Revisiting the Golden Rule

You’ve probably heard some version of the “golden rule” of business (not the one we grew up with) – “S/he who owns the gold makes the rules.”  In the world of business-to-business (B2B) integration, it’s easy to see the golden rule at work.  In general, it’s the payer – the customer in a B2B relationship – that sets the rules for partner interactions, including implementation details like document types, versions, and syntaxes, document size and content constraints, communication and security protocols, and quality of service requirements.

The term “channel master” has long been used to describe the role of a dominant company in a value chain, exemplified by mega-retailers like Wal-Mart, Target, or Sears.  Companies that supply products and services to such channel masters understand that compliance with their integration requirements is a price of doing business.

But just as in the world at large, the golden rule isn’t observed universally.  In some cases it’s the supplier that sets the rules, particularly in highly concentrated verticals, where buyers may be required to comply with conventions set by the supplier, in order to obtain favorable pricing.

Even small suppliers with compelling products, capabilities, pricing, or availability may give buyers no choice but to accommodate their B2B requirements.  This is particularly common among offshore suppliers and contract manufacturers, whose B2B integration capabilities may be limited by the office suite software they use for data management and communication.

But perhaps the most difficult situation is the one faced by intermediaries, who may need to comply with the B2B conventions established by both upstream and downstream members of their value chains.  Logistics service providers and medical claim processors are two examples of this.

Regardless of who sets the rules, if your company is on the receiving end, you have a much different B2B integration problem than the one faced by channel masters and other rule-makers.  Channel masters may have large and highly complex IT systems, but because they can set the rules of engagement for B2B integration, the number and variety of business transactions they support can be relatively low (usually a few dozen, at most).  They may support many thousands of trading partner connections, but the implementation requirements across those connections may differ very little.

The situation is different for most suppliers and intermediaries, especially when they participate in multiple value chains (have many customers).  Each customer will typically require support for some minimum set of B2B transactions.  Even if there is similarity in the transaction types required by multiple customers – orders, order changes, invoices, and shipment notices, for example – differences in implementation details are inevitable.  The number of document syntax, document version, content validation, acknowledgement, and communication variations supported by a mid-sized manufacturer or 3PL can easily reach into the hundreds.

The “golden rule” is a well understood value chain dynamic, but its importance to B2B integration strategy, implementation technology selection, and even enterprise application strategy is often ignored.  Companies that give too little weight to their value chain role when making B2B integration decisions greatly increase the risk of project failure.

In my next post on this subject, I’ll examine how key differences between value chain owners and value chain participants dictate very different approaches to B2B integration, and point out some specific capabilities to look for, if your business must accommodate a wide range of partner-determined B2B requirements.

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