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Innovatie

Feb 23
0

Digital Twin; connecting the physical and digital world

By | Blog, Innovatie

Digital Twin is finally getting the attention it deserves. Still, Digital Twin as a concept becoming part of the mainstream has been slow in most industries, especially beyond industrial manufacturing, like marine engineering and aviation. There are two reasons for this: first, the technologies that make up Digital Twins have not yet matured enough for mass adoption by mid-sized companies. The second was that people were still not able to grasp what Digital Twinning had to offer and what it really means to invest in this technology – ‘How does it differ from a 3D model?’ ‘Is it not relevant only for industries and big machinery?’ were the industry murmurings.  

What is a Digital Twin? A Digital Twin is a virtual representation of a physical object, process, or service. The representation can range from jet engines or wind farms to large-scale representations of buildings or even whole cities. 

However, Digital Twinning goes beyond the physical embodiment of an object. It can be used to encapsulate an object’s behaviors as well as its relationships and links to other objects in a dynamic system.   

A digital twin, in essence, is a computer program that uses real world data by integrating the Internet of Things (IoT), cloud computing, and data analytics to create a simulation that can depict how a product or process is performing and predict current and future scenarios and outputs by leveraging machine learning and Artificial Intelligence (AI). 

Signals of Digital Twin

A Digital Twin can position itself to be an enabler as systems become more and more complex. Digital Twinning bridges this nexus by replicating these processes anywhere in the world in a virtual environment so people can monitor them from anywhere in real-time. 

Digital Twin also enables deploying automation at scale through a single platform that allows users to focus on the larger or more granular aspects of their choosing. A solar or wind farm, for example, located in the harsh seas near the Dutch island of Texel can be difficult to monitor in-person 24/7. A Digital Twin of these farms and their assets can help monitor their state and function without having to dispatch personnel under these harsh conditions. At a certain point, for some assets, self-initiating tests and cleaning mechanisms can be deployed via Digital Twin.

With the advancement of machine learning and a data-first approach, these virtual models have become a staple in modern engineering to drive innovation and improve performance as well.   

The Opportunity Digital Twins provide

Digital Twins can allow the enhancement of strategic technology trends, prevent costly failures in physical objects, and, also, by using advanced analytical, monitoring, and predictive capabilities. It doesn’t only test the object, but the processes and services as well. For example: AMS Institute has used Digital Twin to launch gamified solutions that tests how to optimize energy consumption in a specific region of the Arena Poort area. By creating a socio-economic lens and capturing how different actors such as individual citizens and communities in this system respond to these proposed solutions, the approach creates scenarios that mirror real-world relationships that are otherwise hard to capture. 

Finally, because humans are visually-oriented beings and since it revolves around visual representation, Digital Twinning is a much more intuitive way to collaborate. Essentially, as they enable transparency and collaboration, Digital Twins can serve as a constant source of truth as opposed to information being misrepresented and interpreted.  

What we’ve seen

Let’s take a look at how our client, Growy started their journey with Digital Twinning. Growy started out as a vertical farm with a vision of becoming next-level healthy, sustainable, and affordable. To achieve this, they use robots to reduce labor costs, minimize human contact to keep plants healthy, and to tap into renewable energy and reduced water usage.   

As a part of scaling up, Growy was expanding their vertical farms on various continents. Their vision of controlling quality and ensuring that all farms operate in a way that fulfills their promise of next-level healthy, sustainable, and affordable food was a key motivator for them to experiment with new innovations. 

As monitoring, collaboration, and visualization were key values for Growy, a clear synergy with Digital Twin technology emerged. Growy has assets at multiple levels, such as plants, robots, and farm units, that they need to monitor. Not only was there a need to keep track of all these objects but they also had to consider the overall process and life cycle of the plant and the farm. That’s how the replication of the farm, its objects, and their life cycles in the here and now was identified as a key focus rather than using the Digital Twin for future simulations.  

