Disrupt Or Be Disrupted
Will the Buying Group Model Face Disruption?
“Disruption”, as defined by Clayton M. Christensen, refers to a process where a smaller organization with fewer resources successfully challenges an incumbent business.
Here’s the way disruption works: as an existing business focuses on improving their products and services for their most demanding and most profitable customers, they ignore the needs of other customers. Disruptors successfully target those overlooked customers, delivering more-suitable functionality often at a lower price. They do this partly by harnessing new technologies but also by developing new business models and exploiting old technologies in new ways.
The incumbent business does not respond fast or strong enough to the new competitors. These disruptors then move upmarket, delivering the benefits that incumbent’s mainstream customers need/want, while preserving the advantages that drove their early success. When the mainstream customers begin to adopt the entrants’ offerings in volume, disruption has occurred.
What Could Disrupt Buying Groups?
There are a number of ways that Buying Groups could be affected in the future:
- Will a nimbler Buying Group more adept at technology enter your space?
- Could online ordering portals allow independents to aggregate their purchasing power outside of the group?
- Will Amazon’s continued growth disrupt the supply chain in a way that affects groups?
- Will third party supply chain finance organizations provide new ways to fund purchases?
- What effect will the rise of 3D printing have on your preferred vendors?
Most likely, if disruption comes, it will come from an unexpected direction.
What Can a Buying Group Do to Prevent Disruption?
First, groups need to watch for and be aware of potential disruptors. It is important to have someone in your organization constantly asking what your competitors are doing and what you can do to either stave off or embrace disruption.
You also need to watch for potential disruptors to the business of your members.
It is worth noting that you should choose carefully what you view as disruptive. This shouldn’t become a “sky is falling” scenario. Develop a keen understanding of competitive offerings and know when a new model can offer more to your members in a different way than you currently do. Avoid an excess of attachment to today’s measure of success and avoid the common technology trap of being attracted to the next shiny object.
If you do determine that a potential disruptor is entering your space, you should focus on the needs of smaller members. Remember that disruption starts with smaller, less-demanding customers. Because your offerings are not as well-suited to the needs of smaller, less committed members, the door is open for disruptors to focus on providing them with a “good enough” service.
The good news is that disruption is creative and not just destructive. By devoting people and energy towards the growth opportunities that accompany disruption, your group may become stronger than ever.
Written by Steve Seguin
LBMX offers a business-to-business marketplace platform, helping independent businesses, their Buying Groups, and suppliers buy better and sell more. Its Private Group Marketplace for Groups has transformed billing and ordering, rebate management, real-time analytics, e-commerce and product information management across the building materials, HVAC, plumbing, sporting goods, industrial supply, manufacturing, and agricultural industries. Its LBMX Supply Cloud platform allows suppliers to look at their industrial distribution customers through one lens, offering full EDI, PIM, Analytics and Payments.