Module Case Study

Project Galaxy 4 – e-Sourcing Strategy 2011:

Round 1
Phil Willcot thought about his meeting with the MD team of directors on his train back to the
big city. MD is a prospective entrant into the e-sourcing space, looking to acquire market
share from the dominant players by taking advantage of the best of today’s cloud computing
technology. The analogy they used was that they seek to do to Oracle, SAP and Ariba what
Salesforce and subsequently Zoho has done in the CRM space to Act and Goldmine, or
what Google has done in the application space to Microsoft.
MD là công ty công nghệ với tham vọng giành thị trường từ những ông lớn bằng cách tận
dụng công nghệ điện toán đám mây như một số cty lớn đã từng làm

At first, he thought they were crazy, trying to take on the mature e-sourcing market swamped
by numerous players that already had at least a ten- year head-start. How could there
possibly be room in the market for yet another entrant? How on earth could they convince
their potential customers to adopt their offering, particularly as customers were increasingly
looking for end-to-end solutions (công ty cung cấp giải pháp từ đầu đến cuối)
Phil nghĩ rằng ko thể thâm nhập thị trường vốn có nhiều tên tuổi lớn

However, as he listened to their proposition, he began to see that their ambitions were not
fuelled by experience and determination alone, but upon a sound market niche which
they were looking to exploit. Although ten years had allowed the competition to develop a
robust, feature-rich toolset, it had also encouraged complacency (sự tự mãn) in the market.
In fact, a refreshing offering is precisely what the market needed. If marketed and
positioned in the right manner, MD could even manage to create a market of their
own, one that very few competitors would even consider. Just a cursory glance towards
their main competitor, Ariba, and you could see that the market was bracing itself for a shift,
just the kind of shift that MD had anticipated.
Nhìn lại thì ko phải impossible vì Phil nhận ra rằng MD có thị trường ngách và nếu được
tiếp thị đúng cách thì có thể tạo ra thị trường riêng với ít đổi thủ cạnh tranh

Phil contemplated his role as the lead for Project Galaxy, the name given to the activity for
the refinement and implementation of the MD business case. The MD directors had
constructed the initial business case from many months of analysis as well as using their
own experience as purchasing consultants. During their previous roles they had conducted
managed e-sourcing services for major clients in the oil and gas, manufacturing,
automotive and aerospace sectors, amongst others. During this time, they had spotted
something their competitors had not or had chosen to ignore. Phil had no doubt they knew
the product and services. However, he noted that they did not have extensive commercial
experience, particularly in relation to board level strategy. It would be this top-level planning
and direction that he would most need to apply himself.
Phil dự tính là khi tham gia vào project galaxy thì sẽ phải tự apply những chiến lược
cấp board level bởi các gđoc kinh doanh trước đây đã tìm ra những điều mà đối thủ
bỏ qua nhưng họ lại k có extensive commercial experience.

Through no coincidence this was precisely his background, having fulfilled roles within the
aerospace sector as a buyer then purchasing manager before joining the consultancy field
for a large blue -chip advisory firm. Dissatisfied with the rigid corporate structure inhibiting
his career path, he left to found his own niche management consultancy, an action which
resonated well with the MD directors and perhaps even secured him the work. As one of the
first projects on his books, he was determined to make it a resounding success.
background của Phil + quyết định nghỉ việc táo bạo và quyết tâm thực hiện project
lần này thật thành công

e-Procurement and Reverse Auctions

Billions of pounds are tendered every year on goods and services by companies across the
globe. Procurement as a profession is becoming an ever more important focus. Companies
realise that in these times, coming out of a recession with increased global competition, an
efficient procurement strategy
can mean the difference between profitability and receivership. Simple analysis at OEMs
such as Rolls-Royce shows that a 1% reduction on procurement costs can relate to a 10%
increase in gross profit.
Figure 1 below shows the growing trend for e-procurement which is enabling the
procurement profession to evolve and gain the much-needed efficiency.

[Appendix 1 shown at the end of this case study also indicates the potential growth in the
SAAS sector of e-procurement]
E-procurement entered the scene in the mid-nineties with the dotcom boom and e-market
places. It took time for the real value to come to light after the initial surge and consolidation.
One technology which emerged in assisting companies efficiently and effectively reducing
costs of their purchased goods and services was the reverse auction.
sự phát triển của ngành mua sắm, đặc biệt là mua sắm điện tử/thươn mại điện từ;
giới thiệu đấu giá ngược như là một cách để cty giảm cost

A reverse auction is an auction in which the roles of buyers and sellers are reversed. In an
ordinary auction (also known as a forward auction), buyers compete to obtain goods or
services, and the price typically increases over time. In a reverse auction however, sellers
compete to obtain business, and prices typically decrease over time. It is widely recognised
that the reverse auction does not conclude all negotiations but has its place in the buyer’s
toolset where it can be hugely beneficial when used correctly. Traditionally reverse auctions
in the procurement space were utilised solely for commoditised and readily defined goods
and services. Typical examples are office supplies and furniture, printing services, IT
hardware, utilities and so on. However, today they are increasingly being used to negotiate
for strategic goods and services, such as raw materials, logistics, manufacturing processes
and precision engineering services.
To make a reverse auction a success, there are several criteria you need to examine.

Specification - The category needs to be defined exactly. The reverse auction will
focus on price so to be able to compare everyone’s prices, they all need to be
bidding on exactly the same commercial terms, service levels and standard of
product or service. cần xác định chính xác category của hàng hóa
Market Liquidity (tính thanh khoản của thị trường) –The probability of a
successful reverse auction increases with every supplier involved who is willing to
bid. It would be risky to run an auction with fewer than three motivated bidders.
Scheduling – The timing has to be right. The categories could involve hundreds of
parts for example and all the contract end points need to be examined so any result
from a reverse auction can be concluded swiftly, otherwise it will adversely affect
your potential market liquidity.
Savings potential – A reverse auction can be quick but will generally involve a fair
amount of work. The most successful events will have well written RFQ’s and involve
personally calling the supplier base to sell them the idea and get them involved.
Thus, you would not generally embark on this direction unless there is sufficient ROI
for the work involved. Typically, you would look at tenders over £250,000 to ensure
not only that the bidders are attracted to the contract but also that you see a
return from the costly investment of time and resource.

