Building a B2B Marketplace Using BlockchainBuilding a B2B Marketplace Using Blockchain

Building a B2B Marketplace Using Blockchain Transcript:

Jeff White: Hi, everyone. This is Jeff White, co-host of The Kula Ring. One of the things you’ll notice about this episode is that it seems to end rather abruptly. We didn’t have an opportunity to truly say goodbye to our guest the way we normally would. That’s as a result of our podcasting platform, or should I say our previous podcasting platform, Zencastr, which had some issues as we were recording this episode, and we were unable to finish it the way we wanted to. However, the interview is still very complete and there’s lots to be learned here from our guest, Lisa Butters at Honeywell, and I do hope that you enjoy the episode. So, without further ado, here we go. 

Announcer: You’re listening to The Kula Ring, a podcast made for manufacturing marketers. Here are Carman Pirie and Jeff White. 

Jeff White: Welcome to The Kula Ring, a podcast for manufacturing marketers, brought to you by Kula Partners. My name is Jeff White and joining me today is Carman Pirie. Carman, how are you, sir? 

Carman Pirie: I’m doing well, Jeff, and I noticed that in the intro, sometimes you’ll say, “Brought to you by Kula Partners, an agency made for manufacturers,” and other times you skip that part of the intro. 

Jeff White: I’m very dynamic with this. 

Carman Pirie: I like how you’re kind of A/B testing this intro. It’s kind of conversion optimization of the podcast intro. 

Jeff White: Of everything we do, yeah. 

Carman Pirie: I just love today’s episode. I love when we get to chat with somebody who’s just completely breaking new ground in the space, and just kind of doesn’t seem to really care about how things used to be done. 

Jeff White: Yeah. Disrupting it in almost every possible fashion. 

Carman Pirie: Yeah. Yeah, so I guess that’s a pretty good build-up. Let’s introduce today’s guest, get going. 

Jeff White: For sure. So, joining us today is Lisa Butters. Lisa is the General Manager of GoDirect Trade, which is a Honeywell company. Lisa, welcome to The Kula Ring. Why don’t you tell us about yourself and what you’re doing with GoDirect? 

Lisa Butters: Yeah, sure. So, as you guys mentioned, I’m Lisa Butters, the General Manager of GoDirect Trade. GoDirect Trade is an online marketplace that’s powered by Honeywell. So, Honeywell, for those of you who don’t know the Honeywell name, we’re actually a Fortune 100 company. We’ve been in business for over 100 years. We have a really rich legacy of innovation in industrial manufacturing, aerospace background, and what’s really cool is we have this 100-year-old legacy company that is trying to really spearhead innovation, and we have a software startup. 

So, I run GoDirect Trade, which is a software startup inside the Honeywell four walls, and what it is, it’s an online marketplace for used aerospace parts, and what’s really interesting about this marketplace is that used aerospace parts, it’s about a $4 billion industry every year, and almost none of it is actually done online. And the majority of all transactions are done in the really antiquated fashion of emails and phone calls. As a matter of fact, if you’re familiar with what the used car industry looked like 15 years ago, that is exactly what used aerospace parts looks like today. It’s very much relationship-based, come into the dealership, I’ll make you a deal. Nothing is transparent until you’re really working with somebody. Price isn’t something that’s published. And that’s exactly what we’re dealing with today. 

Our online marketplace is looking to change all that. We’re trying to bring the buyer expectation, which for you and I, we wake up every morning, we probably buy something from Amazon before we have a cup of coffee, but for a multitude of different reasons in this industry, people don’t have that same expectation. They’re okay, so to speak, with buying their parts via emails and phone calls, and we’re trying to change all that. 

Carman Pirie: Man, there are so many areas to unpack here. 

Jeff White: Let’s start with how terrifying it is that it used to be like used cars for planes. 

Carman Pirie: Exactly. And in large part still is, and we depend on these as consumers. So, I guess first off, we have a $4 billion industry, almost none of it is transacted online, and I’m guessing there’s a good percentage of people that say that there’s a reason for that, and people are never gonna buy this stuff online. I mean, that had to be the earliest objection to any of this. 

