The B2B marketplace potential
Independent professionals working in the talent economy are a crucial resource in the new world of work.
26 April 2021
IT and marketing have always relied heavily on external expertise due to increasing technicity of those jobs. Technological change is becoming faster and faster, which makes it difficult to recruit trained employees.
The most wanted tech skills are not available on the regular job market or take too much time to recruit.
Mainly because many of the most sought-after independent professionals are not looking to be employed. (Malt & BCG, Freelancing in Europe 2021)
A potential roadblocker to access these talents? Strict compliance regulations and cost saving goals often lead to complex RFP processes and excessive bureaucracy coming from procurement and HR departments.
But it doesn’t have to be this way: digital sourcing and recruitment solutions are a huge opportunity to improve efficiency and save costs in HR and procurement processes. And the most interesting value proposition might well be the chance to position HR and procurement at the forefront of innovation and digital transformation.
In order to meet the demands of a fast-paced digital business world, individual departments need to access external resources and especially talent fast. Building a flexible talent pool is a key to more agility.
On the opposite spectrum procurement departments, who oversee the sourcing of external service providers, are focused on cost savings and compliance. Being gatekeepers of companies in order to control costs and ensure compliance often leads to excessive bureaucracy. For the departments this either means loosing valuable time or choosing to bypass procurement resulting in “maverick buying.“
Because ultimately the departments will be measured by reaching their project goals, not by their number of “approved” spendings.
But there is good news: Procurement departments that manage to overcome the red tape of bureaucracy and free themselves from operational tasks like validation workflows can unlock a huge potential for cost reduction, efficiency and more security.
The emergence of increasingly specialized and advanced marketplaces in the B2B world can be the answer to this challenge.
Just like B2C marketplaces B2B marketplaces bring together many sellers and buyers in one place to reduce search costs and simplify the supply chain.
The difference with B2C marketplaces is that the services and processes offered by a B2B marketplace have to match the needs of multiple stakeholders in the company, not just one person.
Thus, B2B marketplaces have to understand complex organisation structures and what the challenges are for each of their stakeholders.
With the right setup, B2B marketplaces are able to respond to critical procurement challenges and give back accountability and autonomy to internal stakeholders, who can now choose and order themselves. This sets procurement free from the role of validation that led them to be bottlenecks and allows them to spend more time to monitor and focus on high value added tasks. At the same time it can also lead to a change of behaviour on the user side towards more responsibility and ownership.
So let’s talk about some typical characteristics of B2B marketplaces and what features you should prioritize for your specific needs.
Product marketplaces offer goods such as office supplies, furniture and equipment or packaging.
Service marketplaces offer services such as freight services or consulting services e.g. by freelancers.
Some product marketplaces also offer services related to their products such as providers of maintenance, repair and operation (MRO).
So far, quite simple. But product or service really makes all the difference regarding the features a marketplace should focus on.
Because in the marketplace world products are standards, and services are complex.
For the online trade of products the one-stop-shop solution is always attractive. The more “complete” the range of products within a marketplace, the higher is the potential for cost savings through high volumes, as well as efficiency gained through centralized management.
Service marketplaces, however, often involve solving a complex problem as it is the case for example with consulting services. This makes quality and level of customization a decisive factor.
The more complex the service requirements, the more important it is for the marketplace to offer quality control and advanced customization. In most cases, this is only possible through verticalization.
In order to ensure efficiency in the purchasing process, service marketplaces need to offer a flawless customer experience, support and security guarantees.
Horizontal marketplaces try to cover as many suppliers as possible. Prominent examples are Amazon Business or Alibaba. The advantage of horizontal marketplaces is the one-stop-shop solution they offer.
However, we have already seen in the past how marketplace giants like Craigslist or Ebay were disrupted by competition that specialized in specific segments or categories of a horizontal marketplace. Through verticalization marketplaces move away from the one-stop-shop in exchange for more tailored solutions.
The advantage is that they fundamentally improve matching. They understand the specific challenges within their category and can respond to problems of their market with specialised solutions, high quality standards and good service.
In theory, verticalization can go on and on — each time creating a solution that is even more tailored. However at some point a high fragmentation of suppliers comes at the price of efficiency for the procurement manager since it leads to the administration of many different suppliers again.
The challenge for the procurement manager is to find the right balance between tailored solutions where needed and centralized solutions where possible.