Due to procurement professional’s poor level of understanding of this new technology, the
primary method of delivering benefits from reverse auctions was via a managed
auction service. This is where a third -party consultancy or service provider manages and
carries out all the work during the reverse auction process, from composing the RFQ,
sourcing, qualifying and motivating suppliers to take part, expediting and analysing the
quotations, managing and hosting the auction event and on occasion assisting with the
implementation with the chosen supplier(s). From start to finish the activity takes 6 to 8
weeks, requiring both a project team from the client to sign off the documentation and
suppliers lists and to respond to any questions, and a project team from the service provider,
typically a project manager and a sourcing manager.
Do trình độ kém hiểu biết của chuyên gia đấu giá về công nghệ mới này, phương pháp
chính để mang lại lợi ích từ đấu giá ngược là thông qua dịch vụ đấu giá được quản lý.
The companies who emerged offering this activity derived their benefits from their skilled
resource, cutting edge methodologies, robust technology and their proprietary supplier
databases. Some prime examples of such companies would be TradingPartners,
BravoSolution and FreeMarkets (now part of Ariba).
The most common form of remuneration for such an activity was a gain-share model of
up to 30% of the contingency savings. An upfront fixed fee may also have been applied for
more complex and resource-intensive projects, as a way of sharing the risk. The total fees
for such a service could command upwards of £60,000 on the turn of the millennium.
However, as the market matured and cost became a greater differentiator, a managed
auction service can now be bought for less than £30,000, despite the service being almost
identical to when it first hit the market. This was having a noticeable effect on the service
providers, provoking many to diversify their software and services into the broader cost
reduction and e-procurement arenas. (miêu tả hình thức trả công phổ biến nhất)
With sales revenue of managed Reverse Auctions apparently on the decrease, Phil Willcot
considered what the next s-curve in innovation would look like. With the general
understanding of reverse auctions vastly improved within the procurement community and
with universities teaching about e-sourcing as part of their curriculums, would procurement
professionals wish to run their own tenders via reverse auctions? Or do they just want a
wider range services in the e-procurement space?
Với doanh thu bán hàng của Đấu giá ngược được quản lý dường như đang giảm, Phil
Willcot đã xem xét đường cong chữ s tiếp theo trong sự đổi mới sẽ trông như thế
nào.

Why companies would use e-auctions?

To help him direct the sales and marketing strategy, Phil Willcot contemplated why
companies actually use e-auctions (the broad term for both forward and reverse online
auctions) in industry. They are certainly growing in usage and awareness but what are the
driving factors and who would use them?
As the global economy was struggling to overcome the effects from the 2007 to 2009
recession1 with companies typically facing lower sales revenue from global competition,
there was an increasing pressure on cutting costs. Procurement became the heart of the
organisation. More efficient, better negotiated purchasing was required to keep the firms in
profit. The pressure on companies was immense, exemplified by the uncharacteristically
aggressive letters distributed to the supply chain from leading public sector service firms
such as Serco2 and MITIE3.

Phil Willcot recollected the variety of sourcing strategies which he used to employ in his
former profession (Appendix 2). Reverse auctions easily fell in to the category of exploiting
buying power, which, on top of aggressive negotiation, sought other benefits such as spend
and invoicing consolidation and supplier rationalisation. Aggressive negotiation could take
several forms. There was the demand for a cash rebate based on the previous 12 months of
business or in return for a ‘preferred’ supplier status, there were cost reduction workshops,
held co-operatively with the key suppliers, there were tactical negotiations based on volume
increases, raw material price movements, currency fluctuations and other factors, there were
make versus buy decisions and there were sourcing and RFx (Request for Information /
Proposal / Quotation etc.) activities. Clearly the reverse auction was just one tool to be used
out of many potential alternatives. What could the reverse auction achieve that none of
these other activities alone could offer?

Reverse auctions are proven to generate more savings than face-to-face negotiations,
on average up to 25% when viewed against traditional paper-based tender processes4,
as suppliers are put under greater levels of competition than they would have
otherwise experienced. The other big advantage is the efficiency in the negotiation stages,
as the software could allow in excess of 50 suppliers to compete concurrently. This could not
be achieved either without some form of electronic bidding technology. Reverse Auctions not
only find you the true market price for your goods and services, but can also help you narrow
down your options for the final award decision process. Such a strategy can put suppliers at
ease as they know there will be a chance at the end for the top few to sell the other value-
added services that they can offer.
lợi ích của đấu giá ngược

Reverse auctions have become increasingly popular in the public sector. The key reasons
listed by the government for adopting reverse auctions are 4:
elimination of paper and streamlined processes short
negotiation cycle
 better value for money procurement
increased transparency of the contract award process

These sentiments are echoed throughout the procurement field and are not just
applicable to the public sector. As the government are morally obliged to represent the
public and therefore cannot rock the boat too greatly, it could be argued that reverse
auctions are, in the general consensus, the right approach. This bodes well for MD.
lí do đấu giá ngược ngày càng trở nên phổ biến: loại bỏ giấy tờ và quy trình hợp lý
hóa, chu kì đàm phán ngắn, better value for mua sắm bằng tièn, tăng tính minh bạch
quá trình trao đổi hợp đồng

There are many typical objections to using a reverse auction as a negotiation tool and bad
practices by an unscrupulous few have not helped. Typically, the objections centre on the
use of reverse auctions as nothing but a one-way negotiation on price and on the negative
impact reverse auctions has on supplier relationships. Auctions are price-focused but if the
adequate preparation is carried out and you clearly communicate your intentions with the
supplier at all time before, during and after the auction, such objections can be mitigated.
With respect to supplier relationships, the open and honest approach of reverse auctions
has been shown to actually strengthen ties5.

