The Cargo Cult of Business Information

The state of B2B credit today can be compared to the cargo cults of the post World War II pacific islanders. Like these cults, the large credit bureaus and financial institutions are trying to predict the future by recreating the circumstances of the past and forcing modern businesses to perform their sad obsolete rituals.

The John Frum Cult, located on the South Pacific island of Vanuatu, is a modern remnant of the “Cargo Cult” phenomenon. These cults sprung up when technologically advanced western cultures exposed themselves to the native islanders. The natives, upon seeing the inexplicable technology and vast amounts of supplies brought in by the militaries of the United States and Japan, attributed these achievements to magic or divine origin.

Once the war ended and the militaries withdrew, the natives began creating rituals that mimicked the behavior of the occupying militaries. They would stage parades, build runways, coconut radios and even airplanes made from palm trees in an attempt to conjure up the fantastic amounts of men, supplies and the miracle of flight. Sadly for them, short of another war, nothing they do will replicate the unique set of circumstances they witnessed in the 1940’s. Even today, the John Frum Cult (“Hello, I’m John from America”) has a ceremony every year on February 15th to celebrate their new god in the hope of his return.

Unfortunately, the business credit industry is enacting similarly obsolete rituals. Here are a few examples.

Check Credit.  It costs a lot to check a company’s credit and in most cases the data isn’t accurate, timely or correlated with any company’s long term viability or ability to pay. This is especially true for small and medium businesses. Furthermore, business failure is a process and not an event. In order to understand the true risk of entering into a business relationship you need to monitor viability vs. check credit.

Reporting Credit.  It costs a lot of money to report on a company, good or bad. The quality of a report is dependent on collecting ALL of the data on a particular company. These fees are a negative incentive to participation and reduce the quality of the overall data.

Data Integration.  It costs a FORTUNE to integrate real time with the large business credit bureaus. This is an additional blockage to free data and skews the existing data toward the outcomes of the larger integrations: telecom, utilities, etc.

Trust.  The large credit bureaus don't trust you to update your own information.  They also don't track key information beyond the payment information such as certifications.  (SOC1, SOC3, ISO, etc.)

At Trust Exchange, we are trying to stamp out the cult by making the data open, free and peer generated. With our service, you can create your own standards, rate companies and monitor all of your key business relationships.  

Learn more by contacting us HERE

Disrupting B2B Information: Social Scale

As we pointed out in our prior post, The Secret of the B2B Credit Middlemen, the process for establishing, maintaining and granting credit is fundamentally busted. It’s expensive, inaccurate and non-transparent. We believe this industry can be restored in three key ways: 1. Freeing the Data, 2. Socializing the Data and 3. Fixing the Process. In this post we’ll discuss how socializing the data can eliminate one of the key problems in business credit reports: accuracy.

The credit bureaus DON’T ISSUE CREDIT! Businesses grant credit to each other and use bureaus such as Dun and Bradstreet to assess the viability of a given company. A quick glance at the D&B FAQ and you can see to create the credit scores, they use data from multiple sources. Most of these sources include public data or utilities reporting on the timeliness of your payment.

Similarly, businesses make their own decisions about partners, vendors and key relationships. It's the same decision process.  Entering into one of these types of business relationship is similar to issuing credit in that you're allocating resources to invest in these relationships.  

The bureaus claim to manage over 100 million profiles. The biggest of the bureaus makes 20 million data verification calls per year. Something doesn’t add up! There is NO WAY they can possibly verify the accuracy of 100 Million companies by cold calling.  Imagine if they were competing with Waze, verifying traffic and police locations by cold calling drivers on their cell phones.  They're a linear tool in an exponential world! 

The ratings business information should be SOCIAL. DnB, Experian etc. are data storage middlemen. If companies are able to view and manage profiles, rate other companies and contribute ratings free of charge, then the data will be more accurate, timely and more closely correlated to business reality. Reaching SOCIAL SCALE is the only means to truly achieve this cost effectively.

At Trust Exchange, we aim to create an open, easy to use, peer to peer, risk management platform that enables companies to more effectively manage their risk.  The value of the network is proportional to the number of members...we need you!!

Get your Free Account HERE

Tutorial Part 1: How to Build a Custom Compliance Dashboard

Here is the first of a series of tutorial videos we will be releasing over the coming weeks.  This video provides a general overview of our product and demonstrates how easy it is to build a dashboard and track companies.

It's never been easier to build a custom compliance dashboard.

Uploaded by Trust Exchange on 2017-03-31.

To learn more contact us.  HERE

Trust Exchange 2017 Release is LIVE!

Release Features

This major release launches our new user interface, which features beautifully redesigned views, intuitive navigation and forms, greater user control over permissions and significantly enhanced reporting flexibility.  In addition to these platform upgrades, system updates have been implemented that increase speed and stability, several bug fixes have been applied, and support resources have been expanded.

