Forget central marketplaces for digital cooperation between companies.
Digitizing internal processes — and then?
Many companies have started digitizing processes primarily within their own corporate structures. And with a few exceptions, this is now working quite well.
But as soon as it comes to the digitalization of cross-company processes, pure chaos often still prevails. We are busy sending emails, exchanging faxes or wasting time with hours of phone calls.
In the last 20 years, not much has changed in the way companies cooperate with each other. However, the reason why the first step in digitization was to focus on internal processes is obvious. To digitize internal processes, you don’t have to coordinate with many other companies, which ultimately makes it easier to achieve rapid efficiency gains.
What the digitalization of cross-company processes actually means!
The first and most important step in the digitization of cross-company processes is always the standardization of information exchange. You need to talk to your customers and partners about what data you want to share and how. This is not a major problem if you only work with few partners and customers over a long period of time. This is because in general, a long-term relationship creates enough trust to map system integration via interfaces into your own IT systems. And you only have to do it once in several years.
However, if you have constantly changing relationships with different partners, this is not a feasible way for you. And that will be the new normality. As the overall number of business collaborations continues to grow and value chains become longer and more complex, so does the number of partners that companies work with.
Two ways to digitize cross-company collaboration
There are basically two ways to digitize your cooperation with other companies without having to integrate the system via interfaces to each individual partner.
The first possibility is the use of central platforms, on which companies can exchange information. The second possibility is the establishment of neutral industry networks, which are jointly used and operated by companies.
Let’s concentrate first on option one, the central platforms.
Digitization of collaboration via a central platform
Central platforms that enable companies to digitize cross-company collaboration basically do nothing else than to standardize data exchange and to bring confidence in the cooperation between still unknown partners.
Let’s make it more tangible with an example!
You are a rental company for construction machinery and would like to digitize the entire rental process to many different customers and partners. Instead of building a system integration to your various customers, you use a central marketplace, on which you offer your machine and publicly share its availability and metadata. The platform operator tells you in this case, which information you have to provide in order to carry out a rental process - and thereby standardizes the data exchange.
The interested customer has to do exactly the same. In order to rent a construction machine, he must first provide detailed information about his company, payment details and requirements.
Once the necessary information has been uploaded and exchanged between the involved partners (standardization of data exchange), matchmaking can begin and rental agreements can be concluded.
Notice!
- Platform operator defines standards…
- …holds process data
- …provides data exchange.
This solution involves two major risks.
Firstly, you are dependent on a central platform provider. Let’s assume that 50% of the matchmaking with your customers takes place after some time via a central platform. What will you do if this platform no longer exists in the future? Or if this platform demands more and more absurd prices for its services? Exactly, you will be pretty upset!
Secondly, you should note that you share all information not only with your partners, but also with the operators of the platform. So let’s assume that you equip your machines with sensors and connect them directly to a central platform, e.g. to let the order processing run directly over the machine. In this case, you have to ask yourself whether it is okay for you that a central operator has all this data about your machine or your company.
These two reasons cause that central platforms are not a sustainable solution for digital data exchange between companies.
Digitized collaboration on the basis of neutral networks
The second way to work digitally with partners and customers is to build neutral networks for the exchange of information. These networks are jointly operated and owned by companies in the same industry.
Admittedly, this path is a bit more complex at the beginning than simply using central platforms. But it’s worth it. Based on neutral networks, it is possible to exchange data digitally with partners without losing data sovereignty or becoming dependent on a platform operator.
How the cooperation on neutral networks work
In contrast to cooperation on a central platform, there is no central operator of the platform in neutral networks. In addition, the neutral network does not hold any data but only offers services for encrypted data exchange between companies. In concrete terms, this means that both the customer and the rental company retain sovereignty over their data.
Notice!
- Stakeholders define the standards
- Owners of the machines keep data
- Companies build together the necessary infrastructure
- Neutral network is operated jointly by the companies
The reward for building neutral networks
As I said earlier, the use of central platforms for digital data exchange between partners is easier in the short term. The operator takes care of the standardization of the data exchange and ensures the necessary trust between the partners involved.
If, on the other hand, you want to work together on the basis of a neutral network, you first have to build it up together with other companies, which costs you both money and time. You need to start talking to both your partners and your competitors about standardization for data exchange. You have to find a suitable technology on which you can build such an infrastructure. And of course, you also have to think about the rules and laws that will govern this infrastructure in the future. That sounds like an awful lot of work. And so it is.
But the return you get by building neutral networks in your industry in the long run is much higher than the effort involved in building them. Because more than ever, in the future data will determine the success and existence of companies on the market.
As soon as companies understand this, they also understand why they need an infrastructure, on which they can exchange data tamper-proof without losing control over their own data.
If you want to learn more about how you can set up neutral networks on the evan.network, please check our website.