Forward auctions also have much more value and application than is widely known. The
most obvious application is to dispose of excess stock or unused assets. Companies tend to
put little effort into these activities as it is not their core business and in many cases the
assets have been written off the accounts anyway. However, if these activities are
approached with the same rigor as the reverse auction activities, then significant
improvements can be made on their success compared to just selling the scrap to a local
dealer.
Increasingly many companies are realising the potential of selling their product to their
customers via a forward auction. If your goods or services are in sufficient demand and
you operate in a seller’s market, a forward auction presents a genuine opportunity to
negotiate the optimum sales price. It makes the process extremely efficient with great
repeatability; saving both time and resource.
forward auctions: đấu giá kì hạn

Phil Willcot could see there were some unique reasons for companies to negotiate via
an e-auction. There is good awareness and positioning already in the market for reverse
auctions yet forward auctions were still largely underused. Perhaps it was connected to the
non-core nature of forward auctions or for their non-strategic sales process which enables
sites like eBay to cater for them. Either way, it would pose a significant challenge to address
the forward auction market, yet if successful there would be few competitors in the B2B
arena.
Competitors in the Reverse Auction Market

The reverse auction market is very competitive yet equally there are potential niche markets
which can be exploited. The competitors can be broken into four segments:

Large multinationals: The traditional large companies such as Ariba, SAP, Emptoris and
Oracle dominate this segment, which offers reverse auction capability as part of a much
wider purchase-to-pay offering. They are beginning to embrace the notion of cloud solutions
with a pay as you go approach. Ariba signaled their intentions when they bought Procuri in
20076 to be able to offer a subscription service. However, as these companies are large,
global corporations, they are less agile and responsive than some of their smaller counter-
parts. In many cases it can be off-putting to companies turning over less than $1bn to
partner with such dominant solution providers. On the other hand, other very large
organisations with sales into the many billions would actively seek to partner with solution
providers in this segment for the breadth and depth of the service that they offer, as well as
the reassurance of working with a recognised brand.

Boutique consultancies: There are many consultancies in this area such as

TradingPartners, BravoSolutions and Hedgehog. They offer managed e-auctions, typically
hosted on their own bespoke software, to companies on a fixed and/or contingent fee
arrangement. The software used by these vendors is not developed explicitly for use by third
-party purchasing professionals rather it has tended to be largely influenced by the e-auction
process that the consultancies follow. Nevertheless, their software is on occasion licensed to
their customers but more to supplement their service offering. It is these consultancies that
are facing the greatest pressures, as the barrier to entry for an experienced procurement
professional to enter this market is low, particularly if their clients have their own licensed
software or if the professional can partner with a software vendor. TradingPartners, for
example, has undergone a major restructuring of their business, greatly reducing the
headcount in their head office7. The question that needs answering to ensure longevity in
this sector is do companies still want a managed e-auction service or do companies want a
much broader e-auction and cost reduction service covering all aspects of their supply
chain? Depending on their interpretation, they may either remain as boutique consultancies
in a wider context or they will become software vendors.

Tailored software vendors: These could be typically classed as SMEs who offer bespoke
e-procurement software packages solely for use by their customers. They differ from the
large multinationals in that they traditionally aim at specific solutions and do not have the
infrastructure to support the large global corporations. Traditionally their software has been
locally deployed on their clients’ premises and they will have a legacy of pricing which
inhibits their ability to offer a clear price level. Companies in this sector may also offer some
level of supplementary services or consultancy, such as supplier sourcing, bid analysis and
managed e-auctions. However, they differ from the above as they would still class
themselves as a software company. Examples here are Iasta, Curtis Fitch, Quadrem and
Wax Digital.

Commoditised software vendors: This is the sector inhabited by MD, which is where
e-auction software is offered to the general market as an off -the-shelf, easy-to-use
product; much like the Hotmail of the e-mail world or the Facebook of social media.
Increasingly this is the sector that e -auction providers are seeking to infiltrate, with
companies such as CPOConnect and Purchasing Auctions already established in this area.
The differentiators here come down to support levels, price, professionalism and features.
The software has to be carefully balanced so that one size fits all yet is not over-
complicated or insufficient to their customers’ needs. Provision of support is also vital to
provide reassurance to their customers, yet it also has the potential to place too great a
demand on the vendor.
Thị trường đấu giá ngược rất cạnh tranh nhưng cũng có những thị trường ngách tiềm
năng có thể được khai thác. Các đối thủ cạnh tranh có thể được chia thành bốn phân
khúc: các công ty đa quốc gia lớn, Boutique consultancies, Tailored software
vendors, Commoditised software vendors

Phil Willcot realised that it is in this sector that MD should look to uniquely position
themselves. Yet he also saw that as they expand, the strategy must allow them to compete
in the other, more service-oriented sectors. He could see that this could be a difficult
challenge, particularly as MD had no intentions of becoming yet another service provider.
Phil Willcot nhận ra rằng chính trong lĩnh vực này, MD nên tìm cách đặt vị trí độc nhất
cho mình. Tuy nhiên, ông cũng thấy rằng khi họ mở rộng, chiến lược phải cho phép
họ cạnh tranh trong các lĩnh vực khác, hướng đến dịch vụ hơn. Anh ấy có thể thấy
rằng đây có thể là một thách thức khó khăn, đặc biệt là MD không có ý định trở thành
một nhà cung cấp dịch vụ khác.

The MD Proposition
MD believes it has realised a gap in the market for a commoditised product that could
cater particularly well for the SME market. The apparent paradigm shift away from the
managed e-auction service towards the software-as-a-service (SaaS) model, that allows any
company to run their own e-auctions, makes the basic concept very attractive to them. The
traditional managed auction service
had been considered a luxury product in the market, affordable only by those companies
with significant areas of spend, whose cash flow would allow for a high level of investment
for a medium-term return. However, by pricing in their cloud software at a level affordable to
many SMEs, MD believes they can create their own market niche.
MD tin rằng họ tìm ra gap cho thị trường, nhắm tới nhu cầu của thị trường SME, Mô
hình rõ ràng thay đổi từ dịch vụ đấu giá điện tử được quản lý sang mô hình phần
mềm dưới dạng dịch vụ (SaaS), cho phép bất kỳ công ty nào chạy các cuộc đấu giá
điện tử của riêng họ

Since very few companies had entered the e-sourcing market since 2001, there were very
few companies in this industry who were in a position to radically adapt their company
structure and strategy around the SaaS model. The teams of highly-skilled sourcing
consultants recruited by all these companies would find themselves largely redundant in an
SaaS company. Therefore it would take a very brave CEO to make the irreversible call to
switch to a software model. By the end of 2010, only one dominant player, Ariba, had made
the decision to focus on e- procurement SaaS when they decided to sell their sourcing
services and business process outsourcing (BPO) services assets to Accenture for $51
million8. Just 6 years earlier in 2004, Ariba spent $493 million to acquire the same outfit
which at the time was called FreeMarkets9. Despite the less-than-exemplary performance by
Ariba, MD shared the vision that SaaS was the future of the e-sourcing market.