Platform-wide User Experience Redesign

The new Trust Exchange user interface features attractive, easy to understand views and intuitive top level navigation in the left sidebar, as well links to user-friendly support resources and company information in the footer of every page.  In addition, helpful text descriptions and mouse over information is served up contextually throughout, and forms for searches, reports and information entry have been extensively redesigned for simple and efficient input of parameters and data.

Enhanced Dashboard Information

Dashboard pie charts have been replaced with dynamic graphs which provide detailed information on multiple aspects of portfolio list status at a glance.  The new dashboard also features a scrolling feed in the right sidebar highlighting summaries of new events created in portfolio companies.  The dashboard continues to offer direct navigation between portfolios, and list management, monitoring and reporting tools remain accessible via the list drop down menu.  New, expanded reporting capabilities can be utilized by clicking on the “Reports” icon in the navigation sidebar.

Intuitive, Versatile Reporting Tools

In the updated interface, reports are built using easy-to-understand report wizards and permit significantly increased reporting versatility.  Event Reports and Checklist Reports can be created for any number or combination of companies and/or portfolios. Each report type allows the user to select a custom set of events or checklists to report on, and the user may choose from several convenient, pre-set date ranges.

Flexible Company Profiles

Both company profile views and reports increase user control over the types of events displayed and the date range covered.  Enterprise tier users may now delete events which they themselves have created from a company’s timeline.
 

Expanded Company Information

Company information input forms are now tiered in multiple tabs, allowing a user to add basic information and then more details as desired.  A company owner has access to additional tabs to further complete their company’s profile.  This information works hand-in-hand with enhanced search capabilities and will allow prospective customers searching Trust Exchange to more easily find vendors who meet their needs.  Trust Exchange and its partners will also use this information to feature companies who meet the criteria of our enterprise customers who are seeking vendors with specific attributes.

Improved Document Management

Documents can now be uploaded in a user’s “Files” section via an easy-to-use form.  When attaching a document to an event, a user’s list of documents is served up at the bottom of the new event entry form, allowing a user to click to select any number of documents to attach them to the event.

Enhancements

Several useful enhancements have been implemented with this release:

• Editing permissions can now be selectively granted for both private and public events

• A “Comments” field, which displays in the Event Report as well as in event summaries, has been added to all event types

• Users can now navigate to portfolios from a company profile

• Functional organization is improved for portfolio and user settings

• Many entry fields for event creation, checklist monitoring, permissions and reports throughout the platform now use incremental search rather than scrolling lists for input selection

Business Information Middlemen

The process of collecting and monitoring business information is broken, laden with middlemen who don't add value and yields less than perfect information.   One of the most compelling aspects of Internet companies is their ability to eliminate the number of parties involved between a producer and a consumer. Dell famously did this by creating a very lean supply chain and delivered custom computer systems more quickly and inexpensively. Through podcasting, Apple enabled the producers of raw content to distribute it directly around the globe collapsing the layers between teachers and students, artists and fans etc.

The business information and  credit industry is laden with middlemen creating several costly bottlenecks which should have been rendered obsolete years ago. These bottlenecks increase costs, decrease accuracy and increase the risk of sustaining financial damage.

Currently, the credit worthiness of a business is largely determined by the church of big fat credit bureaus. Quoting the Wikipedia definition:

“…(they) collect information and provide information for a variety of uses…”

That doesn’t seem like a whole lot of value. The bureaus are the data middlemen behind the credit curtain. These fading credit wizards have outlived their value yet continue to peddle stale, inaccurate and snake oily data. They keep you anchored with an ID, charge you to establish your profile, view your profile and update your profile. Then, they resell this data they charged you to input to other companies as “leads.”

This broken industry can be optimized by doing three things:  

1. Freeing the Data

2. Socializing the Data and

3. Fixing the Process.  

Over the next few weeks we will discuss this topic in a series of posts and present a new way to view business viability and manage risk.

Peer to Peer Risk Assessment

The value and scale of Peer to Peer (P2P) networks is well known. There are several examples of very successful uses of this framework including Skype, Kazaa, Napster etc. The emergence of “social” software and web 2.0 infrastructures is largely based upon the core analogy of P2P. At TrustExchange, we are building the first P2P Risk Assessment Platform which will leverage this model to enable businesses to obtain a more accurate view of risk inside their operating ecosystem (customers, vendors and partners).  Our goal is to be the "waze" of business information.  

To gain a better view of what we’re up to, it may be helpful to first discuss the core idea behind P2P networks and then expand on how it applies to risk analysis.  First, the definition, from Wikipedia, of Peer to Peer networks:

“Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions tasks or workloads between peers. Peers are equally privileged, equipotent participants in the application. They are said to form a peer-to-peer network of nodes.”

Note the part about peers being “equally privileged, equipotent participants,” and you’ll understand the core idea behind TrustExchange's approach. We’ve noted previously how the existing b2b credit granting and credit management process is broken. And we believe these processes can be greatly improved by creating a P2P, open and transparent risk analysis platform where the data is created and maintained by the peers participating in the network.

