by David Gould

The July, 2000 eCommerce: B2B Report, from eMarketer predicts the continuing rapid growth of B2B (business-to-business) e-commerce as firms take steps to fully engage e-business practices. Worldwide B2B revenues are now forecast to grow from US$185 billion in 2000 to US$1.26 trillion in 2003. Those are some staggering numbers given the numerous reports of more dot-com business ventures failing, losing millions of dollars both in the B2C (business-to-consumer / retail) and B2B sectors.

Why is this happening and what does it mean for today’s sales and marketing professional catering to the B2B market?

The first part of the answer is to understand that the e-commerce dot-com business issue is really not very complicated. First, you take a large number of businesses with no established revenue stream that spend inordinate sums of money to tell people why they should come visit and buy from them, and often less on promoting the products and services they sell. Then these businesses load up on finished goods inventory, warehouse and fulfillment services and the like with heavy up-front start-up costs.

There should be a break-even position established, as there would be for a “traditional” venture. In the fast paced dot-com environment however, breakeven is very much a floating point, mainly because the business plans are so full of guestimates and situations change by the minute depending on visitor reaction to the e-commerce offering. As long as your financial backers and investors agree to those terms, you get to carry on. If it works, everyone will win as we have seen some do, and profits can be very solid; if it does not work, the end is quick. Once the moneylenders realize that their prospects for return on investment are limited or even realizable, the boom comes down.

On the other side of the coin are the established corporations with proven B2B revenue streams and existing supply and fulfillment capabilities. Having a viable business, they watch from the sidelines letting others carve out the e-commerce concept at their expense, not the established businesses’. When the pathfinders are burned out physically, if not financially, the heavy hitters muscle in to sweep up a sizable amount of the newly established e-commerce market by leveraging their established brand equity. This is where the core B2B growth numbers are coming from as these smart organizations embrace the cost-efficiencies the e-commerce model provides.

These profitable and proven businesses have two ways to grow their profits -- either increase sales, possibly to larger markets, or cut costs. The dot-com revolution allows them to achieve both goals. The break-even point is measurable from the outset and investors can realistically determine both their potential and real return on investment. In other words theirs is a much more solid business case as proven by many leading corporations (Cisco, GE and others). Hence the dramatic forecasts within the B2B market.

Smart, established businesses strive to gain the best from both worlds and form digital strategies that retain base core business while migrating whatever can be efficiently executed digitally. In this way, they form a win/win scenario for themselves and their customers. This concept is also becoming apparent in the retail B2C sector where prominent established retailers -- Wal-Mart, Sears and others -- are making dramatic inroads using a similar digital strategy.

In the middle of these two zones are businesses that are losing their competitive edge because of this technological evolution. These are businesses in the wholesale sector primarily that can no longer justify and sustain their existence when their supply source manufacturers can more efficiently sell direct to their customers. The perfect example is how Dell Computer’s make-to-order strategy has awoken other computer manufacturers to mimic them. Combined, this direct sales trend has caused considerable fallout in the computer wholesaler and reseller distribution channel and there is more to come across the entire economic spectrum.

The dot-com revolution essentially is weeding out businesses that do not provide tangible and quantifiable value-added services. This pruning is very healthy for a progressive economy but it signals that yesterday’s status quo has shifted with positive and negative repercussions.

By understanding and accepting this concept, it is fairly obvious how professional sales and marketing managers can immediately leverage huge opportunities to help their employers AND their customers reinvent themselves and their trade relationships.

The first hurdle is to accept the change and get on with the new task at hand. This is quite often much easier said than done because forging a digital strategy that complements or in some cases replaces your core business strategy is no easy task. Difficult? Perhaps. Impossible? No! The two are not the same, yet have to integrate harmoniously to be successful which takes considerable careful planning and execution particularly if the impact of that change is the death knell for your traditional business.

The second hurdle is the fact that for every business, regardless of prospects, there is a clock ticking. Someone, somewhere is working right now figuring a better way to do business with your customers. Acceptance of this reality is mandatory. The issue is not that someone might try and steal your business away, but when. The choice is to sit back and watch it happen or quickly do something about it before it is too late. And do it better than anyone else does because the competitor may be on the other side of the planet bringing a totally different culture, cost and business ethic to the table. In combat they say you never hear the bullet that gets you. It’s the same in the dot-com revolution.

