11:16 pm
July 17, 2018

The ‘marketplace’ model will demolish your strategy: Is your board ready?

The ‘marketplace’ model will demolish  your strategy: Is your board ready?

By Betsy Atkins

As a corporate board member, you’ve gotten the memo on how technology change is shaking up how you do business. But don’t get comfortable; the compounding of tech advances is now changing the definition of “change” itself.

Look at a heat map (a two-dimensional, color-coded depiction) of your company’s current business model and competitors. Think you have a handle on your market and strategy? What if your market is overwhelmed in a few years by a company that not only isn’t on that heat map, it doesn’t yet exist – and even the technology it will use to eat your lunch hasn’t been invented.

Think of this coming tectonic business shift as the age of the “marketplace.” A marketplace model is when the maker of the product or service is able to directly connect with the consumer without going through a middleman, such as a retail distribution model. These competitors won’t out-compete you, they’ll out-invent you.

This competitor significantly cuts the cost and boosts the ease of use for your customer, while you’re still fiddling to improve your old model. Your customers can now get just what they want or need, when they want it, more efficiently. These marketplace demolition machines are popping up across all vertical industries.

In urban transportation, we see Uber and Lyft upending the taxi industry. In hospitality, Airbnb, VRBO and HomeAway make the old idea of “booking a room” seem quaint. In the “personal” industry, there are Tinder and Match.com. In the professional networking sector, we see LinkedIn and GLG. For health care, ZocDoc; for food, OpenTable, GrubHub and DiningIn; for entertainment, StubHub; for crafts, Etsy; for stuff in general, eBay. Even the sourcing of board members and advisors is being handled in a marketplace by ExecRank, which will disintermediate retained search.

Black_Car_Driver_ColorThese marketplace models are so dynamic in their growth that almost every one of them has achieved “unicorn status” reflecting hyper-growth. Think of what Craigslist did to newspapers and classified ads and realize that tomorrow, a company that now only exists in some entrepreneur’s dream will do the same thing to you.

There is no category of company that will not be affected by this dawning marketplace model – including yours. Your company right now needs to adopt and embrace this shift, either by partnering with a marketplace company or deciding to disintermediate yourself. 

This is not all gee-whizzy “paradigm shift” talk; you’ll need to get your definitions straight going in. For example, a “marketplace” is different from a simple e-commerce “go to market” distribution channel. The Fandango movie ticket site may be shaking up its entertainment sector, but it’s not a “marketplace.” Fandango is an e-commerce channel for major theater companies such as Regal and AMC. It is not connecting the movie directly with the consumer, it is a distribution channel through an e-commerce middleman – just a more efficient way of doing what theaters have done since “Gone With the Wind” was playing.

Yes, e-commerce cuts the friction of transactions for the consumer, but a marketplace is different. It is the next logical step for directly connecting consumers in a frictionless way, and it will wildly disrupt traditional industries. In our role as fiduciaries on boards, the longevity and competitiveness of our enterprises demand that we consider how our businesses relate to these marketplaces. Ignore the power of the marketplace mode, and you put your business on track to be the next Borders Bookstore, which ignored Kindle, or Blockbuster Video, bypassed by Netflix.

The marketplace model is not merely a new iteration of technology, but a fundamental recasting of commerce. If management is still focused on your competitors from a year – or even six months – ago, a marketplace challenger to your current business may not even show up on the radar.

My suggestion for boards is to form a technology/innovation committee that should look not just at technology trends like analytics, big data, mobile and cyber, but also encourage management to think around the corner. Look at reinventing, reimagining and, yes, even adding a marketplace component to the company’s current business plan to stay relevant for the long term. 

The marketplace model is a business tsunami that will smash into all of our comfortable business strategy assumptions. Your board of directors can be the leaders who choose whether your business will be swept away… or learns to surf. 

Betsy Atkins is the founder of venture capital firm Baja LLC and former CEO and chairman of Clear Standards Inc. Her current board memberships include Polycom Inc., HD Supply, Darden Restaurants and Schneider Electric SA. Contact her at betsyatkins.wix.com/betsyatkins.

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