I have been helping to build B2B (Business to Business) marketplaces for six years now. My driving motivation has been to make business more efficient, reduce surplus or deficit and optimise markets for the participants, always aiming to create the elusive Perfect Market – a theoretical market in which buyers and sellers are so numerous and well informed that monopoly is absent and market prices cannot be manipulated.
The title of this blog entry is “disrupt or die: creating the elusive perfect market” – in effect I’ve been helping businesses to disrupt themselves, to present new opportunities through the medium of digital transformation. There’s a wide-open field of opportunity as the march of technology slowly reshapes your life around better ways of doing traditional “things”. For instance, the ubiquitous taxi industry disruption (sometimes, there’s just easier ways of doing things; Dominos’ Pizza found the easier they made it for you to order pizza… the more pizza you’d order).
To give you a bit of context before I push on, I’m in the business of helping what I call “Big Marketplaces”. These are B2B marketplaces that can be thought of as those with complex products and/or complex buying dynamics, typically encompassing international trade. In other words, not homogenous, highly fungible (easy to trade) products. This kind of business is not about rationalising the process of buying and selling supporting products for your business (such as stationary, which has all been taken care of by e-procurement). It’s about trading products used to make other products, either in great volume or in great value. An example of this might be agricultural produce such as skimmed milk powder, which is used in a variety of manufactured products.
Take our example above (skimmed milk powder) – it is a complex product with many characteristics like moisture, fat, lactose and protein contents, plus the pesticides used in its production, etc. A complex buyer might be a manufacturing facility in China, requiring skimmed milk powder to make chocolate bars. The buyer demand and the seller supply is highly variable and affected by weather (on both sides), consumer demand, and so on. The Chinese buyer might be purchasing from many different geographies, which have varying lead times for logistics. In this example, you can see that creating a marketplace which helps to match supply and demand is non-trivial.
Big Marketplaces are complex and this means that there are many areas where efficiencies can be applied. For example, in moving to a digital channel you can start to be data driven closing the gap in your understanding of market sentiment and what price you may ultimately pay or receive at any given time.
There are many reasons why it’s “disrupt or die” time for businesses who sell in a B2B “big” market: technology to help support transactions is starting to mature to the point that the feasibility of completing a transaction end-to-end in a digital channel is a real possibility (think here of smart contracts, new ways of B2B payment settlement, and electronification of logistics including containerisation). It’s beneficial to deploy some of these technologies as they in themselves reduce the fee burden on each transaction and make your department more efficient.
Perhaps the most compelling reason is if you don’t start to do this yourself, new entrants in the market will be showing up to eat your lunch. New digital challengers are easily able to articulate a new approach with connected processes and efficiencies which may very well disaggregate your business, or perhaps force you to reduce margin potential by increasing direct competition through increasing market access via an online marketplace (or portal).
It might feel like this doesn’t apply to your business or market, which is well established and has a great supporting eco-system of connected partners. Tradition and difficulty of enacting change might lead you to believe that disruption is an unlikely near-term threat. The fact remains that change and progress is relentless – “easier” disruption may be occurring in other markets right now, but the focus will start to shift to more complex markets with big challenges, but equally large rewards.
Just to be clear, I’m not advocating seismic change to all big marketplaces and participants therein. Disruption can be in-part, providing complimentary digital services to tackle common opportunity and easily delivered efficiencies, allowing your organisation to focus efforts in growing business in other areas – safe in the knowledge that you’re already leveraging technology for efficiency and with a standard play book to enable you to identify where this can be deployed to best effect in the future.
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