PassAct, Inc.
Question 1
It was the early 1990’s, when Louise Rawlins and James Blevins founded PassAct, Inc. Both of them had worked in sales department of company that distributed electronic components, so they were facing all problems on the market and had a great possibility to analyze them.
The first and main problem on the market was that many engineers and scientist tried to get some particular components that were needed in their researches or to make a commercial prototype (in case of R&D engineers of commercial companies). But there was a practice of supply companies that arranged an order minimum (in volume of cost) so that it was a very hard task to get one or few necessary components without making a huge order. Suppliers’ limitations were one of the main problems for development of small technological enterprises that needed only concrete components for their prototypes.
The second problem was that all suppliers were too scattered because of costs minimization process. They relocated their manufactories into low-salary countries, so it was almost unreal to make a small order because of huge transportation costs. Furthermore, it took a lot of time to get the necessary component (if you order a single piece of component you were needed to wait for bigger delivery in your direction). Relocation was a good decision for producers, but not for their clients in.
And the last problem was that because of manufacturing relocation it became more complicated for consumers and suppliers to cooperate. There were only paper contacts books with phone numbers, but the information was often out of date and not all propositions were set in those contacts books. So, there was a huge need to have some tool (or platform) of business cooperation between buyers and suppliers. And this problem was even more important because of peculiarity of the industry – it was normal that some concrete product was produced only by one of two suppliers.
All in all, when the PassAct, Inc. was founded there was three major problems that the electronic components market couldn’t solve – different order limitations (mostly, minimum order limit – by volume or costs), manufacturing relocation due to costs minimization, and absence of special platform for cooperation between buyers and consumers. So, PassAct., Inc. was the company, which goal was to fill those gaps.
Question 2
Founding PassAct, Inc. in 1994, Louise Rawlins and James Blevins tried to solve all the market problems noted above. Their experience in sales department helped them to analyze the need of suppliers and consumers, so they started to make their own business that was considered as a universal platform for business cooperation on electronic components’ market.
The first step was to find out what was the real situation in the industry. Louise and James identified that there was a huge market gap because of suppliers minimum order limitations (in volume or cost), manufacturing relocation for lower production costs, and absence of modern and universal communicational tool for business cooperation (old and out of dated contacts books were useless). This analysis had shown them a way to develop their own business.
In order to address these issues Louise and James developed a new Internet platform called PassAct (named bya combination of two major types of electronic components – passive and active). They chose an Internet as the most appropriate way of cooperation between suppliers and consumers because of new strong web-trend. Almost each supplier had his own web-page, but they were user-unfriendly and it was too hard to find the component you were looking for. So, PassAct was like some sort of aggregation platform (with standardization) of all these suppliers’ web-cites.
In the first period of business performance, ability of full communication was limited due to a technical issue. The consumers were able only to see the contacts and products lists of supplier, but they couldn’t make an order. It was hard to solve this technical problem due to lack of financial funds. So, Louise and James started to look for investors and because of their bright idea they succeeded in fundraising. They upgraded PassAct platform so that the client could found the component he was looking for, get the full information about supplier and place the order (since 1999) without need to contact the supplier directly.
So, PassAct, Inc. became the leader on electronic components e-market and succeeded in its business performance.
Question 3
PassAct, Inc. works on electronics components e-commerce market, which rapidly grows year by year. And there is no surprise that it became more and more competitive. To be successful in such competitive market it was very important to identify key success factors. There are three main factors that are important for the success or failure of PassAct.
First of all, each company that is facing competitive environment on market (especially on such rapidly grown as an e-commerce market is) must be innovation-driven. And it doesn’t matter whether you were a pioneer on this market or not. If you want to reach a long-term success you should base your strategy on the idea of constant innovation process. And these innovations could be implemented not only in the product, but in organizational structure, communication, marketing, or sales as well. To be leader on the market means to create changes and not to adjust them. But as for PassAct, key innovations are in technological dimention.
Another important factor to be successful on market is cooperation with counteragents. And in case of PassAct, counter agents are divided into two main groups – buyers and suppliers. Both these groups need strong loyalty communication, but, naturally, in different way. As for suppliers, it is very important to be reliable partner for them and be positioned not only as another sales channel, but as a real partner (that understand your needs and will help you when something is going wrong). On the other hand, buyers need full service when they are entering the PassAct web-page and consider PassAct not only as a platform, but as their problem-solution. And in order to build really loyal community PassAct should do its best in its operational processes. Partners’ loyalty is a real success factor on highly competitive market.
And the last important factor is operational processe optimization. Because of specialty of any e-commerce market, the huge importance goes to operational factor. All process could be repeated by any company (now there are no any secret or special processes that are like a “black box” for your competitors) so if you want to be on edge for long, you should minimize operational inaccuracies. There is no question of what you do, but there is still huge difference in how well you do. So, operational effectiveness is one of the major success factors in PassAct business performance.
All in all, there are three main factors of success or failure of PassAct: orientation of innovative development (in all dimensions), need of building loyal partnership community, and operational impeccability.
Question 4
At the beginning of new millennium PassAct was faced with some difficulties. The era of “Internet optimism” was ending and investors demanded clear explanation how the company will increase its profitability. There were two major problems - each for suppliers and buyers. As for suppliers, they didn’t see benefits from small order operations (they have already had their own loyal clients base that were purchasing a lot). From the other side, the quantity of buyers didn’t increase as well because of hard sign up process and web-site navigation. To fix this situation, PassAct developed a few solutions.
First of all, PassAct has changed its philosophy of business performance. They realized that they should charge its partners for each service that they provide (in previous revenue module were plenty of possibilities for partners to make the charge amount much lower). And now new customers were charged for $50,000 as an initial fee, which included full support system (consulting, integration and implementation processes) for concrete time (13 days) and extra support was for an extra charge.
In addition, PassAct started to charge its suppliers partners for each concrete service so that supplier could choose what he wants to get from PassAct (catalogue digitalization, web-solution upgrades, etc.). This solution helped to build standard and clear relationship with each supplier.
These actions were very effective according to PassAct revenue reports. The concept that each value that you are providing should be paid was the best solution in that situation. Only by February 2011 PassAct signed up over 100 new customers (since 2000), over 700 new suppliers were added to PassAct’s virtual platform. The company hired extra 360 employees and its revenue has increased rapidly.
As a result, changing revenue model from one stream to few smaller was the idea that brought PassAct an incredible success in contrast to its old business performance model’s results.
REFERANCES
Hill, Bryan. “What Is a Business Model Change?” n.d. Web. chron.com. 24 February 2016
n.p. “The Pivot: 6 Situations When It's Time to Change Your Business Model and Value Proposition” 23 Julay 2015. Web. Strategizer.com. 24 February 2016
Dibendetto, Tony. “5 Tips for Radically Changing Your Business Model”. 25 August 2014. Web. Inc.com. 24 February 2016
