In a recent white paper, I stated that we are experiencing a paradigm shift, and the nature of power is changing. Sun Tzu, the ancient Chinese general, says power comes from formation. The general creates power by intelligently placing his assets–his soldiers and weapons–in the right formation before battle. Power has never been a function of what we control and own. But until recently controlling and owning things has been the most efficient way to coordinate them.
New companies and solutions are arising that make it easier for us to coordinate the uncoordinated, to create power without owning, in both the public and private sectors. The most obvious ones are the ones we read about in the Wall Street Journal and that we interact with daily: Facebook, Twitter, LinkedIn, etc.
But to grow too enthralled with these exciting innovators is to risk missing out on some other exciting, and equally promising, emerging companies. These are companies that are transforming the darker corners of the economy. Shying away from the glamour and attention of what we prefer to refer to when we talk about social media.
Consider, for example, FedBid, which is helping governments reinvent how they buy things. The company enables federal agencies to procure products and commodities through a full-service online marketplace using a reverse auction process in which vendors vie to provide the government with what it needs.
Let’s say you are a buyer supporting scientists working on a government project, and they request 20 ferrets for an experiment. Your guidelines require you to get quotes from at least three different providers, but you usually buy lab equipment, IT equipment and other more mainstream requirements, and you have no idea where to find ferrets. Besides, you have 20 other purchase requisitions in the queue, all for much higher dollar items and complex services. How do you find the time between cutting orders and negotiating service contracts to effectively source ferrets and manage the bidding process?
Today you can turn to FedBid. Go online, quickly specify your acquisition scenario, describe your requirements, and post your buy onto the marketplace. FedBid notifies qualified ferret providers, who compete to provide you what you need at the best value. They compete not only to give you the best price but also to deliver the exact ferrets you need when you need them.
The amount of goods sold through reverse auctions has grown by more than 50% between 2008 and 2010. FedBid is helping to lead this growth. Government agencies purchased $1.15 billion worth of products and commodities through the company’s online marketplace in 2010. This volume has been growing at more than 25% a year for the last several years.
I had a chance to interview Glenn Richardson, FedBid’s president. A former military man, Glenn spent a career as a partner in several large consulting firms, and then was drawn to FedBid’s promise. “We are truly a game changer,” Glenn explains. “By improving the competitive process, we have been able to maximize the value of every tax dollar used to make purchases through FedBid.”
Although the company is viewed as a technology forum, it made a number of strategic decisions that helped to avoid getting washed away in the early 2000s with the many other reverse auction providers that fell when the .com boom ended. The company uses technology, for example, but only as the marketplace enabler. What differentiates it is the company’s patented streamlined competitive process and the comprehensive services underlying that process.
Other sites may let you post that you are looking for ferrets, but FedBid completely manages the competitive process, with resources that source ferret providers and get them into the marketplace, provide full support to users throughout, and perform quality assurance during and after the competition. While other reverse auction providers focused on large transactions, which they treated as individual events that may take several days or weeks to stage, FedBid focused on a higher volume of smaller purchases, using a more efficient process to support buys from a few thousand dollars to a few hundred thousand dollars.
Glenn states that his company helps the government save over 10% on average. They also help users save time by enabling them to set up a bidding process in a few minutes when doing so the old-fashioned way might have taken several hours and resulted in much less robust competition and much more administrative work.
The company is not alone in this space, and we cannot know for sure that FedBid will remain the fastest surfer on this wave, but they do give us a window into how even the federal government is adopting the new outthinker mindset.