2 remarkable applications of the platform economy in Procurement
Since I wrote about “Procurement-as-a-Platform” (PaaP) a few weeks ago, I came across two companies that exemplify some of the ideas I developed. Both are examples of platform business models.
The first one, Palambridge, allows organizations to access the expertise and market intelligence that they need to create supplier-enabled competitive advantage that was previously out of reach. It launched this week, and its value proposition is to make Procurement-as-a-Service accessible and flexible thanks to an on-demand business model. It is an innovative solution to ensure that Procurement teams have access to the best talent when they need it the most.
The second one is INNOVO. It developed a platform that brings together buyers and suppliers of all goods and services in a community founded on cooperation. In return for telling suppliers when they are ready to buy, buyers — and good causes — share some of the suppliers’ savings in wasted selling costs and spare capacity.
Palambridge: On-Demand Procurement-as-a-Service
Palambridge is the product of the work of Kelly Barner and Philip Ideson who are both passionate about moving the profession forward. It is, to some extent, the logical continuation of their previous initiatives (Buyers Meeting Point, the Art of Procurement, and the Procurement Revolution). It is also a perfect example of the platform aspects that Procurement should consider as part of its digital transformation (a term that despite being an abuse of language should inspire Procurement teams and CPOs).
It consists of a network of experts and technology partners that companies can engage with when they want. It answers the needs of organizations who have specific challenges or are looking for new perspectives on their Procurement practice. The way it works is also interesting. Customers buy credits and can use these credits as they wish to use Palambridge’s network. It creates flexibility, and it removes the risks and fears that commitments on longer terms might represent for many companies.
“No one in a company can know everything. No one consulting firm can know everything. The model is built to figure out: what is your challenge? Who are the best people in the world to help you solve that?” –Philip Ideson
Palambridge answers the “talent challenge” I described in my PaaP article:
Many organizations do not have the required expertise available in-house for all the categories they manage. They focus on the most critical ones. And, because of a particular project or because of a merger & acquisition or because of the emergence of new technologies on the supply market, what was marginal may become vital. To ramp-up capabilities and temper its talent, the organization can decide to:
- train his current resources
- source and hire new talent
- tap into the gig economy (the market of independent contractors and freelancers)
- rely on the wisdom of the crowds (crowdsourcing, for example, is one of the many ways to use external resources for a specific task or problem instead of hiring a consultant or expert).
The Palambridge’s approach is to tap into the concepts of the gig economy and crowdsourcing (although limited to the network it represents) to build a platform:
“[Palambridge is] a platform which brings together the best-of-the-best from across the world and makes them available in a different commercial model.” –Philip Ideson
For more about Palambridge, I recommend:
INNOVO: a Platform for Collaborative Growth
INNOVO is introducing a new way to look at B2B. Its working principle reminds me of situations I had faced several times as a purchaser when I wanted to develop a supplier. Most organizations have guidelines on dependencies between them and their suppliers. These guidelines state that the buying organization should not represent more than 25% or 30% of a supplier’s revenue. It is, in part, to limit risks linked to the legal responsibilities induced by representing a large part of a supplier’s revenue. So, if you are already at the limit and want to increase business with a vendor, your only solution is to develop him by, among other things, helping him to find new customers. The philosophy of INNOVO is exactly about that.
“If we introduced you to new customers who would buy a lot more from you, would you give us collectively a better deal?”
In addition to the risk scenario I mentioned, the idea behind INNOVO is to transform business development into savings (called INNBATE) for all parties. Buying organizations invite their suppliers to the platform where they can find new customers by posting, for example, their unused capacity at lower prices.This creates savings for all because of
- economy of scale (aggregation),
- waste reduction (like unused capacity)
- reduced costs on the supplier side for customer discovery / engagement.
Another unique aspect of the platform is the possibility to transform savings into donations to a good cause.
These two examples illustrate two different but innovative approaches to Procurement-as-a-Platform. One focusing on talent and one focusing on business development. They are part of new possibilities offered to Procurement to address particular challenges in an innovate and efficient way. So, they are both worth exploring!
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