INFO tapped into IoT, data analytics, data integration, and visualization through a platform (using 2D assets) and approached the concept in a way that was be faster in comparison to traditional 3D modeling approaches. This helped us to test and understand if the technology and the concept could fulfilling our need to monitor, visualize and control assets of the farm remotely and demonstrate a clear proof of concept of how Digital Twin concept could help accomplish the vision and create economical value for the company 

Experimentation is a big part of Growy delivering on its promise and staying ahead of the curve. With all the data being collected on how different levels of water, nutrition, and oxygen help with yield and quality, the next step for Growy could be to run simulations by leveraging machine learning to create new scenarios and experiment with different plant profiles.   

To optimize visualization and collaboration, their solution could explore 3D modeling of the farms to run simulations or help teams understand how to optimize farming units inside the farm to meet their goals as well.   

Advice on how to get started

Today  – Research what value Digital Twin can add
Get a dialogue going and determine what the Digital Twin concept can mean for your business and team. By taking a design-led research approach to understanding what value Digital Twin can add, you can pave the way for actual Digital Twinning in the (near) future. The technology and concepts are constantly evolving, as are their applications, and there is no one way to fulfill a certain need or approach a certain problem. Diving deep into case studies, research papers, and keynotes about the subject can help you to build context and assess what you can achieve with the technology beyond the traditional applications.

Tomorrow  – Evaluate which values will you unlock
Now that you have a baseline, start aligning the value that Digital Twins offer with the challenges you need to address to see if there is a junction somewhere and if Digital Twin is a good fit. A good rule of thumb is to make sure you’re unlocking two or more values out of the following:

  • automation
  • testing strategies
  • risk management
  • predictive analysis
  • simulations
  • enhance CE
  • predictive maintenance
  • optimizing operations
  • monitoring
  • experimentation
  • sustainability targets

Evaluate what the key technologies from Digital Twin are and take a lean approach to test if the technological concept of ‘Twinning’ the process, object, or its behavior will help address the challenge or unlock the value you identified.

Done with your evaluation? Then it’s time to take a look at the people that will embark on your Digital Twinning journey. Do you have a team in place with the necessary skills? Or do you need to look outside the organization?

Implementation of Digital Twins can be complex. However, by working on smaller chunks that make up the Digital Twin concept and technologies involved, we can get a step closer to streamlining which features will create the most value to convince your stakeholders of the technology. Work on smaller chunks that make up the Digital Twin space. Focus on the concept and ideate on low-fidelity ways to achieve the same result. Catch our keynote at TNW 2022 (4) to see how you can build an approach for your needs.

Day after tomorrow  - Strong need for industry collaboration Digital Twin opens up a bunch of possibilities for your complex business needs. And since we’re all in the same boat there is a strong need for the industry to collaborate and share frameworks, approaches, and experiences while at the same time working with this technology to match it more to the challenges it is solving.

Despite all of the benefits, Digital Twins are not suitable in all instances. Some business problems simply do not need a Digital Twin and can be solved without the associated investment in time and cost.

At the same time, with so many connected devices and technologies involved, security and privacy are important themes to consider. The close connectedness between physical and digital objects also increases the risks of security breaches and foul play. For certain domains in the public realm, Digital Twins and IoT pose a considerable risk, and a lot of attention needs to be paid to tightening security.

INFO evaluates how to implement emerging technology like Digital Twinning from a responsible design lens while considering themes of security, privacy and ethics as well. Our hope is in the future we collaborate with companies and industry value chains to explore these frameworks and to bridge the knowledge gap when it comes to new emerging technologies like Digital Twins to solve societal gaps.

