Disrupting B2B Information: Free the Data

As discussed in our earlier post about B2B Credit Middlemen, a powerful aspect of doing business on the Internet is the elimination of sales and distribution layers between the producer and consumer. In a typical non-Internet value chain there are many “value-added” steps in the process between the producer and consumer. Each step increases costs and reduces profit. 

Internet distribution models eliminate many of these steps by scaling distribution and eliminating sales complexity (e.g. Amazon, iTunes, and Zappos). In this post, we will attempt to illustrate the value chain for the B2B credit industry and point out the false value provided by the credit industry middlemen: the credit bureaus.

Credit Bureaus

Credit bureaus estimate a company’s viability by aggregating data from other businesses for them to use in making new credit application decisions. Unlike banks and financial institutions, they DON’T ISSUE CREDIT. Businesses issue credit to each other and should be the real arbiters of worthiness.

Furthermore, this data is created by businesses, provided to the credit bureaus (for a fee of course), and then resold to other businesses. The never-ending fees keep people from using the service and in turn make the data less accurate, less timely, and pretty useless. Who is a better judge of a company’s viability: a random call center operator or the people at companies who interact with each other?

Free the Data

The prevalent business model among these bureaus is to charge companies to ”establish” their profile, charge to view other companies’ profiles, and charge to submit data regarding the quality of interactions they have with other companies. Charging to submit data is a disincentive to accuracy and keeps the largest population of companies (small businesses) from participating. If companies could freely exchange THEIR data, then there would be a more timely and probably more accurate way to determine creditworthiness.

The value of the data increases as the number of active users in the network increases. A sort of Metcalfe’s Law for social networks in practice. The data should be free!

At Trust Exchange, we've created a community of businesses that disclose information with each other to build trust.  We believe that with increase trust, business happens faster and more effectively. We've helped many companies in several industries.  If you're interested in learning more you can either request a DEMO.  

OR...just get started with a Free account HERE.  

Businesses Build Trust by Sharing

At a certain point in my military career, I was made to sit through an extremely dry and soul-sucking class on the process of classifying information. Without going deep into that torture, I’ll sum it up with a statement that may seem counterintuitive.

“When possible, produce information that is usable by the largest possible audience.” In other words, “don’t produce classified information that nobody will be able to use.”

Trust me. This is the hardest lesson to teach. Top Secret information is sexy. It feels powerful to produce it and to control it. But, producing information that is classified (at any level) often makes it useless. Why? It’s quite simple. Information, data, intelligence, whatever you want to call it, has no value without application. Information only has value when it can be consumed. It’s like growing a garden of fresh vegetables, then never harvesting and eating them.

Businesses of all sizes, throughout all industries,  make the same errors every day. I understand, the competition is ruthless and is always looking to take some market share. Even non-profit organizations are in competition. Why would you ever want to share information with a rival? I’m going to begin my answer with an example. When casinos catch a cheater, what do they do? They quickly notify all their competition throughout the region. Why would they do this? The cheater won’t do any more damage to their business. Why not let the cheater go wreak some havoc at the competition’s Blackjack table? You know the answer, because passing that information quickly and efficiently helps to keep the industry healthy. When it comes to reporting cheaters, there is a high level of trust between competitors.

“Information only has value when it can be consumed.”

The business world needs to change its perspective. Nobody is telling you to give up a competitive advantage – that’s what the government does when you don’t properly nurture your industry. Ask yourself what information your organization collects, that when freely shared, will not put your company at a disadvantage to the competition, but protect the health of your industry. You could start with your vendors. In certain industries, especially pharma, credit unions and community banking, the vendor overlap between two randomly selected organizations is surprising. Reduce that list to critical vendors or high-risk vendors and the overlap becomes worrisome. We have the data, and we’re watching entire industries are put many of their high-risk eggs in the same baskets – a trend that does not statistically bode well over time, yet it exists. There’s an opportunity here though.

“Business information has NO value without application.”