MD had spent the last 3 months designing and developing their e-sourcing and e-auction
software in-house to keep the start-up costs to a minimum. The software, written in Ruby on
Rails, a platform shared by Twitter, Groupon and Shopify, was not innovative in terms of
feature/function, as they believed that 90% of e-auction needs could be catered for by the
bare essentials, but was novel in the way it could approach and be positioned in the market.
họ tin rằng 90% nhu cầu đấu giá điện tử có thể được đáp ứng bởi các yếu tố cơ bản,
nhưng mới lạ theo cách nó có thể tiếp cận và định vị trên thị trường

The MD unique selling point and mantra is that there is no e-auction software on the
market offering a solution which combines the following characteristics:
Easy to use (no training costs),
Professional processes (ensures success),
Transparent pricing (great value)
USP Dễ sử dụng (không tốn chi phí đào tạo),Quy
trình chuyên nghiệp (đảm bảo thành công) • Định
giá minh bạch ( giá trị lớn)
MD, by offering a combination of the above features, feels it is uniquely placed to take e-
auctions to the next stage in their evolution. Not only can they build on the understanding
already in the market place, which ironically is continually increased the more prodigious
their competitors become with their managed e-auction services, but their software can also
be marketed to any ‘average’ purchasing professional by providing a very low barrier to entry
with respect to cost, usability and best practice. The definition of the term ‘average’ is any
purchasing professional that has a decent grasp of e-procurement, spend analysis, RFQ
compilation and supplier sourcing. MD recognises that by addressing the average
purchasing professional, their software will not be suitable to the very large enterprises, for
example the major supermarkets, that run complex, combinatorial e-auctions almost on a
daily basis. MD made this decision early in their developmental phase to help focus their
product yet sought to incorporate functionality to cater for 90% of the e-auction market.

In addition to the reverse auction, the MD software can be used for forward auctions for
activities such as asset disposal, where platforms like eBay lack the professionalism. MD
intends to exploit such immature markets in order to maximise their revenue potential.

Ngoài đấu giá ngược, phần mềm MD có thể được sử dụng để đấu giá kỳ hạn cho các
hoạt động như xử lý tài sản, nơi các nền tảng như eBay thiếu tính chuyên nghiệp. MD
dự định khai thác những thị trường còn non nớt như vậy để tối đa hóa tiềm năng
doanh thu của họ.
Another prospective revenue stream identified by MD is to approach the purchasing
consultancies and interim purchasing managers, as there is a clear overlap in their sales
and marketing targets. Typically e-sourcing software would take many months to develop
and would incur significant costs; hence it is major barrier to entry for the niche
consultancies, of which there are thousands in the UK market alone. Instead consultancies
and interims offer their skills, experience and resource as a service to assist their clients with
reducing cost in their supply chain. However, due to the clear and highly competitive price
level of the MD solution, consultancies could now be tempted into adopting the software into
their own service offering to their clients. Not only would this help MD rapidly infiltrate the
market through an affiliated network but it would also generate multiple revenue streams
from selling either directly to the consultancies or indirectly to the clients they engage with.
Very few competitors would be able to similarly perform this feat as they have their in-
house consultants to take precedence.
điều này không chỉ giúp MD nhanh chóng thâm nhập thị trường thông qua một mạng
lưới liên kết mà còn tạo ra nhiều luồng doanh thu từ việc bán trực tiếp cho các đơn vị
tư vấn hoặc gián tiếp cho các khách hàng mà họ tham gia.

Notably, the majority of the MD marketing plans were focused on the private sector. The
main reason was the lower barrier to entry. The public sector, whilst on the one hand has a
huge market potential and has a vested political interest in e-auctions10, was on the other
hand dominated by a handful of large organizations, such as BravoSolution and Due North,
who were firmly embedded within the various public sector bodies on up to seven-year
contracts. It would take a huge overhead in terms of time, cost and resource to develop
software that could compete in this market. MD took the decision that whilst the potential
return could be significant, the risks involved were too great for a self-capitalised start-up.
MKT plan của MD tập trung vào cty tư nhân vì có lower barrier to entry. mặc dù cty
công có tiềm năng thị trường và doanh thu lớn nhưng công ty ko sẵn sàng vì có
nhiều risk…

MD also had great ambitions in the horizontal market. They stated their intentions of offering
their solution to the consumer; a completely untapped market. Their innovative USP of ease-
of- use, clear pricing and professional software would render their solution attractive to
companies or individuals with a tender value as little as £20,000 to allow, for example,
consumers to negotiate the price for their new conservatory or for re- roofing their house.
Furthermore, the software could cater for new initiatives for forward auctions such as
property and estates. This potential for new business is vast and would only require new
website designs with the same e-auction engine integrated into the back-end.
MD có tham vọng trong thị trường ngang, usp của họ là cung cấp giải pháp trực tiếp
tới người tiêu dung, thị trường này chưa ai khai thác, tiềm năng lớn và ko yêu cầu
nhiều sự đầu tư

One of the more unique features of the MD offering was their payment system. MD
offered two payment structures, the first a Pay- As-You-Go type approach, which cost
£1,000 per e-auction, regardless of scale, complexity or value. The second was an Annual
License model, which cost £5,000 per user and permitted an unlimited number of e-auctions.
As the software could also be used as a paperless method of gathering in quotes,
regardless of whether or not the user then goes on to run an e-auction, the Annual License
also had further benefits in this way. What was unique about this system was not the pricing,
but the way it was paid for. The payment method was transacted via a credit system,
whereby 1 credit cost £10. Therefore, to run one successful e-auction you would purchase
100 credits, which would then be expended when you invite your bidders to interact with
your event.