Lisa Butters: Yep. Yep. 

Carman Pirie: And so, did you just have to approach that from the point of view of it’s either religion and you believe it or don’t, or what? 

Lisa Butters: I think it’s one of those things I believe will be a slow roll until you reach a tipping point, and then the whole industry will feel compelled to move into the digital channel. And I think it’s very much like what you saw with Amazon in the late 1990s. So, when the internet first came to be, and you started with e-commerce, you had a lot of microsites, people trying to sell things online, and then you had the advent of Amazon and this whole concept of a marketplace, and trying to bring those buyers and sellers together in a centralized, institutional way. And what you saw was that you had a lot of sellers that really stayed with the whole brick-and-mortar mentality. They didn’t really feel compelled or see the need to digitize their operations, right? To take pictures of their products, to price their product, and then to put it online for people to sell within a global marketplace. 

And then as Amazon kind of snowballed, that’s when you really see all the sellers, it’s FOMO. It’s the fear of missing out, right? Now if you’re not on the digital channel, 100% you’re gonna get left behind in the world of consumerism today. And that is exactly what our startup is facing today, but in the used aerospace parts industry. You have many sellers that are highly successful, right? They’re very successful in selling things with a phone, right? With a fax machine, and with making trades, and with trying to find a buyer, and right now they’re not in this place where they feel like, “Hey, if I don’t launch an e-commerce store on GoDirect Trade, if I don’t start selling in the digital channel, I feel like I’m gonna get left behind, because I’m really successful in doing it the way I am today.” 

And I think that for GoDirect Trade, bringing more and more storefronts into our marketplace, getting more products out there, and then having the buyers come in and purchase through the digital channel, once we reach this tipping point… Let’s call it 100 storefronts. I’m just kind of making it up, because it’s really not about storefronts. It’s really about bringing the right product to bear in the marketplace, but once you reach that critical mass of enough sellers selling digitally, and enough buyers buying through the e-commerce channel, you reach that tipping point and then all the sellers that were not participating in the digital channel, they will feel like they are missing out, and they will get left behind. 

And so, we are trying to win over sellers one by one until we reach that tipping point, where sellers feel compelled to sell through the channel. 

Carman Pirie: Lisa, I mean look, you are convincing, and you’re convincing me. But Honeywell had to decide to invest in this, and probably somewhat significantly. Has that been a bit on the power of your persuasiveness and influence? Or I guess I’m just curious, did the people that were skeptical of online adoption and purchase of aerospace parts, I mean, how do we get over that objection? 

Lisa Butters: Yeah, so I think the real question is why does Honeywell care, right? Like why does Honeywell, as a $40 billion Fortune 100 company, why do they care about opening up a marketplace for used aerospace parts? And you know, the answer when people ask me that question, it really boils down to the fact that we see a significant customer problem, and the customer problem that we see is that you have a highly inefficient industry that’s living in antiquated times. And with our software background, and our aspirations, and frankly our crusade, and we’re doing it, right? We’re becoming a software-industrial-tech company. 

That, blended with the fact that we see a major customer problem, Honeywell’s like, “Why not?” Right? Because we believe that at the end of the day, someone’s gonna solve this problem, and if somebody is able to figure out how to create an aerospace marketplace and become the center of all aerospace-related transactions, there’s a lot of power in that position. And Honeywell believes that we can solve the problem, and we want to be at the center of all of these aerospace transactions. 

Carman Pirie: All right. And as I look at GoDirect Trade… Well, I’ve gotta say, this is a number of weeks ago now, and even as people are listening to this, because it’ll be in 2020, but it was just before the Thanksgiving holiday. I was on LinkedIn, and we’re connected on LinkedIn, and I see that in a world where people are questioning whether or not e-commerce and B2B is going to be a real thing, you’re promoting I think an additional 40,000 SKUs on a Black Friday sale for GoDirect Trade. And I go on the site now, and it’s “12 days of Christmas, 12 days of TFE goodness. We’ve got turbo fan engines.”

Lisa Butters: Yep. 

