eCommerce
B2B Governance and the 1:1 Formula by Nilesh Gopali
“Business to business marketplaces have become the hottest topic in e-business, driving a future surge in revenues that could reach around $200 trillion within 10 years. – B2B business is booming by Mark Vernon, ComputerWeekly.com”
It would be stating the obvious that the B2B market – particularly in India – is growing so rapidly that its influence and dominance of economies cannot be questioned.
The effective management or governance of this growth is therefore critical.
Within the context of effective governance, I was recently reminded of an October 21st, 2014 Forbes article, in which Daniel Newman introduced the idea of a 1:1 B2B marketing model. In talking about the 1:1 model, Newman made the statement that instead of “over-scrutinizing large vanity numbers,” organizations would be much better off if they spent more time “focusing on single meaningful connections.”
Meaningful connections, as illustrated in the image above, are essential in the relationship driven B2B world, more so than they are in the highly volatile, transactional B2C world.
However, are 1:1 meaningful connections or relationships even possible in the one-to-many B2B world?
Not only are they possible, I would contend that they are essential to success.
What Is A Meaningful Connection?
Effective governance at its truest core is built upon relationships. Relationships are maintained through trust. This is the definition of a meaningful connection.
In the transaction-oriented B2C world, relationships are tenuous. eCommerce platforms are a means to an end in that they are more of a fulfilment mechanism after the buying decision has been made.
With the B2B world, eCommerce platforms are an extension of the relationship between buyer and seller or sellers. In other words, they enhance the capabilities of both existing as well as new buyer-supplier relationships, to achieve mutually beneficial outcomes.
These outcomes are achieved through the introduction of several key technical elements.
To start, a secure eCommerce platform which can be trusted by organizations of all sizes. I am not just talking about transaction security relating to financial considerations. What I am talking about is a trusted platform in which the process behind the technology itself provides opportunities for increased engagement and collaboration between buyer and sellers.
This means that the ability of B2B eCommerce platforms to analyse spend and benchmark prices against global markets or, the utilization of algorithms to identify best prices across large datasets and multiple contracts, is used in a collaborative manner.
When I say collaborative, I am moving beyond the adversarial use of pricing data to drive down supplier prices. Instead, and with regard to global markets, using pricing intelligence in this fashion ensures that the Indian supply base remains competitive both domestically as well as on an international basis. This is particularly important for initiatives such as the Make In India program.
Beyond the collaborative benefits, standardization in critical areas like product and service coding is also important. Whether using the UNSPSC, NSV and other similar codes, proper classification enables effective product grouping, reporting and comparison.
Collectively, the above elements – which encompass a B2B eCommerce platform, ensures accessibility for all suppliers, while streamlining manageability for the buyer. As a result, a 1:1 relationship capability is now possible within a one- to-many B2B platform.
In other words, the effective governance of the supply network is realized through an increasing engagement capability, that is based upon a fair and reasonable opportunity for a single vendor to do business with a large buyer. In turn, the buyer now has reliable access to an ever expanding pool of qualified suppliers, in which individual supplier capabilities can be identified and leveraged to achieve the best outcome for both parties. This is the epitome of a meaningful 1:1 connection.
In the end, effective governance is really based upon a sound Supplier relationship management (SRM) discipline. This discipline includes the ability for the buyer to strategically plan for, and managing, all interactions with third party organizations that supply goods and/or services to an organization in order to maximize the value of those interactions.
B2B eCommerce platforms provide the means to that end, and in the process harness the full promise of the B2B economy.
How Personal Mobile Connectivity Is Driving India’s Retail Evolution
Back in April I wrote an article titled Are you part of the “connected” revolution.
In it, I talked about the fact that more and more Indians are accessing the Internet, and doing so by way of mobile devices.
The impact on the Indian economy as a result of this new age of personal connectivity, is significant.
In today’s post, I will examine more closely, these key areas impact from the standpoint of the retail industry.
The Retail Evolution
Lately, much has been said and written about India’s retail market, and how it will skip a stage in terms of its evolution. At the heart of this accelerated transformation is the emergence of online retail as a viable and trusted platform.
Of course with 243 million Internet users – more than the United States and second only to China, it is clear that Indians are not only comfortable with technology, but are embracing it. So skipping a stage is not entirely a surprise. Especially given the comments made by eBay India’s Managing Director Latif Nathani during an interview earlier this year.
In the interview, Nathani made the statement that the entire evolution of e-commerce happened over a period of 15 years in India. This was a considerably shorter period than it was in what he considered to be advanced markets such as the United States, where it took more than 50 to 60 years to reach the same point.
I have little doubt that – at least in part – the original vision of the Digital India initiative helped to compress the time from 50 to 15 years.
Described as being an “umbrella programme”, Digital India’s primary objective has been centered on “inclusive growth” in key areas such as broadband and mobile connectivity.
What is most interesting however, is how mobile connectivity is almost single-handedly reshaping the next phase of the Indian retail marketplace.
Today, an ever increasing number of people – especially those who are part of the younger generation (35 and under), use mobile devices to both buy and sell online. Many of these have never even used a desktop or notebook personal computer.
As indicated in the following excerpt from part 1 of my 4-part series in Brokers Forum of India magazine, mobility is truly going to be the key driver of e-commerce in India for many years to come:
In his May 16th, 2014 article The Internet of Things and M2M – Some Predictions for a Bubbly Next Few Years from http://bluehillresearch.com/, Tony Rizzo talked about the fact that by “2020 wearable technology alone will be generating 1.2 zettabytes (yes, zettabytes) of data.” Think about this for a moment in the context of how people will interact in an eCommerce world. Specifically the devices they will use to buy and sell. This is the backbone of the new economy, where bricks and mortar storefronts will cede way to virtual stores where buying and selling can happen with a click of a button.
As a result, this has forced retailers to bypass or skip their mid to long-term e-commerce strategies, and become more proactive in their roll-out of programs that accommodate the new mobile reality.
A Case In Point
In her July 8th, 2015 live mint article “The medium term is dead,” Sapna Agarwal provided an example of how retailers have had to dramatically change their strategies.
Referencing a 2013 interview with Zomato’s Deepinder Goyal, Agarwal wrote that the restaurant chain’s founder had originally indicated that it would take “4-5 years to launch an order online facility on its platform.” The reason given was that the “logistics and infrastructure to connect all the restaurants would take time.”
This was, as Agarwal pointed out, less than two years ago.
Here we are in 2015, and instead of taking the previously predicted 4 to 5 years to launch their order online facility, Zomato’s just recently started the pilot to “allow consumers to order online.”
The restaurant chain is not alone, as most companies are following suit and introducing their own strategies at a quickened pace.
Conclusion
In the end, India’s retail evolution – and the evolution of business overall both domestically and globally, will continue to become increasingly personalized.
When I say personalized, I am talking about the power of individuals to transact business from anywhere at any time, whether for their own personal needs or, the needs of the organizations for whom they are buying (or selling).
This brings it own challenges, relative to security and controlling spend – at least in the traditional sense.
While security and managing spend is a discussion for another day, in the here and now, a proactive response to this new age of personal mobile connectivity should be the focus of every business.
