Sales Management

The nature of sales: The big unbundling in B2C space, and implications / bad news for technology SMEs operating in B2B space

OLYMPUS DIGITAL CAMERAI have always been intrigued by the power of ‘reasoning by analogy’ in business, that one can predict industry trends in one industry by studying what is currently happening in a similar, and more mature industry.  This rhetorical device, which all of use in various everyday contexts, is something I learned to use effectively for predicting industry trends and technology trends while doing my M.Sc. in Management at MIT, while working at McKinsey as management consultant, and during a number of courses in rhetoric.  In general predictions based on reasoning by analogy are reasonably robust.

When I read about the big unbundling in app space, today an inherently B2C type of market, in a recent article by Eric P. Newcomer in The Information (see https://www.theinformation.com/Why-the-App-World-is-Breaking-Apart for those who subscribe), I thought it could be interesting to explore its ramifications for what will happen in B2B space.   After all, industry trends in B2C space are believed to lead or at least converge with industry trends in B2B space, see for example Gartner’s interest in social media, cloud, mobility, and big data (and internet of everything), of which at least  3 (4) out of 4 (5) are essentially B2C technologies.  (The same relationship used to hold between military technology trends and civilian technology trends in the time period 1960-1980, but broke down some time in the late eighties.)

What is then the big unbundling?  It is the app space version of point solutions or best-of-breed solutions in enterprise computing, as opposed to platform solutions and bundled solutions.  If going from B2C space to B2B is a valid analogy in accordance with the above, the big unbundling in app space should just be precursor for a similar unbundling in B2B space, and if that is true in software space it may also be true in other industries, say oil services space.

I will argue that such analogy does not hold, for three reasons: B2C space is characterized by i) many small customers buying small items goods (that is why such goods are fundamentally marketed, not sold); ii) less professional buying processes and criteria (including less focus on formalized requirements and integration, higher focus on ease of use, and higher discount rates); and iii) lower product and services complexity.

Lack of analogy does of course not logically imply that the unbundling will not happen.  I will however, based on other arguments, argue that the unbundling will not happen in B2B space and that if anything, we will continue to see strong and even stronger platform solutions in B2B space, whether in enterprise software (think Microsoft, Amazon Web Services, and Google), in the CAE market (read Ansys, MSC Software, Dassault Systemes, CD Adapco, and LMS), or in oil services space.

This conclusion is bad news for technology SMEs, which will have to continue to fight against technology giants with mediocre, but large footprint technology solutions.  That said, there are as always ways around such situation, including partner-based and indirect approaches, and just having significantly better, cheaper and more innovative technology solutions (or selling out to the giants).  And, going back to my claim of being able to compile robust predictions through reasoning by analogy: This time I was less successful.

Grim

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