[STEP BY STEP] B2B Payments: The Final Frontier

Brian: [00:00:03] Hello and welcome to Future Commerce, the podcast about the next generation of Commerce. I'm Brian.

Phillip: [00:00:08] And I'm Phillip. And today we are with Paul do Forno, who I know from Twitter. But this is sort of our sage guide to this first part of our first episode in this series that we're partnered with Balance, talking about the future of B2B payments. Welcome to the show, Paul.

Paul: [00:00:28] Thanks. Super excited to be here. I lead up our B2B practice and so this is something that definitely comes up a lot. And I've been working both from B2C over the last 15, 20 years in the commerce space. And so really excited to talk about this.

Phillip: [00:00:47] Yeah, excited to have you here. And in this series we're trying to answer sort of a thorny question about how businesses of all sizes and industries are modernizing their payments and particularly B2B payments. It's not credit cards and it's not necessarily Shopify. What does the landscape of B2B look like these days?

Brian: [00:01:09] Or is it?

Phillip: [00:01:10] Is there any digital transformation left to be had? I guess is the first question that I would ask you, Paul.

Paul: [00:01:16] Hell, yes. Because if you think about all of these laggards and industrial companies, manufacturing companies, they've been putting off a lot of these investments. And so they're just catching up. So but there are other segments like if you talk about B2B business, software or TMT, those guys are way ahead. So you have a huge spectrum across the beat of what digital transformations are happening. And also, many clients are dealing with right now, there's a big massive upgrade in back office, in SAP. S4 is coming and everybody has to move to the latest version. And so you have a massive amount of digital transformation still happening, especially in the B2B, more industrial companies.

Brian: [00:02:15] And can you quantify what kind of opportunity we're talking about right now? Do you have some numbers that you can put around that?

Paul: [00:02:21] Yeah. I mean, if you step back and think about it and let's use the US as an example. So I know Digital Commerce 360 has an estimate out there that approximately somewhere in the neighborhood of around $17 trillion businesses are paying other businesses. And if you think about that, that's a pretty big number and they estimate almost half of that, those payments are done manually. And if you look at what the largest part that's done electronically is, it's EDI.

Phillip: [00:03:00] Wow.

Paul: [00:03:00] EDI has been around for 40 years. And it's costlier and it's hard to... That was the B2B payments that solved so many issues, but now it's expensive. And so commerce is only down around the 10 to 12%, depending on different calculations. And there's also procurement. The other area, platforms such as Ariba or Coupa also are out there. And so what you have is half of that, $8 trillion worth of payments to get to optimize on and so there's a massive opportunity out there.

Phillip: [00:03:44] So you're saying that there's an inbuilt opportunity as businesses make their next generation investments in other systems and technologies, for them to address other areas where they've been laggard. And this investment a whole industry can benefit from as they began looking at other parts of their business where they're seeing inefficiencies and deficiencies. What does that look like when we say B2B, that's an overly broad umbrella term. Could you define a little...

Brian: [00:04:16] 17 trillion.

Paul: [00:04:18] Yeah.

Phillip: [00:04:18] That's a lot.

Paul: [00:04:19] Yeah.

Phillip: [00:04:20] So let's kind of make it a little more manageable. What are the kinds of industries that you see right now that stand to gain the most from digital payments and investment and shift to digital for B2B transactions?

Paul: [00:04:38] So I think what you're going to find, everybody's going to benefit, and this also... Part of Deloitte, I'm part of Deloitte Digital, but my accounting friends spend a lot of time with accounts payable. And so you have this area of two different areas trying to solve for this. One, the B2B commerce, is coming from the place of innovation and new ways to get paid and sell. Where the traditional problem is if you look at how do we actually make a lot more money and grow our margin. It's well, what's our day's invoices know if I'm out on average 70 days if I bring that down to 35 days... We've done this for some large customers where reducing... Every day you reduce your accounts payable, you actually help the bottom line by tens of millions of dollars. So you map that out to every type of company. Reducing your accounts payable comes right to your bottom line. And as we're going into recession, that's at everybody's top of mind. And so what some of the new tools will help to do is help facilitate, reducing the friction to allow your customers to pay you in an easier way. And it doesn't necessarily mean they might pay you sooner, but you make it easier for them to fulfill their contractual obligations.

