Digital sovereignty is possible! This is how companies in Europe become more independent with data-driven business models

In the future, nearly every company will base its business model on data – ideally, this data management should be secure and independent. However, value creation primarily occurs through data sharing. This entails risks and creates additional technological dependencies. To secure the sovereignty of its companies in the digital age, Europe has launched the Gaia-X initiative: through secure and trustworthy data ecosystems, a framework for digital business models according to European legal principles is being established.

With digital transformation, the contribution of data to value creation is growing across all industries. In the transition from an industrial to a knowledge-based society, data combined with human creativity is becoming the most important growth factor in the economy. For the European internal market, the EU Commission expects growth in data-based business models from 440 billion euros in 2021 to one trillion euros by the end of this decade (Source: European Commission study).

A business model can be understood as the core logic of a company, defining how it creates and markets added value. An industrial company, for instance, processes raw materials, refines semi-finished products, and develops them into finished products. At each stage, value is added, with the company ultimately aiming to generate profit. In digital or, more precisely, data-based business models, the value increase essentially relies on the use of data along a value chain.

The foundation of digital business models is the data sources. In the future, data will increasingly be generated by the Internet of Things (IoT). Currently, an average of 17 devices per household in Europe are connected to the internet, amounting to a total of 15 billion IoT devices worldwide (Source: Statista). This number is expected to double by 2030.

To derive any added value from data, it must be collected, stored, and processed. Hence, infrastructure and development platforms from the cloud constitute the second level.

Only at the final value creation stage do data services emerge. Here, the essential benefits for business customers and consumers are realized. In the future, providers will market personal AI assistants, personalized healthcare services, smart dispatching for power grids, and new mobility applications at this level.

Many Innovations from Data Require sharing with others large internet companies may be able to implement data-driven business models on their own. However, for most companies, this is not a feasible path. They need to complete their data value chain through collaborations.

But in doing so, companies face legal, technical, and organizational hurdles. Forty-five percent of companies (Source: Bitkom) fail at the first stage of value creation due to a lack of market transparency: they cannot find data sources or suitable buyers for their data. Thirty-eight percent fear legal risks when exchanging data. To share data with even a handful of partners, all parties must contractually agree beforehand.

At the second level, many companies struggle with technology: half of the firms (Source: Bitkom) that attempt data exchange complain about incompatible data structures. Additionally, there is the looming dependency on large cloud infrastructure providers. Constant data transfers between different clouds are cumbersome. Once stored, it is laborious and expensive to retrieve data. Hyperscalers charge for every bit transferred to or from their platforms.

Restrictive pricing models, lack of interoperability, and the risk of vendor lock-in drive up the costs of data-based business models. Currently, only a handful of internet platforms control the majority of value creation from data, even in Europe. They solve the problem of data availability and sovereignty by claiming user data as assets and hoarding them on their cloud platforms. Marc Zuckerberg's company, Meta (Source: zdnet), goes so far as to charge users for the right to opt-out of having their personal data marketed, demanding up to 250 euros per year.

Under such conditions, businesses are reluctant to share their data. Consequently, six out of ten companies in Germany still refrain from exchanging data with third parties, according to consistent study results from the Institute of the German Economy (IW) (Source: IW Köln) and the industry association Bitkom (Source: Bitkom). Only by jointly managing their data will new business models have a chance to succeed.

What is missing is a technical infrastructure combined with strong governance to regulate cooperation. The answer to this requirement profile is data ecosystems. Since 2019, the European initiative Gaia-X has been developing an infrastructure for data-driven value creation based on open-source principles and European legal standards.

Data ecosystems are designed to prevent monopolies and offer market participants the widest possible choice of data sources, platforms, and data services. This approach lowers the barriers to data exchange and creates a stable foundation for digital business models.

The data economy is uncharted territory. Many companies without experience in data-based cooperation struggle with the first step. They can turn to the Gaia-X Hub Germany. Currently, more than 500 organizations from 14 industries and over 1500 members are organized within the Hub. This serves as a national contact point for all societal actors interested in exchanging data within open data ecosystems.