Very well analysed. Having worked in e-commerce in India I can vouch that the coordination costs can b very high. I also see parallels to UHI though in healthcare there are no large incumbents. Would like to know your views on UHI.
Thanks, I want to look at UHI and OCEN more deeply before I comment. I've been receiving questions on these as well as ONEST and other protocols. I will share more in a subsequent post once I've looked through a wider range of protocols and what makes them tick vs not.
What will be the scenario if a guy with lots of warehouse real estate and serving as a multi brand distribution hub were to expose his inventory as a fee based API subscription? Will that lead to standalone logistics players competing with non big players with an SCM in place? There is this DHL case that talks of intelligent supply chains https://dhl.lookbookhq.com/ao_thought-leadership_social-recommend/article_harnessing-the-predictive-supply-chain. Can ONDC create that for the average logistics provider such as VRL or Redbus (https://www.redbus.in/travels/yathra-logistics) by just exposing the data from (consented) inventory that goes through them. Will ONDC be a revolution for supply chains, by creating a "live catalog" (what is there where right now at what price and number) versus "promised catalog" (what is an idea or aspiration presented to you that can be delivered if you show the money).
A live catalog requires integration into inventory management systems and successful implementations are seen only in some verticals. These verticals will typically involve (1) high margins, (2) premium placed on unplanned (right here right now) vs planned (need it in the future) spend, (3) differentiated inventory (as commoditized inventory can be fulfilled with promised catalog if you 'ping' enough sources.
Great analysis, and provocative for a point solution platform in the social change space like ours (@Armillaria) where both the challenges and solutions are complex as we move up and down the social value chain.
Great thinking as always as I spoke with Jesse Walden last week we seem to agree that the space for protocols is around simple/ossified transactions contexts.
A couple of point for reflection:
1) delivering vertically integrated experiences is, on one side, a way to extract margins, on the other a rather capital intensive element (see https://www.danhock.co/p/the-future-of-marketplaces) - therefore I think if large players step in as seller side onboarders to - say - provide fulfillment, dispute resolution and returns - as long as they wil do it on inventory they've no data about this will introduce risk and thus reduce margins over the short term. So I see that the advantange is clearly there for them to play that role, but it won't be free. Of course, having capital to deploy helps in this case so it's rather normal that incumbent will have a better chance to play such role.
2) all this process, in the ONDC setting, commoditizes excellent experiences, continues along the red queen effect and speeds it up
3) if ONDC will end up "onboarding offline sellers and democratising access to their inventory" I think it will have fulfilled a large part of its promise (I spoke about this with Arvind Gupta here: https://www.youtube.com/watch?v=GYgQcbtBRcg and I think access and enablement of the marginal players was a core element of the strategy)
4) I think it's normal that we can't expect startus to thrive in vertical e-commerce integration (which is evolving into commoditization) as they thrive more in the genesis space. It would be interesting to see how new startups emerge to provide less capital intensive elements of the chain, if any
All of the factors you shared here make sense but are not commonly understood. When analysts view options as binary (centralized vs decentralized), they miss the nuance and trade-offs required to clearly unpack issues.
To successfully ‘unbundle’ an e-com transaction into independent roles of the buyer, seller and logistical operator requires ONDC to ensure not just interoperability, but also overall customer satisfaction. This is where it runs into conceptual problems from an operational and privacy perspective. Unbundling creates multiple handover points between different entities; this means disaggregated responsibility. It reduces control over each transaction and increases potential friction in dispute resolution. In remote online transactions, the chain of responsibility is fuzzy. For instance, who should absorb the cost of foreign chocolates received in a partially molten state? The customer, seller or the logistics provider? Or what if a customer alleges that she received a counterfeit product on a non-refundable transaction? The determination of when to initiate a return/refund is arguably more about customer service policy than it is about arbitrating between the buyer and seller. Big platforms have a clear customer-centric bias, which helps in customer retention while top-down visibility and control over the entire transaction helps them pinpoint failures.
Very well analysed. Having worked in e-commerce in India I can vouch that the coordination costs can b very high. I also see parallels to UHI though in healthcare there are no large incumbents. Would like to know your views on UHI.
