Building a successful company takes quite a lot of time, energy and using the right resources at the right time in the right manner, etc. In this post, I am sharing with you about four companies that succeeded and failed in two different domains. The two domains I have selected are B2B direct sales and B2B ecommerce.
Domain 1: B2B direct sales
Successful Company: Distribution Now
Headquarters: Houston, U.S.A.
Target Customer Segment: Oil & Gas Industry
The Business
Distribution Now supplies core electrical products, cable and accessories, lighting, fiber optics, enclosures, controls, motors, and more, as well as management, assembly, and design services for the Oil and Gas industry.
Business Model
Distribution Now aggregates the products from respective manufactures and stocks them, so that it acts as a one stop for all electrical related products and accessories for the oil and gas industry.
Why Successful?
- Distribution Now sources the best products from the best available resources so that the quality standards are maintained to a high level.
- They have a very good expertise on the product they are selling, so that they are able to help the customer understand the product easily.
- The customer gets any clarification with respect to the product directly from Distribution Now, rather than waiting for the response from the manufacturer.
- They are very clear about the market segment, they are operating in. They understood the expectations and needs of the customer and projected their offerings accordingly.
- Their offerings are quite unique and innovative which attract the customers.
- They always ensure on time delivery, so that customer’s schedule is not disturbed.
Failed Company: Unifyo
Headquarter: Cambridge, U.K.
Target Customer Segment: Enterprise sized B2B companies
The Business
They were into relationship management and developed a software to aggregate the data of a particular customer from sales, service and social media database. This helped in arriving at the entire data about a customer at a one particular platform
Business Model
They approached enterprise sized B2B companies and sold the software. Their revenue was directly from the sales of the software.
Why Failed?
- The solution they offered were very much useful to large companies. However, as a startup, they hesitated approaching big companies as they felt their solution may not be good enough for them.
- Theirs is a B2B product and they were selling to businesses. The founders were not from a B2B sales background and they did not hire a experienced B2B sales personnel, which led to poor sales planning.
- The sales cycles in the B2B space is quite longer. Some can even take years to get finalised. So, it is important to be patient and have resources till a sales cycle becomes routine. Unifyo did not raise funds to sustain the long business cycles.
- The founding team didn’t communicate their vision and mission to the stakeholders properly leading to miscommunication among the team.
Domain 2: B2B Ecommerce
Successful Company: https://www.power2sme.com
Headquarters: Gurugram, India
Target Customer Segment: SMEs in India whose raw materials are commodities constituting up to 75% of the total purchase value.
Business Model: They aggregate the demands from SMEs across the country and procure the raw materials in bulk, and sell it to buyers through online, based on their demand
Why Successful
- They buy in bulk, so that the purchase price come down and they pass on the benefit to the end customer, who otherwise end up purchasing at a higher price due to low purchase volume.
- They are helping SMEs to buy the raw materials in small quantities at the same price large companies are paying for a very large quantity
- They also provide financial assistance
Failed Company: https://www.tolexo.com
Headquarters: Noida, India
Target Customer Segment: SMEs, B2B buyers and sellers
The Business
Tolexo.com aimed at connecting B2B sellers to business customers who are either consumers or resellers through their online portal.They aimed to make the buying process simpler and easier
Why Failed?
- The main reason the company cited was the demonetisation announced by the Govt of India in November 2016.
- Tolexo had relied mainly on the Cash on Delivery model, which failed because of the sudden demonetisation announcement by the Govt. of India.
- The revenues under this model was low, while the cost kept increasing due to a inventory based business model.
- The sellers were not updated regularly on the enquries and customer feedback.
- The targets set by tolexo.com was so aggressive that they were not able to meet them.
- The service support was very pathetic.They were unsympathetic and unresponsive.
- The number of wrong deliveries went up and the company did not address them seriously.
- The website was very complex and the app was filled with bugs and advertisements.
The lessons
The companies even though operated in the same in domain, had their own reasons for success and failure. I am listing out the common factors for success and failure here.
Reasons for success
- Clear understanding of the requirements of the target market
- Delighted the customer by reducing the purchase price without compromising the quality
- Had all relevant product information and shared the same with buyers.
- They provide value added services like financial assistance, engineering design, etc.
Reasons for failure
- Lack of understanding about the target market
- Poor communication among the stakeholders
- Did not prepare a long term business model, which affected the business during unexpected situations like longer sales cycle and demonetisation.
I hope, the above input will help you in designing your operational plan efficiently and avoid pitfalls. Post your feedback and comments.