Brian: [00:06:11] Or like with Balance, you just get paid.

Paul: [00:06:13] Yeah.

Brian: [00:06:14] That's... {laughter}

Paul: [00:06:16] Right. And that might be an opportunity for some of your segments where you might have not done business with people because it might not have been easier to set up terms or do credit.

Brian: [00:06:27] Right.

Paul: [00:06:27] There are players out there that actually can actually connect those two parties. Where they might give some sales credit or whatever. And there are a couple a number of players trying to solve for that.

Brian: [00:06:41] It's a really good point.

Phillip: [00:06:42] Yeah, great point.

Brian: [00:06:42] To be able to open up the market there. If you couldn't come to terms with someone if you wanted to grow market share. A lot of business is based on trust. You are going to put terms on someone that's a trust-based transaction. And so as we look at sort of digitizing that and removing the relationship component and focusing it more on just making it transactional, there's an opportunity, or at least maybe stepping into a relationship for the first time, outsourcing that opportunity to give them terms, but make sure you get paid and all of a sudden you like you don't have to trust them as much.

Paul: [00:07:29] Right, exactly.

Brian: [00:07:29] That gives you the opportunity to like broaden your market because you can sell to a set of businesses you couldn't have sold to you prior.

Paul: [00:07:41] Yeah, exactly.

Phillip: [00:07:42] There's a question that I think our audience would have, which is, well, first we sort of came in joking about it, but I said, "Is there any digital transformation left?" It feels like we've been on this journey for 20 some years. I've talked about this now for at least ten years on podcasts. Why would people still be doing these this type of payment transactions and facilitating business to business payments manually in the year of our Lord 2022? Why is that? Is there some inherent advantage to that? Because I can't believe that we're only doing it that way because that's how we've always done it. There's been a lot of digital disruption over the last decade, definitely. So is there some hidden cost or some sort of challenge that teams perceive that maybe there's just no reason, if it ain't broke, don't fix it? I guess it's the thing that I think some people would probably just chalk it up to.

Brian: [00:08:44] Checks are free right?

Paul: [00:08:45] Yeah. Yeah, I guess what I would say from my perspective, the big challenge is that there's it's not just all one problem. It's a complicated problem of how do I set up my payment terms? How am I selling? Who am I selling to? How do I make it easy? How do I set up new clients? Oh, by the way, if I'm running a small manufacturing plant, do I have people showing up to work? So you have the most important thing is I've got to get this product manufactured to get out the door so you can imagine and use this example across a lot of different industries. They just haven't been motivated to solve for until interestingly enough, you've seen big jumps at times of recession where people have invested that they've had to do it because they don't have the people and they're losing. So there may be a massive opportunity right now. So people might say, "Hey, recessions coming," it's hitting a lot of different people, but that's when they'll be then, "Oh, is there any electronic way to help me smooth out some of my challenges?" Most of the other time it's more of a, hey, I got to get stuff out the door. And again, that's more in probably a manufacturing and industrial. When you get into other, from an adoption perspective, especially in software tech industry, they're way further up in adoption.

Brian: [00:10:20] What you're saying is that times have been too good to innovate. Necessity is the mother of invention. And so when you're focused on just growing, why would you invest in ways to make things more efficient? You've got to invest all of your resources in growth and things are just humming along. So why change?

Paul: [00:10:45] Right.

Brian: [00:10:45] Recession gives you the opportunity to step back and say, "Well, hold up here. Maybe we could be doing this better. We could actually be making more money, we could be getting money faster."

Phillip: [00:10:57] It's an interesting point, Brian.

Brian: [00:10:58] We could be cutting costs.

Paul: [00:11:00] Yeah. I mean, just to add to what you're saying, another interesting factoid. It's also kind of a culture, especially as you get into some of the industrial, smaller-sized companies where perhaps they've been laggards in some of the technologies because they didn't grow up with the technology. "I always did business this way." And you're seeing a lot of these people retire and sell their businesses and you're seeing a massive, I think I saw a stat the other day that boomers are going to be retiring at an unbelievable rate. And there are some like 10 million businesses out there to be bought of things to optimize and change. And so I think there's also some cultural what people are used to and the tools that they grew up with.

