production can be divided across multiple locations while retaining full control of the process. The power to assess the costs and efficiency of each step and each machine in the production chain enables production managers to effectively rationalise operating costs without affecting production. In terms of cost savings, this can be a real game changer.

From a supplier’s point of view, 5G enables seamless integration into their customers’ processes, making unplanned changes to orders much quicker and easier – and increasing order volumes as a result. In manufacturing, 5G also makes it possible to automate transportation of goods between multiple sites, using automated and self-driving vehicles. The machinery used in the process can be either fully automated or remotely operated – all enabled by the low latency of 5G – while network slicing provides network security and means there is no need to connect machines to a locally configured production network. In addition to this, data can be collected from the entire value chain, significantly enriching data models. This gives different value chain players their own individual platforms, which can in turn be bundled into an overarching, shared ecosystem.

For manufacturers, this means that digital platforms can be designed to accurately reflect individual customer needs. Data sovereignty is thus assured, while simultaneously enabling an interlinked and open ecosystem approach for production.

One such example is the joint venture between Haier, a producer of smart home appliances, and Huawei. The two companies built a complex, interconnected 5G factory for producing refrigerators: the factory incorporates smart devices, augmented reality (AR), remote control, and cloud-based automated guided vehicles (AGVs), all powered by 5G. The flexibility of these networked technologies allows efficient, mass customised manufacturing, while also enabling automation throughout the entire production cycle. In turn, Haier was able to enhance product quality, reduce downtime, boost efficiency and reduce operating costs8.

Mobile manufacturing (pop-up manufacturing) is another possible outcome of 5G implementation. As outlined above, the technical capabilities of 5G allow manufacturers to design modular processes which can be digitally tracked. This enables two possible use case scenarios: bundled, remotely operated manufacturing, where one operator is responsible for several production lines; and more flexible, regional production processes9.

Put simply, 5G offers great potential in manufacturing, enabling businesses to shift production even closer to customers and markets. In terms of connectivity and machinery, devices will no longer be tied to production sites and fixed processes, opening up more flexible and scalable mobile production processes. The underlying philosophy here is “steer globally, provide locally”, which tackles two recent trends at once (“lot size one” and regional supply). The difference between this and traditional production processes is that it’s possible for manufacturers to rapidly react to changes brought about by external factors, from enforced factory closures (e.g. due to infection control protocols) to changes in demand.

8 See www.huawei.com/en/publications/winwin-magazine/37/building-worlds-first-smart-5g-connected-factory.9 See www.gsma.com/iot/wp-content/uploads/2020/04/2020-04_GSMA_SmartManufacturing_Insights_On_How_5G_IoT_Can_Transform_Industry.pdf.

Source: PwC, 5G in manufacturing – How the new wireless standard can accelerate automation, 2020. https://www.pwc.de/de/technologie-medien-und-telekommunikation/5g-in-manufacturing.pdf

The climate crisis is one of today’s major challenges. More and more corporate businesses are recognising this threat and are taking steps to mitigate risks. To be disruptive, we at PwC believe that new technologies must also contribute to the goal of a sustainable economy – and nowhere is this more relevant than with 5G.

One example is smart forests. The much lower energy consumption of 5G devices compared to earlier generations opens up a number of new applications that would have benefitted from digitalisation earlier if it had been possible (and feasible). In forestry, for example, devices with a battery life of a couple of years could be directly attached to trees. 5G devices enable woodland to be monitored right down to single-tree level. Much like existing digital twins of machinery, this could be the beginning of “digital trees”, giving rangers the ability to enlarge their area of impact by bringing it into the digital world. This allows comprehensive mapping of wide areas to prevent the spread of weeds, wildfires, or simply to monitor the status of a forest.

The advantages are the same as with conventional digital twins: complete monitoring of all relevant properties of a real-world asset, the ability to carry out predictive maintenance, and the opportunity to run complex simulations. A vision like this is not limited to trees: it could address the entire forest ecosystem to mitigate concerns such as pollution. Comprehensive forest monitoring therefore enables faster and more effective regulation. In the future, smart forestry could also be used for climate agreements and other intergovernmental measures. The UN, for example, has suggested a national forest monitoring system to reduce emissions from deforestation and forest degradation (REDD)10. One example is rainforest monitoring to prevent illegal logging. This would also be relevant for local governments, as the process can optimise the use of resources and improve air quality in the long run. Companies that want to make sustainable and environmentally friendly commercial use of forests will also benefit from designing this use case using an open platform approach.