Feb 09
0

The added value of design

By | Blog, Innovatie

When people think of design, they usually think about simply adding visual context to (written) content and making things beautiful. And even though this is certainly part of it, design encompasses a lot more than merely making content beautiful. Designers create solutions to specific problems and the international council of design states that ‘they strive to do more with less, they maximise economy (of materials, of investment, of energy, etc.) ‘

 

To us, design is about adding value. Value for the company, sure, but more so for the customers, the end users. In our (humble) opinion, any designer worth their salt adds value through designing solutions: a solution to eliminate friction; a solution to help set priorities; a solution to increase conversion; a solution to streamline the customer journey;  a solution to create alignment, etc. 


How design adds value

The higher in the organization the designer can operate, the more value is added. This is called the maturity of design, or, in other words, the level to which design is attuned to the values, day-to-day operations, and potential problems of an organization. If you start small but dream big, you will add value throughout your business, solve problems, and guide your organization through operational, tactical, and strategic problems.

 

How INFO adds value through design

At INFO, we are all about building the right product and building the product right and we believe in the power of collaboration. Our designers regularly team up with stakeholders and our clients’ clients, aka the end users. They validate their assumptions to make sure that the solutions we come up with actually solve the problems or issues that they are experiencing and that the platform behaves in a way that feels natural to them. We don’t stop there, however. We also steer clear of the designers-design-and-developers-build trope. Our designers and developers work closely together throughout each project, from start to finish. 

Below, we have defined nine ways in which INFO adds value through design. Please keep in mind that this is a “live” document – as design in tech evolves, we evolve with it, coming up with new ways to add value to your business each year. 

  1. Setting priorities through design 

Often, the ideas for digital solutions are myriad, but resources are limited. Setting priorities is important to ensure that the business focuses on the right product or service. Design-oriented activities, like defining a product or value proposition, mapping value and effort, conducting a scoping session, defining design principles, etc., help to define a point on the horizon and to make decisions. 

2. Alignment through design 

Introducing a new digital product or service triggers cascading changes in many areas and processes within the organization. The critical factor that determines the success of those products or services is alignment. When designing for alignment, we manage stakeholder engagement and use an open and collaborative design process that creates a shared vision. Design staples, such as prototypes, storytelling, visualization, and creating a clear definition of the associated Key Performance Indicators (KPIs) also contribute to aligning all stakeholders involved.  

3. Create and build proposition through design 

Design is the process of creating value for all actors affected by a product, service, or combination thereof. What do your customers really need? Do they find value in what you have to offer? Creating and building a value proposition and communicating it clearly is one of the toughest challenges for any organization. It will guide all subsequent actions and decisions for the organization, both internally and externally. Design can help build a proposition by using tools like the value proposition canvas and ecosystem mapping.  

4. Scalability through design 

Organizations can experience difficulties when it comes to scaling their digital product or service. Increasing product or service use triggers challenges in performance and adaptation to new customer or content segments and might affect internal processes (e.g., more service desk questions). Scoping new features becomes more complex on a larger scale. A sound product vision will give direction to the development roadmap. Long-term design solutions and a clear design system contribute to scalable and consistent designs. Internal processes can be mapped in the service blueprints that designers often use in order to find weak spots and strengthen them.  

5. Building trust through design  

A reliable and trustworthy digital product or service has become a prerequisite for customers to engage with and stay loyal to a brand. Trust is extra important when you’re offering a high-value product or when sensitive information is involved. A good understanding of what matters most to the customer and being transparent as a provider are key. Insights from interviews or mapping the journey lay the foundation for designing a trustworthy digital product/service, including trust-enforcing moments in the customer journey. In short, we create trust by actively designing for transparency. 

6. Solidifying brand identity through design 

Brand identity speaks about a brand, the company’s values, what the product or service stands for, and how the company resonates with its target audience. It’s the brand’s personality, and it helps to establish a relationship with the customer. Design principles, such as ‘We build trust by being transparent’, and a design system, help to translate this personality to a (digital) product and keep track of consistency throughout the implementation. To ensure the brand’s personality is reflected in every element of your digital product or service, it is important to consistently implement design at every turn. When done right, this will make your customers feel a profound connection with your digital product or service. 