Brian: [00:11:52] Oh, that's a good point, too. As you have sort of an aging workforce that's sort of been in charge.

Paul: [00:11:59] Yep.

Brian: [00:11:59] It's just easy for them to do what they knew. And as we see turnover and the new generation come in, I mean, as consumers, they've been used to using a certain set of tools. And they probably walk into these situations where they're like, "I have to write this money on a piece of paper and print it out on this weird printer paper?" And I mean, actually, looking back, even when I entered the workforce, which was a long time ago now, and I stepped into the world of data and documents and payments, which is actually my first role coming out of college. I was like, "So this is it?"

Phillip: [00:12:45] "We're still doing it this way?"

Brian: [00:12:47] We're still doing it this way?

Phillip: [00:12:48] That was 2002.

Brian: [00:12:48] Yeah. This was a long time ago, but not 2002. Not that old. Hold up.

Phillip: [00:12:56] Dang, Brian, that was savage.

Paul: [00:12:59] {laughter} Yeah.

Phillip: [00:13:00] Let's switch gears a little bit because I have this question around how much simpler software can really be because implementing software can be quite difficult in the way that we buy and procure software is actually pretty difficult and can be its own sort of challenge as well, especially if it's a business in an industry that's laggard for one reason or another. What are some of the pain points that you anticipate businesses are going to have to go through for this modernization to occur?

Paul: [00:13:37] I think it's more of like a battle depending on the size and the company. So the larger the company that you get, you're dealing with more change management. A lot of different people. No central person owns a topic, especially around payments because you get into finance and you get into the accounts receivable team and you have the front office revenue and you've got from the sales team, so you get a lot of different people who are trying to move, "Hey, I need to upgrade my ERP so I don't have time to work on that. So battling the different goals and tasks that people work on, that's probably the number one thing from just a broad perspective and especially as you get larger. That's more of it. On the smaller side, you have the opposite problem of, "Hey, I'm just too busy. I don't have anybody to get to it." And so I think the hard part is how do you make it easy to plug in either on an add on either to a tool or something that I'm already adopting that it plugs in. And so it doesn't become one of the things I say to you, I've been selling for big companies, they end up buying tools that might be, "Hey, I already have an MSA for it." That's easier than having to deal with...

Phillip: [00:15:13] Oh, yeah.

Paul: [00:15:15] ...starting a whole new onboarding, a new client, a new tool. So that's also out there.

Brian: [00:15:24] That's super interesting. It's interesting. It almost, I don't want to say conflicts with what we just said, but in a recession, these teams are getting cut even more. I feel like this gets even more essential, making things easy to adopt. That's probably the number one blocker to seeing digital transformation. A lot of these efforts look so big and feel so big and look so overwhelming. The idea of completely revolutionizing how you receive payments sounds intimidating to a lot of businesses.

Phillip: [00:16:01] And I would even chime in there, Brian, and ask does it make it easier or does it remove objections. Because I think the removing of objections sounds like... One of the objections that we're hearing here so far in this conversation is, is the timing right for us to be making an investment in a particular area? And I think when times get tough, that's when you start becoming a little scrappier. When teams become constrained and they can't deal with a volume of payments and manual tasks, they start looking towards automation. So I do think that these objections are being removed right now, and that's the macro environment that we're in. I think my question then... Oh, go ahead, Brian.

Brian: [00:16:48] No, just to add on to that, I think this also gets to buying centers as well.

Phillip: [00:16:55] That was my next...

Brian: [00:16:55] Oh, was it? Okay.

Phillip: [00:16:57] That's where I was going. Yeah. Typically the buying centers are misaligned between what a traditional, consumer-centric, B2C investment might look like. And the finance team, I think that there's a question of, "Do we need to procure a new technology? Can't we just use the thing we already have?" Paul, what does that look like when you're selling across buying centers? Are they more aligned on the B2B side?

Paul: [00:17:28] Yeah, I kind of went off what I talked about before was more of what you need to break through.

Phillip: [00:17:37] Hmm.