In cooperation with the Lower Saxony Chamber of Agriculture, the Ostfalia University of Applied Sciences recently launched a pilot project focusing on smart forests. The project involves equipping trees with sensors to measure dryness, temperature and bark beetle infestation to improve the forest’s vitality, prevent widespread tree dieback, and help achieve climate goals in the long run.

Local timber companies are also interested in using the solution to obtain real-time information about the quantity and quality of timber available, and thus plan their harvesting operations better – saving time, money and CO2

11.

What do smart forests teach us? 5G makes the spread of smart technologies and interconnected solutions possible and economical in areas of the economy that had previously been left out of digitalisation programmes, while simultaneously contributing to more sustainable ways of doing business. While smartphones brought people into the digital world, 5G and its value drivers have the potential to bring everything else into the digital world. A general challenge with 5G – as with all new technologies – is that interested players often shy away from the initial costs, as potential returns are still uncertain. However, it is clear from the examples given throughout this paper that the return on investment can be much more than just financial benefits. For example, 5G enables companies to quantify the costs of climate change and individual measures, and to determine the sustainability of a business model. Indeed, 5G can play a role in improving smart cities and accelerating the green economy in a way that other technologies simply cannot.

5G, ecological challenges and sustainability

10 See www.fao.org/3/bc395e/bc395e.pdf.11 See www.lwk-niedersachsen.de/index.cfm/portal/7/nav/1095/article/35964.html.

5G: democratising the platform economy 9

5G: democratising the platform economy 10

A new era of business models – 5G and platforms

Over the past decade, technology and connectivity have radically changed our lives. A key driver of this development has been mobile devices such as smartphones and tablets, which connect people and companies all over the world. Today’s big tech players – such as Amazon and Alibaba for e-commerce, or Google with its pure digital capabilities – have effectively leveraged this technology to create new, internet-based platform business models.

Most high-scaling platform businesses are owned by large tech companies located in the United States or Asia. Comparing the European economy with the US tech industry clearly shows the importance of these platform business models. For example, the US tech stock market alone was worth more than all of the European stock market combined in August 202012. A frequently cited reason for the lack of big tech players in Europe is the absence of venture capital13,14, which is required for businesses to grow large enough to assume a dominant role in the market. However, there are large industrial companies in Europe which are trying to establish

platform businesses and leverage their own platforms to shift from a focus on products to a high-margin, service-focused business model, a development known across Europe as servitisation. Success here has been limited. A primary reason for this is that industrial companies working in the analogue world are not able to generate value via digital, highly scalable services. 5G will play an important role in creating digital characteristics in the old economy going far beyond pure digitalisation. But before we take a look at how 5G will open up new business models and how the mechanics of platform opportunities differ from those in pure digital businesses, it’s important to analyse how platforms in general generate value.

How platform business models generate value“Platform” is a very diverse term applied to various different business models. What all approaches have in common, however, is offering digital services which – due to their digital nature – are highly scalable and can be scaled up at little or no marginal cost. In general, there are three ways in which platforms generate value:

Fig. 5 The three types of platforms and how they generate value

Type 1

Services

Providing and selling digital services is the platform owner’s key focus

Revenue for platform owner:service fees

Examples: Salesforce, ServiceNow

Type 2

Marketplace

Providing marketplace services and access to a large customer base

Revenue for platform owner:marketplace fees

Examples: Amazon, Alibaba

Type 3

Customer insights

Accumulating a large number of users by providing digital services specific to user needs

Revenue for platform owner:selling data or customer access

Examples: Google Search, Facebook

12 See www.cnbc.com/2020/08/28/us-tech-stocks-are-now-worth-more-than-the-entire-european-stock-market.html.13 See https://blog.iao.fraunhofer.de/the-winner-takes-it-all-marktkonzentration-bei-digitalen-plattformen.14 See www.bloomberg.com/news/features/2018-08-16/inside-europe-s-struggle-to-build-a-truly-global-tech-giant.