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Rule 1 for Supplier Onboarding: Don’t begin training for the race at the starting line by Lyn Duncan
A recent report on supplier network management made the following observation:
“Historically, onboarding 10 – 20 percent of suppliers was considered sufficient, but that is no longer the case. Being unable to electronically connect to a majority of a supply base leaves a tremendous amount of uncaptured value on the table.”
While one would be hard pressed to argue with the second point regarding the need to connect to “a majority” of your supply base, it is with the first part that I have an issue. Specifically the suggestion that “onboarding 10 – 20 percent of suppliers was considered sufficient.”
The fact is that it was never sufficient, nor was it acceptable.
So while the above reference suggests that this was the rule rather than the exception relating to the viability of building and effectively engaging a supply base in the past, it is the consequences relating to this lack of participation that is the focus of my article today.
For those who have read my series of posts on our In The Cloud blog, and in particular the one on Perfecting the supplier farm system, you will almost immediately recognize the fact that the supplier onboarding process is one that evolves over time.
To be clear, I am not talking about the ease at which suppliers can now be introduced into a new system or platform. What I am talking about is their effectiveness once on board.
This is one of the main reasons why, from the very beginning, cloudBuy decided to focus on how to enable suppliers to better align and adapt their offering to the buyer’s needs within the framework of their own strengths and capabilities. Or to put it another way, it wasn’t a build first and then make suppliers adapt later approach. It was instead a deliberate cultivation of supplier capabilities at their individual point of development with the end objective being the creation of a network with a consistent standard of service delivery excellence.
What I am talking about is creating the proper foundation for a true and fully engaged eCommerce ecosystem.
For those vendors who have built their platforms around the acceptable 10 – 20 percent premise, attempting to catch-up through an accelerated onboarding capability is tantamount to beginning a training regiment for a marathon at the starting line.
You might be able to run the race – at least for a little while, but you certainly will not be able to maintain a competitive pace, let alone win it.
This is why it is absolutely critical to look beyond the technology of onboarding, and really understand how the supply network has been cultivated and developed over time.
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The Future of Indian eCommerce
EDITOR’S NOTE: The following is part 4 in a 4 part series by cloudBuy’s Nilesh Gopali that has been published in the Brokers Forum of India magazine. You can access part 1 in the series through the following link (July through October issues); http://www.brokersforumofindia.com/NewsLetters.aspx
“ What is interesting though in India is that the entire evolution of e-commerce happened over 15 years. In advanced markets like the U.S., it took over 50-60 years . . .” – Latif Nathani
In an interview [1] earlier this year, Latif Nathani, Managing Director, eBay India, talked about the rapid growth of the Indian eCommerce market. Compared to what he referred to as being advanced markets such as the United States, the comparison was nothing short of amazing.
Nathani’s enthusiasm relative to eCommerce growth was however tempered by challenges relating to amongst other things infrastructure support, and the unique elements of the Indian economic landscape.
In this the fourth and final part in my series that began with the first article Connecting the dots between eCommerce innovation and a robust economy [2], I will examine more closely both the promise and challenges of the emerging Inidian eCommerce world.
Assessing The Possibilities: Defining The eCommerce Revolution
When you consider the potential of the Indian eCommerce marketplace there are good reasons for optimism.
To begin, and as reported in the above referenced Nathani article, the country now has more than 200 million Internet users, of which 89 million are regularly visiting online shopping sites.
This has led to a proliferation of eCommerce companies that are well funded and strategically positioned to capitalize on the promise of the new economy both nationally and internationally. For example, and according to Nathani, “every eleven seconds someone in the world is buying a product from an Indian eBay seller”, while within India itself “16 products are sold every minute”.
Beyond the Indian borders, the potential for the general online market to dominate in other countries such as the United States is even more pronounced, as demonstrated by a Business Insider Study [3].
In markets such as Media, Sporting and Hobby Goods, online sales have increased by 40%. This upward trend is expected to surpass the 65% mark by 2020. Other industries such as Electronics and Appliances and Furniture and Home Furnishings, while not as robust, are also on a similarly positive trajectory.
Conversely offline sales for even the giants such as Wal-Mart, JC Penny, Best Buy and the Gap are experiencing a steady decline into negative growth. This has resulted in these as well as other chains closing physical stores at an alarming rate. As a point of reference, Staples is expected to close 225 stores by the end of 2015.
Even premium brands such as Abercrombie & Fitch are not immune to the effects of the emerging eCommerce economy, as the chain is scheduled to close 180 of its locations in 2015.
“We’re in the midst of a profound structural shift from physical to digital retail . . . it’s happening faster than I could have imagined” – Jeff Jordan, partner at Andreessen Horowitz (January 2014)
In the U.S. $1 out of every $20 is now spent online. This means that eCommerce in that country, is viewed as being the driving force in “nearly all retail growth”. With the proliferation of mobile and wearable technology – about which I talked at some length in part 1 of this series – it is clear that this paradigm shift in shopping will continue worldwide.
The Indian market has the potential to experience similar results in terms of the shift to doing business in the virtual realms. However, before a true transformation can occur, there are a number of indigenous barriers that must be removed for the eCommerce potential to be fully realized.
Converting Possibilities: Capitalizing On The eCommerce Revolution
Despite the positive trending relating to eCommerce adoption globally, within India there are a number of barriers that must be overcome for the country to truly become part of the revolution. This includes the disparity between those visiting online shopping sites and those actually buying goods and services online.
Referring once again to the Nathani article, of the 89 million who visit shops online, only 14 to 15 million make a purchase. This is a significant statistic in that it points to a number of serious problems.
To start, and unlike the US, the infrastructure to support electronic trade – including the use of credit cards – is not nearly as developed in this country.
The reason is quite simple . . . credit cards have been a major economic staple in the US for many years. Its utilization outside of the physical bricks and mortar model has been greatly facilitated through several transformation points including catalogue and TV shopping.
In India, such facilitation has not taken place. This has created an economic vacuum centered around an immature logistics and fulfilment process, and a lack of trust in terms of electronic payment vehicles. This is one of the reasons why eBay has introduced their “Power ship” and “Paisa Pay” programs. Tailored specifically to the Indian market, the hope is that such initiatives will begin to lay the foundations of reliability and trust resulting in the Indian consumer making the move from virtual window shopping to paying customer.
In certain situations, regulatory obstacles represent another potential barrier that has to be removed before the eCommerce model can be fully embraced. This includes a requirement in some states that buyers complete and submit a form to the seller before a purchased product can be shipped.
Of course the biggest challenge that must be faced and addressed before eCommerce in India can fully evolve, is the successful migration from the present day cash-based transaction model, to modern electronic payment systems.
In this regard, the expressed “inclusive” vision of the Reserve Bank is both necessary and welcome.
Earlier this year, the Reserve Bank of India’s Chief General Manager, Department of Payment and Settlement Systems, Vijay Chugh’s [4] made the following statement regarding “an urgent need for all stakeholders to collaborate to enable access to an efficient payment system for the unbanked and under-banked population”. Being able to provide this capability at an “affordable cost” is critical for not only eCommerce success, but the growth of the Indian economy as a whole.
Despite these challenges there is little doubt that India is truly on the cusp of a major retail paradigm shift.
The Emerging B2B World: When Familiarity Breeds Opportunity
In the April 29th, 2013 CXOtoday.com article B2B marketplace to accelerate in India [5] by Sohini Bagchi, the dominance of the B2C market in India is viewed as a springboard for the emergence and maturation of the B2B world.