MD was keen to push the advantages that their customers would have from this approach.
Firstly, they believed it gave their clients flexibility to choose when and what to spend their
money on. They were not tied into any monthly subscriptions and could simply purchase an
e- auction, run the auction, then not
use it again for a year. The credits also allow their customers to consolidate their purchasing
and invoicing transactions, as they could bulk buy credits and gradually use them at each
opportunity.
USP của MD còn là hệ thống payment của họ, họ offer KH 2 loại… nhằm tạo ra cắc lợi
ích cho KH
The advantages of the credit system to MD was that the credits were purchased in advance,
perhaps many weeks prior to the event being created, which greatly helps their cash flow.
Secondly it allows them to develop add -ons for their software, which could then be sold for
additional credits. Thirdly, MD could design various marketing campaigns that could bring in
leads enticed by the offer of say 20 free credits towards their first event. Once MD grows in
size, the campaigns could grow accordingly, such as 30 credits to the company that runs the
most valuable e-auction each month.
hệ thống tín dụng của MD tạo ra nhiều advantages: boost cash flow, develop add-ons
for software, design đc các mkt campaign

Phil Willcot enjoyed discussing the ambitions and ideas of the MD directors. There is
certainly logic behind their reasoning but at the same time it is a difficult and competitive
market with some interesting challenges around differentiation and adoption.

Challenges
Phil Willcot was well versed in the challenges MD were going to face, relying on his
experience to know that the process of selling e-auction software to organisations was
demanding. The sales process was certainly going to be one major challenge, as there
could be a little in the way of a proof of concept or a trial, due to the time and resource
required to run a successful e-auction. Traditionally the cost of sale for these types of
solutions is very high. However, a solution sold at a commoditised price level cannot afford a
high sales cost. MD would have to modernise and streamline their sales process.
Phil biết rằng MD sẽ face to challenges vì ổng biết rằng quy trình bán phàn mềm e-
aunction cho những cty rất khắt khe.n Phil sẽ phải hiện đại hóa và hợp lí hóa quá
trình bán hàng của họ
Phil broke the sales and marketing strategy down into the constituent elements. Firstly, there
was lead generation. Their best bet was to market the software very clearly on the web,
outlining the benefits and the USPs. The website could be supplemented by other lead
generation activities such as webinars, seminars, viral marketing campaigns, cold calling, e-
mail rushes, sending hand-signed letters, SEO, networking through social media as well as
attending events, paid advertising and so on. The leads would then be qualified with the
realistic desired outcome being the arrangement of a demonstration, preferably over the web
due to the limited MD resource, but also face-to-face. Once a successful demonstration was
carried out, it would be over to the sales process to sign up the customer by encouraging
them to register on the website and make the purchase.
chiến lược mkt mà Phil dự kiến sẽ áp dụng cho MD, Đặt cược tốt nhất của họ là tiếp
thị phần mềm rất rõ rang trên web, phác thảo các lợi ích và USP
Herein was their challenge, as there was no firm hook, for example, that would be provided
by a managed auction activity first which would demonstrate the potential ROI of e-auctions.
The Pay- As- You-Go and credit-based approach allowed the potential customer to make
the purchase on their own terms. Without a monthly subscription, there would be no
recurring revenue, yet at the same time that was also one of MD’s competitive advantages
(although the Annual license with the ability to collate quotes as a mini RFQ system would
create a recurring revenue stream). Furthermore, the transparent price levels did endanger
the opportunity for further negotiation. If a prospective customer was not attracted by those
prices prior to having any discussion on the benefits or return on investment, it would be
more difficult to engage them in the sales process. If, however, the price was attractive to
them as they understood the benefits, the negotiation aspect would be negated and the
sales process should be a lot more efficient. Phil did wonder whether improvements could
be
made in this area, both for MD and for the prospective customer who may not be familiar
with a credit-based system.
những thách thức mà MD có thể đối mặt với mkt campaign dự tính
The other important consideration of the sales process is ‘who are they selling to?’ MD had
listed several key target markets but developed a brand that had a broad focus, essentially
aiming at any company or individual who was looking to buy or sell something for over
£100,000. Whilst it could be advantageous to keep the spectrum wide, there are also
advantages in addressing a niche client base or industry, such as aerospace or electronics,
to help establish some traction and brand recognition to re- invest in other areas. Phil
wondered whether MD would be best investing their time and energy into creating a leading
e-auction brand in one specific industry.
tầm quan trọng của target market: MD muốn ptrien một thương hiệu với focus rộng
nhưng Phil vẫn tự hỏi cfos nên focus hẹp hơn ko vì niche market cũng có cái lợi
Phil also considered the typical objections from a potential customer against using e-auction
software to run their own events and came up with the following list, although he knew it was
not exhaustive:
E-auctions are too price-focused, where in reality companies seek to find the “best
value”. Such an example would be buying a cheap kettle for £5 that breaks after a
year or buying an expensive kettle for £30 that lasts a lifetime.

E-auctions hurt supplier relationships as it leads to an erosion of their margins hence

a degradation of the level of service and flexibility that they offer.

It may be hard to convince suppliers to actively take part in e-auctions, particularly

the incumbent suppliers, as they do not welcome such high levels of competition.

Buyers may not have sufficient spend categories for an e-auction.

Reasons may range from:
o Spend levels are too low,
o there may be no available specifications for the goods or services, o there
may not be anyone else in the market who can supply such
goods or services,
o the goods or services are far too strategic to the company to take to the open
market,
o the spend categories are tied up in lengthy contracts, etc.
Buyers simply do not have the experience, resource or capability to run their own e-
auction. Without a capable purchasing team, the e-auction will not be a success and
will therefore not be adopted.
There is a risk the buyer may not achieve a return on investment. In particular, that
risk lies with person who decided to run the e-auction.
Phil compared the MD offering to the objections above and noted some short-comings.
Clearly some objections to e-auctions would be extremely difficult to overcome, whereas
perhaps others could be mitigated by a few simple strategies.
Phil liệt kê một số lí do mà KH dungf để từ chối sử dụng dịch vụ, có một số điều thì
dễ khắc phục nhưng cũng có một số cái khó để khắc phục.