5G: democratising the platform economy 11

The first type is the services platform. The platform owner offers services to customers via a platform itself. The added value for the customer is primarily the availability of expertise and complex solutions and services. Examples in the digital world include the Microsoft Azure Platform, with numerous cloud solutions; or software platforms such as Salesforce, which offer enterprise software and analytics solutions and thus build up purely digital platform businesses.

The second type is the marketplace platform. With this type, the platform provides market access for participants, which enables them to gain access to a large group of potential customers. The value of the platform for the customer is created via services which enable them to focus on their core competencies and scale their business quickly. Well-known examples of this type of platform include Amazon, Alibaba, and the Apple App Store, which provide end-to-end sales processing services and developer environments through their platforms. The platform owners’ revenue is generated from marketplace fees, which are often a share of the sales that the customer generates using the platform.

The third type is the customer insights platform. This provides added-value services to users, and in return the platform collects information about the users. This information can then be made available to other companies – either directly, or in the form of target group analyses. The platform owner generates revenue by selling data or information to third parties – for example, selling advertising. Companies using this approach are among the most valuable in the world today, such as Facebook with its social media platforms, or Google with its widely used search engine.

A type one platform is the starting point for all other platform types. For example, Amazon started only with book sales, and Facebook initially only provided services to connect individuals through its network. However, all types of platforms are dependent on digital data, which limits platform opportunities for traditional companies working in the physical world.

The success of today’s high-scaling platforms is mainly based on types two and three, and relies on the size of participants: above a certain size, these platforms create positive feedback loops, as attractiveness increases with the number of users, thus attracting even more users. A “winner-takes-all”-principle applies, making it difficult for smaller players to compete in the market.

5G will break this cycle. It will integrate characteristics of purely digital and software-based business models into today’s mainly analogue world. The physical and digital worlds will merge as 5G spreads, and the opportunity to apply similar digital platform business models to companies from the old economy will grow significantly. This applies to all companies in all industries, from automotive manufacturers and utilities to consumer goods companies.

An analysis of today’s platforms also shows that 5G platform success factors work differently from those in most of today’s platforms and will allow smaller companies with high expertise to build new platform offerings.

New platform business models will emerge from the digitalisation of the physical worldAlthough there are already platform business models based on physical objects (e.g. smart homes, smart manufacturing), most of today’s platform business models are entirely software-based and are rarely linked to physical products for value creation. Technical feasibility and limited profitability of existing solutions mean that the number of endpoints is still very limited. It is very likely that the advent of 5G will overcome these barriers. The number of endpoints will increase tenfold, while low latency and high transmission rates will enable high-quality, real-time digital twins of the physical world and will get the IoE off the ground – as described in the smart forests use case above, for example.

When building connected solutions with current technology, connecting the physical endpoints themselves is a major task. With 5G, however, the number of endpoints – primarily driven by individual use cases – will increase rapidly. Therefore, it will not always be necessary to create end-to-end designs from the sensor to the solution. Instead, there will be a large number of connected devices; it will be possible to create and offer services for these devices via platforms, ultimately enabling platforms to scale up.

Just as new platform models emerged when individuals and companies were first connected over the past decade, platforms will leverage new physical endpoints and networks of things to generate value in a wide variety of ways. Virtual reality use cases which allow real-time remote operation of healthcare and/or industrial equipment, or smart forest solutions which allow entire ecosystems to be monitored are just some examples of ideas which will be orchestrated via platforms in the future.

5G will democratise the platform economyNew platform opportunities are linked to the physical world, setting them apart from today’s purely digital platforms. While both current and future platforms generate value in the same way, the mechanisms that determine their success are fundamentally different.

The added value of platforms enabled by 5G is primarily generated by networks of things, not by networks of individuals. Endpoints – which represent digital twins of physical things are much more heterogeneous than individuals. In the case of individuals, the value of data does not vary by domain. For example, Amazon, Google and Facebook all generate value while leveraging needs and analysing behaviour. In a network based on things, however, use of information (e.g. sensor data) is much more application-specific. Generating added value depends on having dedicated know-how for specific use cases.

5G: democratising the platform economy 12

For type one platform businesses (including those with a strong link to physical products), provision of excellent services with deep domain knowledge will attract and retain customers. Digital platforms often begin life as type one and shift to type two or three later, but 5G makes it possible to start with a type two or three platform business. Overall, the value of a platform always depends on the quality of its services and any related physical products. Consequently, domain knowledge is indispensable; size or number of users are no substitute.

