Question

who faces a skewed market in B2B markets?​

Answer 1

The Future of B2B

by Richard Wise and David Morrison

From the November–December 2000 Issue

The use of the Internet to facilitate commerce among companies promises vast benefits: dramatically reduced costs, greater access to buyers and sellers, improved marketplace liquidity, and a whole new array of efficient and flexible transaction methods. But if the benefits are clear, the path to achieving them is anything but. The B2B market is still in its infancy, and its structure and players remain in rapid flux. Despite breathless press coverage, very little is known about how business-to-business commerce will evolve on the Internet.

The high level of uncertainty is causing widespread anxiety among executives—and for good reason. Whether as buyers, sellers, or both, all companies have substantial stakes in the business-to-business marketplace. Their supply chains, their product and marketing strategies, their processes and operations—even their business models—will be shaped by the way B2B relationships are formed and transactions are carried out. Yet at this moment even the most basic questions remain difficult for companies to answer: Which exchanges should we participate in? Should we form a trading consortium with our competitors? Should we demand that our suppliers go on-line? What software should we invest in? Executives understand that the wrong choices could have dire consequences, but they also know that in the fast-paced world of the Internet they need to act soon or they’ll be left behind.

Fortunately, there is a model for the future shape of B2B: the financial services industry. Characterized by information-based transactions, large and liquid exchanges, and intense competition, financial markets closely resemble the new B2B markets. But unlike their B2B counterparts, the financial markets have been around for centuries. Their evolution provides important clues to the likely evolution of B2B. In particular, the recent restructuring of the financial industry suggests that, counter to the common wisdom about B2B today, exchanges are not the primary source of value in markets that are information intensive. Rather, value tends to accumulate among a diverse group of specialists that focus on such tasks as packaging, standard setting, arbitrage, and information management.

We will use the financial services industry as a window into the future of B2B. We will show why the current exchange-based model is structurally flawed, examine the major trends that will influence the strategies of both entrepreneurs and established companies, and describe the key market players that are likely to emerge and the roles they’ll play. The future we envision is already coming into being. New B2B players are now emerging with business models that mirror those that have come to define and dominate the financial industry.

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