Marketplaces R.I.P.

Q. Why did so many marketplaces, exchanges and other promising B2B dot-com experiments fail so dismally? A. Because the...

June 27, 2003

Q. Why did so many marketplaces, exchanges and other promising B2B dot-com experiments fail so dismally?

A. Because they applied an outmoded, transactional model to business-planning.

The b2b pioneers claimed to be creating new ‘business models’ based on win:win dynamics, risk-sharing and systemic cost-reduction. The truth is that, however unwittingly, they were actually engaged in ‘Relationship Cannibalisation’, and they just didn’t understand the human implications.

Despite lofty ambitions of speed-to-scale, and critical liquidity, what they were actually talking about was changing the power-structures within markets, shifting the balance of need, and uprooting the modes and channels of all market-interaction.

Many b2b business were actually engaged in ‘role reengineering’, in the process breaking long-established promises across systemically interdependent business webs. They demolished relationship structures and disenfranchised stakeholders at every turn. Achievable perhaps, if one were replacing these structures with something equally compelling at a HUMAN level. But they weren’t.

Instead, the b2b pioneers were trying to achieve these lofty aims with the rusty iron toolkit of consumer marketing. While preaching supply-webs and collaboration, their marketing approaches derived straight from a culture of supply-chains, tell-sell marketing and a competitive, transactional mind-set. They then expressed amazement when these business models crumbled. Weird!

This doesn’t mean that the ambition was wrong, of course. Inefficiencies should be rooted out; transactional friction should be eradicated; costly competition should be replaced with appropriate collaboration. But in a world of product parity, the prime differentiator for businesses no longer comes from the ability to strip out costs, but instead from the management of relationships and their supporting structures.

Structures which improve flexibility, pre-empt market power-shifts and develop new revenue streams, many of which will derive entirely from relationships assets: knowledge, trust and mutual commitment.

Understanding the foundations, structures and orientation of your relationship assets is the key to strategic success – through perpetual relationship innovation.

However, this same compelling logic applies to your suppliers, innovation-partners and channels to market. Their needs cannot be compromised. Retaining your licence to innovate depends not on your ability to co-erce these groups into buying your new relationship model, but in devising a carefully calibrated relationship-leadership strategy which is beneficial to all…in their own terms. In a dependency culture, power is everything. In an interdependency culture, responsible leadership rules!

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