Platform marketplaces (type two) will also play an important role for 5G platform business models. Opening a platform to partners will always increase the quality of the platform. However, the value of a growing number of users – which gives rise to a winner-takes-all effect for platforms offering purely digital services to individuals – is less pronounced.

Platforms linked to physical products operate in narrower domains, so the owner of the platform with the best solution will attract users, and therefore gain further partners and participants. The number of endpoints of these platform models is much higher than in today’s digital platforms. For example, a smart factory might be under the control of just one company yet contain thousands of endpoints. Relevant dimensions of size can be shifted towards new platforms through the actions of only a few actors. This means that if a platform offers better functionality than others, it will always gain market share and become more relevant in the market.

Of course, the value of data is also relevant for platforms based on connected things. However, the winner-takes-all principle will not apply to customer insight platforms (type three) in a world of connected things as this world will be

based primarily on devices rather than users. The added value created by size and number of participants is limited. At a certain size, the added value of information gained from identical devices will decrease, as real value will come from information about the product itself and how the service and product can be optimised. Interoperability of devices has the same value as in purely digital platform businesses and might suggest positive feedback effects when platforms are growing. However, the same mechanisms as for type two platforms apply here as well. A large number of endpoints can be transferred to new platforms by just a few platform users. Quality of platform services is still the driver for success, and the required scale can be achieved through targeted action by just a few players.

Industry players from the old economy can significantly enhance their business models and market attractiveness through 5G. This means that SMEs will also have the opportunity to establish their own platform solutions on the market. Platforms such as Adamos in the manufacturing sector and Hue by Philips are two examples based on existing local networks.

In summary, bringing more and more parts of the value chain into the digital world will make domain expertise in platform business models more important in the combined digital and physical world of the future. The greatest added value of platform models is no longer in their size, but in their ability to leverage domain expertise to process information and offer digital services via platforms. This means that domain specialists have a competitive advantage over technology-focused players, giving them the opportunity to use 5G’s value drivers to make up lost ground.

Fig. 6 The winner takes it all principle is not valid for 5G enabled platforms

5G-enabled platforms

Key value driver:domain expertise

Many platforms per domain

Big tech platforms

Key value driver:size (number of users)

One platform per domain

5G: democratising the platform economy 13

Action required – Kick starting into the 5G world

As shown in the previous chapters, 5G will pave the way for the creation of more platform-enabled businesses with in-depth knowledge of particular domains, allowing the carve out of new, unique business models. In order to benefit from these opportunities, European enterprises (especially SMEs) need to actively engage from a strategic point of view – 5G, after all, offers the opportunity to catch up with large tech companies. It’s a particularly good idea for SMEs to use opportunities to collaborate on their 5G journeys, as this will give them the chance to focus on domain expertise and to play a part in designing 5G solutions – such as business-to-business-to-x (B2B2X) use cases – which will become much more relevant in the future15. Once your

company has identified an individual opportunity in a 5G world, it’s therefore necessary to look out for strategic partners to help you realise the use cases that deliver the most customer value. However, most companies are still at the beginning in the 5G business world. Therefore, the main question is how to prepare for 5G and how to get started.

To start the journey to a 5G future, PwC suggests companies to ask themselves the following questions to create their own 5G vision. This vision will form the basis of the business case, give an overview of necessary capabilities for their 5G future, and highlight specially selected lighthouse use cases.

Fig. 7 Key questions to start the 5G journey

What 5G will mean to the company’s current business and the respective industry?

What does a 5G strategy and roadmap for the coming years look like (short, medium and long term)?

What capabilities are needed under the 5G business model? What opportunities do partnerships offer?

With which 5G use cases should the company start? Which use cases enable the establishment of a relevant market position?

