Data ecosystems are essential for a dynamic and innovative economy to thrive. However, the power of centralized platforms also have negative aspects. How can this conflict be alleviated?

Ralf Neubauer: We need data ecosystems that can leverage the benefits of digital processes and shared data spaces while also being organized in a decentralized manner. Decentralized means the absence of a central instance responsible for managing the platform as a whole and coordinating data and data-related operations. Decentralized ecosystems are based on the principle of data sovereignty. The sharing of data is at the discretion of the data provider, who has the authority to choose the recipients, timing, extent, and conditions of the sharing. Technological solutions and a collaborative approach are necessary for this. The outcome is a dynamic network where value is collectively created. Catena-X for the automotive industry is an example of a data ecosystem currently being developed under these conditions.

So the goal is to establish a comprehensive and clear set of rules?

Dr. Oliver Mehl: Yes. The goal is to achieve autonomy from central components and provider systems, ensure data ownership, prevent vendor lock-in, and ultimately safeguard data and investments.

This system can provide a diverse range of services and infrastructure options that participants can choose from based on their specific needs. For this reason, part of the set of rules explicitly addresses the question of how standardized selection options can be created.

What measures can be taken to prevent the loss of data sovereignty within a network such as Catena-X?

Ralf Neubauer: Mainly by organizing the data exchange between participants based on rules and without a central intermediary. For example, Catena-X only permits an exchange between process partners and only between direct process steps, in other words, not across various stages of the value chain.

On the one hand, this presents a technical challenge. The software used in these ecosystems is either based on open source or adheres to the same standards as third-party software. Decentrally organized Self-Sovereign Identities (SSI), digital identities, are used to identify network participants and to create legal security. Or solutions are used, which bring together data from one partner with algorithms of another partner, ensuring that neither party needs to reveal their proprietary information.

On the other hand, it is essential to have standard rules and comprehensive governance in place to ensure compliance with standards. For example, the governance rules for Catena-X are established by the Catena-X Association, which is organized as an association.

Digital exchange within supply chains has been around for many years. What is the advantage of decentralized ecosystems such as Catena-X compared to established approaches?

Ralf Neubauer: Catena-X aims to make the entire supply chain part of the ecosystem. This has several decisive advantages. Communication along the supply chain is significantly accelerated and is based on common standards. Currently, the level of digitalization diminishes as you move backwards along the value chain. This prevents the full potential of digitalization from being exploited.

Smaller companies can also benefit from an open, collaborative ecosystem based on common standards. For instance, if they are no longer tasked with managing several proprietary platforms at the same time and unilaterally opening up data access. This means that operational added value can be shown and at the same time the quite rational fear of loss of sovereignty, dependency and high investment costs is reduced.  

Dr. Oliver Mehl:  There are also advantages in terms of flexibility, speed and cost efficiency. If the entire value chain is part of the ecosystem, there is no need to conclude complicated agreements with new suppliers, set up new interfaces or rebuild data exchange. Processes meet established standards and compliance requirements, and projects can be initiated very quickly. It is important to acknowledge the significant strategic importance of this by considering the geopolitical, climatic, and technological disruptions that value chains are currently facing. Lengthy process setups and IT synchronization delays are not feasible when faced with an urgent need for critical spare parts.

The way into a network like Catena-X requires more than just adjusting a few external interfaces. To what extent must companies alter their processes and technologies to be able to take part?

Dr. Oliver Mehl:  Each company needs to determine which processes are beneficial or essential within the framework of its unique business model. Catena-X, for instance, has implemented a use case to track the product carbon footprint (PCF) throughout the supply chain. In order to use it, you have to meet the Catena-X standards for data preparation and documentation. However, your own process organization and technology must also be able to do this. Participation in decentralized ecosystems therefore often requires a transformation of internal processes and systems.

At present, decentralized data ecosystems are in the early stages. To what extent do you believe they will influence the industry in the upcoming years?

Ralf Neubauer:  I believe that ideas that are being developed today in the context of such ecosystems will have a lasting impact on both value creation and IT. It is probable that within five years, the technologies currently in use will be so commonplace for companies that we will no longer be discussing them. The ongoing process of their standardization will play a significant role in this.