Phil also noted that the list above would be the objections that a customer would mention out
loud. There would be other objections that would prevent a sale yet would not be revealed at
a meeting. One that he had personally arrived at was that if his alternative approach to
negotiation involves dealing directly with the
incumbent supplier and he achieves the pre-defined savings target from this, what
motivation would he have in complicating and extending the process to be an e- auction for
the sake of extra savings that he would not personally gain from? Furthermore, if he
achieves excellent savings in Year 1, what is left for Year 2 and Year 3? Ask this question to
the Financial or Managing Director and the answer would categorically be “get those extra
savings in now”. However, MD was not necessarily conversing to their customers at
the board level, due to their low-price level, and so their marketing may need to be
more embracing than simply about the bottom line.
MD không nhất thiết phải trò chuyện với khách hàng của họ ở cấp hội đồng quản trị,
do mức giá thấp và do đó, hoạt động tiếp thị của họ có thể cần phải bao quát hơn là
chỉ đơn giản là về lợi nhuận.

In the past some companies, such as Oracle and WhyAbe (part of Source one), have
offered e- auction software for free, based on the firm reasoning that the software acted as a
lead generation tool for them to offer their consultancy services and other solution packages.
The free software had a very low uptake, mainly from its the poor design and performance,
as well as the general distrust from the market in investing time and resource into something
that is free, as it would have little or no support, the plug could be pulled at any moment and
they might be bombarded with sales calls from prospectors asking them to upgrade and try
other services. Also Source One would not want to detract from it managed auction services.
As MD has no service provision, Phil contemplated whether their business model could be
destroyed by a better marketed and more capable push by these companies, and others,
into offering free e-auction software. However, that would affect the market to such a huge
extent that it would be highly unlikely.
KH thường ko có niềm tin vào chất lượng của những cty cung cấp phần mềm miễn
phí. Phil lo rằng những cty cung caapsdichj vụ miễn phí sẽ phá hủy MD và gây ra ảnh
hưởng lớn tới thị trường

There are also some other very professional on demand solutions out there from companies
like Ketera and Ariba. However, Ketera counter-balance their low price offering for the
buyers to use their software by charging the suppliers a fee instead. This can exacerbate the
objections as suppliers now have to pay to use something they dislike, plus they factor the
costs of taking part into their final offer to their customer, which means the customer gets a
worse deal. Ariba have also started to offer an on -demand solution but it is too complex as it
tries to incorporate every possible feature, plus it has many costly add-ons. Both these
examples provided Phil with some very important lessons and would clearly be worth
exploring further, particularly how and if Ariba make a success in the SME market.
Ketera đã cân đối lại việc đưa ra mức giá thấp của họ để người mua sử dụng phần
mềm của họ bằng cách tính phí thay cho các nhà cung cấp. Điều này có thể làm trầm
trọng thêm sự phản đối vì các nhà cung cấp hiện phải trả tiền để sử dụng thứ mà
họkhông thích,

=> 2 ví dụ cho Phil bài học quan trọng

Phil also wanted to differentiate MD from the traditional boutique consultancies, as this was
where a large proportion of the e-sourcing market value lay. The most recognised
advantages that clients had by partnering with a consultancy were the highly skilled
professionals with category and industry specific knowledge, the robust methodologies
developed over the years, access to large supplier databases, and use of their sophisticated
technology. In comparison MD could only offer the technology aspect and would have to
convince their sales leads that they already have the skills, processes and knowledge within
their company. However, supplier databases can be built over time and most established
organisations have their own in-house. MD offer their own free consultancy guides and
advice on their website to greatly assist the first-time e-auctioneer. The MD software is
designed and developed in such a way that the e-auction process is already embedded
within it. Therefore, there would not be any off-piste incidences. Phil wondered whether this
would all be enough, even with the ever-increasing knowledge and awareness of the e-
auctions process.
mong muốn của Phil trong việc làm MD khác biệt so với các cửa hàng tr thống (which
chiếm tỉ trọng lớn trong thị trường), các advantages của MD đc nêu ra nhưng Phil ko
biết liệu nthe có là đủ ko vì nhận thức của KH về e-aunction càng ngày càng tăng

Software and guides can never provide as much feedback and advice as an industry expert.
There was still a big question whether the MD Directors should
openly offer their skills to help manage the first few e-auctions per customer, even if they
only involved themselves at key milestones, such as signing off documentation or approving
the supplier lists.
One further advantage of a third party working on a fully managed auction is that they can
act as a barrier between the supplier and the buyer so as to protect the buyer-supplier
relationship. MD would not be able to repeat this but could advise the buyer to
depersonalise the relationship by telling the supplier the decision came from the top
and was not his/hers. The best approach MD could attempt would be to make the software
so easy to use that suppliers actually prefer it to the traditional and laborious alternatives.
This, too, would be a significant challenge and is not something that has been done in the
15 or so years that e-auctions have been around for.
thách thức của MD trong việc làm cho phần mềm trở nên dễ sử dụng và bảo vệ mqh
giữa buyer-supplier

Despite MD’s unique positioning and approach to the market, Phil felt certain he needed to
firm up their strategy. He was not sure there was enough encouragement for buyers to try
reverse auctions. He was equally uncertain that the software alone would give the buyer the
confidence they needed. The managed e-auction route was certainly one way to
demonstrate the advantage of the e- auction whilst also providing valuable experience to the
buyer for conducting their own. There were two ways that instantly came to Phil’s mind
for MD to overcome these issues and those were either comprehensive training
sessions with supporting documents, perhaps modular and via the web, or to focus
the selling efforts of the software to the consultancy and interim network to enable
them do the managed e-auctions. Both were worth considering further in his mind.
Phil đã nghĩ ra hai cách để củng cố chiến lược: comprehensive training session và
modular via web

Phil Willcot knew that one area MD were going to find particularly challenging is offering the
right level of support. A successful reverse auction on a complicated category requires
significant preparation, which in turn can lead to numerous support queries. MD are offering
phone, e-mail and live chat technical support along with a strategic consulting session.
However, Phil could see that MD was vulnerable to a few inexperienced customers
saturating their resource. Despite MD stating that their support is technical, they would not
be in a position to risk turning down a customer’s request for assistance.

