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Risk-Sharing as B2B Ideal The following article appeared in the July 5, 2000 edition of Line 56 News an electronic newsletter published by "Line 56 Magazine." By Demir Barlas B2B customers want fast, easy access to information about products and processes that allow them to make quick, effective business decisions. With that in mind, a study released today by New Hampshire's Beta Consulting Group says that success in the B2B marketplace depends upon the establishment of true business partnerships which transcend the production and delivery of goods. Beta founder and manager Bradley Hosmer says deep communication and risk-sharing are the cornerstones of modern business partnerships. "The old hierarchical type of communication is breaking down completely," says Hosmer, because of multiplication of contact points between businesses and the increasing transparency of business processes. Non-managerial employees now have a greater amount of leeway to make critical decisions - in dealing directly with vendors, for example - and Hosmer advocates even greater access to internal operational information for customers, vendors, and employees alike. "By reaching a deep contact in a vendor organization, the B2B customer can find out quickly what its options and opportunities are. This facilitates good, fast decision-making. If you can make the lines between customer and vendor seamless, your B2B operation will do well in this environment," he says. Once-stodgy mainline companies like GE now embrace the ideals of non-hierarchical communication and deep contact, so the point is well-made. But what about risk-sharing? Hosmer sees it as part of "the adoption of a different outlook between vendor and customer." Vendors should be more proactive in their relationship with customers for instance, by making product offering suggestions. This is a sensible prescription, but there are still some barriers in place. For example, large vendors often tend to put small and medium-sized businesses (SMBs) on the back burner, and SMBs are often locked into using large vendors because of product selection issues. In cases where SMBs deal with vendors of their own size, Hosmer's true partnerships will be easier to implement, since there will be a genuine value proposition for each party. Without these mutual value propositions, the old ways of doing business - to the smaller party's disadvantage - will persist. Many B2B exchanges share risk (and profit) by exchanging equity participation. E-STEEL and FreeMarkets, for example, have equity deals with major suppliers as an incentive for them to use an independent e-market. This type of risk sharing is a hedge against the biggest start-up risk of any independent e-market - liquidity. Bradley E. Hosmer, CMC, heads The Beta Consulting Group in Concord, NH, specializing in improved sales, marketing and new business development for generating profitable growth. For further information please contact Mr. Hosmer at Beta Consulting. |
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