As Sohini adeptly points out, the same issues faced by the B2C world were the same “factors haunting specifically the B2B segment where trust also plays a prominent role”. As a result, it is reasonable to conclude that understanding and addressing the B2C challenges, will inevitably translate into B2B success. The experts seem to agree with this assessment.
According to Sohini, industry pundits believe that “B2B e-commerce can certainly be successful in India because of the vital role B2C has been playing the past few years”. This is especially true in the Indian market where business buyers as Sohini calls them “may be resistant towards using e-commerce”, because of the aforementioned issues relating to “trust and skepticism”. The fact that B2C e-commerce is gaining traction in India bodes well for the future of B2B e-commerce in the country.
In short, as B2C users begin to feel more comfortable in terms of buying goods and services on the web, the more likely this level of trust and certainty will facilitate the transition to a B2B e-commerce platform.
This undeniable link between B2C experience and B2B success was highlighted in a January 8th, 2014 In The Cloud post [6] by Ronald Duncan.
Duncan the Chairman for cloudBuy – which has recently established an Indian-based office – indicated that many of the adoption barriers in the B2B world had been removed as a result of “the growing and continuing dominance of the B2C world”.
Of course the connection between the B2C and B2B world can be a two-edged sword, especially in terms of user experience.
This latter point was driven home by Duncan when he made reference to the increasing number of business users asking the question “why can’t we have the same experience sitting at the office as we do at home”? Within this context of familiarity, B2B e-commerce providers would be well advised to assimilate B2C functionality into their platforms.
Viresh Oberoi [7], who is the Founder, CEO and MD for mjunction Services shares similar sentiment to those of Duncan.
In an interview Oberoi stressed that a competitive edge can be gained by B2B providers through the use of “flexible business development models”.
Focused on delivering “greater results”, Oberoi’s organization listens carefully to its customers in terms of identifying specific pain points, and redesigning their processes based on this feedback. This enables the company to “deliver greater results” in the critical areas of transparency, efficiency and low inception costs, which according to the mjunction founder is where many B2B platforms falter.
Of course the parallel between B2C and B2B extends beyond user experience.
From a financial perspective, industry experts project that as B2C adoption grows, so too will the B2B e-commerce market.
On The (Leading) Edge Of Change: Realizing The Total Indian eCommerce Vision
In an April 2014 article [8], Global VC firm Accel Partners provided the following insights relating to the future of eCommerce in India:
- By 2016, the current number of shoppers in India will double to 40 million, and their spending will more than quadruple to US $8.5 billion.
- Fashion eCommerce doubled last year, and will see 400 percent growth by 2016, rivaling the electronics and mobile category. This is likely driven by women’s growing influence, which will grow by five times in the next three years.
- Tier 2 cities’ eCommerce adoption is growing far faster that Tier 1 cities, but some states lagging behind still need better infrastructure in place.
- Online retail is still just a sliver of total retail sales. It only accounted for two percent of mobile shipments and one percent of fashion sales.
- 3rd party ewallets will become a significant alternative to cash-on-delivery in coming years.
- Only nine percent of Indians with an Internet connection shop online, compared to over 30 percent in other BRICS countries. India’s eCommerce market is still 60 times smaller than China’s.
- 88 percent of the growth in Indian eCommerce will come from 200 million Indians coming online in the next three years, especially young people.
While each of the points referenced in the Accel Partners findings are in and of themselves notable, what stands out the most is their collective impact in terms of the potential or “headroom” for growth in both the B2C and B2B world.
The fact is that all of the pieces for a successful eCommerce market are falling into place. Through the collaborative recognition of where we are today, and what we need to do to get to where we ultimately want to go, India is on the right track.
In this context, eCommerce’s future in India is not a question of if or how much, but when. For Indian business and the health of the overall economy this means that the future is now.
Reference Links:
[1] Indian e-commerce market is nowhere near maturity – eBay India MD, The Hindu (April 21, 2014) – http://www.thehindu.com/business/Industry/indian-ecommerce-market-is-nowhere-near-maturity-ebay-india-md/article5929148.ece
[2] cloudBuy’s Nilesh Gopali writes about eCommerce innovation and the Indian economy, Brokers Forum of India (April 5, 2015) – https://cloudbuyblog.wordpress.com/2014/07/04/244/
[3] E-COMMERCE AND THE FUTURE OF RETAIL: 2014, Business Insider (August 22, 2014) – http://www.businessinsider.com/the-future-of-retail-2014-slide-deck-sai-2014-3?op=1
[4] IFC, Partners Focus on E-payment Systems for Inclusive Finance for India’s Low-income Households, IFC Press Release (April 22, 2014) – http://ifcext.ifc.org/ifcext/pressroom/IFCPressRoom.nsf/0/5056288A4E095CA185257CC20030AD29?opendocument
[5] B2B marketplace to accelerate in India, CXOtoday.com (April 29, 2013) – http://www.cxotoday.com/story/b2b-marketplace-to-accelerate-in-india/
6] Risk awareness versus risk aversion in the emerging B2B Marketplace, In The Cloud (January 8, 2014) – https://cloudbuyblog.wordpress.com/2014/01/08/risk-awareness-versus-risk-aversion-in-the-emerging-b2b-marketplace-by-ronald-duncan/
[7] B2B marketplace to accelerate in India, CXOtoday.com (April 29, 2013) – http://www.cxotoday.com/story/b2b-marketplace-to-accelerate-in-india/
[8] A peek into the future of India’s fast-growing ecommerce market, Tech In Asia (April 4, 2014) – http://www.techinasia.com/peek-future-indias-fastgrowing-ecommerce-market-slideshow/
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Direct and Indirect Procurement in the B2B World
EDITOR’S NOTE: The following is part 3 in a 4 part series by cloudBuy’s Nilesh Gopali that has been published in the Brokers Forum of India magazine. You can access parts 1 and 2 in the series through the following links; July issue, page 26 for article part 1 of 4 and August issue, page 31 for article part 2 of 4
“Technology is the key in the supply chain organization of the future. The right technology will enable enterprise-wide supply management, external supply chain visibility, and internal and external collaboration.”
The above is an excerpt from the Enabling Technology section of a ISM, CAPS and A.T. Kearney Report that was originally released in May 2007. So why is it relevant here in 2014?
Simply put, it reflects the enduring truth that while technology has and will continue to evolve, the core objectives in procurement remain the same. Specifically, the need to facilitate collaboration both within and external to the organization, ensure end-to-end supply chain visibility in real-time and, enhance supply chain performance of the emerging global enterprise.
In today’s article, I will talk about what this means from the standpoint of both Direct and Indirect procurement in the B2B world.
Technological Relevance: The Tools Of Our Trade
Before I get into the specifics of Direct and Indirect procurement in the B2B world, I would like to first talk about the technological evolution, and what it means to the modern day procurement practice.
To start, in his article Technology’s Diminishing Role in an Emerging Process-Driven World, Jon Hansen talked about how the focus of procurement professionals has changed over the years. In referencing the audiences before whom he has spoken at conferences around the world, he noted that “today’s procurement professionals are seeking insights into the actual processes that drive their enterprises”.
