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Opportunities in Complexity
A Q&A with Venture Capitalist Bruce Golden about the investment culture surrounding trading exchanges that deal in complex products.
Posted Oct 29, 2000
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Bruce Golden is a partner with Accel Partners, where he focuses on investments in
e-commerce and next-generation software. He is responsible for Accel investments
in comScore, eCoverage, eCommerce Industries, exchange.com (acquired by Amazon.com) and Quokka Sports (QKKA).

Q: How are complex marketplaces evolving?

A: We are witnessing the birth of command and control systems for the extended enterprise. Over the next decade, companies will need systems to track the relationships they have with their key stakeholders. Part of the context for the new complex marketplace is the role they play in facilitating the growth of more complex relationships.

Q: What are some of the components of a complex marketplace?

A: Complex marketplaces are very rich environments that will require large portfolios of application services over time. You need procurement systems. You need pricing mechanisms including static and dynamic pricing capabilities. You need lots of relevant content around products, services and parts. You need information liquidity between participants, so you have to support different data types and data formats.

Q: How can marketplaces facilitate the creation of online trading communities?

A: You need community components so people can uniquely describe their value adds. B2B exchanges are a large community, so each company that participates does so with its own brand and message. You need mechanisms to describe what those advantages are. You need to look at it in the context of an extended enterprise framework. You need systems to track whether one supplier will be dependent on another for good visibility into all of the dimensions of making a purchase.

Q: What will encourage companies to use these marketplaces?

A: If you have an airplane marketplace with tens of thousands of components and you're trying to figure out which ones are substitutes for each other and which components can go on different versions of an airplane, then the stakes are high. The more confidence people have that the data is accurate, timely and robust, the more likely they will be to shift their buying behavior to these marketplaces.

Q: Will the creation of too many marketplaces result in over competition?

A: Right now multiple start-ups are competing to be the number one B2B marketplace in their particular vertical market. It is clear there will be some consolidation because there can only be one or two clear leaders in each complex marketplace. The question boils down to who is going to win, and what are the key success factors.

Q: What are the most important success factors for marketplaces?

A: We focus on three success factors. The first is having a best-in-class team. The second is developing a unique and superior technology infrastructure for the particular vertical market. The third success factor is to have a relationship in place with one or two of the defining companies, weaving them into the construction of the marketplace from the very beginning.

Q: What kinds of CRM issues need to be addressed for these marketplaces?

A: The key first step is to move the pre-existing customer relationship seamlessly into the exchange environment. If I have a relationship with you and have established financial terms and we decide to do business through an exchange, we start by using the rules we have established on the exchange. There should be no disadvantage to working through the exchange. From there you want to enhance the value of that preexisting relationship. The exchange, for example, might provide a consolidated view of all the customer relationships I am trying to track.

Q: What are some of the other elements that would be beneficial to CRM?

A: I want more real-time analysis to determine which customers are most profitable and which are most vulnerable to churn. I want trend-line analysis by product and geography. I want to be able to identify and resolve problems quickly. I want integrated inbound and outbound infrastructure. This area is ripe for giving birth to some giant new platform companies.

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