Jeff White: Hauling Santa’s sleigh. 

Carman Pirie: Exactly. 

Jeff White: It’s awesome. 

Carman Pirie: So, you know, a lot of people talk about how B2B experience is being more like B2C or what have you, and it seems like you’ve moved way past that argument. 

Lisa Butters: We’re trying. I mean, I think everyone’s so used to this concept of B2C. I mean, you and I, we purchase things online every day, and that consumer experience online, I would say it’s far easier to design for a consumer experience than it is to design for a B2B experience. And the reason why is that when it comes to a business-to-business transaction, there are so many more complex things that occur inside of that transaction than when you and I buy something on etsy.com with a credit card. When it comes to B2B, you still have companies that pay with really antiquated ways, like paying with a purchase order. You still have the need for companies to be able to map to multiple bill-to codes and ship-to codes and sold-to codes. You have global companies that have taxation across a hundred different countries. 

That’s where the complexities really start occurring for these B2B transactions. For us, the key is really figuring out how to understand the consumer experience, but then take that consumer experience and overlay it, and try to mask all the complexities that you have to really design for in a B2B transaction. And so, while it may seem like, “Hey, within GoDirect Trade, it really is a B2B marketplace.” But we’re trying to bring in that consumer experience. 

Every single day, like we just had a spread that went live. We’re still trying to design for making an easy, consumer-like experience within our marketplace. I mean, there’s still so much work to be done in this space, even though yes, I think we’ve come pretty far in trying to design for a good consumer experience on our B2B marketplace, but still a long way for us to go with that. 

Jeff White: I think, too, let’s rewind a little bit. So, you’ve convinced the powers that be at Honeywell that this is an important and essential place to be, and you’ve started to convince sellers to get on board, but tell us about bringing it to life kind of between those two points. So, you got the go-ahead, and now you have to build this big e-com platform, and as a UX and software geek, I think there are some really interesting decisions that had to be made along the way about how you built it. Talk to us a bit about that. 

Lisa Butters: Yeah. When we first… The decision was first made by Honeywell, probably back in March of 2018, to say, “Hey, we’re interested in doing something within the used aerospace parts space.” And what was really interesting is I took over as a general, there was no site or anything like that, but I took over as the General Manager in April, and when I first got into the job, like on day one, the idea that they had really come up with from the powers that be was to create kind of like a listing service, almost… It was actually very similar to what all the competitors are doing today, and they weren’t gonna make pictures required, they weren’t gonna make product images required, and so honestly, the first decision I made as the GM on day one was, “No, screw that. If we do that, we’re gonna be just like all the competitors out there, which is like Craigslist but without price and pictures.” 

And really, that’s when we made that decision to say we’re gonna be more like a blend between Amazon and Etsy. We’re gonna be like Etsy in that we’re gonna let storefronts launch and have all of their listings, and bring in the branding, and all that they want within their own storefront. And we’re gonna be like an Amazon in that we’re gonna be an incredibly easy, consumer-like experience. And we will never let anybody list without price, product images, and quality paperwork, because without that level of transparency, you can never have e-commerce. People will never checkout unless you have the right level of transparency, where they feel comfortable enough to checkout, and that’s really where that whole… Our entire strategy and business model was really decided like the first week that I started. 

And then from there, it just kind of took off. We actually did our first minimum viable product. It took us about 14 weeks to build our first MVP one, and then we launched on December 18^th. So, actually it’s kind of funny that you and I, we’re doing this podcast, because today is our first birthday. So, like outside of this office, like this little cubicle that I’m hunched over at right now in the dark, because our light’s broken, we have streamers, and we brought in a cake, and we have this huge banner, because we’re celebrating our first birthday today. 

Carman Pirie: Very cool.

Jeff White: That’s fantastic. 

Carman Pirie: So, we’ll let you get off the podcast very soon here, so you can get back to the champagne. 

Lisa Butters: But, I mean our MVP one, when we went live in that three-month period, it was a very scrappy marketplace. I mean, we were trying to really beta test a checkout process, a listing process, a storefront process, just trying to get people to checkout, and since then, we work on three-week sprints, and I mean it’s… We’re celebrating our first birthday today, but we’ve already revamped checkout twice. It’s a completely different experience. 

