How The Networked Economy Drives Digitalization Between Businesses
Gert Sylvest is co-founder and General Manager of Small Business and Fintech Products at Tradeshift. We talked to Gert about the origins of Tradeshift, why the emergence of digital B2B networks has proven such a game-changer in driving the adoption of digital services, and the value that buyers and suppliers unlock by connecting to the Tradeshift network.
Take us back to the beginning - how did you arrive at the idea for a universal network?
We’d seen a huge wave of innovation in the B2C space around networks and cloud over the decade before that. Companies like eBay, which itself was kind of a two-sided marketplace, were reaching massive scale. You also had the emergence of social networking sites like Facebook, which were showing the potential for hyper-growth in the network space. It was very clear that there was a paradigm shift happening around networks which extended into areas like the distribution of software and services. Underlying all of this was a new economic model. All of these networks gave stuff away for free and then used that connectivity to distribute value-added services that further incentivized people to join. It was very clear to us that there was a complete absence of these network models in the B2B space. Everyone was connecting companies more or less point to point with business models that were built around making money from the transactions they facilitated. We saw an opportunity to bring about a real change in adoption of digital services among businesses. When we founded Tradeshift, we didn’t think about it as a company that turned paper into bits and bytes. We felt the idea of connecting companies on a network designed to bring value to every participant was a far more compelling proposition.
Digging a little deeper into the value proposition, what’s the benefit of connecting businesses on a network compared to traditional point-to-point connections?
Joining Tradeshift means joining a network with thousands of other buying and selling companies. Think of it like a trading hub, or a trading community, something that can open up a variety of opportunities, from access to marketplaces to access to finance. Any company that joins Tradeshift has the freedom to connect with other businesses on the network or invite their trading partners to join. There’s hundreds of billions of dollars in purchasing power and spend on Tradeshift. Collectively, that’s what really enables a global marketplace, and that’s what makes this model so attractive to external parties such as financiers, marketplace operators and a whole host of other service providers.
For a large enterprise looking to digitize its relationships with suppliers, what makes the network model more compelling than a more traditional approach?
Enterprises have been trying to digitize since the 1970s. Most global companies have gone through several attempts at pulling this off, and yet the reality is that 85% of trade across the world is not digitally connected. We know that around 70% of digital transformation projects fail, and we know that a majority of the costs that businesses have are in the long tail of their supply chain. Up to 35% of a large organization’s supplier base will change on an annual basis, and each change represents a significant administrative cost. The reason we’re in this situation is that large buyers have failed to share in the upside of the digital transformation they are trying to drive. The value proposition isn’t there for suppliers, so when they’re asked to participate in these projects, they refuse. As a buyer, when you ask your supplier to join a network like Tradeshift, you’re not simply asking them to digitize something for your benefit, you’re inviting them to join a trading community that has direct value for them.
What evidence can you point to that shows the Tradeshift network delivers genuine value to suppliers?
Already today, we have financed billions of dollars in early payments for suppliers. We’ve been able to attract those funders exactly because of the underlying economic model of our network and the way we let businesses opt into those services according to their needs. You could also look at it from a pure numbers perspective. In any given month, we have over 100,000 suppliers transacting through our network. Could we do that on an even grander scale? Certainly. It’s not going to happen overnight, but the important thing is we have an established centre and a very strong foundation from which to continue scaling.
What does the future look like for the Tradeshift network and what’s exciting you right now?
Sustainability has become a significant priority for businesses across the world. The Tradeshift network can have a major role to play in driving that forward by providing accurate data on the true make-up of supply chains. We’ve been collaborating with a company called Normative, through which we demonstrated that the information shared across our network can be used to calculate your carbon footprint throughout the entire supply chain ecosystem. This connectivity and transparency are also opening up opportunities to incentivize smaller suppliers to make a change to more sustainable business practices. We think there’s significant potential here in areas such as green financing and sustainability-focused marketplaces.
When you’re talking to third parties about the Tradeshift network, what potential are they seeing?
Every bank in the world is recognizing the need to have a fintech strategy, and many would admit they are struggling with the digitization side of things. There’s huge interest in how these organizations can partner with the likes of Tradeshift to offer their services through networks where trade is actually happening. We’ve already seen this kind of change taking place in the consumer space, but it’s only starting to emerge now on the business-to-business side. We transact more than $350 billion every year on the Tradeshift network. This generates an enormous amount of data financial institutions can tap into about the history of these trading relationships. It’s a fertile environment for financiers, enabling them to bring attractive financial services to businesses that would not have had access before. It’s also a trusted environment for buyers and suppliers to connect with new trading partners and grow their business.
What does a world look like where networks like Tradeshift aren’t underpinning B2B trade?
I’m a firm believer in the power of the underlying economic model of networks and the global marketplace this creates. There’s a flywheel effect that the model enables, and this is really the upside of digitization. If you can bring companies together in this kind of network-based community, then it’s also a very attractive place for other service providers who can bring their own value to the overall proposition. You simply can’t replicate this in an environment where things are not digital, or where the ecosystem is dominated by a single buyer or a single supplier. In the absence of these economic models and incentives for participation, digitization will run at a snail's pace. If companies don’t see the upside to digitization then they will continue to resist it. We’ve seen this for the past 30-40 years already. Find out how you can become part of the world’s most dynamic community of digitally connected buyers and suppliers. Request a demo with Tradeshift today.
Tradeshift is a market leader in e-invoicing and accounts payable automation and an innovator in supplier financing and B2B marketplaces. Its cloud-based platform helps buyers and suppliers digitize invoice processing, automate accounts payable workflows and scale without limit. Headquartered in San Francisco, Tradeshift’s vision is to connect every company in the world, creating economic opportunity for all. Today, the Tradeshift platform is home to the world’s fastest-growing network of buyers and sellers operating in more than 190 countries.
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