Paul: [00:17:37] I think the opportunity like you said, and what really focuses people, and how if I was trying to sell the benefit of a B2B payment, I would focus on the reduction of the average payment time. Because that's the bottom line. It's black and white. Every calculation that you do every time you reduce a day or two of accounts receivable. Straight to the bottom line. And so if I can tell that story of how that's going to contribute to that cost reduction and increase my margin, that solves all will. And getting it to the right people. And that discussion being, and normally what we end up seeing, especially in these times, is they pull together kind of a tiger team cross groups of somebody from finance, from accounts payable, from revenue and sales. How do we break through and find these opportunities? And so that's what I would focus on. So things such as, "Hey, I can take our payments, and instead of having to send something in and do something on ACH or whatever, we can do it directly through a tool that helps us to speed the time, even if they're just scheduling it," blah, blah, blah. That's some examples there.

Brian: [00:19:09] It makes sense. Yeah, I think that is a good throughline, especially when you're looking at what kinds of purchasing processes these buyers are required to go through to make these decisions. So oftentimes you're looking at big formalized processes where an RFP has to go out to multiple vendors and so on. Do you see any of these purchasing processes changing? Because the type of value prop you just provided is pretty cut and dry, and so do you think there's going to have to be any innovation in the way that these businesses think about purchasing their tools? As they go by modern tools, are they going to have to modernize their purchasing processes?

Paul: [00:20:06] Yeah, I think the good way to think about it is I have to chop up the elephant. This is so big, you know, $8 trillion. And so there's going to be mega segments. I think to start with is probably like as a customer looks at the long tail. They're selling in the opportunities that you're seeing is people either starting you see this a lot like, "Hey, I'm doing a marketplace. I'm extending my capabilities. These are new customers. They're their customers." That's where they start to focus on long-tail, underserved customers. And so I think what you're having in many of them, is to solve for that. The harder ones, which become more complicated when you're doing RFPs and bids and negotiations, that's a whole other process. And so I wouldn't be trying to solve that. The B2B payments aren't going to magically solve that. There's a lot of procurement, and as much as everybody loves to talk about procurement, they're not going away. And there are a lot of negotiations that will always be around. And so you're trying to find, "Hey, once I've signed on a client, how do I reduce all of the steps from the cost perspective?" And there may be tools such as a payment provider that plugs into that and makes it easier. And so that's where there're a ton of different use cases to kind of chop this up that B2B payments aren't going to solve all of them, but it's going to solve different use cases. And that's what you should focus on.

Phillip: [00:22:09] We don't need in B2B and specifically, in B2B payments, there doesn't need to be the same kind of agility that you have in other areas where digital has been employed over the past couple of decades. We don't have to move as fast. This opportunity wouldn't exist if it did move as fast. So I think there's something to note here, which is is this really a land rush? Are we having to run out and go grab all this opportunity all at once? Or are we forecasting a coming slow roll where there's going to be a lot of gathering momentum over the next few years where we start to see entrenched incumbents start to really move as others in what you called in our pre-show the messy middle begin to encroach on their territory? Let's talk about the messy middle a little bit. You had this concept that you brought up earlier where they have a little bit of that. They might have the most complicated requirements of many of those of anyone in that there are so many of them and their needs are so varied. What could you tell us about their buying habits when it comes to software and digital? Because I tend to believe that that's where we have the most fragmentation in the software suites that might bring this capability to them. We have the most fragmentation in sort of the age range of leadership and maybe their digital capabilities or whether or not they're ready internally for as a team or have the appetite to take on B2B payments transformation.

Paul: [00:23:54] Yeah. It might be good thinking about a couple of different scenarios to start to grasp complexity around this.

Phillip: [00:23:59] Please.

Paul: [00:24:00] So the scenario would be let's say when you talk about B2B and a lot of these companies and actually most of them you have a sales team, and the sales team might own a region, and then you have like, okay, well, who has pricing authority? Well, you might have regional pricing authority. You might have top pricing authority. And so I want to buy something, I want to buy my new widgets, but I want a deal on it. So I send something to my salesperson. And so there's a sales, a number of different sales understandings of how do you fit into that, meaning, "Hey, I'm in my regional guy, I might give him a discount if I know he's going to sell some stuff down the road." And so it's not about reducing the friction there. It's because I already have existing relationships. I have some leeway. And where you are at the end of the quarter and all of this. And so I'm just using this as an example of like the whole sales organization and the selling that we've done for hundreds of years and how that's managed. That's a big part of all of this as opposed to like the final piece. And so you can't forget how to solve and what powers you give and then enable that, that's also part of like trying to figure out that messy middle.

