“Technology is not the solution to all problem”

Recently, one of our clients came to us for help.

The client, who is a large enterprise in China, has just formed a global trading association. The Chairman had worked hard to enlist more than 50 countries to be their trading partners. With China's commitment to open up domestic market to more foreign products and on top of a large supply base of Chinese products for export, the Chairman has decided to form a new on-line business division.

The idea is simple: build a on-line platform and leveraging on big data to generate new revenue stream from the trading activities among the 50 countries.

But the execution was not simple. An on-line platform was built but the transactions were not significant.

As their Strategist, we are asked to find out what went wrong and how to fix it.

This business is what we termed as: “Two-Sided Marketplace Business”.

Examples of companies who adapted this business model and done so successfully are: UBER, Didi, Airbnb, Ebay and countless of very successful internet companies. These companies connect the buyers and the sellers through a platform and charged both parties for providing the services. The model looks simple and easy to understand.

But the devils are in the details.

In evaluating if this business idea would work, we asked the client a few questions:

1.     What economic advantage will this platform bring to all parties?

2.     Will this model give customer a better experience?

3.     How does the client get paid?

4.     How does the client generate stickiness (making the customers come back again and again)

5.     Can the client ensure a consistent supply of products while attracting a large enough customer based?

6.     Will this model be scalable to each member’s country?

Assuming each of the 50 countries in the global trading association each has 10 local trading companies. That means 500 trading companies with diverse culture and different way of doing business. To add to the complexity, many of these trading companies have been doing business for decades. They are used to ‘old habit’ of trading. They are reluctant to change.

The important question to ask is: “How do you convince them to give up their trusted way and jump into your on-line trading platform?”

In fact, this is the problem statement we should start with.

With this problem statement defined, we went back to the Chairman, develop a plan to gather facts about how each trading company is doing their business and find what value (better experience, cost savings, opening new markets etc) the platform can bring.

Then draw up a blueprint to develop a technology platform to address all the issues above.

This minimizes risk and maximize chances of success.

Technology is useful when the problem is accurately defined.

As much as 90% of all ideas failed and 80% of Merger & Acquisitions failed due to execution.