7. Improving user experience and efficiency through design 

Existing workflows can be greatly streamlined by paying close attention to the way people use them. This is especially valuable when dealing with products that people use on a daily basis. Designers consider the entire customer or employee journey to find ways of improving the user experience. By observing workflows and understanding people’s goals while working with a product, we often conclude their work can be done in a more efficient way. 

8. Increase conversion and reduce costs through design 

Organizations want to achieve their business goals, whether that is attracting more customers, increasing revenue, reducing costs, or something else. Design plays an important role; it is crucial to lowering barriers and increasing conversion. Good design can also lead to cost reductions and optimize employee workflows, making them work quicker and smarter. Making sure customers can use your product well will reduce customer service costs. 

9. Translating data through design (for alignment, finding opportunities, efficiency)  

Data is becoming an increasingly important asset for any organization. It can present facts, remove assumptions, reveal opportunities, and be used as a powerful tool for creating alignment or providing direction. In order to be helpful for users, data needs to be translated into actionable insights. These insights can only be created when you understand the user’s workflow and needs through design research. When data is used as a tool to analyze product usage, design translates the findings into solutions that improve the user flow. 

In conclusion

Companies that have ‘matured’ their design capabilities are able to add value to their products more quickly. They are more agile, better equipped to cater to their users’ needs, and have a far better understanding of what those needs actually are. In short, mature design creates very tangible business value. We will cover different aspects of this value, so stay tuned! If you want to learn about design on a more personal level, get in touch! 

Feb 08
0

Moving towards a Circular Economy

By | Innovatie

This article is part of our Binoculars-series. Download the entire paper here.

Let’s start with a bold statement: the circular economy will be dominant by the 2030s. Circular entrepreneurship is backed by attractive business models, political support, and a strong demand from society as a whole.  

In our current economy, we take materials from the Earth, make products from them, and eventually discard them as waste – the process is linear. In a circular economy, by contrast, we prevent waste from being produced in the first place. 

The circular economy is a model of production and consumption that involves sharing, leasing, reusing, repairing, refurbishing, and recycling existing materials and products for as long as possible. In this way, the life cycle of products is extended and waste is reduced to a minimum. 

The transition to a completely circular economy is being fueled by widespread concerns about climate change. A company that wants to succeed must start adopting circular economy business models in order to remain relevant and competitive in the future.

Signals

Buyers, both consumers and businesses alike, are making more deliberate choices. They demand access to product information, such as where a product was sourced, how the product can be recycled, and other insights into its lifecycle.  

Sustainability is increasingly becoming a more important factor in purchase decisions. We want our cars to be emission free, our food free from environmental harm, and luxury purchases traced back to its origins. But we see more than just evolving demand. The circular economy has strong political support.  For example, the European Union aims to transform its economy to a circular one in order to make Europe cleaner and more competitive.  

Quite notably, the circular transition encounters very little resistance, which is often the case with other major transitions. Companies are under increasing societal pressure to become climate neutral or at least sustainable.  

Product-as-a-Service (PaaS) is a catalyst towards a circular company. In nature, there is no waste, it’s simply food for another species: everything is a resource. Product-as-a-Service (PaaS) is a circular economy business model focused on using a product on a subscription basis rather than selling the product itself. In most PaaS models, companies retain ownership over the actual product and lease it to customers who pay a time or use-based subscription fee. When the subscription period is over, the physical product is returned to the company and then recycled into newer iterations.  

PaaS retains the value of products and saves resources by putting them back into the product cycle after use. Besides the actual recycling of the used product or parts, one of the biggest advantages of recycling is the ability to save energy otherwise used for waste management, incineration or any other alteration.  

The Opportunity

Many reports show that the circular economy offers an incredible $4.5 trillion economic opportunity by reducing waste, jumpstarting innovation, and creating employment. New business models focused on reuse, repair, PaaS, remanufacturing, and sharing offer significant innovation opportunities. For both existing and new companies.  

