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Friday
Oct312014

When staging a bold retreat is good for business

 

Trade Extensions, CEO, Garry Mansell


  
The last two years have seen an unprecedented level of growth in the Trade Extensions business, and like all CEOs I would love to put it all down to the vision and guidance I have bought to the organization. 

However, like the best CEOs I know, first and foremost I am a realist.  Yes, collectively we have made a number of right decisions.  We have focused on continuously improving our offering to the extent clients and industry observers tell us we are now functionally beyond all of our competitors.   

our growth cannot be explained just by having the ‘best’ product and there is something more fundamental going on in our sector 

However, our growth cannot be explained just by having the ‘best’ product and there is something more fundamental going on in our sector creating the environment that is allowing us to grow so dramatically.  It isn’t new, it goes on everywhere and has been happening for years – and after conversations with a few of our clients and prospects our VP of business development has confirmed to me it’s happening now.  The fact is industry as a whole, and managers as a species have been staging a series of ‘bold retreats’.

Now, what do I mean by this? 

In industry the, ‘bold retreat’ is a well understood alternative to either adopting or defeating a new technology/ competitor.   It is best described by companies that recognize they have ageing technology that is being eclipsed by game changing new inventions, and they do something about it. So whether it is sailing ships or computer tape drives, every industry at some point develops to the extent that companies within the market have to make decisions as to either get out of the market or become a niche player, unless of course they become world dominating.  Today, despite faster and more reliable engine powered boats being available, sailing boats still sell very profitably and while cloud storage is suitable for a lot of data, there are still markets that need physical tape drives for their archives.  Often becoming a niche player is the smart decision and companies may change from being market leaders to profit leaders.

'Bold retreat’ is coming from users and providers of enterprise wide solutions.

The ‘bold retreat’ we are seeing in the sourcing and optimization sector is slightly different because it is coming from users and providers of enterprise wide solutions.  In the traditional ‘bold retreat’ scenario the existing dominant technology retreats to a niche position but what we are seeing now is less of a ‘bold retreat’ for the dominant technology and more of a ‘bold entrenchment’ in that it is a planned decision to allow niche players to complement its technology rather than compete in non-core areas. 

This change in attitude could well be driven by the end users who are having a bold retreat of their own.  Despite having implemented enterprise wide systems, end users are realizing the large software providers don’t always have the best tools for every function and, where this is the case, they want to use best in class niche specialists.  Companies are no longer afraid of selecting best of breed solutions and tying them together.  And we see this when responding to RFPs ourselves and the entry criteria “you must provide end to end procurement solutions” is far less common than it once was. 

The fact the often promised mantra of enterprise wide software that “it will do everything you need” is proving not as accurate as it once may have been, is also evidenced in the three most common reasons why clients choose to use our software. 

  • They find that they can run large and complex sourcing/optimization projects in much less time and with much less effort than they can when using their existing toolset
  • They find that they can run sourcing/optimization projects of a size and complexity that simply cannot be run on their existing tool
  • They find that they can run sourcing/optimization projects in innovative ways that bring significant additional benefits, well beyond the capability of their exiting tool 

So how do these bold retreats from end users and large software providers affect a business like Trade Extensions, and many others in this industry of sourcing, procurement and optimization? 

Well, we have been looking at our own client base and the reasons they choose us and if we set aside what I consider to be the ‘givens’ in terms of running a good business such as delivering excellent products and services at the right price there is something else. 

They like the fact that we are specialists and can be considered a ‘niche player’ in a world of vast software providers. They also like the fact that we don’t mind or even care that they have huge enterprise systems in place. We are not trying to remove the hold these companies have on our clients, we want to add to the current offerings they get from these behemoths of our industry and fill the gaps that their other providers have either chosen not to fill or have failed to fill. 

I am sure we are not alone in observing this and many of our competitors are also installed with clients running IBM, Oracle, SAP or similar types of applications. It is clear there is room for a number of niche players in this market and you simply don’t have to be all things to all people, or a “suite” in order to succeed.

...being a niche player in a huge market place is no bad thing to be

I’m not forecasting the demise of the huge software companies but we are seeing them recognize that they cannot do everything and they are being far more open to their clients. They are responding well when their clients ask them to help them integrate a few of the niche players into the overall schema and this bodes well for the future innovation and development of our industry.  The adoption of optimization in sourcing is still low in the procurement sector but it continues to grow.  We are seeing rapid growth and adoption now and being a niche player in a huge market place is no bad thing to be.