There was no doubt in Phil’s mind that the recession was providing the impetus for
companies to challenge the norm and to find savings in a more aggressive and
comprehensive way. Phil hoped to use this as the tipping point in MD’s favour. Finally, if he
does successfully assist MD in becoming the next big player in e-auction software, his final
challenge would be to prevent competitors and new entrants from repeating the act to MD.

Way forward:
Phil had heard and read all he needed to. He was clear in his mind that his strategy had to
embrace every aspect of the business plan from the market and competitor analysis, the
sales and marketing strategy, the product positioning and branding, the pricing, and the
challenges and risks that lay ahead. MD certainly had a unique proposition and he was sure
he could make it work. The SME market lay largely untapped to a tool that was creating
huge success for the large enterprises. There were some interesting horizontal markets to
explore, such as forward auctions for asset disposal and property or expanding the product
into the consumer market. There was also the prospect of one day moving into the public
sector. Either way, for now it was simply a case of getting
the basics right and getting the name MD on the map and that is exactly what Phil Willcot
had in mind.
2012: Round 2
Phil thought back to his first engagement in 2011 and considered the success that he had
had. The plan that he helped design, clarify and implement had been so successful that the
MD team had brought him in for a second project.
2011 had been a great year for Market Dojo. The sales and marketing plan Phil had helped
create, being varied and diverse had enabled the team to keep their fingers in many different
proverbial pies. This allowed them to understand the most successful routes to market and
focus on the most relevant to bring in leads from many different directions. LinkedIn proved
to be the best social media site, with ‘Spend Matters’ being the most influential blogging site
for the procurement community. The MD team also dabbled with their YouTube channel
adding software videos and even virals 11. The creation of several resellers instantly helped
them to rapidly expand their sales force and they are also scouting for interesting software
partners to help create a fuller solution.

Phil had made some great other suggestions that the team had followed.
Firstly, he was a great believer in letting the clients develop the software. Taking this on
board and working closely with their first customer, before long they had developed an
integrated ‘Request for Quotation’12 capability along with many other smaller developments
such as white labeling 13 and allowing the clients to upload supplier databases.

Secondly, he suggested and implemented changes to the pricing structure. It was quickly
noticed that the Pay as You Go solution was less attractive than the subscription model. Due
to the pricing of other solutions on the market, the quick ROI from Auctions and the
surprising interest in their solution from large enterprises14, the Annual License was proving
to be popular. As a modification to their pricing structure, they decided to include monthly
pricing at £500 a month. This made for an easier business case for buyers who wanted to
use their software, whilst spreading the MD revenue across the year and generating 20%
more revenue over the upfront one-off fee of £5,000 per Annual License.

Lastly, he knew that support was the key area to focus upon. By analyzing the process and
design they managed to create an environment which only yielded about 20 queries over
300 sourcing events. This is the key to profitability and gaining the customers’ confidence.
The key word which was emphasised again and again was accessibility and this is now a
key driver for any new developments. There have been many successes with the design of
the software. In one instance, a company ran their first auction for over one million pounds of
telecommunication equipment with no training for the suppliers or the buyers. In another
case, a company signed up, created an event as far as they could with the free log-in then
just requested a month to run an event. This is the key to being able to scale quickly.

Unfortunately, the plans for the consumer market had to be put on hold due to resource
constraints. However, with Phil’s help, the MD team did manage to secure some funds for
developing the basic capability to tackle the public sector requirements. This covered the
ability to create questionnaires within the software and move forward to a weighted event. A
weighted event is simply an activity (RFQ or Auction) where the scoring is broken down into
the pricing and
non-pricing elements. For example, 50% of the score can be based on price, and the other
50% can be based on quality and delivery. These developments would take around six
months but have the capability of opening up a huge new market.

The biggest new challenge though was the current reaction of the main player in the
industry; Ariba. Ariba has been the first to move and created a dilemma that the MD team
must understand. Ariba started out by creating an on-demand solution which evolved over
the year. The basic solution started out at a relatively similar price to MD, although the many
necessary add -ons drove the final price much higher15. This then changed further to offer
initial discounts until they finally offered a completely free solution for two users16 .

Phil discovered that it is not a straightforward offering. He saw that there are a few things
that are worth knowing about the 'free' Ariba tool and that is that it is limited to two users,
that you have to run at least one sourcing event a month and that between the two users
you cannot run more than 4 sourcing events a month. Also, all your suppliers get placed on
the Ariba Discovery network, for which there are subscription costs, meaning suppliers will
seek to recoup their costs in their pricing to the buyer. This can get expensive to the buyer
for multi-year contracts, where the supplier can recoup their costs several times over. It also
means the suppliers can be bombarded by requests from any other Ariba user. Crucially, the
only support offered is via e-mail and their web-form.

How will this affect the Market Dojo philosophy?

Should they change their positioning or pricing? Do
supplier pay models work?
How will they maintain and evolve their competitive advantage?