Overconfidence is like quicksand for Management to fall into when discussing this subject. It usually manifests itself on two fronts.

One: the traditional business can handle new competition without doing anything dramatically different.

Two: that being good or successful at traditional business, the company can easily handle the digital strategy and related execution work with just a little extra effort.

Both suppositions are erroneous.

When consulting on this subject, I encourage clients to consider many things, especially about their competition and their attitudes towards them. You are overconfident if you are not:

- Thinking, and downright scared about what your competition are about to come up with to compete against you.

- Wondering who else, other than your identified competition, just might enter your market and blindside you.

- Nestling up to your customers to find out what they want from you personally, your company AND what they think of how you are doing when compared to how your competitors are doing.

- Dreaming of better ways of doing business with your own and your competitors’ customers.

- Waking up sweating in the middle of the night wondering about all this.

From the thrust of the B2B dollar projections, many corporations have got this message, but surprisingly how many have not - particularly in the small and medium sectors. Huge international corporations are forming e-commerce purchasing cartels, which presents real challenges for sales and marketing professionals. Just as important is the digital response being built globally to compete against and/or with such initiatives whatever their size. Those watching these opportunities pass by are missing a huge potential new business dimension and may suffer from their procrastination.

To design, build and execute a successful B2B e-commerce strategy requires a skill-set that is uniquely challenging.

First, there must be a solid appreciation of the traditional business or venture -- the foundation necessary for the rest of the work required and ensures that a synergy exists from the outset.

Second, the technical expertise must be solid enough to handle much more than just the “basics”, such as creating an electronic brochure. Anyone can do that nowadays.

The key is to integrate with existing marketing, customer relations management and business systems so that the functional relationship between the Internet website buying visitor and the seller are as logical, secure, seamless and comfortable as possible. This too may be quite challenging depending on the degree of sophistication determined necessary or budgetary limitations. It definitely requires expert help to make the end solution functional, dependable and user friendly. The bottom line is that nobody ever remembers how fast you create your e-commerce position, only how well. But, having said that, speed is of the essence because you never know when competition will strike.

The strategy that the best defense is an offence is good advice. Internally, it may require some generational mentoring to determine the best way to achieve that solution. Older managers must be willing to mentor younger ones (and visa versa) as to the best solutions, which can generate the desired results. This has to be a dialogue so all parties appreciate the possible and what some might consider the impossible.

It is very important to approach the entire subject therefore with open minds, and any established strategic alliances with outside specialist support services and vendors must similarly be true open partnerships. The mission is to get the job done right the first time in an efficient, professional, sensible and expedient way. That can only happen when everyone involved accepts and understands their role and take ownership of their responsibilities.

Open communications with strict project and time management are essential for this process to be cost effective. It is definitely not a time to play politics, favorites or games because when the actual e-commerce solution is live never forget that you are just seconds away from a mouse click that may end your chance of a sale forever.

Equally important is to ensure that your traditional sales and customer service staff and resources, including everyone on the production, fulfillment and distribution side of the business, are made aware and involved in this new business direction. Not all people will accept such change with ease and steps may have to be taken to train and motivate accordingly.

I first started writing this article pondering the change of influence that is happening nowadays between buyers and sellers. To be more precise, the power and influence that purchasers seem to have acquired by embracing e-commerce, and how that trend is seeing everything from novel new business concepts, the formation of monopolistic purchasing cartels and sales professionals being made redundant because they no longer add value to the transactional sales process.

On the other side of this evaluation is how some excellent examples of professional salesmanship and marketing are being introduced by progressive minded corporations as they seize the huge opportunities for growth and business development from this digital revolution.

What is happening is that caveat emptor - “let the buyer beware” - has changed to become caveat venditor - “let the seller beware”. If you want to survive in any business, you have few options but to heed the clarion call. It is the end of the world as we have come to know it, but, if you manage the challenge, in many ways the new one will be considerably more exciting and profitable.

© Bald Eagle Consulting Inc. Reproduced with permission.