Phillip: [00:25:38] Oh, that's such a good point. Hold on. Let me say that back to make sure I understand. You know, a lot of this technology sits so far down the funnel. It's when we're actually receiving payments for things that were born of human relationships.

Paul: [00:25:56] Right.

Phillip: [00:25:56] And so the thing that really needs to get solved here is not just the payment stack or the technology stack that enables that so that we can shorten that window like you were saying before, which is the thing that everyone theoretically is going to try to do so that we can improve the bottom line. It's also incumbent on the sales cycle and the sellers and themselves in the sales relationship to provide the same level of service or better than what they're used to getting through the old traditional means of doing things.

Paul: [00:26:27] That plus the pricing. The whole pricing engine. Is it dynamic pricing? Are people used to doing the whole pricing? That's what makes this all more complicated. Why hasn't that been solved is because actually, they spend most of their time trying to figure out how to price this, how to go back and forth, and the negotiation. And "My regional guy, I know if I wait till the end of the month and they haven't had a good month, well, maybe I can squeeze out a few more points from it." So there's a lot of like that piece of it and optimizing all of that. There are a lot of different moving parts. I have a guy that I work with, a partner who's a pricing guy, and he works with one of the largest fast food companies in the world that might be based in Chicago, but I won't say the name. And they've done amazing work around thinking about pricing and different B2B businesses that that's a whole other thing that works into this ecosystem of how to stitch these together.

Brian: [00:27:36] You said something there that really caught my attention, which was eke out a few more points.

Paul: [00:27:43] Yeah.

Brian: [00:27:45] We're talking typically in B2B or not typically, but often about commodities. And these commodities often have razor-thin margins because we're talking about wholesale volumes. And one of the things that we've experienced on the sort of direct consumer side is the cost of SaaS. It's margin erosive, and it creates like, "Oh, we can just throw out the middleman and go straight to consumers. And that's going to be a lot less expensive. So the margins are going to be a lot higher and we're going to be able to lower costs to the end consumer." As we bring software and technology and modernization into the business transaction, sometimes you're selling stuff for such razor-thin margins, how is a piece of SaaS software going to fit into those points of margin?

Phillip: [00:28:58] It typically doesn't save you on margin. I know that. Especially as everyone's starting to price usage by GMV. It gets harder and harder software-wise to contain costs and manage costs. Right?

Paul: [00:29:14] Yes and no. I think it's something that I think over time, again, it's a maybe. There are so many different considerations here. One, when you're dealing with every industry, the more that you have a monopoly or a core product that people want and a commodity that's in demand... So, for example, I'm dealing with a lot of companies that right now have fertilizer. Well, because of what's happening in the world and Ukraine is the number two provider of fertilizer, guess what? It's a huge demand and the values go up. And so you have lots... I'm just using that as an example of there are a lot of moving parts of pricing and how that fits in that necessarily the tools, what gets in hard here is like you now have a whole bunch of new tools to help you. How do I optimize my pricing so I'm maximizing? How do I then have the tools like a payments to make it easier to close so I can get the product, so I can get what I need for my manufacturing piece? And so it's not just when you think about the stack, you should be looking at what is the value, the value benefit drivers along these? And on the B2B side, there's a lot more potential for margin, especially in some commodities that you can optimize that are changing so much that where before they might not have automated those pieces.

Brian: [00:31:11] That makes sense to me, especially when you start to get into industry-specific scenarios. We've been talking pretty generally about B2B here. But if we started to dive into industry by industry: chemicals, steel, wood, lumber. I'm sure that you've probably got some more specific use cases that you have in your mind here, Paul. And as we see some of this adoption, which industries do you expect to kind of jump into this modernization effort with both feet first?

Phillip: [00:31:48] Or who's doing it now?

Brian: [00:31:49] Or who's doing it now? Yeah. Yeah. Even better. Better question. Thanks, Phil.

Paul: [00:31:52] Yeah, it's kind of interesting because, and Phil, you probably saw and you guys saw this, the famous diagram... I also like to put it out there. I know that there's that diagram of eight weeks we grew ten years which.