We’ve done so much development over the course of the year, but yeah, to really get to our MVP one and launch to the entire world, it took us about three months. 

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Carman Pirie: How many people are we talking about? Who’s working on this? How many to get this done in 14 weeks? 

Lisa Butters: Yeah. So, in typical startup fashion, we have a really small kind of core startup team. Our core startup team is about six people inside of Honeywell, but we have a lot of people that… They don’t work 100% on our startup, but they may, for example, like we have a patent attorney. So, our patent attorney doesn’t come and sit with us at the table every day, but the benefits of being inside a mother Honeywell-type structure is now you have access to legal, you have access to a lot of advertising people, a lot of press release people, things like that. And then our development team, outside of our five core people, we have about eight people on our development team that develop on our marketplace. 

But we are a very tight-knit startup group. 

Carman Pirie: Ah. There you go. That’s making a bit more sense to me now. 

Jeff White: Yeah. Yeah. You know, that’s a good size for pulling together an MVP of something, where a lot of the… You’re pulling inspiration from a number of quarters in order to be able to complete something that quickly. That’s really interesting. You’re talking about sprints, and obviously agile and all of those things are near and dear to our hearts, but was that something that Honeywell was already familiar with, in terms of working in that agile way? 

Lisa Butters: Yeah. Very. Actually, it’s interesting, because Honeywell… I actually came from IT, so I’m a tech geek just like you guys. I used to design, and code, and program, and database engineering, and really when I came into IT about 15 years ago, everything was more waterfall. You know, it was kind of the old, archaic way of looking at things, and some of the projects at Honeywell are still done in that waterfall-type fashion. But more and more projects, including GoDirect Trade, and a lot of the things that you would see in our software development, they all run on agile. Just because it… I mean, it makes perfect sense, right? And it’s flexible, it’s fast, it’s exactly what we need in today’s world. 

Carman Pirie: We’re gonna bounce around all over the place on this podcast. I think we’re… Yeah, how did it get built? Talk to us about the consumer versus B2B. There’s just so many different things that you could go through, but I think it occurs to me that you’ve really honed in on the notion of trust, however, with the platform. And knowing that aerospace parts have to be, at least in some part, sold on transparency and trust. You’ve done more than just ensuring photography and prices are published. What else have you done? 

Lisa Butters: Yeah, so in my opinion, when you really look at the root of the problem, so the problem statement for me inside of this marketplace is why are consumers not checking out online? Right? Why are they still using email and phone calls to execute on a used aerospace part transaction? And we really took a look at the problem statement. It really all boils down to trust, what you mentioned before. The parts have to be safe enough to put back into an aircraft, right? To fly people from point A to point B. And on top of that, the parts are expensive. 

We have parts listed for sale on GoDirect Trade all the way from a dollar to multi-million-dollar engines. And our average order on GoDirect Trade is about $10,000, so these are high-dollar type orders that people really just don’t feel all that comfortable putting a $20,000 part in their cart and then just kind of checking out online, right? And so, for us, trust was a big deal. And what’s interesting is that blockchain technology about a year ago kind of came across my desk, and it was something that I really was not all that familiar with, but the only thing I really understood about it was that it was a technology that manufactures trust between two parties. And I kind of thought, “You know what? That sounds exactly what we’re trying to solve for.” 

We’re trying to figure out how to take this big boulder of mistrust and chip away at it, so that people feel comfortable enough to checkout online. And a year ago was when we started to kind of investigate and research it, all starting from that customer problem of how do we get more trust into the transaction in a digital way, and you know, fast forward one year later, and I probably spend 30% of my time with our blockchain advanced tech team trying to build applications, expand our blockchain ecosystem, so that we can bring more trust into our marketplace. And we use blockchain heavily, every day, within our marketplace. 

