The Chinese culture is truly fascinating and for someone likeme who lived the vast majority of his life in Europe, there are striking difference in several aspects of life. Probably more astounding are differences in fields such as education and business. Talking to my local desk-mate DM (alias) at work, I realized how avidly the new generation looks at entrepreneurship, craving freedom, balance in life and success. The new generation approaches business with a lot of passion but still the larger portion selects a B2C model as most appropriate for their venture, overlooking the benefit of going B2B. The issue lies in the widespread misconceptions that a B2B business model that cannot take full advantage of new technologies, such as the IoT or e-commerce platforms, and also is the result of obscure processes. This is just that, a misconception.
Discussing with DM during lunch break, we listed some of the major differences between the two pure business models so to have a clear idea of what choice young entrepreneurs face. On one side, there is the B2C model that is based more on impulse, quick decisions and no time to make comparisons – if not with the immediate local items. On average, purchases are small in value and volumes are high. The stakeholder involved is only one, the decisiontaker, the customer. On the other side of the spectrum, there is a B2B model, in which orders are usually more complex, costly and involve a large number of stakeholders. Take as an example buying a new laboratory. Technical staff evaluates performances while IT department looks at software integration, the finance department usually cares only about costs while the HR department is involved in developing specific personnel training. Managers in the end will take all available information into consideration andcoldly take the final decision. This process is cumbersome but not obscure once laid out and if addressed in the proper way canturn very profitable. I am a strong believer of ripping benefits from business digitalization, so I challenged myself to find ways for a B2B business to improve through the adoption of technology and explain them to DM as if he were a graduate from a local university who’s interested in starting his venture but is unsure of the path to walk. The wide spread e-commerce platforms have proven very effective for B2C and here are the reasons for which I believe they can be even more effective for a firm operating on a B2B business model.
- Big data. Through the e-commerce platform it is possible to gather large amount of data that canbe used to improve revenue forecasts, understand of customer’s buying cycles and possible seasonality effects. It is becoming increasingly important to analyse the elasticity of the focus market as knowing the price at which demand and supply coordinate do not suffice anymore, this can be achieved through acquisition and analysis of data. Also, the mass of information gathered can be leveraged to improve customer segmentation and product portfolio so to capture and retain the most profitable accounts. Big data can be an important tool to install and maintain continuous improvement practices, which only a small percentage of firms have in place.
- Operational excellence. In a B2B environment firms deal with a great variety of order types and are less likely to follow rigid supply-chain process, so being able to dynamically adapt prices to market demand in automatic mode is strategically important. Level of service can be improved by interfacing the online platform to Omni channel solutions, which distribute information/tasksfrom multiple channels to the available resources increasing responsiveness and customer centricity. Integration with the order management system across multiple channels allows to communicate directly with different warehouses, this in turns creates a small JIT that reduces cost very visibly. It holds true even more if the B2B firm move towards cloud and cloud applications.
- Marketing. Through the e-commerce platform, a B2B business can address the relevant stakeholders by emphasizing the solution provided to their problems. Most of the customers buying B2B surf the internet hunting for information on the purchase they’re after, so a B2B firm should help them in the selection process providing additional information that would not be needed in a B2C environment. Continuing along the line of collaboration, speaking the language of the industry, providing multiple payment methods and creating a direct connection with the sale department helps customers making their rational decision. One additional benefit of forging an alliance with the customers is an increasein retention rate. For a B2B business selling services the amount and complexity of information to be provided are greater.
- Account management. The e-commerce platform helps capture subscribers to newsletters and promotional mailing list. In turn, firms can simplify account management thanks to the important information gathered about their customers.
- Pricing. There is a risk in publishing a great quantity of information about a firms’ product lines, that is a search engine can easily find data for many providers of the same product, aggregate them and lead to a commoditization of the products. To counter this eventuality and avoid competing on prices, a Configure-Price-Quote system can set prices dynamically.
All in all, the benefit for a B2B firm leveraging technology can be seen across multiple aspects of the business. At this point the question is why DM in his fictitious role of recent graduate should still hold his belief that B2C is the best choice for his venture. I realized that there are some very good advantages in starting a B2B business during a time in which everyone is going digital. The first immediate reason is that in a B2B business it is possible to achieve the same profit of B2C but with fewer accounts. To do that, attracting customers is the way forward and for a B2B business it is possible to just to buy word searched for the long tail keywords connected to specific characteristic of the product sold. There is little chance that two offerings have the exact same characteristics and so probabilities to show high in the search list increase. Moreover, for B2B business it is not mainstream yet to leverage an e-commerce platform, according to Forbes the estimated total spending on e-commerce technology for B2B is twice the spending for B2C businesses, which leaves a big market untapped. I found interesting how at times the choice to go B2B instead of B2C derives purely from addressing customer pain point in some part of the purchasing journey. Some famous examples are Amazon and Facebook who started their payment system to facilitate customers’ purchases through their website, ending up becoming the pain point for the banking industry. During our lunch break I managed to push DM to consider more prominently a B2B business model. Hopefully going forward more and more entrepreneurs looking to start a venture will consider to develop such a B2B model, without fearing technological revolution or rational decision processes, and instead riding them to rip all the benefits they bring.