Phillip: [00:32:11] Yeah.

Brian: [00:32:13] A lie.

Paul: [00:32:13] Please. If you see that diagram, it was wrong when it first got published. And I think it's still up there in places. It's just it's statistically wrong. But you've seen kind of a dip and going back if you look at the B2B side this past year, it grew close to 20%, according to some estimates. And some of that is it's tied to the price of oil jumping up. That also spills over to different chemical companies. It spills over to other industrial plays that are being driven. And again, because of the laggards on some of the investments and all the money that went into the infrastructure bill. $1,000,000,000,000 got thrown into the economy for building lots of roads and bridges, etc... People are ramping up to be able to take all. So if you think about this and again, I've done a lot of B2C, but just opens up your oh my God, there's all this money out there. How do they optimize to be part of all of those pieces?

Brian: [00:33:23] 17 trillion? Try 18 trillion.

Paul: [00:33:26] Yeah, exactly.

Phillip: [00:33:28] That's a lot of trillion.

Paul: [00:33:30] Yeah.

Phillip: [00:33:31] I think let's kind of shift gears into some of the practicalities of what are the kinds of steps that you see that businesses are taking right now and some of the players involved. Are we sort of in a bit of a lull coming into the end of this year? I know people come back and listen to podcasts weeks and months and years later. But we're coming into holiday 2022, lots of teams, depending on when your fiscal ends, lots of folks are shifting gears. You probably already did your budgeting for the year. Is 2023 the year that we start seeing a lot of investment here? Are we building towards an eventuality where we're seeing a lot of this investment happening and thereby we're seeing a lot of that adoption of B2B payments and digitization of payments in B2B happening in the next 12 months?

Paul: [00:34:28] Yeah. If I go for my own experience right now, our B2B business is growing much faster than our B2C, which there's no real surprise if you look at all the retailers and some of the pullbacks, etc... But again, the laggard money and getting in there. So I'm definitely bullish and I've also personally been super busy in the B2B space continued into now and usually, it's not this busy and so we're seeing it across the board, especially on more of the industrial and commodity-based side. But interestingly enough, from a growth perspective on the other B2B side, on more of a technical or sale or software side, you're actually seeing because we've got a bunch of accountants and financial experts, we're also looking at like, "Oh, how do we optimize?" So you have two different things. There's hey, we don't have the infrastructure even to work within some of these areas. So we need to update and do the digital transformations where the ones that have done maybe those digital transformations, we're spending time on how to optimize and reduce their costs and maybe have like a tiger team of driving down their costs so that they can deal with the headwinds that they have.

Phillip: [00:35:58] You touched a nerve for me because what I have heard for years and years and years is what business consumers want, especially maybe toward the low end of that messy middle that we've been talking about, what business consumers want is a simplification of the business rules that have come about over the years and years of manual processes. And so what the consumer, the buyer, wants is less friction and fewer choices. What we've called traditionally the consumerization of B2B. Is that no longer sort of the narrative here? Is that not really as prevalent or a dynamic that's at play as much in the real marketplace as it is a selling point for eCommerce platforms who are trying to sell their software?

Paul: [00:36:52] Yeah. We tend to talk about it as ease of doing business and we've done tons of voice of the customer research and I've got a word cloud that I use all the time. And if I go to my research and we've done it for very large companies and across the board, ordering vacillates between number four and number five. The platform's like, "Hey, where's my order? When is it going to get delivered? Can I print my invoice?" The ordering is almost the last thing. Hey, product information. So those are the things that you're actually solving for. It's really about breaking down barriers and being easier to do business with and that's most important because in business each individual person is trying to work amongst themselves and just make it easier to interact. Whereas, when you're at a B2C, you're trying to engage and they can make a decision now where do you have enough of a great story to make you push that button to buy? This is a long-term, "Hey, I show up every day, and I need to take care of this one supplier. I just want to make it get in and get out." Or "I have a problem. Shit, we've got to go into production and I don't have a supplier. Where's the order?" I don't want to call someone. Let me look. And so that's an important thing that just to think about B2B commerce, the commerce part may be the least interesting part of it.

Brian: [00:38:36] Hmm.

Phillip: [00:38:37] Oh, if this were any other series, that would be the show title because I'm super into that.

