Knowledge is the currency of progress and business-to-business (B2B) value chain connectivity is the engine of growth in the new economy; various indices measuring national inter se standings are based on how national attitudes to acquiring knowledge, its use and creation of new knowledge. Value creation in the modern economy is driven by innovative products and services and global value chains with businesses working in a collaborative manner to deliver quality to the customers across the globe. This kind of connectivity is aided by both knowledge transfer and knowledge sharing, enabling integration, which in turn leads to knowledge generation activities and innovation.
Communication between businesses is done using various ICT means such as social media by the employees. The Internet provides a means to businesses to show case products and services and exchange information, which facilitates transaction initiation across borders. Such relationships are common in the modern economy in not just large scale manufacturing sectors but also services rendered to businesses.
B2B (business-to-business), also known as e-biz or e-commerce, is the exchange of products, services or information between businesses. These transactions may involve a manufacturer and wholesaler, or a wholesaler and a retailer, generally companies, rather than between a company and individual consumers or those with the government (B2G or G2B). Collaboration of organizations in this mode entails a high degree of sophistication in engagement and communication.
In the case of transactions spanning across borders and geographically dispersed units the interfacing brings on different challenging dimensions but exciting growth possibilities.Consider this, Samsung’s revenue from selling OLED displays it supplies for Apple’s iPhones was about $22 billion in 2018. Large-scale automobile manufacturing, cloud data storage services like Dropbox or big names like General Electric (GE) or Chinese horizontal e-commerce Platform Alibaba are just a few examples. Alibaba recorded consolidated revenues of 22.99 billion U.S. dollars in 2017.Global business-to-business (B2B) eCommerce sales are predicted to reach over $6.6 trillion by 2020, surpassing business-to-consumer (B2C) valued at $3.2 trillion by 2020, resulting in rapid market growth. The United States (US) alone will generate over $1.9 trillion in sales by that time. Emerging trends such as machine-learning, artificial intelligence, and mobile B2B eCommerce will drive adoption rates of these solutions.
Mark Skousen’sbusiness-to-business (B2B) index is based on Gross Output (GO) data, it measures all the business spending in the supply chain and new private capital investment. “B2B spending is in fact a pretty good indicator of where the economy is headed, since it measures spending in the entire supply chain, and it indicates tepid growth and maybe even a downturn”, says MrSkousen.
B2B transactions operate in a complex fashion and require elaborate planning as to client- business relationship management, exchange of information, communication and thorough execution to be successful. Per PWC As emerging markets mature, they will become less attractive as low cost manufacturing bases but more attractive as consumer and business-to-business (B2B) markets. Meaning, thereby, as the markets become more progressive so does the B2B regime raising that segments contribution to the economy. Market maturity is as much an outcome of an enlightened regulatory regime among other driving factors.
Business integration across borders necessitates having corresponding systems, like IFRS, functioning capital markets, rule of law, etc., in place to support knowledge integration. Governments create the rules and frameworks shaping the environment in which businesses are able to compete against each other; from time to time the government changes these rules and frameworks compelling businesses to change the way they operate in public interest- ideally, setting a competitive and level playing field. Regulatory environments in our immediate neighborhood remains challenging putting serious limitations to what B2B interactions can achive. Doing business across the Central Asian Region remains fraught with risks, regulatory ambiguity and/or complexity, barriers to entry, uncertainties and associated costs of corruption.
Economic value creation by businesses is affected majorly by government monitory, taxation policies and legal changes. Transformative growth in regional trade needs transformative policy actions to leverage mutual capacities and know how. The Internet remains the most democratic and level playing field thus far and enables B2B communication across borders but movement of goods and services remains a challenge in the region. Collaboration among businesses means transition to more collaborative regulatory regimes, which necessarily entails sustainable regulatory reform and legal changes across member countries to enable market led growth and shared value.
Building knowledge corridors alongside Economic Corridors is a necessary lateral development. Knowledge integration among the countries along the Silk Route can best be imagined in terms of a knowledge cloud that transcends borders and serves not just as a harmonized repository but a channel that allows external knowledge to be accessed, transferred and shared easily in a demand driven manner. To create new knowledge and drive innovation is both the cause and effect of how businesses will be able to connect and operate across boarders to create and move products and deliver services.
Knowledge is a resource but integration of it is a process and not an “event” and in fortunate circumstances it may even lead to innovation. Different actors, driven by respective goals, in the process are co-creators, users, and resources depending on which side of the equation they are on. ICT platforms serve to work through the dictates of geographic dispersionto a large extent but tacit knowledge is carried by individuals and best harnessed through periodic human interaction and face time.
The challenge faced by businesses is quite clearly one of devising effective organizational and managerial approaches to work across varied regulatory regimes and business environments. There is then the political economy of things, which probably, more often than not, will tend to be larger than the “Internet of Things” that the businesses need to traverse. An emotional understanding of mutual positions and challenges can create the trust and communication that can be the best denominator of change if not immediate progress.
The Writer is a former civil servant
Published in Daily Times, April 30th 2018.