How early adopters succeeded in the digital age – Welcome to Digital Transformation
B2B companies that invested in and mastered a “targeted set of digital capabilities and approaches” generated 8% more shareholder returns and a revenue compound annual growth rate that is five times greater than other companies in their field.
According to a survey by McKinsey & Co, respondents recognise that their companies’ business models are becoming obsolete. Only 11% believe their current business models will be economically viable through 2023, while another 64% say their companies need to build new digital businesses to help them get there.
It’s not that B2B companies haven’t taken advantage of digitisation, but for many, the focus has been on improving back-office efficiencies, internal planning, and existing IT infrastructure. Their websites remain digital brochures without an effective selling mechanism. When it comes to using digital technology and channels to increase revenue and create sales efficiencies, they are lagging far behind B2C companies that have set the standard for how digitisation can result in more users served at a lower cost. The reasons that B2B companies fail to take advantage of the power of sales digitisation range from a complacent belief that they are already being innovative to internal fear of change and cost concerns. Whatever the reasons, any further delay in taking part in the digital transformation reality of B2B sales is a lost opportunity. Early adoption has shown a clear path toward short-term advantages and long-term value. However, early adoption is no longer a trend, it is a reality and organisations must embrace digital transformation to remain competitive.
“Any delay in taking part in the digital transformation of B2B sales is a lost opportunity.”
The current state of the B2B Digital Landscape
There has never been a better moment to sell products and services online. Today’s sellers have abundant new opportunities to use technology to reach audiences, extending market reach. And while online marketplaces have traditionally been associated with consumer products and services, marketplace technology has become one of the key sales channels not only for B2C marketplaces but the B2B sector as well.
According to Statista reports, in 2021, online sales on B2B platforms, log-in portals and marketplaces increased 17.8% to $1.63 trillion.
Traditional methods of B2B operations – from onboarding through to discovery, trading and fulfilment – are becoming digitalised, driven by the outbreak of the pandemic back in 2020 and its consequential lockdowns, and a new influx of millennials in decision-making roles, seeking business interactions more aligned with their B2C experiences. According to 2021 reports, 64% of B2B buyers now place more importance on experience than price, whilst 86% of buyers are willing to pay more for a better experience.
In response, there are many B2B sales channels available to businesses, but operating one's own digital marketplace provides opportunities for true optimisation across the user journey. B2B marketplace platforms bring buyers and sellers together, from wholesalers, manufacturers, and suppliers looking to trade products, parts, raw materials, and services globally.
The importance of being in the vanguard of digital transformation is highlighted by McKinsey & Co., who, over the past three years, measured the “Digital Quotient” (DQ) of hundreds of B2C and B2B companies globally.
Taking into account 18 management practices related to digitisation, such as strategy, capabilities, culture, and organization, the average DQ score for the 50 B2B companies in the study was 28, well behind the average score of 35 for B2C companies, although some of the B2B companies scored very highly. This DQ score isn’t just an abstract measurement, McKinsey found. The top quarter of B2B companies generated 3.5 times more revenue and was 15% more profitable. Research by Forrester also reveals the importance of digital maturity in B2B sales. Launching and managing an online B2B marketplace can potentially save sellers up to 90% on sales and operating costs, Forrester determined. The research firm also found that 56% of B2B companies say they have some users whom they can only profitably serve through an online channel.
The digitally top-performing B2B companies succeeded because they were the first to transform their sales and marketing functions into online, data-driven marketplaces that engage customers and make it easier for them to buy. As a result, their marketplaces allowed for a personalised customer experience and targeted selling while providing efficiencies and customer-centric practices such as smart contracts, end-to-end settlement, and worldwide logistics.
Still, now in 2022, not all marketplace technology providers will offer every feature and functionality you require, and many may take different approaches to building technology. Therefore, it's vital to work with a partner who most closely understands your aspirations and the best execution of those aspirations.
Technology providers such as NovaFori adopt a collaborative and hands-on approach, combining B2B marketplace expertise with your industry knowledge and business requirements to design the right platform for you. We provide businesses with a flexible, scalable and modular platform solution, designed with the needs of the B2B world in mind, to ensure your marketplace is a seamless extension of your business.
What Digital Transformation Looks Like
To illustrate the benefits of online B2B marketplaces, we’ll look at two B2B companies that have succeeded in using NovaFori’s online marketplace platform.
“The digitally top-performing B2B companies are succeeding by transforming their sales and marketing functions into online, data-driven marketplaces that engage customers and make it easier for them to buy and sell.”
