Play Fair, or Don't Play at All

e-Markets have to be level playing fields

New York  April 12, 2001  The future success of e-markets depends upon the creation of a level playing field for all participants, argues a new report examining the reluctance of suppliers to participate in e-markets.

The analysis from PricewaterhouseCoopers' survey, Realism Not Pessimism Addressing the Challenges of E-Markets, warns squeezing suppliers' margins, resulting in increased loss of supplier brand value and commoditization, could reduce e-markets to a cutthroat price bazaar and possibly kill a new way of doing business in its infancy.

Karel de Baere, global e-business leader at PricewaterhouseCoopers, says: "The reality is that domination of e-markets by buyers is not sustainable in most industry sectors. Without suppliers, there is no e-market  it is as simple as that. Buyers are, however, starting to recognize the need for consideration of supplier benefits; only one respondent in our survey insisted on buyer biased e-market models."

The report, based on PricewaterhouseCoopers' experience and the detailed feedback of 31 of the world's largest players in the U.S. and Europe, highlights the advantages suppliers can reap through e-markets, namely greater customer intimacy, product differentiation and operational efficiency. "E-markets must begin with a strategic blueprint for success that enables trusted collaboration between customers, partners and suppliers," said Audrey Katcher, U.S. leader, e-markets, for PricewaterhouseCoopers' Global Risk Management practice. "In the new collaborative economy, the issue of online trust becomes paramount to the sustained success of the online exchange. Trust  or the lack of it  will determine who succeeds or fails."

Coining the phrase `best mover beats first mover' PricewaterhouseCoopers calls for adopting an integrated strategic approach:

1. Best mover beats first mover. Joining an e-market needs to be a strategic decision taken at the board level with an emphasis on getting it right. Failing to do so could result in a very costly and negative experience. The research showed that companies are already taking this advice to heart, indicating that European companies for once could profit from a slower technological development by learning from the experience of their U.S. counterparts.

2. Get the buyer/supplier balance right. Balance and market compatibility are crucial. Make sure the chosen e-market delivers what your business is looking for and understand the dynamics of competitors turning into collaborators. Often buyers have been reluctant to participate in e-markets because of fear of losing price and cost advantages to their competitors.

3. Address technology early. Despite the fact that entering e-markets is a strategic decision, it is crucial to address technology issues early on, including data quality, systems and process integration, security and reliability/availability. Exchanges and participants need to argue for the development of technological standards in order to streamline the workings of e-markets and speed up integration. Not surprisingly, companies pinpointed this as their greatest concern.

4. Collaboration requires trust. Trust cannot be established overnight, especially in an environment in which competitors need to cooperate. E-markets will need to ensure systems are safe from hackers and the possible misuse of information, as well as ensure the confidentiality of data and compliance with agreed legal frameworks. Exchanges will also need to address fulfillment issues, including the expectation of 24/7/365 availability.

5. Make people part of your strategy. E-markets change the nature of business processes. In so doing, they raise critical issues involving how people are recruited, trained, managed, incentivised, and which people have the right leadership abilities.

"These considerations do not equal a roadmap to success," said Karel de Baere "However, to use a racing analogy, you select the best horse for a race to increase your chances of victory, though it does not guarantee it. Similarly for e-markets, preparedness means that companies give themselves the best chance of thriving in a new business environment by understanding the challenges and addressing them."

"E-markets represent the latest development of the application of digital technologies to streamline procurement and other back-office processes," said Mr. de Baere. "In the short term, e-markets will complement existing business channels, rather than replace them."