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Opinion: How large B2B companies can outmanoeuvre startups

Dieter Kiewell, senior partner at McKinsey & Company, explores how incumbents often overlook the value of their most significant asset: their own data

Dieter Kiewell, senior partner at McKinsey & Company
|Apr 3|magazine15 min read

What does it take to win with data in B2B? Traditional suppliers and distributors increasingly face fierce competition from digital attackers. Some suppliers feel completely paralysed by digitisation, ceding to new market entrants and losing ground on the competitive field. However, there’s no need for that. Established companies have significant structural advantages over new entrants, the biggest of which is their data and the resources to take advantage of it. They also have deep, often long-lasting relationships with their customers and access to the data required to optimise propositions to current and new buyers. 

Leveraging data should be a top priority for incumbents, since it can be a massive source of value across many vectors. It can be used to speed up innovation, launch new categories, exploit price opportunities, reduce running costs, and unlock granular pockets of opportunity. Opportunities to transform the business with data exist all along the value chain. What’s more, many B2B incumbents already have structural advantages that put them in a good position to capture these opportunities. 

So, how can they do it?

Qualify the idea

The emphasis should be on identifying the data-driven use cases that will create the most value. What should the Amazon for building materials, the Uber for agricultural equipment, or the Airbnb for oil rigs, look like? Because of their unparalleled industry knowledge, big suppliers and distributors are uniquely positioned to answer these questions. These businesses need to develop clear paths to future revenue based on a deep understanding of changing market dynamics, technologies, and customer behaviour. After identifying these white spaces, the best companies can rethink how to use existing data and access to knowledge of their customers to qualify those opportunities, whether that’s rewiring how they interact with customers or creating a completely new business.

For example, during the COVID-19 pandemic, businesses were forced to go remote, something that previous analysis revealed many customers want. According to a recent study, B2B companies now see digital interactions as two to three times more important to their customers than traditional sales interactions, and almost 90 percent of sales have moved to a videoconferencing/phone/web sales model. This shift has opened opportunities to develop new data-driven services and interaction models. In some instances, the most promising way forward may be a departure from traditional ways of doing business. 

Think of data as assets

Many incumbents have more data than they realise. However, it is often untapped because companies don’t think of them as real assets that can generate new value. In our experience, there are three areas where incumbents have specific advantages:

  1. Their own data – Incumbents have advantages in terms of data at their fingertips that new entrants can’t replicate easily: years of historical data about their customers, the operations of their plants, and the financial performance of a given product or channel; records of all products sold over the past 20 years, from their sourcing and manufacturing to delivery and service; and experienced IT professionals and proprietary software licenses that are the standard in their industry.
  2. Buyer and supplier data – Thanks to existing relationships with buyers and suppliers, incumbents have access to real-time flows of accurate purchase and interaction data. Most attackers will not have access to this data, since they don’t have relationships with these businesses, and building credibility takes time and trust. Incumbents will want to leverage their privileged relations with partners to augment their own data — for example, to create 360-degree profiles of customers and their needs. These data will also need to be standardised and adhere to data-governance protocols highlighted in the previous section so that incumbents can use them effectively.
  3. Risk management expertise – Data-driven growth brings many risks, such as unwanted disclosure of sensitive information and cybercrime. While incumbents have more at stake generally when it comes to managing risk, they also have well-developed risk–management and mitigation capabilities. When combined with a DevSecOps operating model that builds risk management into development, incumbents can present themselves as the “safe choice” option for customers while simultaneously reducing their risk profile through adherence to relevant regulation, such as Europe’s General Data Protection Regulation (GDPR).

Develop an entrepreneurial attitude

Companies often have plenty of ideas and data. But without an entrepreneurial culture, those assets add very little. That culture takes the form of:  

Leadership Time and again, we have seen senior leaders dismiss data-related opportunities without giving them a chance to develop. Only 23% of the companies surveyed in our study said their leaders make time every week to learn about digital trends and technologies. This attitude can filter down to the entire organisation; only 8 percent of companies strongly agree with the statement that everyone in the organisation has a clear understanding of its digital strategy. 

Readiness to reimagine IT Some 72% of B2B incumbents say that managing data is one of their top challenges. One of the root causes of this is that their IT is usually not sufficiently sophisticated to unlock the full potential of their structural data advantages. With this in mind, it’s important to challenge IT orthodoxy in order to “free the data” that is often locked in existing systems. Through developing application programming interfaces (APIs), building out modular capabilities, and migrating applications to the cloud to take advantage of existing cloud-service-provider (CSP) data capabilities, companies can access their data without resorting to time-consuming and expensive system rebuilds. The success of data-driven ventures hinges on developing new technologies in an adaptive, modular way, based on a test-and-learn mindset.

Talent development People with the right skills to deliver against an incumbent’s data-driven ambitions are indispensable. Data scientists and engineers are an obvious priority, but it also takes translators who can bridge the gap between engrained processes and new technology. It can be particularly challenging to recruit and retain these people, since their skill set is unique: an ability to understand, challenge, and shape the technical work as well as the ability to translate business guidelines into technical requirements. Contrary to the perception of many incumbents, they can succeed at attracting top talent if they offer the chance to work with the latest technologies, training programmes to help build capabilities, and flexible working benefits.

With the continued acceleration to digital channels, data will become even more abundant and more valuable. Those B2B companies that are willing to make the changes to exploit their existing data advantages are well positioned to beat attackers at their own game.

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