CarNext - enabling cross-border trade and price discovery
CarNext is the world’s largest vehicle leasing company, managing more than 1.7 million vehicles in 30 countries. Its vehicle fleet management ranges from vehicle purchasing to the remarketing of vehicles at the contracts’ end, and every day up to a thousand vehicles are remarketed — with the majority of its European vehicles being sold through a digital auction.
The company was clearly taking advantage of digitisation already, but its existing auction platform was nearing end-of-life status, and the company wanted more user functionality and a more modern look and feel to its new platform. They also wanted to enable cross-border trading to achieve the highest price for their remarketed vehicles, regardless of which country a vehicle is located in.
CarNext's mission is to change the way people buy a used car. Traditionally, the used car market has been fragmented, localised and inefficient. To address these limitations and transform the experience for everyone involved in the used car market - whether that’s customers, traders or suppliers - CarNext decided to build a remarketing platform and choose NovaFori to deliver the solution.
Overcoming the Challenges of Digital Transformation
With successful stories such as CarNext, it’s clear that digital B2B marketplaces that combine user-centric platforms and advanced analytics are highly desirable and effective tools for B2B sellers.
A McKinsey global survey of 2,500 B2B companies across industry found that those willing to digitalise their sales models and embrace next-generation capabilities are growing revenue at twice the rate of GDP.
Throughout the last few years, most organisations have understood the value and need to embrace digital practices. However, a large number of companies are still largely stuck in an offline or analogue selling mode, with some not even offering an option to buy through their website, much less providing trading and auction mechanisms.
If the majority of B2B providers aren’t underestimating the importance of digital sales and the potential of online marketplaces to raise revenue, why aren’t more of them transforming to digitally focused sales?
All too often, the answer relates to internal issues and misperceptions, and the following hindrances are common:
- A belief by company leaders that the business has already digitally transformed because it has taken steps to improve back-office processes with digital tools and/or invested in internal IT infrastructure improvements — failing to understand that the real growth opportunity is not in internal cost-saving but in using digitisation in sales and marketing.
- An “If it isn’t broke, why fix it?” mentality is often driven by people who have been in key decision-making roles for a long time.
- An irrational resistance to change by a top decisionmaker (e.g. CEO/CF0/CTO).
- A lack of internal resources for digital transformation perhaps some to fear losing control (or maybe even their job) if third-party companies are hired to help with the transformation.
- Concerns about the short-term costs of making a change (without regard to the possibility of impressive ROIs).
- A belief that sales digitisation is a change that can be put off for a while longer.
- A lack of time, resources, or authority by those who realise the opportunities presented by sales digitization.
- A notion that digitisation isn’t appropriate for a company’s offerings and sales strategies.
- Concerns about integration with existing IT infrastructure and systems (e.g., CRM, accounting, inventory management, marketing automation).
- A complacent comfort with existing sales technology solutions without looking for more advanced options.
- A belief that switching to new digital solutions will be time-consuming and take an unacceptably long time.
Without question, these obstacles are real, but none are satisfactory reasons for not pursuing the increased revenue and heightened sales efficiencies that digital online sales platforms can offer.
There’s also no doubt that the technical challenges of designing, building, and executing an effective, optimised online marketplace can be daunting for many B2B companies. Left to their own resources and expertise, many companies would develop less than-optimal digital marketplaces, and the development could take unduly long months, perhaps even years.
Online B2B marketplaces are complex, both technically and in the structure of the markets themselves. The data that is available is intricate and complicated to collect and mine.
Fortunately for B2B companies, NovaFori’s solutions are flexible, scalable and modular. Given a decade of experience in building marketplaces, we provide clients with platforms that can grow with their business.
We work with significant market makers in their respective industries to either create or improve upon their current route to market:
- The need to disrupt themselves before someone else does
- Declining sales
- Margin erosion
- High cost of sales
- Lack of market access
- Being relationship driven, rather than data-driven, lacking an understanding of new market opportunities
With our expertise and technology toolset, we can help any B2B company make a digital transformation and manage the many variables of an online B2B marketplace.
Our background in auction theory and in deploying supply-demand matching mechanisms for price discovery means we deliver value in these complex markets.
Scaling marketplace solutions
Given the complexities of B2B markets and the technical challenges of online marketplaces, many companies can benefit from an experienced technology partner, such as NovaFori. Our solution makes the customer experience easy and frictionless while increasing conversions and maximising revenue for the marketplace.
And with deep, configurable functionality designed with execution speed in mind, we can get your marketplace operational sooner rather than later. NovaFori can be the change agent you need to make your digital transformation. We can help you get started and then help you grow and evolve.
If you've pondered these questions before, or need help navigating your own digital transformation journey, we're here to partner with you.
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