Small Business And The Internet
What Hubs, Portals, Intermediation, and XML Mean To You
Small business owners are learning to benefit more from the Internet. When the Internet first became commercially popular, the focus was upon putting out a web site to make products available to the world. Businesses hired web developers and got their companies online, using good old HTML. But, today, small business owners see bigger advantages to the Internet, such as saving money via more efficient purchasing of supplies and vendor relationship management.
Business to Business hubs have sprouted up to help business buyers and sellers find each other and negotiate pricing more effectively. The Internet should make purchasing more efficient as it closes the information-pricing gap.
While some small business owners benefit from an information-pricing gap when selling their products or services, many business owners are victims to the gap when purchasing supplies, services, and raw materials.
The information-pricing gap is created when disparities in information allow some vendors to charge substantially more for the same product or service than other vendors. Ultimately, all buyers don't have full access to all sellers. This raises the price for some buyers. And, when you pay more than you need, that extra money could have gone straight to the bottom line of your business.
Most business buyers partially overcome this gap by hound-dogging out the best deals. Making calls or paging through catalogs is part of any business. But, that takes time. And, time is money. The Internet will streamline and automate this process in the future.
With any business purchase, ask yourself if the Internet offers a more time-effective and less costly way to make the purchase. Think about how the Internet can save you money as a business buyer. Seek out small business hubs as a buyer.
Repetitive effort is another huge waste of time in small business. Whenever the same action is repeated many times for little extra benefit, time is squandered.
Consider applying for a small business loan. Each bank has its own application. If you apply for five loans in an attempt to enhance the chances of getting a loan, you fill out five different applications. Plus, maybe the sixth bank would have given you the best deal on your loan, if only you had applied to them!
Yet, the useful information you provide to each bank is substantially the same. It is largely a matter of applying different formats to the same information. However, today, sites such as livecapital.com can send out the same small business loan application to many banks simultaneously.
Whenever you find yourself repeating the same information in multiple formats, see if you can find an Internet solution that lets you streamline the application process. Try to enhance your options and selection with less work. Let intermediaries handle reformatting data!
This doesn't imply that you never want to customize a presentation or that you don't have vendor preference. You certainly do, and you must take this into account. Relationship building is valuable. For example, you will probably favor your current bank for your small business loan, as it helps solidify your existing relationship.
If you are a contractor, or if your business serves other businesses, seek hubs as a business supplier. Contractors can't pursue business opportunities they don't know about.
The Internet makes opportunity more available to all small businesses. Rather than depending upon the customer to find your web site via a search engine, seek leading, niche-based, portal sites to generate business for your company.
Today, many larger companies which outsource contract work have online request-for-quote programs, and, in the future, this will be an explosive growth area. Similarly, many Internet hubs help match freelancers and consultants with businesses needing specialized services. Currently, however, many of these sites seem little more than a posting place for resumes.
New consultants benefit from online hubs matching consultants with companies not only because it is an outlet for their services, but also because it shows them what other consultants are doing. The Internet shows new entrepreneurs business opportunities by profiling what other entrepreneurs are doing.
The Internet is great for industry research. For example, if you contemplate starting a new business, you can go to hbsp.harvard.edu and see if any there are any business case studies relevant to the industry you contemplate.
Many of the new business hubs are constructed with XML, Extensible Mark-Up Language, which is designed to allow the seamless sharing of information between different companies and databases. While HTML encouraged companies to develop information-rich, static web pages, the newer XML will encourage industries to establish their own standards for the exchange of information. XML will encourage industry collaboration. Eventually, every major industry will have at least one or two hubs effectively serving it. The key words are eventually and effectively!
Nick Earle and Peter Keen, authors of From .com to .profit: Inventing Business Models That Deliver Value And Profit, write that the business hubs that succeed will become powerful brands, largely supplanting the power of product branding. But, to succeed, the authors write that these portal sites must be value-adding intermediaries, not value-taking intermediaries.
Earle and Keen write, "...invention today pushes toward new forms of intermediation: becoming a value-adding middleman, coordination point, or broker. The many companies applying it often target an entire supply chain, distribution system, or manufacturer-consumer relationship chain that is anything but value-adding. The existing intermediaries in that context are value-taking, gaining high commissions because of the fragmentation of communication, lack of coordination, and information gaps between buyer and seller."
To see if a business hub is value-adding, Earle and Keen pose the question: "Where do we become indispensable to customers and business partners?" That's a good question for entrepreneurs developing the thousand or so new business portal sites.
Unfortunately, many of these portals fail in several key areas. First, they are not nearly effective at seeking out the best prices as they might be. Too many key companies aren't participating or aren't listed at some of the portals.
While it's relatively easy for consumer sites such as mysimon.com to do a great job of querying multiple, established booksellers and finding the best price on a book, many of the new business portals fail dismally when seeking value buying standard office supplies. Partially, this may be due to the wide range of possible product alternatives. But, there is no reason for major office supply players, such as quill.com, not to be included. If the site only lists its own products, that's not value-adding!
Second, the sites which offer many vendors often fail to give the potential buyer insight into the quality of the firm offering the product or service. It seems the portals will need to develop some method of objectively rating the quality of little-known suppliers, especially of business services and custom contracting work. Some small business owners pay more for established reputation and quality. We all like to do business with established companies we trust. Portals which deliver quality are value-adding.
In addition to trusting established brands, small business owners also have networks of people and companies they respect and trust. It will be difficult for portals to transfer this community of personal trust and reliability to larger, online communities.
So, until someone creates your dream business portal, this means that in addition to making calls and paging through catalogs, you will now also want to spend some time clicking around on some business portal sites.
Here are some portal sites which might be of interest:
Forbes Best ranks B2B sites.
A small business portal.
A small business portal site from CitiBank.
A portal which sends out RFQ's (Request For Quotes) to multiple businesses.
A directory of portal sites. Looks like a good site, if you can tolerate banners blinking at you from all directions.
Another directory of portal sites, sans banners.
A B2B Small Business Portal with buying guides.