Consider the rise of SwapFiets. First of all, who would have thought that Dutchies would pay a subscription fee for a bicycle? Something that we have plenty of, right? Yes, we do. But quite a few of them are broken or rusting away tied to a lamppost. They’re often discarded, stolen, or lost. SwapFiets exchanges your bike when it’s broken and repairs it at their HQ. This means very little waste and a great user experience for the end user.    

What we see here is a shift from volume to performance, thus maximizing the usage factor and lifetime of the product. And because SwapFiets retains control of their products and materials, it saves costs.

What we have seen

With the help of INFO, Growy created the world’s first fully robotized, zero-waste vertical farm. We combined our expertise in human-centered design, robotics, IoT sensors, and data science to co-create a fully automated Farming-as-a-Service (FaaS) solution. FaaS is a promising business model in which Growy builds vertical farms and manages them as a service for their customers. Together, we embarked on an extensive journey to shape the vision for FaaS and to provide actionable evidence to properly build, test, and scale towards a fully automated Plant Manager. 

To better understand the interaction between plants, humans, and robots, we conducted research to map out the essential processes involved in a plant’s life cycle. Through in-depth sessions with stakeholders and interviews with growers, we gained a deep understanding of the Growy ecosystem. This allowed us to define a reliable and feasible starting point and to determine the steps needed to realize the FaaS solution, including a data strategy, an implementation roadmap, and a fully circular business case. 

The circular economy is here to stay. So if you’re in the business of producing and selling physical products, it’s time to step up your game. Let’s discuss how you can do more than just reduce waste, and how you can use digital innovation to become fully circular. We’ll focus on what you can do today, tomorrow and the day after.

Advice on how to get started

Today: Create transparency and traceability

The first step in becoming more circular is enhancing your understanding of the materials and resources necessary for creating your product throughout the supply chain and its overall life cycle. This is vital in identifying opportunities for reuse and upcycling. Besides, it taps into the growing needs of customers to receive clarity about where the resources in their product comes from. To achieve this, you can make use of solutions that might seem exotic, but are ready to be implemented in the short term. Among these short-term solutions, we’re excited about the Digital Twins. Various companies (like Growy) are using this kind of technology to enhance their understanding of a product’s life cycle. Creating a digital representation of the physical world opens up ways to manage your assets throughout their supply chain and usage. This will help you to understand how to improve the sustainability of your company. 

Tomorrow: Shift towards the Product-as-a-Service model

A great way to both transition towards the circular economy and increase your revenue is to offer your products as a service. Ownership is making way for subscriptions, fast, especially in B2B. With PaaS subscriptions, your company is more sustainable, while still boosting its profitability and generating recurring revenue. As more companies and customers adopt the PaaS business model, it will become more mainstream, which will cause large, established enterprises to follow suit. However, in order to make sure you’re not late to the party, you need to invest in changing up your operations and incorporate a business unit for reuse and repair. 

Recently, we helped VanMoof achieve just that. Now, they can repair their bikes faster, which instantly makes them more circular. Using our service platform, their process of repairing bikes and reusing old parts and components is more streamlined and less cluttered. Service platforms like this are vital to powering PaaS models. Especially when combined with a Digital Twin that allows you to oversee the entire product life cycle throughout the supply chain. This doesn’t only provide value for you, but also for your main suppliers. 

Day after tomorrow: Embracing Artificial Intelligence

Artificial Intelligence (AI) plays a pivotal role in enabling the shift towards a circular economy/company. The benefits of AI are clear from the major boost it gives your existing processes. It allows your organization to learn from feedback faster and make more sense out of complex, abundant data. Combining it with circular business models really strengthens a company’s competitive advantages. Take PaaS, for example. By using both real-time and historical data from sensors and users, AI can predict demand or maintenance, track circular indicators, and automate sustainable workflows. This helps increase product lifetime and contributes to a circular infrastructure. Besides, having your Digital Twin in place during the early stages makes it easier for AI to be trained and work for you in closing the loop.