This is an important point in that it is through process understanding and refinement, combined with an adaptive technological platform, that ensures a successful outcome of the procurement function.
The fact that the eCommerce world, and more specifically the cloud-based B2B platform, has become an integral part of this process driven approach is noteworthy. This is especially true as organizations make the move from rationalizing their supply base to expanding them. Something that was not possible within the framework of a traditional ERP-based application.
With the more adaptive B2B platforms such as cloudBuy’s, companies no longer have to confine supplier engagement to a select few as a means of managing risk. An important point given that the expected volume discounts associated with driving more business through fewer suppliers has not always delivered the expected savings – particularly with Indirect Material such as Maintenance Repair Operations or “MRO” acquisitions such as spare parts related to equipment repair.
A “Material” Difference: The Dangers Of A Pull Through Strategy
In the same article to which I earlier referred, Hansen made the following observation:
“The majority of e-procurement initiatives initially tend to focus on the high-dollar, low transactional volume spend within an enterprise. As a result most vendors have developed their solutions to manage centrally negotiated contracts that are combined with an aggressive supplier compression strategy.”
In short, most companies apply the same procurement process they use for Direct Material acquisition for Indirect Materials.
With Direct Materials or spend, in which negotiated pricing is more stabilized, savings are more predictable. This is because Direct Materials, which are those materials and supplies that are consumed during the manufacture of a product, are not prone to a significant variance in price over an extended period of time.
With Indirect Materials or spend, there is greater fluctuation in pricing and availability. Indirect Materials are broken down into two categories being Maintenance Repair Operations “MRO”, and Operations Resource Management “ORM”, the latter including expenditures for office supplies and travel. Studies clearly show that with Indirect Materials – especially MRO, price fluctuations can be dramatic. This means negotiating volume discount pricing through a select group of suppliers ultimately leads to a steady increase in price points rather than increased savings. As a result, having access to a larger and more dynamic pool of suppliers is required to consistently deliver maximum savings.
The question is how does one reliably access suppliers capable of serving these two distinct areas off spend?
Indirect Material Procurement: A More Direct Route To Increased Savings
Back in early January fellow cloudBuy executive Russell Darling wrote an interesting post on the cloudBuy company blog titled “Revolution to Evolution: Is the B2B Marketplace Undergoing a Major Transformation?“
In the post he talked about how the Commonwealth of Virginia was “one of the first governments to comprehend the power of a truly open and free marketplace in which both contracted and non-contracted suppliers can come to the table.” Specifically how expanding as opposed to rationalizing one’s supply base can deliver significant returns on multiple levels including increased savings.
While the rewards of supplier expansion are certainly noteworthy, given my financial background my enthusiasm was initially tempered. The potential logistical challenges associated with the financial aspects of this emerging trend were somewhat disconcerting. Any CFO will likely share similar sentiments as it relates to managing the payment process including integration with the organization’s current ERP system.
Because of this obstacle, the true savings that could be realized through a more robust Indirect Material procurement capability is never realized to its fullest potential.
This is where the introduction of integrated B2B payment solutions come into play.
According to a recent article in the Indian Institute of Materials Management, “B2B e-commerce and specifically e-Procurement is an extension of existing business processes using the Internet as a channel”. The article however cautioned that while “E-Procurement allows for efficient interfaces between trading partners and more effective use of data, it is incomplete without integrated payment processes.” According to IIMM, this issue can be addressed “By using the Purchasing Card and online payment software, traditional business purchases can be made just as easily online.”
While the utilization of Purchasing Cards in and of itself is not new, their “integrated” role within the framework of a cloud-based B2B platform such as cloudBuy’s, has changed the game dramatically. Particularly as it relates to supply base expansion and utilization. Or to put it another way, expanding your supply base is no longer a high wire act. As a result, the previously unrealized savings associated with Indirect Material procurement are achievable within an organization’s present environment.
Direct Material Savings: Enhancing A Familiar Practice
They say that a straight line is the shortest distance between two-routes. This describes perfectly the best way to achieve maximum savings with Direct Material procurement.
The question is how does this direct line become shorter within the B2B eCommerce world?
In their 2001 book, The Seven Steps to Nirvana: Strategic Insights into eBusiness Transformation, authors Mohanbir Sawhney and Jeff Zabin discussed the emergence of the Metaprise.
A “Metaprise” according to the authors, “is a synchronized versus sequential architecture (a private or public hub) that simultaneously links all transactional stakeholders on a real-world, real-time basis.” In essence, a Metaprise platform or hub dramatically improves both the collaborative engagement and transactional processes that are necessary for a highly efficient Direct Material practice.
The present day B2B platforms are based upon this Metaprise architecture. The end result is that while forging new savings inroads with Indirect Material procurement through expanded supplier engagement, you can also enhance an existing Direct Material practice through the utilization of a dynamic B2B eCommerce platform.
Commodity Characteristics: Accessing B2B Savings
In explaining the importance of understanding the importance of aligning technology with the unique commodity characteristics that define both Direct and Indirect Materials, Hansen’s research speaks volumes.
Funded by the Government’s Scientific Research and Experimental Development Program, Hansen’s commodity characteristics model was put to the test in a number of different production environments. The end results were significant savings year-over-year, especially in the area of Indirect Material procurement.
In one case study spanning a 7 year period, savings for the Department of Defence average 23% each year.
The key to realizing these savings was the proper alignment with the right technology platform. This means by recognizing the unique characteristics or requirements for different areas of spend – be it Direct or Indirect – an organization can then put itself in the position to properly leverage today’s powerful B2B buying platforms to access diverse supply base capabilities.
In part 4 of this series, I will talk about the future of eCommerce and what it means in terms of practical impact on procurement and the enterprise as a whole.
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The New eCommerce B2B World: Redefining the Buyer – Supplier Relationship by Nilesh Gopali
EDITOR’S NOTE: The following is part 2 in a 4 part series by cloudBuy’s Nilesh Gopali that has been published in the Brokers Forum of India magazine. You can access part 1 in the series through the following link; July issue, page 26 for article part 1 of 4
In my previous article Connecting the dots between eCommerce innovation and a robust economy, I discussed how the eCommerce evolution was having an impact on the overall Indian economy.
In today’s article, I will drill down further to provide you with a better understanding of the mechanics of this impact by examining more closely the buyer – supplier relationship in the emerging B2B world.
The exciting developments that are taking place in the Indian automotive industry, is the perfect starting point for this focus. Specifically, the relationship between the country’s top 750 auto manufacturers and parts suppliers, and the thousands of small enterprise suppliers.
The auto manufacturers are the buyers from the tier 1 suppliers, represented within the above referenced 750 main players in the auto industry. The tier 1 suppliers then assume the buyer’s role when dealing with the smaller supply entities. This means that they serve as the connecting point between the country’s vast small supplier pool and the auto manufacturers themselves.
It is therefore critical that this relationship chain as I will call it, is both streamlined and strengthened. Especially in terms of removing the potential bottlenecks that can hinder the procurement process.
Time To Pay: The Origins of A Disconnect
From a historical perspective, one of the most significant points of congestion has been centered around the timely payment of invoices and the subsequent impact on working capital.
According to a Chartered Institute of Management Accountants study, extended or late payment issues are a perennial problem the world over.
