Where social networks have dominated in the last 10 years, market networks are expected to dominate for the next 10. However, what is a market network, why are they expected to be so popular and how could a market network affect your business?
What is a market network
A market network is a cross between a marketplace epitomised by the likes of Uber and Etsy, a social network such as Facebook, Twitter or LinkedIn and job management software. A marketplace brings multiple buyers and sellers together whereas a network lets you promote your identity and communicate.
A market network such as Okappy, is a combination of the two. It allows companies to come together, promote their business and process jobs through an online platform.
Before market networks
Before market networks, managing jobs, especially those with lots of companies involved could be difficult with lots of duplication and very little clarity over what is happening. For instance, imagine you have a flood in your apartment. You would typically:
- First tell your insurance company
- The insurance company would create a job on their systems and fax or email the details through to their subcontractors, in this case likely a plumber and an electrician
- The plumber and electrical contractor will input the details on to their system (typically an Excel spreadsheet)
- They will print out a job sheet and give it to their engineers (or in many cases another subcontractor)
- The engineer will do the work, fill out the job sheet and then bring it back to the office so that the electrical contractor and the plumber can raise an invoice to the insurance company
There are a number of problems with this approach.
Firstly there is a lot of paperwork and a lot of duplication both within and between companies. There is very little transparency over what is happening. If the electrician doesn't arrive on time, then you will be left to call the insurance company, who will then need to call the electrician who will then need to call his engineer.
The biggest problem we've found though is in the last stage of the process when the electrician or plumber wants to raise an invoice to the insurance company.
If the engineer doesn't bring the job sheet back until the end of the week or even later, then the electrician or plumber cannot raise an invoice. Furthermore, if there is any missing or incorrect information, it is hard to dispute this after the fact. This often leads to the invoice being simply written off.
Benefits of a market network
A market network enhances this process by moving the existing communications and transactions online. This has a number of benefits including:
- A reduction in paperwork and a reduction in the duplication of paperwork as information flows automatically between the different companies
- It is much easier to see what is going on, in real-time, without having to resort to multiple phone calls between each person in the chain
- With less administration, more time is available to improve the process, improve the relationship and take on more paid work
- Payment can happen more quickly and with fewer mistakes. Invoices can be raised as soon as the job is complete with information pre-filled. As the payment can be processed through the network, this further reduces administration and ensures no more waiting for invoices to be paid.
- There is less room for error. Even when issues do occur, they are easier to resolve as information is fresh and readily available without having to search through old handwritten jobs sheets or multiple different emails
Ultimately, a market network makes it much easier for companies to work together and can dramatically increase customer service.
Other examples of market networks
There are other examples of market networks such as AngelList and HoneyBook, a 35 person company which has recently announces a $22 million series B fund raise.
AngelList allows startups to complete fundraising online, allowing companies and investors to promote themselves and then complete any investment paperwork online. HoneyBook operates a market network for the events industry.
What makes a market network successful
Market networks target more complex services. Where market places work for standardised, commodities products. Market networks allow much more complex working arrangements to be fulfilled. Companies are very different both in their skills and experience and there is often no such thing as a standard job.
People matter, the last professional that comes to your house to fix your flood is not necessarily interchangeable with any other person. Specific skills and ability are required and this is often backed up by a long relationship which builds trust and means you know what to expect. Market networks help build long-term relationships by bringing the connections online, by recording the history of these connections and by enhancing communication.
Collaboration happens around a project. With a market network companies collaborate together to offer the final service. In the example above, multiple companies would be involved including the insurance company, loss adjustor, electrician and plumbers. Additional layers of complexity are often added, i.e., the plumber might subcontract to a company that offers industrial drying facilities.
Referrals flow freely. In many industries, referrals are key for each part of the transaction and a platform which supports this is vital.
Market networks can increase each companies capacity. By eradicating duplication and manual processes, time and resource are freed up for all parts of the supply chain. By automating processes and linking systems together, a good market network can improve relationships further as less time is spent fixing issues and it can speed up payment as invoices are raised and settled more quickly.
Market networks are the future
Networks are not new, the railways heralded massive industrial expansion at the turn of the 20th Century followed by telephones, email and instant messaging. With each step, the world shrank and communication become more instantaneous.
However, market networks are a new and growing phenomenon. There could be different networks for markets as diverse as law, travel or media production. One or two networks may come to dominate where they have inbuilt flexibility to work in multiple different situations.
Market networks are likely to have a massive positive impact on how millions of companies work, but for now we're just seeing the beginning.
Interested in finding out more
This article is based on an article by James Currier which first appeared on Techcrunch.
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