Feb 02
0
data alignment

Perfecting Platforms; Composable architecture platforms

By | Innovatie

This article is part of our Binoculars-series. Download the entire paper here.

Platforms as we know them – complex business applications – are the core of your business and should be as robust as they are future proof. This is the way it’s always been and will not change in the foreseeable future.  

Gartner has mentioned that by 2023, companies that have adopted an intelligent, composable approach will outperform the competition by 80% in the speed of implementing new features. 

So, what is happening in the world of platform builders? Is there a change, or are there trends, that we need to take seriously when thinking about platforms for your business?

Signals

We have noticed a trend in the market where companies are looking at focusing their knowledge and expertise on their core businesses. This means that, in the platform-building space, there are parties that put their whole focus on a single, narrow market segment.
The focus that these companies bring improves the quality of the products brought to market in many different ways. Users are keen to take advantage of the quality and are looking at integrating it into their arsenal of tools used to perform their jobs.

In a broader sense, we see that people are starting to take these products and use them in addition to their standard business platforms. Consider, for instance, recording hours worked in a simple spreadsheet when it could be managed in an integrated timekeeping tool. From a business-efficiency point of view, this is not ideal, as it introduces new tools that do not integrate directly or smoothly with current business processes.

The Opportunity

There are opportunities for those who are willing to focus on their core business and stick to it. If you can create a tool component that people turn to, you will be able to stay focused on and increase value in the area that you know and love. These opportunities do require a steely focus and a thorough understanding of what is and is not the core that you want to focus on, though. And it means leaving things that don’t fit in with your core business to others.

Another opportunity lies in the creation of tailored platforms that are composed using the best-of-breed components available in the marketplace today. The components that work well for you help you focus on improving your product. The added benefit of composability is that these platforms are flexible and give you the opportunity to try out novel and innovative ideas. These ideas can then be validated and verified with the help of target groups and iterated on with ease, giving you a better chance to conquer the market. This is also identified by Mulesoft: “Composability will be a core pillar of business strategy to drive innovation and agility”.

What we have seen

When we consider, for example, the Digital Experience Platform (DXP), we notice a change over the past few years. You might remember the advent of the content management system (CMS) and the rise of different media platforms. In this space, the trend is to capture content, (multi)media, and customer experience in a single DXP platform. The platform is used as the hub; the content is kept there, exposed through a website and a mobile app, distributed to customers through different media, and tailored to their individual needs through a feedback loop.

The most prevalent trend in the DXP platforms is to make use of individual, composable components that each cover a part of the overall platform requirements. This means that it will be composed of the headless CMS that fits best with the specific platform requirements, a personalization engine to tailor the content for individual users, a search engine to create the best search experience possible, and other components that are needed for each specific case.

The beauty of this approach is that each component is tailored to the exact requirements of the platform. And components can be individually and independently changed and improved as the situation develops and requires different features. We have been building platforms this way for quite some time now and have seen the benefits of adding a specific tool when the need arises, but not before. This has given our customers a ramp-up when they need it, and it means they are not paying for something they won’t use.

Advice on how to get started

Today – Examine your current platform
Taking a leaf from the composable platforms we’ve seen, we’d advise anyone to examine their current platform and determine where it works and, more importantly, where it does not. The area where it doesn’t work for you is the first to investigate, as that can be a possible candidate for upgrading outside of your current platform. The investigation itself should examine the current platform and identify how it might integrate with an external tool. If you find that it has trouble integrating directly, you may have to get help finding a way to integrate indirectly, but often there are ways around these obstacles.

Tomorrow – Find best-of-breed building blocks
The next step is to investigate your entire platform space. It is ultimately comprised of several processes that work together as a whole, and many of these can be replaced by an existing tool that is focused on a single process and does that better than anything else. Find those best-of-breed building blocks! Using these tools, you can start replacing more and more of your platform and take advantage of the flexibility and scalability of the tools.