The average length of time it takes a plc to pay its suppliers in the UK is 44 days. Approximately one fifth of listed companies take more than 60 days and, an albeit small but notable percentage take more than 200 days to pay.
A Dun & Bradstreet report also suggests that the larger the company, the longer suppliers have to wait for their invoices to be settled. This is demonstrated by the fact that in Australia for example the average payment period “across all industries” is 55.8 days. Companies with more than 500 employees take 62.7 days to pay their invoices.
As a point of reference, large buying suppliers in the Indian automotive industry can take between 60 to 90 days (or longer) to pay the smaller supplier invoices.
Late Consequences: The Weak Link
In North America, the 2014 Annual Automotive OEM-Supplier Relations Study clearly shows the negative impact that a congested payment process has on buyer – supplier relations.
Each of the Big Three automakers in the United States saw their score in terms of supplier relations drop as a result of slow payment issues. The problem areas that were identified included paying invoices on time, paying accurately according to initial payment terms, resolving payment disputes, and the time to resolve payment disputes.
Beyond the obvious financial implications, the study reported that there was a significant and added benefit for manufacturers with the best score. Specifically, those automakers that had a positive relationship with their suppliers were able to offer the “best products at affordable prices.”
Beyond The Financial Impact: A Broken Chain
The longer it takes for an automaker, in North America, to pay an invoice, the greater the pressure on a supplier’s operating line of credit. This is because when calculating the Line of Credit – especially for small suppliers – financial institution financing usually only takes into account amounts owed to the supplier that are outstanding no longer than 90 days.
For this as well as other reasons, expert and Sr. VP Institute for Supply Management Bill Michel, asserts that there is the need to “lean out” the supply chain in order to “eliminate waste and true cost.”
In a Supply Chain News interview, Michel’s stressed that “without attacking the real cost, the (auto) industry will remain uncompetitive to the international competition who do take a cost-based approach.”
This means that buyers truly have to “work with suppliers to attack cost while keeping supplier margins healthy.” This is a somewhat contradictory philosophy to the traditional thinking associated with what Michel’s calls the competitive leverage approach where suppliers are “only as good as the last price.” In the end, Michel’s believes that it ultimately provides a competitive advantage to the buyer organization.
Even though Michel’s was talking about the North American auto industry, his points still apply in a globally competitive marketplace. This fact should not be lost on the indigenous Indian automotive industry. The reason is that India will see, with increasing frequency, the introduction of supply sources outside of the country. This means that ensuring the ongoing financial strength of the smaller domestic suppliers is critical to maintain a strong and reliable domestic supply chain.
In demonstrating the importance of a strong domestic supply presence Michels, in an interview with Procurement Insights, pointed to the collapse of General Motors.
At the heart of the “wreck” that what was once the GM supply network, was the “drive on price reduction, low cost country (LCC) sourcing, and extension of terms.” All of these led to what Michel’s referred to as the “collapse of the domestic automotive supply chain.”
Michels went on to say that GM’s former VP of Procurement and Supply Chain Bo Andersson’s hard line approach might have been “a short term win for GM.” However it created “long term supply chain problems and risk.”
This conclusion certainly confirms the results of the earlier mentioned 2014 Supplier Relations Study. Specifically the emphasis that through positive relationships with their suppliers, auto manufacturers are able to offer the “best products at affordable prices.” Without a strong domestic supply base, such as what occurred with GM, this becomes infinitely more difficult to achieve.
In this context, the streamlined Purchase-2-Pay or P2P process associated with eCommerce platform’s such as cloudBuy’s will play a key role. This is due to the fact that it will facilitate the needed collaborative framework that produces the positive relationship between buyer and supplier in terms of deliverables as well as from a financial perspective.
It will also address challenges within the process flow itself.
Improved Process Flow: A Promising Tomorrow
Errors related to Purchase Orders including invoice variances have delayed the payment process while creating added cycles for Accounts Payable (AP) departments. This is a major problem, the effects of which ripple throughout the entire supply chain. In fact one research article indicated that “defective invoices” actually accounted for close to “63 percent of all past due payments,” taking on average “two to three times longer” to be settled than clean invoices.
Think about the financial implications associated with such inefficiency. Also consider the impact on buyer – supplier relations, and the ultimate impact on the entire manufacturing process.
This is one of the reasons why so many have paid great attention to the results of the previously referenced U.S. auto industry study. Especially in relation to the downstream effect on liquidity associated with process challenges and their effect on the viability of the entire chain.
The best way to avoid these scenarios, is through a real-time transactional engagement between buyer and supplier which is only possible within a eCommerce B2B platform.
The benefits of such an engagement are both notable and immediate. Specifically the elimination of the number of defective invoices and the resulting “ability” to pay the supplier on time or earlier, thus enabling the buyer to capitalize on early payment discounts from suppliers. It is also important to recognize the potential savings that can be achieving through a reduction in the cost of funds.
It was for reasons such as these that a recent Forbes article heralding the end of paper invoices, stressed the importance of eCommerce platforms, and in particular E-Invoicing.
Besides driving the needed process improvements, “electronic invoicing firms, B2B payments and financial institutions” are stepping in to close the “payment gap” through the use of vehicles such as Purchase-Cards.
While the utilization of Purchasing Cards in and of itself is not new, their “integrated” role within the framework of a cloud-based B2B platform such as cloudBuy’s, has changed the game dramatically.
According to a recent article in the Indian Institute of Materials Management, “B2B e-commerce is an extension of existing business processes using the Internet as a channel.” While exciting, the article cautioned that even though this “allows for efficient interfaces between trading partners and more effective use of data, it is incomplete without integrated payment processes.” However, the author concludes that “By using the Purchasing Card and online payment software, traditional business purchases can be made just as easily online.”
The benefit for the buyer is that they improve their standing with suppliers ensuring optimum delivery performance. It also eliminates the bottlenecks associated with an inefficient AP system.
The benefit for the supplier – especially SMEs – is that they will no longer feel the negative impact resulting from process inefficiencies. Neither will they have to solely bear the financial fallout of large buying organizations looking to improve their own working capital position by delaying payments.
In the end, it is a true win – win scenario, and one that is only possible through the advent of the B2B eCommerce world.
All this being said, the influence of what is being sourced and procured also comes into play.
In part 3 of this series, I will discuss the variable strategies associated with the purchase of both Direct and Indirect Materials. This will include the impact that eCommerce B2B platforms have and will continue to have on traditional purchasing practices.
NOTE: You can follow this series and related discussions through the hashtag #BrokersB2B
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cloudBuy’s Nilesh Gopali writes about eCommerce innovation and the Indian economy
Editor’s Note: Nilesh Gopali was recently appointed to the position of Country Head, India for cloudBuy, based out of Mumbai. Below is the the first in a series of articles he has written for Brokers Forum magazine regarding how eCommerce innovation is both influencing and redefining the Indian economy.
There are obvious links between my present world of eCommerce and the financial community to which I once belonged. After all, one would be hard pressed not to have seen the ever growing number of stories relating to supply chain finance and the rapidly evolving Purchase-2-Pay industry. But as important as these areas of connection are, they are transactional in focus. In other words, they represent the nuts and bolts mechanics of how the new global economy works.
To me when you talk about finance and the economy, we have to look beyond the mechanics of how eCommerce works, to see the actual impact in terms of how eCommerce affects business as an extension of our daily lives.