However, it is clear that the market is reacting to the new environment that companies find
themselves in. Phil needed to consider all that has happened, the success that MD has had,
and decide how their strategy should evolve.
2013: Round 3
Phil was brought back for the third time. 2012 was a decisive year seeing Market Dojo carve
a path in the e-Sourcing market. By focusing on what they know and through careful
marketing, they have firmed up a secure reputation. Basically Phil’s 2012 strategy which
won out was to focus on making Market Dojo the best e-Sourcing application out there and
beat competition like Ariba through their dynamic support and innovative, user- friendly
product.
By the end of 2012, significant milestones were achieved:
- Their first Fortune 500 customer and first multi- license customer with 20 users. This
represented a significant milestone beating major players in the process. It has also led to
the development of a User Hierarchy in the product to give large customers the control they
desire.
- A major release following the first grant enabling Market Dojo to tackle the Public Sector,
especially for Sub-OJEU tenders and mini-competitions.
- The award of a second grant from the Technology Strategy Board to build Category Dojo.
Category Dojo is a new web-based tool to help procurement teams identify, prioritise and
manage cost reduction activities, acting effectively as the missing link between spend
analysis and e-sourcing.
It was also a year which saw some serious changes to the market.
- Ariba, who was feared as a company to dominate the space, was purchased by SAP for
$4.3B 17. Their potential of devouring the Commoditised Software Vendors space with their
‘Start Sourcing’ solution was never realised. This was due to a number of reasons although
principally due to their corporate ethos 18 and the ease, through the facilitation of SaaS
products, for companies to pick best of breed solutions 19.

- Emptoris, another large multinational, was purchased by IBM. 20

- Trading Partners, the original boutique consultancy, collapsed 21. Without evolving with the
market into the gap which was seen by Market Dojo, the writing was on the wall.

- Enhanced competition. It seems that the market has awoken to the potential for new
providers in the sourcing space. Several years ago, it was the growth of the ERP and P2P
arena followed by the consolidation and mergers. Now there is much focus on the e-
Sourcing space. What is being seen is a rapid increase in the number of sourcing
companies with a similar view to Market Dojo and the ambition of being bought up when the
consolidation ultimately takes place.
Market Dojo have taken the path of becoming a Best of Breed sourcing application. Through
this model they can be offered to any company looking to streamline their procurement
process and save money through auctions. Their solution can be bolted onto existing ERP
solutions, which by their very nature and structure could not offer the same type of solution
as Market Dojo. e-Auctions are a great entry point to companies. They offer a negotiation
technique which procurement professionals can’t do by themselves. However, they are just
a part of the whole sourcing solution which is needed to offer the stickiness of their product
for real recurring revenues.

Phil asked himself: how can Market Dojo stay on pole position to grow rapidly and carve
their share of the market? As a micro company, their dynamism and customer focus has
helped secure a loyal customer base, although without rapid expansion, is this enough to
avoid being hidden next to all the other solutions? Resource is limited with many
developments on the go, although any disadvantage is partially curtailed through customers
paying for these innovative features.

Phil needed to understand how the technological landscape is changing and whether Market
Dojo are pioneers in this changing environment or will they just become a ‘me too’. What are
the other directions that Market Dojo could move into without breaking out of the directive of
e-Sourcing?
Could this expansion be achieved through automating the final parts of the sales process to
move to a zero-touch model with viral marketing or would Market Dojo need to seek
investment?

2014: Round 4 – [Case study – Imagine you are Phil Willcot this year]
Phil was brought back for the fourth time. 2013 was a solid year creating more growth and
focusing on new developments. No investment was sought and Market Dojo grew through
Phil’s plan of prioritising between sales and
development. Several tele sales campaigns were completed with fair success however
Market Dojo in reality need to move to a zero-touch sales model.
Market Dojo’s client base grew with both large and small companies joining their ethos.

Most notably Phones4U were signed up which is a great household name and very
much added to the credibility of Market Dojo.
Two new major developments were released at the end of 2013.

The first was Innovation Dojo22. “This simple, yet effective, way for managing the early
stages of ideas will help pave the way for a possible Request for Proposal (RFP) or Request
for Information (RFI). It gives the opportunity to efficiently examine blue sky thinking and
forge closer relationships with your suppliers. It truly allows for a collaborative framework
with your suppliers to rapidly progress innovation”.

This was actually part of the first grant but it has had a proper facelift and ready to use.
Many clients have expressed a view to using this tool for managing innovation from retail
stores feedback to looking for cost down in engineering components. Apparently, it would
seem that the market is now looking to collect innovation as an integral part of Supplier
Relationship Management (SRM) and perhaps it is slightly ahead of its time.

The second innovative development was from our second grant, Category Dojo
24.

“Every procurement department needs to analyse their spend, understand the opportunities
and determine the correct strategy.
Category Dojo delivers an innovative procurement web application that will provide spend
category insight, strategy and opportunity assessment for public and private sector
procurement teams
The benefits of the unique tool will allow procurement teams to consistently address more
cost reduction opportunities, reduce the time taken to compile and manage category
management plans, and mitigate against the wrong procurement strategy being adopted.

“Category Dojo is the missing link between spend analysis and e-Sourcing.”

This tool, like the Innovation Dojo23, is sourcing neutral and further pushes the bounds on
innovation within the eSourcing space instead of heading towards developing into the P2P
arena for example.
On top of these two developments (and many other client led additions to Market Dojo)
Market Dojo was awarded a third grant which is perhaps the most exciting. Many customers
have asked to be able to create their own eMarketplace using Market Dojo. The third grant
facilitates the first phase in this development with an ‘Energy eMarketPlace’ as the first
candidate. This will hopefully allow business users to negotiate fairly for their energy in what
some might call a broken market.
Also, any clients, who know their market well, such as their potential customers, the bidding
strategies, the suppliers, will be able to use the Market Dojo eMarketplace to make their own
ideas for creating a company become a reality. In some ways similar to eBay who allow
people to create businesses within their environment. Clients can manage the eMarketplace
and charge their users to run events using specific templates and dedicated supplier pools.
Later versions of the eMarketplace will allow clients to better manage their own users.

On top of this, the development will allow current users in Market Dojo to be able to create
complex bidding templates moving Market Dojo in line with the capabilities of a lot of the
main players, but with the difference being the Market Dojo focus on usability and adoption.

This year Phil has to understand how and where Market Dojo should grow? They now have
a robust sourcing product as well as new sourcing neutral applications. Not to mention a
whole new product to develop for mid-2014 with the eMarketplace.

1. How should Market Dojo prioritise their time between development and growth; how
should they effectively get their message out there?
2. Currently they are just the 3 co-founders with offshore development resource and
outsourced telemarketing. When should they look for investment, if at all?

3. How do you scale the business organically?