The way that we use it is if you’re familiar with Carfax, so Carfax is something that when people buy used cars, it gives them as much information about a car as possible, like previous owners, maybe it was purchased in a cold-weather state and people don’t like the fact that the engine was exposed to so much snow. We do the same exact thing for serialized parts inside of GoDirect Trade that are for sale, except we use it using blockchain technology. 

The way we use blockchain is it’s a highly secure way to kind of crowdsource information in a database, and we use the technology to try to get as much information about serialized parts as possible. Previous owners, maybe the repair shop that it just came from to get a repaired overhaul on that part, but we believe that bringing that information to the consumer and giving them as much information as possible, that is going to help make more efficient decision making on the part of the buyer. They’re gonna like that, right? If you have two parts for sale, they’re the exact same part number, but maybe one just came off of an American Airlines plane and got listed for sale, and one came from some obscure buyer in… I don’t know, I’m making it up, like Russia, you’re gonna probably pick the part that came from American Airlines, right? 

If all things held equal, just because it feels safer. You feel more trust in that transaction because of knowing more about the part and where it came from. And that’s really how we’re trying to build trust digitally inside of our marketplace with each transaction. 

Carman Pirie: And was that, was the blockchain technology kind of enabled at launch, or is that something that you kind of iterated on after the MVP? 

Lisa Butters: We iterated on after the MVP. So, when we went live with our MVP, we did have some semblance of blockchain technology working within the marketplace, but week, after week, after week, and fast forward the year to where we are now, blockchain is just highly ingrained inside of our entire marketplace. Like for example, anything, something happens within the marketplace, so if a seller lists a product for sale, that gets written to our ledger, to the blockchain ledger. Every time a sale is made, it gets written to the ledger. When repair shops that kind of participate with us on the ecosystem, if they repair parts, that gets written to our ledger, and ultimately the reason why we care about all of these events getting captured inside of the blockchain ledger is because it will manifest itself inside of our marketplace. 

So, when you ultimately go and you look for a part, a serialized part, and you’re trying to figure out more about it, the listing information inside of GoDirect Trade, it’ll show the… kind of like the part pedigree information, and that’s all powered using blockchain technology. 

Jeff White: The thing that’s awesome about that is that as you go forward, and fast forward five, six, ten years from now, the fact that you have stored and kept all of this data and information is actually going to make aerospace safer for everyone. 

Lisa Butters: It will. We can talk about blockchain as a completely different subject, but that’s really why it’s so important now, for this really kind of fragile, infantile technology inside of aerospace, I consider it infantile, blockchain, within aerospace as an industry, but we have to lay the groundwork now, so that’s why it’s so very important for us, for Honeywell, to really have this pioneering, crusading-type mentality, to get more and more companies, more and more repair shops, more and more aircraft OEMs using the technology, participating in providing information about parts, so that it can feed into the ledger and 10, 15 years from now you have this ecosystem that naturally will start collecting data about parts, and start storing the part pedigree data for other applications and other people to start using this. 

GoDirect Trade as a marketplace, we happen to be one application that is using this data. What it’s gonna look like in 10 to 15 years is you’re gonna have a bunch of applications running off of that pedigree platform data. 

Jeff White: Brilliant.

Carman Pirie: Yeah. Yeah, it’s very cool. And I just can’t… I’ve gotta think that when you began to introduce this into the platform, even within this first year, you must have seen an uptick in transactions at that point, just as those more visible signs, why you can believe in the platform become more-

Lisa Butters: Yeah, I mean we’ve seen our growth in transactions, month over month, and I think this is really where startups… In the first year, you’re really just about trying to survive, right? You’re trying to survive, you’re trying to get legs underneath you, you’re trying to understand what are the most critical things that you need to work on. But at the same time, you really need to focus on measuring your floor indicators, whatever they are, to make sure that you’re growing at the right rate. And one of the things that we heavily look at, every single day, is what does our online transaction volume look like, and we’ve already processed, in the first year, millions in orders. Next year, for 2020, we have a 5X growth target for almost all of our measurements, including online transactions. 