So here is the vital question . . . how does eCommerce go from being viewed on an individual transaction basis, to having a positive impact on a company’s bottom line, and ultimately the overall economy? How do we in essence connect the dots?
In contemplating the alignment of these connecting points, I had to consider them both individually as well as collectively. It is through this dual lens of synchronized understanding that I will hopefully provide you with a big picture view of where economies of the world are headed.
What is eCommerce?
Perhaps an overly simplistic question, your answer would obviously be something along the lines that electronic commerce is trading in products or services conducted via computer networks such as the Internet. But this is not the end of the answer it is actually just the beginning. This is because it is not so much what is done, but how it is done that matters.
Connecting Point 1: Wired for business – carrying virtual storefronts in our pockets!
In his May 16th, 2014 article The Internet of Things and M2M – Some Predictions for a Bubbly Next Few Years from http://bluehillresearch.com/, Tony Rizzo talked about the fact that by “2020 wearable technology alone will be generating 1.2 zettabytes (yes, zettabytes) of data.” Think about this for a moment in the context of how people will interact in an eCommerce world. Specifically the devices they will use to buy and sell. This is the backbone of the new economy, where bricks and mortar storefronts will cede way to virtual stores where buying and selling can happen with a click of a button.
I know, many will say that the shopping experience of actually visiting a store will always have a certain appeal. While I am inclined to agree with you to a point, we simply have to consider what has happened in the newspaper industry to see that tactile interaction is more of a luxury than it is a convenience.
In talking about the future of the news print industry in his July 22, 2009 address at the Commonwealth Club of San Francisco, media industry veteran J. William Grimes had predicted that there will be no daily newspapers in the United States within 5 years.
Referencing statistics which indicated that print newspapers’ share of the $37 billion spent on advertising was 15% – down from 25% a decade earlier, Grimes pointed out that only 5% of our collective time is spent reading newspapers. This he concluded “is not a sustainable model.”
Even though Grimes’ apocalyptic prediction regarding the demise of print media, as cited above, hasn’t materialized to the degree he had expected, no one doubts that electronic media is the wave of the immediate future. And while the newspaper industry has mostly struggled with making the necessary transition to the virtual realms, it has nonetheless pursued the transformation to its new reality. We of course see practical evidence of this transformation every day when, instead of purchasing a print newspaper, we simply look at our iPhone or tablet to read the latest news.
Within the same context of the Grimes’ prediction, a parallel between the newspaper and retail industries was drawn when AP Retail Writer Mae Anderson wrote; “No one thinks physical stores are going away permanently. But because of the frenetic pace of advances in technology and online shopping, the stores that remain will likely offer amenities and services that are more about experiences and less about selling a product.” Like the newspaper industry, changes to the retail business model have to be made to reflect this new reality.
Connecting Point 2: Structuring a new business “service” model that’s truly “wired” to connect with the consumer
In considering the form that these new business models will take, Forrester analyst Sucharita Mulpuru indicated that bricks and mortar stores of the future will be more about “services, like day care, veterinary services and beauty services,” while the “online and offline shopping experience” will feature more drive-thru pickup and order-online, pick-up-in-store services. Even when we physically visit stores Mulpuru concludes, “Checkout also will be self-service or with cashiers using computer tablets.”
In short, and like newspapers, the way we transact business will change dramatically requiring the development of newer more robust business models to create new streams of revenue to replace the old.
All of this as cited above will have a major impact on a company’s bottom line, but not in the traditional manner one might expect.
Referencing the newspaper industry once again, one may wonder why the Grimes prediction did not come to fruition. The answer can be found in the following excerpt from a recent (2011) article in Publishing Executive:
“Digital publications are not necessarily more profitable or even less expensive for publishers to produce than their ink-on-paper counterparts. But don’t tell that to the folks who shelled out hundreds of dollars for a tablet or e-reader under the often erroneous assumption that they would end up saving money on publications. Even media experts are confused on the subject.”
So if the issue is not one of cost in the traditional sense, then what are the underlying factors that are redefining the print media model? It is the connection with the reader themselves.
The Electronic Journal of Communication identified this readership connection – or disconnection as it can be called, when they reported the following:
“Similarly, Lain (1986) states that “newspaper editors and publishers have been aware for some years that their audience, if not actually slipping, is not keeping pace with the growth of the population” (p. 69). Katz (1994) writes that “for millions of Americans, especially young ones, newspapers have never played a significant role” (p. 50), and that this is but one aspect of the larger problem, that “newspapers have been foundering for decades, their readers aging, their revenues declining, their circulation sinking” (p. 50).”
In similar fashion, the everyday retail consumer is moving away from the traditional in-store shopping experience to one of virtual convenience. But similar again to the print media world, it is not an either or proposition, but one of blended service capability.
In a March 20th, 2014 Financial Post article titled “How bricks-and-mortar stores are looking more and more like physical websites,” the blended model brings the physical and virtual realms together as a compliment to one another. By capitalizing on the unique strengths associated with an in-store experience, stores now see the Internet as a means to boost both customer service and sales through advanced services such as pre-store visit express check-outs. This of course reflects Forrester’s Mulpuru’s take on where the retail industry is headed.
Outside of the consumer or Business-2-Consumer relationship, the same operational framework of technological convenience also applies to Business-2-Business interactions between buyers and their suppliers.
In fact, and as pointed out in their company blog article ‘Risk awareness versus risk aversion in the emerging B2B Marketplace’ written by cloudBuy Chairman Ronald Duncan, “Consumer experience, it is safe to say has forever changed the business world’s approach to B2B engagement. Specifically, people now ask the question “why can’t we have the same experience sitting at the office as we do at home?”
In the end, the coming together of the traditional retail storefront and the eCommerce world will enable businesses to streamline their existing operations to create a far more robust cost model that delivers solid profits and exceptional customer service.
Connecting Point 3: The Smaller Engines That Drives the Bigger Financial Picture
When I initially took a step back to identify the connection between individual company financial performance and the collective impact on the general economy I was immediately reminded of an article I read which talked about the “Bike Rack Effect.”
It is a compelling read that talks about a city council meeting in which a larger more expensive project regarding a $100 Million power plant zoning change took less time to approve than the a request to build a $10,000 bike rack for city sidewalks.
In referencing British historian and operations researcher Cyril Northcote Parkinson’s book Parkinson’s Law, the author explains that while the power plant is so expensive to the point that the sums of money are hard to frame, the bike rack is more tangible. In other words council members did not likely understand the complexities surrounding electronic power generation and the related costs but, they almost all have a bicycle and bicycle rack.
When we talk about eCommerce and the economy, Parkinson’s Law equally applies. As such we tend to get locked into the minutia of the mechanics of eCommerce such as ordering on line, while overlooking its broader economic impact. This doesn’t make the latter point any less real, it just means that it is less accessible in terms of understanding – or connecting the dots.
So how does eCommerce drive the economy . . . by empowering small business growth!
According to just one of the many reports on the importance of small business to a nation’s economy, 50% of the United States’ gross domestic product (GDP) is generated by the nearly twenty-seven million small enterprises in that country. The numbers while different, are no less influential in the robust economies of other countries around the world.