• Impact of 5G on the company’s USP

• Potential benefits of 5G for the business model

• Adjustments required to exploit the potential of 5G (including 5G infrastructure)

• Identify 5G’s specific implications and opportunities for the existing business model

• Derive required capabilities and operational cultural change

• Create a capability map and identify capabilities offered by partners

• Initiate partnerships to complement own capabilities and build a relevant 5G market position

• Decide whether to make or buy

• Demonstrate the importance of 5G using selected use cases that are unique among competitors

• Introduce 5G use cases in areas with the strongest domain expertise

• Plan for further 5G use cases

5G vision

1 2

5G business case

3

5G capability map

4

5G lighthouse use cases

15 See www.strategyand.pwc.com/gx/en/insights/2019/making-5g-pay/making-5g-pay.pdf.

1. 5G visionThe first step to take for any organisation is to answer the question of what 5G will mean to them, their current business and respective industry. Depending on the industry, 5G may have very different effects: there is a wide variety of scenarios, from complementing existing business models to disrupting entire value chains. It is therefore essential to understand the potential roles a company can play in a 5G future. The starting point should be reasonable questions, including: will my current USPs still apply with 5G in the picture? Could my business models benefit from 5G? How do I need to adapt in order to exploit this potential? It is also essential to understand your right to win in a 5G universe and what your business can contribute to it. Only if a company starts answering these questions and creating scenarios today, they can take advantage of 5G tomorrow.

2. 5G business caseFull implementation of 5G technology and infrastructure will take a considerable amount of time. One possible approach is to start by identifying 5G’s implications and opportunities for existing business models. Based on the 5G vision, a strategy and roadmap for the years to come needs to be created. This will generate important insights into the required digital capabilities and the cultural and HR-related changes and developments that need to be made.

3. 5G capability mapOn their 5G journey, companies need to focus on their strengths and domain expertise to create customer-oriented, high-quality solutions. 5G technology requires various capabilities – for example, the capability to build and run the necessary infrastructure – which can vary greatly depending on the use cases a company is planning to implement. Accordingly, it must be decided which capabilities are built in-house, and which ones are supplemented through partnerships or purchasing.

4. 5G lighthouse use cases5G creates a unique opportunity for industry players and SMEs to build new digital services orchestrated via digital platforms. Once a company identified its strategy and right to win, the next step is to establish a relevant market position. The quality of services is the key factor for success. PwC therefore recommends focusing on solutions that enable a unique service to be provided to customers. To do this, companies should start by implementing 5G use cases in areas of their strongest domain expertise. The main goal must be that new solutions become indispensable for customers. Start with a single service which sets your company apart from all your competitors and expand it into a comprehensive solution – step by step.

A 5G transformation can be a lengthy process and involves a variety of uncertainties for many companies, as the technology will have a major impact on business cases, solutions and ways of working. To combat this, PwC has developed the 5G Jumpstart approach to help getting started quickly.

5G: democratising the platform economy 14

Fig. 8 The 5G Jumpstart approach

Identify existing 5G-relevant assets and infrastructure,

ideas, opportunities and outside-in perspectives

Identify/describe capabilities that are necessary for the 5G vision

and the business caseEvaluate top use case ideas using

PwC framework and identify the lighthouse use cases

Translate aspirations into tangible formats: develop 2–4 5G

lighthouse use cases which will be leveraged to quickly and iteratively test and validate

solutions and services (including 5G infrastructure for testing)

Validate on go/no-go of the 5G use cases and

decide whether to stop or continue with 5G

transformation

5G vision and business case

List of use cases from which the lighthouse

use cases are selected

Prototype of 5G lighthouse use case

5G roadmap

Investigate

Describe

Evaluate

Prototype

Start or stop

The approach has four phases and is intended to support organisations in designing a 5G vision and business case. This is achieved by mapping and reviewing existing assets and infrastructure, by combining first use cases and ideas and by pointing out how 5G can be beneficial to specific use cases. The approach includes the identification and evaluation of the technical and organisational capabilities and ultimately creating a high-level road map. PwC’s tried-and-tested evaluation framework identifies the most promising lighthouse use cases – using iterative and agile methods. Our framework helps in developing and testing 5G lighthouse cases as prototypes; the outcome is then used to decide whether to roll out the use cases as part of a 5G transformation.

Please feel free to contact us if you would like to discuss the benefits of 5G for your business model and find out how we can work together to approach your 5G transformation.

5G: democratising the platform economy 15

© May 2021 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, which is a member firm of PricewaterhouseCoopers International Limited (PwCIL). Each member firm of PwCIL is a separate and independent legal entity.

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