The unfair Internet disadvantage

For SBT
E-commerce promised a lot – in the beginning. Here was a supposed opportunity to sport your products and services in a secure and expedient “B-to-B” environment.
Here was a chance for the small and medium-sized business to reach out and touch our planet, anywhere at anytime. And to do so fairly cheaply. That is, the expectation was that you could forget the expensive sales trips, the ungodly dead time in airports, and the waiting, and waiting, and still more waiting time to personally have an audience with your customer or prospective customer’s chief buyer (buying team).
Invariably, someone figures out how to “pass go” without throwing the dice. Unfortunately, that’s been the experience of a number of our TEC members, and, for some, it has been a costly experience indeed in the world of e-commerce. Costly, because sometimes up front the rules of the game are not completely articulated.
This month I would like to walk you through one e-commerce experience. I’ll let you judge if this is an arena that you want to deal with (without Russell Crowe on your side).
ConAgra Foods used the Internet for a quotation request for labels on March 30, 2001. The RFQ document looks like many I have seen, i.e., specifications, performance requirements, quality issues, etc. Until you get to Page 4.
On that page you are informed as a bidder that there are four “lots,” with lot closings scheduled for 10 minutes per lot, beginning at 3:30 p.m. EST. You are told that time between lot closings is 10 minutes. The estimated value of this label contract is $3.9 million. You bid in the lot or lots for which you believe you are best competitively qualified. You are also instructed that ConAgra itself will not accept inquiries pertaining to the bid prior to the bid event.
Then there is a dictionary of supplier qualification compliance information (pre and post bid) you need to meet – just to participate in this process.
Well, here’s the point. I don’t know who won the ConAgra bid for its four lot-needs. I do know that the reverse-auction Internet concept is alluring companies, innocently, to be forced to their knees and compete as proprietary companies, but treated as if they were offering nothing more than commodity offerings. Something is sadly wrong with this picture.
The human component of B-to-B disappears. Value-added becomes an irrelevant idea. Suddenly, major commerce is being transacted in a “dot-com” setting that neutralizes everyone around one common denominator – price!
So, if you do elect to play what can be a dangerous Russian roulette game, what can you do? Here is some advice from our TEC members and Sam Bowers, CEO of Service Sales Institute in Charlotte, N.C., who knows all too well the axiom, “I’ve been there, but don’t want to say I’ve done that”:
1. Right up front develop a strategic game plan. For example, how can you build a bid profile that exactly meets customer expectations, but does not exceed them (to do so increases your costs and increases your chance for error).
2. Change your internal focus from a “selling” perspective to a “they are buying” perspective.
3. Your objective is to be the low-cost provider in the bidding process.
4. Engage your customer right away to find out if “online bidding” will dictate the final selection method.
5. Make sure your B-to-B technology is in order (e.g., internal/external networking, high-speed up and down links, etc.).
6. Know that, in this game, cost innovation is highly rewarded with no sacrifice in quality on your part.
7. Service commitments and follow-through capabilities must be designed at computer speed.
8. The “give-and-take” of personal interaction must be replaced with the “give-and-take” of computer interaction throughout your supplier-chain network.
9. Learn all you can about the bidding software that will be used during the bid event (e.g., ConAgra contracted with FreeMarkets Bidware for its bid events).
10. Consider your online bid experience a potential window to the global world of bidding, bringing new markets to you that heretofore had been out of your conventional marketing/sales distribution reach.
Reverse-auction technology via the Internet is probably not going to go away. Certainly, at some point the human element will return to play a key role. But in the meantime, if you choose this route to deliver your products and services, become the owl and not the ostrich! Learn all you can, compete, and to the readers of this column, I hope you “outbid ’em.”
Until next month, good “RFQing” on the ‘Net!
Harry S. Dennis III is CEO of The Executive Committee in Wisconsin and Michigan, a professional development group for CEOs, company presidents and business owners. He can be reached at 262-821-3340.
Aug. 3, 2001 Small Business Times, Milwaukee