The advent of eCommerce has played a significant role in stimulating small enterprise or non-employer business development and growth as reported in a 2013 Forbes article The Rise Of The Million Dollar, One-Person Business. In the article, Elaine Pofeldt talked about how an increasing number of non-employer or sole proprietorship enterprises had for the first time broken the $1 million mark in sales.
In explaining the breakthrough Pofeldt indicated that “technology is probably helping some entrepreneurs break sales records that they might not have been able to achieve before the internet era by expanding their reach.”
The fact that total revenues from these microbusinesses rose to $989.6 billion, up 4.1% from 2010 speaks to the importance of the eCommerce influence.
It is also at this final connection point that it all comes full circle through the introduction of facilitation platforms such as a cloudBuy.
Concluding Remarks
In the end, eCommerce brings together more effectively than any other vehicle in history, the different yet complementary strengths of large and small businesses respectively.
In a recent Houston Chronicle article by Stacy Zeiger she writes; “For high-value items such as designer clothing, antiques, jewelry, furniture and cars, a retail storefront will appeal more to customers and generate a higher profit margin on individual items.”
Zeiger then goes on to say that while “A retail storefront will perform better for a business that sells a select amount of products, an online store may work better for a business that carries an extensive selection.” The reason is that on-line businesses are generally cheaper to open and run than their physical storefront counterparts.
By enabling each business model to play to its strengths, it is clear that everyone benefits.
Or to put it in more precise terms, these same small business owners are also themselves consumers. The more successful they are in their business endeavors the more money they will spend in their personal lives. And the circle connecting all the points from consumer to business to the overall economy will continue to turn.
In my follow-up article in August, I will examine more closely the B2B connection, and how the eCommerce evolution is redefining the buyer – supplier relationship model, including what it means to the consumer.
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At the crossroads of payment capability and risk mitigation by Lyn Duncan
Back in our earlier days it was a much simpler world in that eCommerce transactions were more confined or limited in terms of overall access points . . . at least in comparison to the way things are today.
This does not mean that we did not have to deal with potential risks, we did. This is the reason why we were one of the first Barclay’s Commercial partners in 1998 to pass the forerunner to PCI DSS security requirements. In December 2004, we also became one of the first global PCI accredited organizations, and have kept on moving up through the PCI levels as our transactions have grown. We now have the highest accreditation at Level 1.
Suffice to say, and seeing eCommerce from the supplier perspective – which was a benefit to our buyer-side clients, we knew that security would be a key area of focus. This was due to our anticipation that there would one day be what was then an unfathomable number of transaction entry points. I am referring specifically to people doing business from not only their desktop computers but also their laptops and even cellular phones. At the time, and as it still is today, anticipating where the market is going to be 5 to 10 years down the road is a crucial part of our planning.
It turns out that this proactive prognostication approach was critical, as illustrated by a May 16th, 2014 article by Tony Rizzo titled “The Internet of Things and M2M – Some Predictions for a Bubbly Next Few Years.”
In talking about the emerging machine-2-machine world in which wearable technology alone by 2020 will be generating 1.2 zettabytes (yes, zettabytes) of data, Rizzo made reference to the “mobile security holes” that “lurk” within any given business, and the need to understand the “vastness” or magnitude of the corresponding risk. Within this context, Rizzo openly wondered if, given the number of devices – mobile and otherwise – that are already in use, a truly secure environment could actually exist. I would have to say yes, at least in terms of the present day cloudBuy platform.
While we will delve into the specifics of security within the cloudBuy platform in much greater detail in a future post, I wanted to start off addressing the issue of risk mitigation simply because both buyer and supplier confidence are obviously critical factors in the eCommerce world. Or to put it another way, automation without certainty undermines the entire end-to-end P2P process.
Using our PCI platform as the foundation upon which to grow our service capability, we are able to integrate with other UK bank gateways. This expansion to include other financial institutions was usually predicated by the adoption of a new client, many of which were significant in size and transactional volume. Although it is now safe to say that BT’s decision in December 2002 to terminate their Intershop solution accelerated this process considerably. The problem it turned out was that BT’s merchants were given precious little time to respond to the change. As a result many looked to us as an alternative, which meant that we had to coordinate the integration with a range of banks by early January when the merchant’s service dropped. We were obviously successful as we picked-up many of our largest customers during this extremely “busy” period of transition. It was I believe one of the major development points in our company’s history.
Amongst the most notable client acquisitions at that time was London Theatre Direct.
Even though our relationship ended 10 years later, when they were put up for sale, their present day site still very much reflects our architectural framework and integration capability. Although it is considerably more expensive because of the need for customization thus becoming what we in the UK call a bespoke application. As you will recall from my previous post, cloudBuy has maintained an affordable accessibility by pursuing an out of the box strategy that has worked extremely well for our clients.
This being said the fact that over the 10 year period that we worked with them, London Theatre Direct grew from a few hundred thousand in turnover to £10m in global bookings is, I believe, a testimony to our embedded payment capability. By the way, you can check out the London Theatre Direct site through the following link; http://www.londontheatredirect.com
Beyond a London Theatre Direct the cloudBuy platform, and more specifically our embedded payment capability, has evolved to what it is today by our being able to meet both the basic needs of regular merchants, as well as those merchants with exceptionally complex requirements such as AbD Serotec.
Once again, our consultative approach has enabled us to continually add the needed functionality that has positioned cloudBuy to be a leading player in the eCommerce world.
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Responsive Evolution is at the heart of today’s cloudBuy platform by Lyn Duncan
As the promised follow-up to my May 3rd post (A Big Hairy Audacious Goal), I would like to take you through what I call the responsive evolutionary process of what is now the cloudBuy platform.
I use the term responsive because at our core we are a consultancy whose focus is on solving the challenges faced by our clients. It is just that simple.
In this we are much like the company that I worked for before starting out on this journey – Oasis Group PLC. Formed by a group of technical visionaries and led by Dr. Rob Wilmot, Oasis was at the vanguard of relational computing which made it very agile in developing technical solutions to client problems. Where it differed entirely from technical competitors was in its focus on quantifying performance improvement for customers through this technical innovation. The driver was not building systems, but re-engineering business process in which technology was simply an enabler.
It’s responsive evolution ended when it was sold to Sybase in 1994. Looking back my former competitors, consultancy firms such as Bain & Company and McKinsey are not all that different – especially when you consider the historical evolution of these firms (or companies started by representatives of these firms) into the world of procurement and more specifically e-procurement.
For example FreeMarkets – which many consider to be one of the pioneers of reverse auctions, was founded in 1995 by former McKinsey consultant and General Electric executive Glen Meakem. As the story goes Meakem, who had failed to find meaningful traction within General Electric for his revolutionary technology concept, launched FreeMarkets with the help of McKinsey colleague Sam Kinney. No doubt the premise for their platform was forged by the recognition of the need to buy and sell more effectively, an insight that was at least in part, gained through their consulting practice. Unfortunately, and unlike cloudBuy, despite initially surviving the dot.com implosion, the FreeMarkets’ business model could not be independently sustained. As a result the company was acquired by Ariba in 2004 for $493 million. This of course is where the FreeMarkets responsive evolution came to an end.