Day after tomorrow – Loosely bound set of tools
We have not discussed yet how these tools are set up, and I will not divulge too much here, but an important note to make for the future is that these tools will become more loosely bound. What I mean by that is that they will not have to be digitally close together, and they will only require minimal configuration to work together. Your platform will then become a loosely bound set of tools that will only require start-up configuration and minimal maintenance after installation.
We can see this happening with the different highly focused cloud services. One interesting example is automation service IFTT4, but there are still too many that are trying to do ‘everything for everybody’. For businesses, that might look interesting, but we find that this almost never aligns with their business cases. So, as you can imagine, INFO will be using these singular, focused services as tools to solve parts of larger composed platforms.

Looking through Gartner’s crystal ball, by 2027, more than 50% of enterprises will use industry cloud platforms to accelerate their business initiatives. These are significant numbers, and together with what we’ve experienced and seen, there’s a real reason to take these trends seriously.

Jan 10
0

Preparing for the Protocol Economy

By | Innovatie

Another wave of digital transformation appears on the horizon. Maturing and developing technologies such as machine learning, blockchain, edge computing, and virtual reality are driving this wave. We can already hear it growling through the buzz about NFTs, Web3, and the Metaverse. Sure, the hype is real, but also filled with lots of hot air. Still, one should not underestimate the underlying systematic changes brought about by this wave.  

The digital transformation of the past decade has given rise to a new form of economic activity: the platform. Businesses like Apple, Google, and Amazon have established platforms to cater to consumers’ needs and created what is known as a ‘platform economy’. 

Alongside the Web3 paradigm, another type of economy arises. An economic system where individuals or groups can participate in economic activities and earn rewards based on their contributions: the protocol economy.  

In the protocol economy, business (solutions) can be seen as a bundle of autonomous building blocks. Each building block is to be regarded as a microbusiness that creates specific value. Building blocks interconnect through open protocols that include value delivery, payment, administration, et cetera. They can be run from within the organization or from the external business ecosystem. When combined, building blocks drive exponential value creation in an ecosystem.  

Often, the protocol economy is positioned as the hacker movement, which aims to counter monopolies in industries, like how the Bitcoin-mining network is challenging the financial world. This, however, does not do justice to the broader transformative power of this model.  

Signals that show the Protocol Economy is here

There are several technologies currently maturing that form the foundation of the protocol economy. First of all, today, an interoperable digital identity is already available for all businesses and individuals (in theory). From national mobility cards to European eIDAS. This means that value can be exchanged between all kinds of parties, whether financial (e.g., banking), physical (e.g., goods), or IP-based (e.g., art). 

Secondly, as Web3 technology is becoming a commodity, it is possible to share the benefits of value creation through a decentralized ecosystem. Technologies such as blockchain and smart contracts allow the bundling of building blocks (services and data) into a new business without a controlling entity (as opposed to the previous platform owner). 

Thirdly, Digital Twinning boosts the integration of the physical and digital worlds. Combined with the technologies above, it allows real-world objects to have transactions with other real-world objects. Imagine your central heating at home negotiating a barter deal with your neighbor’s electric car. 

Fourthly, the adoption of cloud computing and the trend toward composable architectures allow developers to create reusable components to build applications more quickly and easily. This design pattern has been gaining popularity in recent years as businesses strive to reduce the time needed to develop and deploy new applications.  

Finally, there is the societal perspective. We are already at the point where societal pressure on privacy is being transposed into European legislation. It won’t be long before this also applies to topics like ethical Artificial Intelligence (AI) and sustainability.  

On top of that, the public is increasingly aware that, in the digital world, most value is created through monopolizing ownership of data. And that this has resulted in a power imbalance among platform companies across industries, resulting in increased social resistance.  

The protocol economy offers solutions to combine privacy, (data) ownership, and value creation and can thus, (in theory) tackle societal challenges.

