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October 06, 2014
There is a lot of B2B inside of every B2C transaction
By: Mark McDonald

Consumers get all the attention in digital. It is easy to demonstrate digital’s business impact by showing off a mobile app, digital marketing campaign or sharing economy start-up. Digital looks simple in these situations and also for consumers only.

Nothing could be further from the truth.

For the simple reason that you cannot have B2C without having prior B2B transactions. It is simple logic, but one often overlooked when considering digital business and its impact on the enterprise. It is also a convenient reason to avoid thinking through the impact of digital in your business model.

Consider the B2B transactions preceding any online purchase, working backward from your decision to buy:

  • Purchasing triggers a range of B2B transactions including: authentication, payment, shipping, warranty, etc.

  • Listing the item online creates numerous B2B transactions ranging from the actual listing, to advertising, supporting the listing online, etc.

  • Acquiring the product or assembling the service precedes its listing, containing multiple B2B transactions from purchasing, negotiating, pricing, contracting, etc.

  • Manufacturing, distributing, planning, engineering and other production functions sit at the start of the B2B cycle.

Each of the transactions described above represents an exchange between parties and an opportunity for digital technology to improve or disrupt or create new value.

B2B > B2C

From a transaction perspective the B2B marketplace dwarfs B2C. For every B2C cycle of ‘market, sell and serve’ there are multiple cycles of ‘produce, distribute, retail and serve.’ While B2C represents the end of the value chain, the profit, performance and product potential rests in the preceding business-to-business transactions.

B2C gets all the attention because it's easy to explain, readily available to see and personal. We are all consumers so we are all interested. A B2B revolution in logistics, for example, remains hidden from most of us and therefore invisible. It is a mistake to think that because its visible it must be important. Any magician will tell you that the exact opposite is true—what you do not see is the mundane and what you see the magic.

The same is true in terms of digital. Google has more than 52,000 employees. Amazon carries more than $11 billion in physical assets on its balance sheet. These assets represent the physical reality of virtual digital success and dispel the myth that digital pure plays are purely digital.

B2B2C – a digital update to disintermediation

Disintermediation was the buzzword of ecommerce. In digital the ‘word’ is disruption. Fundamentally they are the same concept, but not the same answer. B2C ruled ecommerce as the technology predominately concentrated on creating new ways to buy things. The online catalogues, shopping carts and bots of the dot.com era created for the web have become the mobile sites, sharing economy and new digital business models.

Digital picked up where ecommerce left off, even more so as digital technologies are fundamentally more personal and human than hawking products online. The result is that the digital world looks to be for consumers only and therefore not for my business, which predominately sells to other businesses.

It’s a popular myth that consumer spending represents the bulk (70%) of economic activity. Consumer spending is the most visible part of the economy, it’s the easiest to account for, it is what we do every day so therefore it appears supersized relative to everything else.

The consumer purchase is the last link in the value chain, but that does not negate the other links in the chain. Consumer visibility just makes it easy for you to lose sight of it and to lose sight of the B2B opportunity.

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