Paul: [00:38:47] As a commerce guy all my life I can say that.

Phillip: [00:38:52] I feel the same way. I also think that there is a trust that needs to be developed where you're trusting the data that's coming out of the platform that it is most recent and up to date. There is already a fundamental trust with someone that you have a personal relationship with that you have been doing business with for years and trusting the information that's coming out of this platform that is most recent, most up-to-date, and it is indicative of the state of your account, those are things that is like a muscle that needs to be developed over time and you only get there and build that trust through a lot of goodwill and good work and a lot of hygiene in the organization. That's really hard to build over time.

Brian: [00:39:36] Well, and actually to your point, Phillip, trust or maybe don't trust. So this is the other side of it. And this is a question that I wanted to ask. In the environment that we're in right now, we've seen massive supply chain issues, whether we're oversupplied or we're undersupplied. It's really hard to predict right now. And let's focus maybe on the messy middle. I would imagine one of the biggest questions right now is who has the power in these relationships? Oftentimes, buyers have less power than suppliers do. They're required to go to these suppliers. When it comes to imposing modernization, is it imposing or is it doing it because customers demand it? And I guess this is like you talked about customer profiles, do customer profiles matter as much when suppliers actually hold the power in the relationship? Or do they? And maybe this is too broad.

Phillip: [00:40:50] You should have given Paul a primer on our philosophy series of buyer dynamics and power dynamics. Did you take a Foucault course before you came, Paul? Because Aristotle and Foucault have something to say about this.

Paul: [00:41:05] Oh, you guys are all way too smart for me. Sorry.

Phillip: [00:41:11] Do you think that there is a power dynamic at play there, that there's a sort of a misbalance of power that maybe software can help to rebalance?

Paul: [00:41:19] Yeah, I'll answer that, but I want to go back. Phil, you brought up originally around trust. And I think that's a very important thing. We do a bunch of work on research on trust. And one of my colleagues actually just wrote a book about trust. And obviously, it's a big topic, but from a B2B perspective, I think one of the things that these are important... If I'm signing up a new supplier, and I don't, especially now when it's mostly the largest portion of people out there working are millennials, if I go in and I don't have a portal, I don't have a website to go to, I don't have the tools, they're not going to have the trust in this supplier. Like shit, if you can't even show me the order how the hell am I going to trust you to actually deliver this for us?

Phillip: [00:42:17] Hmm.

Paul: [00:42:17] So that's also a huge buying reason. If I see you have your stuff together that hey, I got an automated message, I can go back. I signed up. I know where my order is. I'm getting notifications. It's proactive. Man, I feel like I have this trust. These guys know what they're doing. They're organized, and those are the guys that are going to win. And so especially as you look at all the little suppliers and how to make good and build that trust so that you get more allocations coming up by having the tools and again, I'll go back to it, the ease of doing business with the easier to do business with and show that you're going to gain that trust.

Brian: [00:43:05] Hmm. Sounds like a visibility and accountability issue as well.

Paul: [00:43:10] Yeah.

Brian: [00:43:11] If you can't see it somewhere, you can't reference it. The only thing you can do is call and trust someone's word. And so, especially when you're talking about the long tail of suppliers, that's really hard to do. It's really hard to build those relationships because there are too many things you have to buy.

Phillip: [00:43:31] Yeah. We have quite a small media start-up business here and I feel up to my eyeballs already in various AR portals and it's all hard to manage. Everybody is at a different place, and I can't even imagine what it must be like to actually work where every single day is trying to make sense of states of accounts and picking up the phone and talking to people, and trying to give people timely updates. This is a big, thorny problem. I was going to let you off the hook, Paul, but I feel like I need to try one more time.

Paul: [00:44:16] Okay.

Phillip: [00:44:17] Who holds the power in the relationship at the moment? And is that subject to change? Is there a rebalance of power or is that something that is just that trustful relationship that comes over time? And maybe software is the thing that democratizes that? Is this an opportunity for vendors or for buyers, I should say, to find more vendors in the marketplace? And this gives like it's a coming growth opportunity for vendors who traditionally couldn't find new customers and had sort of a fixed market? And does that sort of rebalance the power in this ecosystem to where this isn't just a cost savings initiative? Hey, maybe digitization also can be a growth initiative at some point in the future.