Thanks, I want to look at UHI and OCEN more deeply before I comment. I've been receiving questions on these as well as ONEST and other protocols. I will share more in a subsequent post once I've looked through a wider range of protocols and what makes them tick vs not.
What will be the scenario if a guy with lots of warehouse real estate and serving as a multi brand distribution hub were to expose his inventory as a fee based API subscription? Will that lead to standalone logistics players competing with non big players with an SCM in place? There is this DHL case that talks of intelligent supply chains https://dhl.lookbookhq.com/ao_thought-leadership_social-recommend/article_harnessing-the-predictive-supply-chain. Can ONDC create that for the average logistics provider such as VRL or Redbus (https://www.redbus.in/travels/yathra-logistics) by just exposing the data from (consented) inventory that goes through them. Will ONDC be a revolution for supply chains, by creating a "live catalog" (what is there where right now at what price and number) versus "promised catalog" (what is an idea or aspiration presented to you that can be delivered if you show the money).
A live catalog requires integration into inventory management systems and successful implementations are seen only in some verticals. These verticals will typically involve (1) high margins, (2) premium placed on unplanned (right here right now) vs planned (need it in the future) spend, (3) differentiated inventory (as commoditized inventory can be fulfilled with promised catalog if you 'ping' enough sources.
Of course! Do ONDC like protocols have a play. Maybe I should read your article again :-)
Thanks for penning this down. The quadrants of variability v/s co-ordination cost was very insightful.
Thanks, great to hear this hit home.
Great analysis, and provocative for a point solution platform in the social change space like ours (@Armillaria) where both the challenges and solutions are complex as we move up and down the social value chain.
Exactly, these issues especially play out in complex ecosystems, where those coordination costs emerge.
Great thinking as always as I spoke with Jesse Walden last week we seem to agree that the space for protocols is around simple/ossified transactions contexts.
A couple of point for reflection:
1) delivering vertically integrated experiences is, on one side, a way to extract margins, on the other a rather capital intensive element (see https://www.danhock.co/p/the-future-of-marketplaces) - therefore I think if large players step in as seller side onboarders to - say - provide fulfillment, dispute resolution and returns - as long as they wil do it on inventory they've no data about this will introduce risk and thus reduce margins over the short term. So I see that the advantange is clearly there for them to play that role, but it won't be free. Of course, having capital to deploy helps in this case so it's rather normal that incumbent will have a better chance to play such role.
2) all this process, in the ONDC setting, commoditizes excellent experiences, continues along the red queen effect and speeds it up
3) if ONDC will end up "onboarding offline sellers and democratising access to their inventory" I think it will have fulfilled a large part of its promise (I spoke about this with Arvind Gupta here: https://www.youtube.com/watch?v=GYgQcbtBRcg and I think access and enablement of the marginal players was a core element of the strategy)
4) I think it's normal that we can't expect startus to thrive in vertical e-commerce integration (which is evolving into commoditization) as they thrive more in the genesis space. It would be interesting to see how new startups emerge to provide less capital intensive elements of the chain, if any
All of the factors you shared here make sense but are not commonly understood. When analysts view options as binary (centralized vs decentralized), they miss the nuance and trade-offs required to clearly unpack issues.
ah! our polarized world!
Very interesting piece - I made a similar argument about coordination and variability in a column in Mint sometime back (excerpt below). Unpaywalled link here: https://rgupta.substack.com/p/combating-amazon-and-flipkart-monopoly
To successfully ‘unbundle’ an e-com transaction into independent roles of the buyer, seller and logistical operator requires ONDC to ensure not just interoperability, but also overall customer satisfaction. This is where it runs into conceptual problems from an operational and privacy perspective. Unbundling creates multiple handover points between different entities; this means disaggregated responsibility. It reduces control over each transaction and increases potential friction in dispute resolution. In remote online transactions, the chain of responsibility is fuzzy. For instance, who should absorb the cost of foreign chocolates received in a partially molten state? The customer, seller or the logistics provider? Or what if a customer alleges that she received a counterfeit product on a non-refundable transaction? The determination of when to initiate a return/refund is arguably more about customer service policy than it is about arbitrating between the buyer and seller. Big platforms have a clear customer-centric bias, which helps in customer retention while top-down visibility and control over the entire transaction helps them pinpoint failures.