SERVING CUSTOMERS: PUTTING THE BUSINESS COLLECTIVE TO WORK
An ecosystem strategy provides a fresh approach to meeting fast-changing, ever-more-demanding customer expectations. In our hyper-competitive world, product and service innovation is no longer enough to guarantee success. Companies must now innovate at the business model level. This realization is driving the adoption of a new ecosystem approach to facing the competition, which we call Business Collective 1.0 (BC 1.0).
In a Business Collective, companies align up and down the supply chain to serve their end customers in a manner that creates sustained value for Collective partners.
But executing this transformation isn’t easy, particularly because the customer demands are constantly changing. “Experience with new platform technologies and business models is dramatically increasing both the expectations and empowerment of consumers,” reports a recent IBM study. “They are developing an insatiable desire for compelling experiences across all areas of life. They expect integration across channels and touch points, and they are quick to change loyalties to organizations that can better meet their needs.”
For example, according to IBM’s research, 81 percent of under-40 year old consumers demand improved response time; 76 percent expect organizations to understand individual needs and 68 percent want organizations to harmonize consumer experiences.
This same mindset is quickly taking hold in the B2B environment.
But there’s a problem. Most B2B companies are not set up to deliver these types of experiences and, as a result, face a number of challenges ranging from rising costs to customer dissatisfaction or, worse, defection.
A Practical Application
How then do you put the Business Collective to work in B2B? The consumer goods (CG) sector provides an excellent illustration – where partnering can help solve a growing cost and service issue.
The problem stems from several dynamics. First, a rash of recent private equity purchases have drawn individual flagship brands out of larger company portfolios and into standalone entities. Warren Buffet’s purchase of Duracell from Procter & Gamble is a case in point.
The rationale behind these deals is, among other things, the idea that the brands will be better off on their own with more direct sales and marketing support, and more direct interactions with their customers. However, as standalone brands, these downsized enterprises lose the logistical clout they enjoyed as part of a mega-corporation’s aggregated supply chain. Suddenly, they find themselves without supply chain critical mass – and they watch as their logistics costs go up and service goes down.
At the same time, the hyper-expectations of Internet commerce are starting to permeate the B2B channel, creating service requirements that traditional supply chain networks were not designed to address.
“Big consumer goods manufacturers have built optimized, large-scale distribution networks with regional distribution centers, full truckload shipments and other economies-of-scale practices,” notes Eric Catlin, Senior Director Business Development, DHL Supply Chain. “But these models don’t necessarily fit in the new dynamics of the consumer goods industry, which is an e-commerce-style world, where everyone expects consumer-like agile, fast service. Consumer goods companies don’t quite know how to be retailers, and they are not sure how to fit into the e-commerce model or meet e-commerce-like expectations.”
That’s where the Business Collective comes in, in the form of a shared supply chain. The shared supply chain is not a new idea. What is new is that the convergence of market forces discussed above has propelled the idea from ‘nice to have’ to ‘must have’.
“CG companies are aggressively looking for partners to join forces with, to solve the new cost, flexibility, quantity and speed issues,” Catlin says. “They are looking for shared space, shared systems and shared networks. No one wants to go it alone in tackling these new issues, so they’re saying, ‘If we collaborate, we can all serve our customers better.’”
The global third party logistics service provider, with its diverse customer base and network portfolio, can serve as the matchmaker in this new shared supply chain. “We can leverage our customer base to find complementary matches,” Catlin explains. “We can marry up previously separate supply chains to re-capture economies of scale and service capabilities.”
“But we don’t have the power to do this unless everyone agrees to this new way of doing business,” Catlin qualifies. “Everyone in the shared system has to line up in sync to make it happen. This takes a lot of work, but the potential benefits are worth it.”