Paul: [00:45:10] So this problem, of course, is very different for different industries. If you think about commodities.

Phillip: [00:45:17] Yeah.

Paul: [00:45:18] And I use the example of fertilizer. Guess what? We wouldn't be able to feed everybody in the world if we did not have fertilizer. And there are a lot of great studies that show that. So there are only a couple of suppliers that globally can do this. And so guess what? They've got the power on their side, and on the other side, as we look at the big challenge, this is one of the biggest challenges in uncertainty. How many misses have you seen in the past couple of months that, hey, I thought eCommerce was going to grow like crazy and I ordered way too much? So this whole balancing of demand planning and buying it shifts so fast, the power dynamic that you can't bank on being one or the other. And so the only way to be able to do it and this is where I think some automation comes in, is how do I maximize and take advantage of the time, using the pricing engine to reduce costs? To take advantage and be quicker to react and systems and automation that can take advantage of that because you don't have like, okay, for this quarter, this is our pricing and these are the terms that we'll accept. What you have now is okay, we have a daily update, so how are we going to tune our pricing engine today and how is it going to curve throughout the day? And hey, our terms are changing too, because, for example, look at what's happened to the price of a ship coming from China. It's now at less than 20%, almost even of pre-COVID. I mean, it's fallen off the cliff, between not only the demand was off, but you get into political factors. "The US is driving that bringing more onshore." And that demand of people buying that bring more onshore. And so that's the big macro effect that's a big unknown is this whole worldwide, bring it back onshore, and nationalism, how is that going to affect what before, think if I'm a digitally native brand. Hey, I basically figured out a cheap way to buy it. It's going to get here real quick and hey, I sold it. I have ads that work great with Facebook and boom, I made some money. Now when that all breaks down the world changes. And so all of those things really drive it. It's hard. This is not an easy problem.

Phillip: [00:48:11] No. But it's good to have sage advice and wisdom from folks like you who can help us sort of navigate it. I think just forecasting where the opportunities are in the industry is super valuable for the folks that tune in to this show. Brian, I'll give you sort of the last question here.

Brian: [00:48:32] No, I mean...

Phillip: [00:48:32] No philosophy. We're not allowed to have philosophy on the show right now.

Brian: [00:48:36] No.

Phillip: [00:48:36] This is the starter show. This is the 101.

Brian: [00:48:38] Don't worry. Yeah. No, I mean, I think my final question would be what about finance teams specifically? How are they viewing the modernization of payments? Is this scary to them or are they excited about this?

Paul: [00:49:00] They are excited about anything that draws their cost of money, especially right now, as the feds raised rates. Money was basically given away for the last ten years. Almost at no cost. Now, everything, every cost investment is being looked at.

Brian: [00:49:19] Hmm.

Paul: [00:49:20] And so they're looking at any kind of opportunity to reduce their costs. So the dollar fund cost that they now have has just jumped. And so trust me, they're all in. Anything that you can demonstrate translates to the cost reduction of money.

Brian: [00:49:43] Even if it might shrink their team size a little bit? That's sort of the flip side.

Phillip: [00:49:48] Isn't that the goal? Or no?

Paul: [00:49:50] Yeah.

Brian: [00:49:50] Maybe that is the goal.

Paul: [00:49:51] That is the goal. Part of that, correct?

Brian: [00:49:53] I like that. I like that. Well, these are hard problems, but there are some good solutions out there. Balance is one of those. Super excited to be partnered with them. Thank you so much, Paul, for your insights. Having your guidance navigating through these waters is so essential. So appreciate your sage words.

Paul: [00:50:14] Thanks, guys. It was awesome to be on your show.

Phillip: [00:50:18] Yeah. Appreciate it. We're going to have you back. We're going to have you back when we promise we won't talk about philosophy.

Paul: [00:50:22] Okay, that's okay. But you know what? So I'm ethnically Portuguese and so we're very reactive. And so I've been trying to be more stoic. So there's my little...

Brian: [00:50:34] Ooh, nice.

Paul: [00:50:36] Stoic like if I can't control it, just accept it. That's my mantra. There you go.

Phillip: [00:50:43] That's a great motto for 2023. Thank you so much, Paul, for coming on the show. Thank you so much for listening.