The opportunity the Protocol Economy provides

As described earlier, a business can be seen as a bundle of autonomous building blocks. Building blocks that are operated from within the company or purchased from third parties.  

Consider both generic (micro-)SaaS services, such as authentication, invoicing, parcel delivery, and so on, as well as services provided by highly specialized businesses.

This allows a company to benefit from the economy of scale right from the start, as the cost of most building blocks is based on usage (OPEX instead of CAPEX). Since the interconnection of blocks is based on digital standards and protocols, it can be highly automated, improving efficiency. Standards and protocols also lower the cost of value chain coordination.  

Furthermore, it is the combination of blocks that provides value for the business’ clients, but not all blocks add equal value. In the protocol economy, a company can focus on the (custom) development of building blocks that allow it to add the most value. Other blocks are integrated from other companies in its ecosystem. Web3 elements allow a decentralized structure of value creation in that ecosystem. When combined, building blocks drive exponential value creation. From ‘winner takes it all’ to ‘winner shares it all’. 

What we’ve seen 

To illustrate the above, imagine an airport that promises to reimburse ticket costs when travelers are unable to fly because of waiting time at the security desk. The traditional reimbursement process is rather cumbersome. The traveler must provide all kinds of data (copy of identity card, boarding passes, proof of attendance), not to mention the control and enforcement activities that the airport has to carry out. 

In the protocol economy, the following digital building blocks would be used to compose this process:

  1. A digital identity service that protects the identity of the traveler (think of DigiD).
  2. A ticket booking service that links the traveler to a flight (think of Booking.com). 
  3. A location tracker service that confirms the traveler’s presence in the airport security queue at that time (much like Apple’s ‘Find my’ geolocation service). 
  4. A so-called public data oracle that provides the time an airplane leaves the gate (think of FlightRadar24). 
  5. A payment service that handles reimbursement payments (like Adyen.com). 
  6. A Distributed Ledger Platform (like Hyperledger.org) that holds the smart contract on which the reimbursement agreement is registered, verified, and (if true) executed.  

Theoretically, only the smart contract needs to be coded to implement this payback promise. All other building blocks involved can be fulfilled by existing, independent digital services, forming a trusted digital ecosystem.  

Once implemented, the reimbursement service can run autonomously, without human intervention. The contract will terminate or expire once the airplane leaves the gate (regardless of whether the  traveler is on the flight or not).  

Also note that, to process a traveler’s reimbursement, the collaborating building blocks do not need to exchange private data. Mutual trust in the ecosystem is the ‘only’ requirement (together with a bunch of clever Web3 experts).  

Advice How to get started

Today:  Start a dialogue

As always, keep cool and separate trend from hype. Start a dialogue on how the upcoming protocol economy could affect your business. Look for examples that emerge in your industry. What standards and APIs are being developed? Map the (digital) ecosystem your company is part of and identify business models where value concentrates. 

Tomorrow: Create a vision on product, architecture and collaboration

A company without a vision is a company without a future. So: 

  • Outline a product vision that lets you take advantage of the protocol economy. Analyze the modularity of your business; can you identify autonomous building blocks? Can these blocks be unbundled and rebundled? How do they relate to a distributed (Web3) ecosystem of blocks? 
  • Outline an architecture vision that allows you to compose your business service(s) from various autonomous building blocks. Can you decompose your IT infrastructure? Which external (micro) SaaS service options are available to help you build your business? What technology stack do you need to integrate those blocks? 
  • Outline a vision for collaboration for your future (digital) ecosystem. Which organizations are crucial in your future (digital) ecosystem? What level of trust do you need to make it work? 

Day after tomorrow:  Start exploring by doing

The transition towards the protocol economy is not straightforward, nor is it an instant revolution. So, start exploring by doing. Select a (part of a) business service and redesign it from a protocol economy perspective. Implement it step by step.

                 

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