I hoped that, by now, we would see different news than just Corona related ones. But it sincerely ain’t gonna happen anytime soon.
So, let’s continue with more learnings and consequences that we can put in action to make our businesses more resilient by becoming more nimble.
Nimble in the way we can react to disruptive outside events so that our customers are suffering minimal harm by retaining our ability to fulfill their needs.
In my last column I discussed how sales can get digitalized quickly in order to be able to react fast, if a disruptive event happens.
This time I will concentrate more on a long term solution beyond e-commerce.
The Double Challenge
We have learned that businesses have seen disruption on both ends of the value chain – the demand side as well as the supply side. For many a business the demand side broke down for obvious reasons – where there is a lockdown or where people refuse to leave their homes, there is no traffic. And where there is no traffic, there is no business.
As I have written in my previous column on how to digitalize sales, businesses that have been able to sell via e-commerce had – and still have – a significant advantage over those businesses that haven’t.
That’s the demand side of the challenge.
But, wait, there is another side: The supply side.
Businesses that do not get stock cannot sell, too.
Both sides, supply as well as demand, need to be addressed.
The demand side is fairly easy to address
As said before, an important part of solving the demand challenge is an e-commerce presence, along with the ability to digitally engage with the customers – and to deliver to them at the end of the day. To accomplish this, there are e-commerce systems that are as easy to implement as Shopify, up to high-end systems that resemble a toolbox that can be assembled to support any particular need. An example for this would be Spryker solutions ranging from SAP Commerce, via Salesforce Commerce, Magento, Intershop, and many more that have less of a toolbox character.
There is always a but.
At the end of the day, especially in a B2C business, but increasingly also in B2B environments, it is important to be available where the customers are, digitally as well as physically.
Additionally, customers are not always browsing from their desktop, or not even with a web browser at all. Instead, they use services like Tic Toc, Instagram, We Chat, WhatsApp, or one of the other ones that are available galore. They are using all sorts of payment providers, starting with a simple credit card, but also PayPal, ApplePay, Google Pay and more.
All this creates an exciting opportunity.
To which I will come back after discussing the sourcing side.
The supply side is not as easy to address
Now that the webshop is set up happy customers are ordering the good stuff.
Which need to be supplied and delivered.
And this is where the challenge starts.
The supply chain is optimized.
Optimized for cost minimal delivery, maybe even just-in-time delivery. Often there is one supplier of choice for products, because of scaling effects that can be used that help both sides by increasing volume (good for the supplier) and decreasing price (good for the buyer).
A supply chain like this is easy to manage and works well – as long as it is working.
And this supply chain is not working anymore.
The solution to this cannot be covered by a system only. Instead, this needs a more fundamental change. The supply chain must be optimized towards supporting another set of objectives than price and simplicity. There must be a higher resilience against events like these built-in, too.
And that means using more than one – multiple, in fact – suppliers to source single parts or products. It also means looking at the own value chain, answering the questions “Which other suppliers can I work with?” and “Do I need to insource more of my value chain and, if so, which ones?”. Answering these questions then might lead to a fundamental follow-up question: “Do I need to reposition my brand”?
A brand repositioning might be necessary due to possible price or quality changes that do not resonate with the existing brand message. As a brand repositioning is a major act, companies usually try to avoid this, especially if only for operational reasons.
Connecting the dots: Where does this lead to?
The answer to all these challenges is pretty simple – in theory. We are looking at two topics, namely for an ability to converse with customers and transact via nearly arbitrary platforms and for a ‘place’ that connects multiple buyers with multiple sellers.
The first topic can be covered by extending the own e-commerce presence into the conversational platforms that are used by customers.
This second topic addresses finding a place that facilitates buyers and vendors achieving their objectives. And this in a networked environment (vendors may be buyers and buyers are vendors, too).
In simple terms, this is a marketplace. Add a bit of complexity and we are talking about a business ecosystem.
A little detour to marketplaces and business ecosystems
In simple words, a digital marketplace is the extension into the digital world, of the market place that still often exists in the centres of villages and towns. It is a web platform that connects vendors and buyers, thereby giving vendors more reach and customers more chance to compare vendors and their offerings and prices. The owner of the (digital) marketplace processes the transactions and typically earns a commission for this.
This is part of the explanation for the success of digital marketplaces. Another reason is that it is easy for customers to compare products and services, which attracts customers. Yet another one is the infrastructure cost that is significantly lower than setting up an own webshop.
An business ecosystem is slightly harder to understand. As far as I know, the concept was introduced by James F. Moore in his article ‘Predators and Prey: A New Ecology of Competition’. In this article, Moore defines a business ecosystem as “an economic community supported by a foundation of interacting organizations and individuals – the organisms of the business world. The economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organisms also include suppliers, lead producers, competitors, and other stakeholders” (Source: Wikipedia).
So, in summary, a marketplace is a simple business ecosystem.
So, the main part of the solution to the challenge of staying nimble in the face of disruptive events is making both, demand, and supply side, more resilient and flexible. But how to get there? Glad you asked.
Here is a simple three-step process to make your business more resilient by using marketplaces.
Step One – Analyse
Step one into a digital marketplace is getting clarity about whether the own brand is strong enough to set up an own market place or not. Besides one’s position in the overall market place, this also needs to be thought about whether – or not – you already have an ecosystem of sorts, with customers, suppliers, and partners interacting. If this is not the case, then it is likely better to join one or more existing marketplaces instead of investing into an own one.
A second consideration is whether you create and sell a finished product, or are in the middle of the value chain, i.e. not selling to an end customer.
The third question to answer is whether you have customers in more than one industry.
Seriously answering these questions is crucial for success.
Step 2 – Select
In case you are strong enough to build an own marketplace, then in all means do so, before the competition does. An industry can sustain only a limited set of marketplaces before it gets saturated. And marketplaces offer advantages to first movers. This is for example, what Siemens did with its MoBase marketplace, which evolved out of its Easy Spares marketplace. There are many tools available for this. For instance, Mobase is built on SAP Commerce and Mirakl.
If your analysis shows that your brand is not strong enough to start a market place of your own and you are in the middle of the overall value chain, and not confined to a vertical, identify and select marketplaces that are a good fit for you.
Good horizontal marketplaces to start researching then are Ariba, Amazon, or Alibaba.
Alternatively, you can choose to join one or more industry-specific marketplaces, depending on their conditions and reach. Vertical marketplaces include the likes of Chemnet or Fastmetals. This list, of course, is highly abbreviated.
Step 3 – Act
Once you have decided on the way to go, connect your systems to these marketplaces, and ideally make contracts with more than one supplier (in different parts of the world). That way you have addressed both sides of the equation, the selling and the supply side.
From there on decide on which parts of your supply chain you want to insource again.
That way you can react nimbly to a disruptive event and can continue to think big while acting small.