And you know, do I think blockchain has something to do with it? I think it does. I think people… It’s kind of that inherent thought of can I trust this site, can I trust this transaction. I think it’s gonna play an even bigger part in the future years, as we expand the ecosystem, but I think increasing online transactions will be a combination of not only blockchain, but so much more, right? It’s getting the right listings from the sellers, it’s getting a bigger buyer base, it’s advertising, social media, it’s branding, it’s a lot of other things, too. 

Carman Pirie: Jeff and I are just trying to point to each other to see who’s gonna ask the next question. I don’t know if we’ll edit this out or not. I mean, I think we just leave it in.

Jeff White: Yeah, it’s probably fine. It’s probably fine. 

Carman Pirie: Let our bumbling about show, you know? 

Jeff White: But, I mean I think what you’re talking about, what’s the name of that manifesto that we have about the flywheel? 

Carman Pirie: Oh, it’s… Flywheel concept certainly is part of the Jim Collins Good to Great, yeah, and they talk in the flywheel monograph about Amazon’s flywheel basically-

Jeff White: Being getting the resellers to set up storefronts, which creates a fear of missing out for people who aren’t there, and then it just self-perpetuates. 

Carman Pirie: Yeah. Yeah, so this is a playbook that isn’t exactly brand new, but it’s certainly brand new in its application to aerospace. 

Jeff White: 100%. I know we’re jumping around a fair bit, but you mentioned that you’ve redeveloped the checkout process a few times since launch. What were the things that you were looking at, and what were you optimizing for as you went through that, and how were you judging whether or not you had made it better?

Lisa Butters: Yeah, I think… Well, when we first went live, I mean, imagine trying to build an entire marketplace in 12 weeks, right? From start to finish. The checkout process was a single page, which is good or bad. I mean, some people love the single kind of checkout page, but it was so… It was just far too complex for a checkout. And again, I alluded to it before, but the complexities with checkout really have to do with the fact that many corporations have this concept of sold-to codes, multiple ship-to codes, carriers they can have. 

For example, a company, when they checkout, like on a B2B transaction, they want to be able to see in the dropdown that, “Hey, I want to checkout with DHL for this, FedEx for this, and maybe UPS with this.” You don’t really deal with that, right? On Amazon, you just checkout, and you just… You go on your merry way. But when it comes to company transactions, the complexities of carrier information, your carrier account information, maybe you have multiple bill-to addresses that you want to be able to send a PO to or get your invoice at. Those are the kinds of things that inherently make these transactions more complex, and when we first went live, we had this very complex kind of single-page checkout, and fast forward till today, and what we’ve tried to do is take concepts from Target, Walmart, Amazon, Etsy, sites that we love and that we checkout on every day, and figuring out, “Okay, what are the most complex things in a B2B checkout transaction?” And try to merge those two together so that it’s very intuitive for the user to checkout. 

So, let me give you one example. When a company checks out on our site, and I know this may seem like a no-brainer to you, but when they check out on our site, we capture all of their data, like their bill-to information, ship-to, and their sold-to codes, and even their credit card if they put in a credit card. And on the next visit, even if they have say like 20 ship-to addresses that they want stored inside of our system, we default everything for them, including even like their carrier account and their shipping notes from the last transaction. So, that way it’s just kind of an easier experience for them as they checkout. 

But again, what’s really funny is that like when people listen to this podcast, they kind of think, “Well, that’s like a no-brainer, right? I mean, we do that every day.” Most things default to what you last checked out with. But I am telling you, with most B2B marketplaces, especially within used aerospace, because there really is no concept of a marketplace, it really isn’t done today, right? And so, for us, it’s trying to bring the innovation of a B2B complex transaction, and really, genuinely making it as easy a B2C transaction. 

Jeff White: I’d like to take this opportunity to thank Lisa for joining us on The Kula Ring. I know that we learned a lot about what she was up to within Honeywell, and developing an e-commerce business within a legacy manufacturer of the scale that Honeywell is at. As I mentioned off the top, we didn’t have an opportunity to properly say goodbye or thank her for joining us, but I do hope that you enjoyed listening to the episode, and that you learned something that you can bring back to your own manufacturing organization. Thanks a lot. 

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