Currently, the data used to assess the credit worthiness or viability of a given company is maintained and controlled by the large credit bureaus such as Experian and Dun and Bradstreet. These bureaus are fundamentally middle men with limited value since they don’t grant or issue credit. Businesses make the credit decisions themselves and need a better tool that is more accurate, timely and correlated to viability.

Wouldn’t it be better when analyzing the risk of a given company, if you could not only look at their payment history, but examine how they perform in all aspects of their business? A global risk assessment which takes into account how they perform as a customer, vendor and partner?

Wouldn’t it be valuable to not only look at a single company but view an entire portfolio of customer risk, vendor risk and partner risk?

This is what we are creating at TrustExchange. If you think this is valuable and have strong opinions on the issue sign up now and participate in the discussion and give your input into the development process.

Our Epiphany. Why We Started TrustExchange.

The idea for starting TrustExchange came when one of my customers (from another company) went out of business. We rarely lost customers but when when it happened it was usually due to death (bankruptcy, shut the doors) or marriage (merger or acquisition). When companies die, it’s my experience that it’s a very painful process and a little check on the company stability goes a long way. This particular incident stood out in my mind because we had taken all of the typical precautions: checked their DnB, researched their business information, built personal relationships with the executives and interacted with them frequently.

Their failing wasn’t an event but a process where their loss of business stability extended over several months, and like the famous frog in the hot water, we ended up getting burnt in the end. A $25K burning! So here is the story:

We first met CompanyX (name changed to protect the guilty) just as they had begun getting traction. They were located in Silicon Valley, had signed several marquis customers, attracted some impressive investors, moved into a nice new office and from all accounts were pretty good citizens.

During the initial phases of the sales process, they were very diligent and asked all of the right questions about our product. The management team at CompanyX was pretty impressive. Degrees from the best schools, experience at tech stalwarts and a strong handle on their market and prospects. It was a tough sales process but in the end we were victorious and awarded the deal and promptly started contract negotiations and closing process. In the end, we negotiated a $10K startup fee and $5K per month recurring fee to use our product.

Prior to granting access of our product to customers we did a few things to check a company’s stability: Dun and Bradstreet check and we asked to see their financial statements. CompanyX, like most small privately held companies, refused to disclose their financials. It was a tough call since we had limited insight into the company stability but we had a quota to meet and they had a check for $10k, so we signed the deal!

Everything seemed fine for the first six months, they paid their bills on time and were happy with the product. Then we noticed they were 10 days late. When we called to check they apologized and said they would send it out promptly…except they didn’t. Then they went 30, 60 and 90 days late yet stayed in communication with us, told us they were fund raising and would be able to pay us soon so we didn’t turn them off. Our CFO checked their credit again and all seemed fine. After the fourth month, they stopped responding to emails or taking our calls.

Finally after the fifth month, we sent someone to their office and to our horror discovered an empty office. No people, no furniture nothing but a shell. We shut them off that day.

When I called some of my CEO peers, they had the same experience and were left holding the bag too.

Key Learnings:

1. Company stability is a process and not an event.

2. Credit report data is less than adequate.

3. Bad stuff happens to good people.

4. I could have stopped the bleeding if I had discussed with my vendor peers earlier!

5. I need to monitor company stability vs. just spot checking

Company Stability is a process and not an event. So…we started TrustExchange to help businesses monitor their risk and exchange key information to increase trust in each other. If you're interested and want to learn more about how we're doing this, CONTACT US.  

Time to Trust

Businesses have outsourced Trust. Rather than rely on on their own criteria businesses use services to help the determine the trustworthiness of other businesses. Will they pay on time? Will they provide good service? Are they helping or hurting my company’s compliance?

In some cases, this is a matter of scale, especially in the consumer market. Macy’s for instance couldn’t possibly have a deep enough conversation with every customer prior to purchase to get comfortable so they outsource that process to the likes of Visa, Mastercard or American Express.

In the business to business world, companies have outsourced this function to third parties in order to determine the likelihood of another business paying their bill or providing quality service. The only problem with this, is that businesses are different. B2B transactions usually have a much higher average selling price and are usually recurring. And, most importantly, unlike the consumer market where Visa, Mastercard and Amex underwrite credit, the B2B credit bureaus don’t actually grant credit. Businesses grant credit to each other and therefore, should not outsource this core task.

By leveraging a combination of Trust and Reputation, Trust Exchange is enabling companies to gain control of this function and bring actionable data directly to the people who need it most.

Why should a credit bureau define the “worthiness” of a business? Trust is built by a company’s consistent performance and results. Trust can be discovered most accurately by the individuals closest to that business: the owners and advisors. Reputation can be discovered by observing the way a business interacts with customers, suppliers, partners and vendors. Combined, we call this the SMART CROWD!

Who better to measure and define business performance that the “smart crowd” that’s already doing business with the company. Take back Trust, and be in control of your own reputation – Trust Exchange gives you the platform to do just that.

Stay tuned to our blog for more information.  

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