There are all kinds of companies in the marketplace today. Which ones are likely to survive and thrive for the longer term? As an investor, isn’t this the fundamental question to ask before all others?
Darwin wrote that “… if variations useful to any organic being do occur, assuredly individuals thus characterised will have the best chance of being preserved in the struggle for life; and from the strong principle of inheritance they will tend to produce offspring similarly characterised. This principle of preservation, I have called, for the sake of brevity, Natural Selection.”
Companies are living organisms. The successful ones reinvent themselves constantly, seeking to discard traits that are disadvantageous in favor of ones that are. They grow in terms of their use of technology, their culture, their social norms, their product set, the way in which they finance themselves, their customer base, their approach to management, etc. You can think of every new iteration of a company in this evolutionary process as a child in a hopefully long chain of successors to the original startup.
Adapt or die.
Can you imagine a company doing business today the way they did business fifty years ago?
A critical input to the traits that organizations find productive is the environment. They do not exist without context. By environment, I mean the social and commercial constraints imposed upon them by external conditions.
For companies that sell to other businesses, the Request-for-Proposal process is a key environmental constraint.
Either they learn how to deal with the RFP process, or they try to figure out a way around it, for example by becoming a sub-contractor (letting someone else handle the friction of sale for them). Or, perhaps they sell only in small lots, via catalogues operated by other larger distributors.
The friction of the RFP, a business process that has been around since the Industrial Revolution, distorts outcomes.
It distorts outcomes by discriminating against smaller, potentially newer, companies who do not have a track record of demonstrable capacity and capabilities in favor of older, larger, more established companies who can point to social proof, even when the smaller companies may bring other advantages such as technology, or just plain old devoted attention.
It distorts outcomes by introducing administrative expense and hassle that discourages suppliers from submitting proposals, especially if they feel that the buyer has determined the outcome already and is engaging in a pro forma process. Buyers are focused often on being seen to comply even as they subvert the principles motivating the use of the RFP process in the first place.
It distorts outcomes by making risk more difficult to manage, wrapped as it tends to be in opaque, secretive mechanisms, despite the availability of new technologies, even as it discourages collaborative discussion of more creative solutions to the problem the RFP seeks to resolve.
What is the broader social cost of these layered distortions?
One, it discriminates against smaller businesses, many of which tend to be owned by members of historically disadvantaged communities, in favor of larger businesses with the bureaucratic overhead to be able to deal with this friction.
Two, buyers end up overpaying for second-best solutions when they cannot get enough of the right suppliers to submit proposals. This is a massive deadweight loss for society.
Three, it sucks up resources that could be deployed more efficiently for innovation, putting them to work instead on sales and marketing.
EdgeworthBox is a platform for re-inventing the RFP process to reflect the way we do business in the 21st century. We call it “network-based sourcing™”. Most, if not all, of the strategic sourcing solutions on the market take the RFP process as an immutable truth. At EdgeworthBox, we question that belief preferring to adapt the RFP process with key lessons and features of financial markets. We’re here to update it for the modern world and the modern workforce. We have built a platform that layers three categories of tools on top of a marketplace for RFPs: a central clearinghouse for administration (vendor management and opportunity notification, principally); a central clearinghouse for data; and social networking tools. We are particularly excited about our messaging platform that opens the strategic sourcing conversation within a buyer or supplier organization, but across these organizations to our entire network of buyers and suppliers. We are positioned as a layer on top of the incumbent sourcing architecture, delivered in the cloud, with a straightforward SaaS pricing model that makes us very easy to purchase. Reach out to us for a consultation.