If the organizations in an industry contract with many of the same critical vendors or high-risk vendors, does it make sense to share certain information with the industry? We think it does. It's not a complete list of possibilities, but consider the following possible events and conditions:

·       An investigation for fraud or bribery

·       The sudden departure of a CFO

·       Continuous failures to meet compliance requirements

·       A lawsuit

·       Restructuring

·       Layoffs

·       The unexpected loss of a critical client

·       A failure to maintain an overall industry reputation (falling out of favor) *

·       A failure to keep up with industry innovation *

I put an asterisk next to the last two examples because they fall more to the subjective side of the business information spectrum – extremely important data that needs to be included in any system of business information. Look at the list again. Concerning a common vendor, is there any item on the list that would compromise your competitive advantage? I’ll argue with you later, but the answer is no.

What happens when you do share this information with your industry peers? What are the positive outcomes for client and vendors?

Positive Outcomes of Sharing Selected Information with Other Industry Participants

·       The company’s reputation is improved in the peer-group.

·       Disruption of business due to vendor failure is less likely.

·       The industry’s reputation, in the eyes of the public and regulators, is improved.

·       The quality of the vendor pool is improved.

·       Vendor compliance costs are distributed throughout the industry.

·       Vendor responsiveness to checklist requirements is increased.

·       Reliance on 3rd-party information brokers is reduced, resulting in saved expense.

Positive Outcomes for Vendors when Performance Information is Shared

·       Top performing vendors are rewarded with improved reputation, resulting in increased business.

·       The vendor pool is compelled to maintain a high level of quality.

·       A vendor’s awareness of reputation in increased, allowing them to better manage the market’s perception of their product or service.

·       The vendor’s ability to observe and respond to market needs is increased, allowing them to remain competitive.

The biggest problem with most of the vendor management platforms is that they do NOT allow the sharing of important business information between industry peers. At the same time, they also do not allow the vendor to actively maintain their profile within the platform. They all essentially do the same thing, display the data that you already have. Trust Exchange made the decision to break this trend by applying social technologies to your business information/compliance program. Now, you have a choice. You have the choice to share business information or not. You are also now able to discover what everyone else is reporting about your critical vendors and high-risk vendors.

It’s time to adjust your perspective. Ask us how we’re different.

CONTACT US!

The Humanitarian Side of Vendor Management

BDP International, a Trust Exchange customer, explains in a recent report how our platform is uniquely designed to monitor and investigate its vendors, partners and customers, ensuring all are compliant with international policies on anti-corruption and anti-trafficking.  The article, Special Report on: Human Rights, published by Ethisphere Institute, highlights the continuing issue of human rights violations around the world, and cites several organizations, including BDP, who are taking a proactive approach to addressing these challenges.   

"The private sector has an ability to positively combat [human rights] challenges through creating and enforcing proper policies, engaging with governments and NGOs focused on ending these abuses, and working together to ensure suppliers, partners and other stakeholders are aligned with similar goals," says Stephen Linssen, Chief Compliance Officer of Ethisphere.  "By its nature, exact data and metrics around forced labor and other abuses are hard to come by, but reports by the U.S. Department of State and Human Rights-focused NGOs estimate that more than 20 million people worldwide are forced to work against their will and without compensation."

So how exactly is Trust Exchange, a compliance/vendor management software, helping combat human rights violations, you ask?

By providing unique, real-time means for companies to investigate and monitor their business partners.  BDP is committed to ensuring that its organization, partners and vendors adhere strictly to anti-corruption and anti-human trafficking policies, and depends on Trust Exchange's customizable compliance platform to do just that.

"We rate partners through trust certificates benchmarked against best practices in the industry", says Catherine Muldoon, Chief Legal Officer of BDP International, Inc. in the article entitled "The Logistical Approach".  "[With G2Link] monitoring is automated consistent with the policy requirement we created. Thus, we maintain oversight in real time and are alerted as soon as behavior deviates from policy requirements."

BDP and Trust Exchange aren't alone in their commitment to combat human rights violations.  The co-author of "The Logistical Approach" is Caitlin Smith, who is completing a concentration in Business and Entrepreneurship Law at Drexel University.  

Read the whole thing:  A Special Report On:  Human Rights

If you would like to learn more about how we can help you manage vendors more effectively, Contact us HERE.