Forbes Innovation Growing Your Business With A B2B Marketplace Angus Ward Forbes Councils Member Forbes Technology Council COUNCIL POST Expertise from Forbes Councils members, operated under license. Opinions expressed are those of the author. | Membership (fee-based) Mar 7, 2023, 10:00am EST | Share to Facebook Share to Twitter Share to Linkedin Angus is CEO of Beyond Now , a fast-growing ecosystem orchestration and digital platform provider.
getty E-commerce was the winning formula during the pandemic, offering the convenience of self-serve and shipping everything from books and groceries to beauty products and wine. Most online stores or marketplaces, though, are simply a digital channel in front of an existing linear (“sell to”) business model. Its undoubted popularity with the born-digital generation and changes in automation, cost efficiency and SG&A reduction mean it is now rapidly being applied to B2B.
A huge opportunity lies in matching digital sales (a marketplace) with revolutionary platform-based business models to create new sources of competitive advantage (such as “network effects”), improve customer intimacy and increase profit margins. So companies can upscale from a simple “sell to” business model to “sell through” and “sell with” B2B2X platform models. McKinsey found that 65% of B2B companies offered e-commerce capabilities in 2022.
Likewise, Forrester predicts that 17% of all B2B transactions will be through marketplaces in 2023. However, there is still a lack of understanding of the opportunity to evolve business models. Selling online is no longer revolutionary, but the new business models they enable most certainly are.
Understanding The Concept Of A B2B Digital Marketplace Traditional linear business models centralize power and decision-making. For example: I make socks. I buy wool.
I define standard products and prices and then sell to customers (B2C) using direct sales and paid marketing campaigns or wholesale (B2B). I add a digital sales channel to sell online. My competitors have similar socks and entice my customers with similar offers, prices and the same paid marketing.
MORE FOR YOU The ‘Backsies’ Billionaire: Texan Builds Second Fortune From Wreckage Of Real Estate Empire He’d Sold Norfolk Southern Announces New Safety Plan To Help Prevent Future Train Derailments These Sustainable Growth Strategies Can Help Midsize Companies Improve More Than Brand Reputation Platform-based business models are very different. From a business perspective, a platform is defined as having a multi-sided business model able to generate powerful network effects (think Amazon “fly-wheel”). This is where volume generates economies of scale and an expanding partner ecosystem delivers more choices for customers, attracting more customers into an online community and driving further volume and scale gains.
As platform solutions have near zero marginal cost of growth (e. g. , Airbnb adding new rooms), volume delivers economies of scale.
This allows for price reductions to secure more volume and customers recommending others drive down customer acquisition cost (CAC). From a technology perspective, a platform brings extensibility and portability—it overlays and extracts the existing IT landscape, and with an API, can be continuously built on with compelling customer experiences. Multi-sided business models are uniquely powerful for digital solutions—a real sweet spot for B2Bs, as illustrated by all the hyperscalers and startups.
First, digital services always start with the customer problem needing to be solved. A perfect solution requires a broader set of capabilities than any one company can muster, so invariably it means co-creating (“sell with”) with an ecosystem of partners bringing complementary specialisms. There are four roles within a multi-sided or platform business model: a platform-owner, who orchestrates the value needed to perfectly solve the customer problem, bringing together producers (partners who own capabilities), providers (partners who own customer relationships) and the customers themselves.
The role played by each actor may be one or many and will change depending on the solution. So, a platform owner may be a producer and a provider or purely orchestrating the ecosystem to perfectly solve the customer problem. Secondly, digital services (unlike socks) can be added and combined to create something completely different and tailored to specific customer needs: 5G, edge, video, AI, robotics, software and data combined into a pay-as-you-manufacture solution.
A digital SaaS can be canceled, so components are continuously supported and upgraded to offer new value requiring skills and accepting risk, so an ecosystem partner model is much better than a linear upfront acquisition model. Thirdly, producers and the platform owner must switch from being “project” to “product” (“solution”) led. This means B2B customers can discover the solution online for themselves (e.
g. , harnessing AI-based marketing tools), evaluate, buy and scale up their use of a solution, and self-serve online. Solutions are designed to be repeatable, which means rather than being hardwired, the user has a full range of options within the shopping cart to fully configure the solution to their precise needs.
This standardization creates scalability while driving down the cost of support and upgrades. For companies used to selling through custom projects and a commission-based sales organization focused on corporate buyers and not end users, this is a major shift in itself. Finally, multi-partner digital solutions are often complex, so end-to-end automation of every step and partner in the value chain is key.
It also highlights the pivotal role of the platform to frictionlessly “orchestrate” the value on behalf of the customer based on the complex business rules, dependencies and trigger events set up for each solution in the product catalog that spans the entire ecosystem. The Role Of Communities A linear business model is “transactional,” so customers buy one product (socks) and may come back at some point to check prices on another product. Platform business models are about continuous customer engagement to build trust, intimacy and a community.
You want to get customers recommending you to new customers, suggesting new problems to be solved and participating in testing out the MVPs of new solutions. This community brings powerful network effects: high volume, economies of scale and low CAC. If adding a marketplace to a linear business model is 90% a technology project, then evolving to a marketplace with a platform business model is 90% business-led.
Business decisions include determining what to sell and a solution portfolio, what’s your compelling customer journey and how you will create a minimal viable community (MVC)—the point at which network effects are triggered. A marketplace is about selling highly repeatable solutions online. Self-service, building volume, and providing choice and reduced prices with continuous customer engagement to build trust, a community and network effects.
This yields a much lower CAC and higher customer lifetime value. You automate end to end with near-zero marginal costs of scaling. Even though you’re managing more complexity with a higher volume of partners, your customers experience a seamless service.
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