The conventional wisdom of the past 20+ years is that new technologies are killing middlemen. The landscape is littered with examples of silicon valley tech doing just that, from AirBnB (displacing hoteliers and real estate renting agencies), Uber (displacing taxi union institutions), to Amazon (displacing retail stores), etc. The informational asymmetries that allow middlemen to thrive have been disrupted, and the disruptors have not just taken most of the profits pie, but decreased its size too (via greater efficiencies and lower margins).
There are no doubts that technology is coming. Like Bangladesh, who are currently living in blissful ignorance of COVID-19 (as of 27 March, 2020, the Government of Bangladesh has confirmed a total of 48 cases, 11 recoveries and 5 deaths in the country…!), the industrial markets can ignore digitisation in the short term, but in the fast-approaching medium term it will be coming thick and fast.
Putting luddites to one side, conventional wisdom is pretty unanimous that traditional industries need to adopt network digitisation and that this will lead to a leaner, more sustainable and future proof way of working. Conversely, those that continue to put the blinkers on will find themselves fast-approaching a day of reckoning when the balance tips. Those that try to develop lean tech in-house, and fight market tech solutions, will arrive at the same fate after having spent a lot more dosh.
Digital transformation is a must for any enterprises wanting to survive in the next 5-10 years.The conventional wisdom of the past 20+ years is that new technologies are killing middlemen. Silicon Valley is littered with examples. Here's a company that does things a little differently... Click To Tweet
How brokers can fall in love with digital disruption
So where does this leave enterprises who:
- rely on connecting various businesses and facilitating transactions
- provide market intelligence (aka aggregated and synthesised counterparty information), and
- introduce one company to another for them to transact with one another?
The answer is not simple, but they must embrace technology. Business as usual will only keep them pumping for so long before a swift downfall.
At DeepStream, a disruptive technology company, we are seeking to facilitate information exchanges between businesses, but are not seeking to change the industry core dynamics. I am proud to say that we have broker intermediary businesses as our clients. Not only that, but we believe that they perform an absolutely critical function within the supply chain that can be enhanced, and facilitated, with our digital technology.
Contrary to the doom and gloom narrative amongst many brokers when talking about digitisation, we have been extremely impressed with the “digital-first” attitude of broking companies such as Clarksons, who are clearly ahead of the curve in harnessing technology in a way that works for their firm and also works for making the market they operate in a more efficient and sustainable one.At DeepStream, we are proud to count #brokers as our clients. Not only that, but we believe that they perform an absolutely critical function within the #supplychain Click To Tweet
Note that this is not at the expense of other business participants in the Supply Chain. DeepStream also caters to end buying clients, suppliers and other third parties, seeking to enhance their exchanges in the supply chain rather than change the dynamics. Every transaction is uniquely complex, which is why we have created a flexible platform that can cater for direct tendering just as easily as brokered tendering.
As we have been growing, we have kept an eye on other “tech” companies operating the shipping market where brokers are active. We have been surprised at how they have all gone for the jugular – seeking to replace brokers with technology solutions. This is the polar opposite of our digital facilitation philosophy, providing a home for all business participants in the supply chain to collaborate.
Why brokers are important to us
Here are just a few reasons why:
1. Shipping is complex
- Brokers sort situations out where humans are critical and no software can solve
- Full of non-standardised issues which cannot be predetermined and fit into a technology framework that can be scaled across situations
- Requires a smart human (the broker!)
- Communications pathways are not predefined (instead they are often serendipitous!)
2. Brokers are deal makers
- Deals get done by people, not computers
- Technology can certainly facilitate transactions, providing quick information to allow for best decision making to be done, however brokers help get transactions done in particular markets which require them
- No getting away from the fact that a number of market participants in the shipping industry trust and want to deal with their established contacts
- Cutting this avenue away is a recipe to cut the market end chartering clients can deal with
4. Procurement operations are outsourced to brokers by end clients
- There is no doubt in anyone’s mind that procurement officers cannot be replaced – so if these are (to a degree) being outsourced to brokers, how can technology replace them?
- This is a trend we have been seeing recently, and set to continue – it just needs to be done within a transparent and sustainable framework!
Where can technology enhance the current dynamics?
1. Provide auditability of informational flows
- Increasing regulation, compliance risks: auditability of information is key for both brokers and end clients to mitigate compliance risks around tendering processes
- This is a significant risk that end clients are taking when they engage on a JV basis with other third parties who do not use a digital, sustainability focussed auditable platform
2. Reduce time taken with admin intensive tasks
- Brokers we speak to spend an inordinate amount of time copy and pasting information in excel spreadsheets – this is in no-one’s interest.
3. Give assurance that best-in-class processes and workflows are being followed
- Visibility is everything in ensuring best practice
How DeepStream caters for brokered tendering
Here is how DeepStream bridged the gap left open by other technology companies in the shipping market:
Collaboration Feature between Clients and Brokers
- Multiple businesses can be on the “Buyer” side of transactions
- This allows for Brokers to “collaborate” with their Clients, giving them (permission based) access to the software at the click of a button, whilst still driving the transactions within the DeepStream software
Broker Account Licences: a permission-based “home” for Brokers in the Supply Chain
- Brokers have separate Account Licenses to other businesses on DeepStream
- Brokers are able to set permissions across their activity to a granular level of their choosing, ensuring information protection for them
Concentrating on data exchange between businesses, not market intelligence
- DeepStream does not focus on delivering market intelligence that tries to substitute some of the value which brokers deliver to their clients
- DeepStream is fundamentally a data exchange platform on a permission based system that allows for efficient workflow-based engagement
- 100% software delivered to clients
- Software extremely user friendly
- DeepStream do not offer consultancy or market advisory services
So, by using DeepStream the market still gets to benefit from the critical value that brokers deliver to the supply chain, whilst also doing this under a lean, tech-driven and digital framework that provides transparency, informational integrity, compliance adherence and tech-driven admin efficiencies to the market.
So no, the relationship between brokers and disruptive technology does not have to be awkward at all. On the contrary.