Global availability can be a huge advantage that online marketplaces can deliver quite easily. This is why many B2B marketplaces want to become global in order to expand their product portfolio and provide competitive prices through increased competition among their suppliers.
This advantage is again especially true for product marketplaces. But we have also seen early service marketplaces like Fiverr or Upwork adopt the global concept. Their main advantage is that they are able to offer significant cost advantages compared to local vendors.
However for a global approach the marketplace also needs to shift to products or services that are rather standardized.
Services designed to solve a complex problem on the other hand require direct personal contact, local accessibility and local expertise as it is the case for marketplaces that offer legal expertise or tax consulting.
But also independent professionals working in consulting, tech or marketing are often a key resource in transformation and digitization projects.
A recent study by McKinsey for example looked at the productivity gap between average and high performers and showed that the difference is most dramatic in complex projects. For a very complex project, the productivity of “high performers” exceeds that of the average performer by 800%.
Marketplaces that offer such profiles must be able to understand and meet customer needs very precisely and provide the right matching features.
One of the main advantages of a marketplace is cutting out the middleman.
Facilitating a direct relationship between customer and supplier and thus cutting the supply chain short can be an extremely powerful cost saver.
But the more complex the supply chain, the better the marketplace must be designed to replace previous structures and ensure a smooth process between customers and suppliers.
Depending on the supply chain, we can observe marketplaces that are therefore still an extended distribution channel for traditional intermediaries like it is the case in freight services for example.
Procurement managers should carefully evaluate at what point in the supply chain they still need to rely on the traditional service provider and when the marketplace design allows them to actually take back control.
The deeper the cut, the more disruptive and transformational a marketplace can become, by offering price advantages that are far out of the non digitized competitors league.
There are some features that distinguish an advanced B2B marketplace from a simple platform that offers a centralized place to meet each other without additional services.
In order to significantly increase efficiency and be an attractive option for large companies, B2B marketplaces need to provide high-end management systems with end-to-end digitized processes, automatized payment workflows with integration to S2P (Source to Pay) systems and in-depth reports and insights across all departments. The big advantage apart from saving costs is regaining control and transparency over the supply chain which will improve security and compliance and at the same time give back autonomy to the internal buyers using the marketplace.
Open marketplaces are able to offer increased product choice as well as transparent and competitive prices. With no admission requirements anyone can become a supplier allowing the marketplace to grow fast and become a global player quickly.
At the same time the risk in terms of quality and security becomes higher. To meet these risks, marketplaces can implement built-in quality control features. These can range from recommendation systems to automatized document verification processes. The most restricted one being manual selection of suppliers which often results in a closed marketplace.
While manual selection promises higher quality, it also requires more resources to offer this service. This will not only increase the margin price, it also requires perfect communication and market knowledge. Especially in human resources, it can be problematic to have “an outsider” making the selection for you, since it’s a very personal and individual decision.
The solution are marketplaces that find a middle ground between built-in security checks and sufficient product choice for the client to be autonomous according to their needs.
Sometimes the additionnal services managed by the marketplace can be so valuable that customers start using the marketplace even if they already have access to the product directly because for example they have superior delivery service such as Amazon or deliveroo. You can order a deliveroo next door because the service will be better or bring your tickets bought on another service to google flights because the UX is so convenient.
Coming back to our initial problem, B2B marketplaces can not only free procurement from transactional tasks and make their own processes more efficient, they also give autonomy to single departments and thus have the power to reduce the challenging KPI of the Maverick Buying ratio.
To ensure that, procurement managers must assess the needs of the individual departments carefully and ensure that the new solution will be broadly used.
Besides flexibility, speed and high quality supply, there is one factor that helps achieving this, but gets neglected too often: Good Usability.
A user-friendly and intuitive design is an absolute must-have in every B2C software and has by now established the standard in people’s expectations when using a software. The “users” in the B2B world are the same as in the B2C world and they more and more expect the same user experience they are used to from their private life.
The mere existence of start-ups such as Userlane prove however, how little importance is still attributed to usability in the B2B world. Managers often prefer to make sure tools and providers are able to mimic every single detail in the existing process, even if it’s at the cost of usability. This is often fatal.
To really close the gap between internal stakeholders, simplicity is no longer a “nice-to-have”, but an absolute necessity.
To conclude: Well designed B2B marketplaces give procurement managers the key at hand to close the gap between internal stakeholders and ultimately drive forward the digital transformation of their business by providing fast access to the most crucial resources.