Based on the insight and expertise gained through our consulting practice, we initially evolved into a software house and systems integrator, specializing in the building of transactional solutions for organisations such as such as Paypoint, Russell Marketing, and Ilion Landis to name just a few. During this period we were also engaged by Inmarsat and one of the UK’s largest radio groups to build their electronic marketplaces as well as being contracted to create applications for large scale global enterprises such as Intercontinental Hotels and Resorts. So it is safe to say that we were well versed in problem solving and helping our customers to identify and articulate their objectives.
Of course throughout all this learning, a new, bolder vision was beginning to take shape; how do we build a product which would solve many of our client’s regular business challenges . . . out of the box. The impetus for this expanded focus was based on the increasing frequency in which we were approached by companies who, although having a clear vision of what they wanted from a transactional standpoint, could not afford to build a sole use ‘one off’ solution. Interestingly enough our corporate customers – who could afford to build for their own use – had a different problem. They needed to connect out to the rest of the world to make their transactional systems work. What we needed to provide in a practical sense, was a universally accessible platform that could enable all stakeholders regardless of size or applications used, to connect through a true trading or eCommerce interface.
In creating this interface, it became very clear to us early on that the ‘catalogue’ approach pursued by the majority of those in the market was not going to work. Even though the technology upon which the catalogue system was based was conceptually easy, its scalable functionality did not translate well for a real life commercial practice. We also came to the conclusion that a vertical approach in which suppliers were “squashed into vertical boxes” was equally ineffective. Part of the reason for our thinking was tied to the fact that many of our clients had a dual focus on both B2B and B2C transactional activity. Looking back it was this latter B2C requirement that likely allowed us to stay on our intended course of evolution as opposed to following the market’s then popularized direction. That and Ronald’s insistence that we had to take the time and invest in building an eCommerce marketplace which solved the problems of both buyer and supplier simultaneously.
As alluded to in the previous paragraph, and considering the market landscape at that time, our conclusions certainly appeared to go against the flow of accepted thinking, as companies such as Commerce One – who provided catalog driven solutions – were apparently successful. It was not until the collapse of the Covisint initiative did our reservations regarding a Commerce One type approach become fully justified.
Having now charted our evolutionary course, we began to recruit more developers as part of a 2 year growth strategy that enabled us to work with more companies from our home business park. These client companies represented a great cross section of real life business challenges for which our vision was best suited to address.
The deliverables from this period, which it is important to note, have not changed much over the years, included;
- Providing different views for different customers
- The ability to deal with goods catalogues and services
- The ability to respond to quote requests
- Different price lists
- Complex promotions
- Delivery charges by weight, address and other related factors
- Different currencies
- Different languages
Other key requirements relating to the development of these early commerce sites, is that they had to be easy to use from the standpoint of updates and SEO alignment, while providing timely analytics that would enable clients to accurately assess order information and marketing campaign effectiveness. Cost was also a factor in that while an obvious consideration as it is today, there was reluctance at this early stage of the eCommerce game to bet heavily on whether or not the virtual marketplace would materialize into something more tangible than mere promise.
Surprisingly, the ability to process on-line payments was not a priority as it is now simply because most organizations were still dependent on back-office systems to process orders.
However, and as I will detail in the next installment in this series, as the industry matured so did the complexity of the client’s requirements including the demand for the capability to accept payments on-line.
In the meantime, we continue to this day to provide our supply side clients with highly functional B2B websites, as a critical part of our complete cloudBuy eCommerce platform.
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A Big Hairy Audacious Goal by Lyn Duncan
4. Set a 15 to 25-year big, hairy audacious goal (BHAG). This is a goal that is concrete enough, and ambitious enough, to guide your company’s progress for years. Collins writes that “With his very first dime store in 1945, Sam Walton set the BHAG to ‘make my little Newport store the best, most profitable in Arkansas within five years.’ He continued to set BHAGs, which continued to get larger and more audacious, as his company grew – Jim Collins: Good to Great in 10 Steps
In a recent Telegraph article Ronald was quoted as saying that cloudBuy now has the potential to “become the biggest technology business in the world, beating Apple, Google and Microsoft.” Just above that is a picture of Ronald with a pair of skis. This is the perfect image to go with that assertion, as Ronald was a downhill ski racer representing Britain in the Olympics and on the World Cup circuit.
I do not know if you have ever been at the top of a mountain staring down a steep vertical dive moments before you explode out of the gate; totally focused on a two mile ribbon that’s two feet wide and must be skied absolutely accurately at maximum speed. It is a world where seconds mean everything, so being off the pace by mere 100’s of a second puts you 10th or 20th. It’s a brutal and dangerous business and every time that you race you put yourself, your performance and your country publically on the line. Downhillers are an interesting breed and the elite that make it through to the World Cup circuit are characterised by the fact that they are generally quite ‘cool’ characters, with the hotheads and extreme risk takers having been weeded out by natural selection.
So it takes a certain mindset and courage to race downhill, as well as the confidence that is the result of years of training and infinite numbers of practice runs in the days, weeks and months that lead up to the moment that you put your poles over the start wand, breathe, channel your focus and your aggression and go!
I would imagine that the same kind of courage is required to set what Jim Collins referred to in the business world as being big, hairy audacious goals. In this regard, there is a parallel between being a downhill racer and a business enterprise.
Similar to having the experience to master the mountains, having years of experience solving complex eCommerce challenges also creates the same sense of confidence that enables one to look at the most daunting peaks with a certainty that you will ultimately excel to be the best. To the uninitiated, whose experiences or personal knowledge of the individual making such claims is usually limited, a big, hairy audacious goal such as overtaking Apple, Google and Microsoft is unfathomable. Once again, that’s a fair statement . . . if you truly do not understand the days, weeks, months and years of effort that went into gaining the knowledge and confidence that would allow you to stand at the top of this particular slope and know that a result at the finish line is achievable.
At this point I think that it is important to stress that the goal – our goal as cloudBuy, was never intentionally focused on being the biggest or beating Apple. Our goal at cloudBuy was and is to be the best at solving the biggest problems relating to doing business in the virtual world that is the eCommerce marketplace. In short, and starting with our ability to solve major problems for clients such as Paypoint back in the late 90s, we are at our very heart problem solvers. The fact that our success at solving problems has taken us down many diverse roads, and positioned us to be an impact player in the market, is a testimony to our ability to both understand and respond to the complex requirements of a rapidly changing Internet-based B2B world.
When you understand cloudBuy’s and in particular Ronald’s as well as mine and the rest of the team’s deep and rich history as problem solvers, you will also begin to understand why we chose to approach eCommerce from the standpoint of the supplier as opposed to the buyer.
This does not mean that we have by any means discounted the buyer. In fact quite to the contrary, we have actually better served the buyer’s needs by focusing on levelling the supplier playing field through a number of services or service streams as we call them, to ensure that a buyer can engage the broadest number of suppliers with the full confidence that they can deliver what is needed, when it is needed and at the optimum price value. There are of course many more benefits beyond these key considerations that we will touch upon at greater length in future articles.
Over the coming weeks I will be writing a series of posts providing a more detailed breakdown of each service stream, including their benefits to both buyers and sellers, culminating with a post that demonstrates how these different elements come together to form a cohesive and powerful service offering that will evolutionize the industry. And it is in this context of historic understanding and proven client successes that Ronald’s reference to Apple, Google and Microsoft makes sense . . . especially now that we are just past the 15 year mark.
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In The Cloud 