In Part One of this commentary stream, I reflected on some conversations related to the history of online B2B adoption. I made reference to a research report written in June 2000 that outlined the positive benefits of electronic B2B processes, but even back then, raised some cautions and practical watch outs. So much has changed in this online B2B technology wave since that time.
In the June 2000 AMR Research report, this author outlined important business and technology change management considerations that warrant some important reflection. The report concluded:
“Trading exchanges have the potential to provide the mechanisms for impacting how companies interconnect, streamline, and reinvent their interaction with customers, suppliers, service providers and channel partners. However, they need to be considered in the context of broader comprehensive strategy that addresses a company’s overall strategic business goals and how e-business and supply chain strategy will enable those goals”.
The above statements addressed the all-important internal and external organizational change management factors that needed to occur within many industries and their supply chains. From an internal perspective, procurement teams discovered that e-procurement practices layered on former methods of bludgeoning suppliers for the lowest material cost would not yield mutual benefit. While adoption of e-procurement practices yielded benefits in indirect procurement, many lacked the energy or resources to broaden initiatives to direct materials and complex services, without additional change management assistance. Companies needed to build trust and collaboration in their trading communities.
Sales, marketing and supply chain fulfillment teams discovered and overcame issues in cross-functional business process and organizational reward alignment. There were obstacles in channel conflict and consistent pricing that still exist today. Some readers may recall battles of the B2B platforms which placed suppliers in precarious positions of which platform to support. Adoption of standardized processes, terms and taxonomy, along with information integration capabilities that span the enterprise also had to align. On-boarding a new supplier in the early days of exchanges was fairly painful and often requited direct IT assistance, and days to complete.
In the external sense, a number of severe global economic recessions provided the mandate to reduce overall supply chain costs, leading toward a wave of global outsourcing and extended supply chains as a mechanism reduce material and labor costs. Many companies accepted the vision of the Internet as the facilitating mechanism of online commerce at their own pace, after observing the success of others, or after internalizing the compelling differentiators for their businesses. Consumers and businesses become far more comfortable in leveraging online commerce tools to secure goods and services. There were few visible innovators, at least those who were willing to openly share strategic intent.
On the technology side, the eventual development of more mature software-as-a- service (SaaS) platforms coupled with improved online integration tools linked with cloud computing platforms have moved the online B2B maturity curve forward. While some issues remain, manufacturers and service providers can now understand the important value propositions that were missing before, namely more extended reach across the extended supply chain, quicker time to overall deployment, and reduced IT infrastructure costs.
In the year 2000, companies like Apple, Amazon and Samsung never appeared in the listing of the top ten most valuable companies. At the end of 2012, both Apple and Samsung appear on that while Amazon is not that far behind. Each has a business model that leverages a world class supply chain that surrounds E-commerce and online business processes. They are supply chain intensive companies designed to leverage required business outcomes. There were no examples of Linked-In, Facebook and Salesforce.com to help teams understand the notion of the network is indeed the system, and that systems of engagement are the other enabler of deeper collaboration and quicker decision-making.
According to a report published by the Boston Consulting Group, in three years, the Internet economy will reach $4.2 trillion among the G-20 economies, a size surpassing some countries. During this past holiday buying season, consumers clearly stepped-up their preferences towards online channels as their preferred buying option. According to comScore, the growth rate of online retail commerce is outpacing the growth of brick and mortar retail by a 4X factor. In the U.S. alone, total retail and travel-related E-Commerce sales reached $289 billion in 2012, 13 percent higher than the previous year.
It may have taken over a decade for all the business, technology and change management factors to align, but those companies and technology providers who embraced change, stayed the course and adjusted to the lessons of the market are now reaping the benefits. We can unfortunately speculate as to more industry casualties to come from those companies and service providers who were not as adept at catching the online B2B wave.
As noted in Part One, we are now entering the third platform wave of online business, the fusing of transactional, advanced analytical and social engagement information where line of business, B2B and supply chain teams will be able to harvest incredible capabilities. The takeaway is accepting the learning of the past as the passport to the future. The spheres of Technology, Process, People and Business will need to again align. The winners will be those who provide the leadership and mentoring toward achievement of the vision, and execution of the components in manageable and organizational readiness phases.
I would be interested in your views on the evolution of online B2B, especially those readers who have first-hand navigated their organizations through this era. You can contact me via email at: info <at> supply-chain-matters <dot> com.