When we created Tradeshift, it was always with the idea to do something bigger than what we had done before. I think it’s common for entrepreneurs to want to change the world for the better, but I think what is fairly unique to my co-founders Mikkel and Gert and I is that we had already gotten a taste of that in our previous jobs. Before creating Tradeshift, we all worked for the government, and while it’s quite embarrassing to admit in a world of ultra-libertarian start-ups who all think the government is the enemy of anything good and the private sector is the perfect answer, I actually have to admit that working for the government was one of the best jobs I ever had.
Not because of the system or the structure or the rules or the bureaucracy – all of that is as bad as you imagine, if not worse, really. No, it was because of one simple thing – we could change the world (or at least our country). One of the first things I realized as a young public servant was that, if you have ever asked why they don’t do something about a problem, working in the public sector, there is no “they” to fix things – if we had a problem to solve, we could either mess it up and my country (Denmark) would be worse off, or we could fix it for the better. Nobody else would do the job – Tag, you’re it!
The second realization was that, as technologists, we were in a unique position to do this. Most people don’t realize it, but governments are software today: any law voted on by Parliament needs to be implemented in software before it will have any impact, and as anyone writing software knows, there is a lot of flexibility in interpreting those rules as they are handed down. The law might say that the government needs to save a billion euro by digitizing payments, but maybe we can “hack” it a little bit by implementing it as open-source instead of a proprietary system and further tweak companies’ insights into those payments, increasing transparency and creating a better overall system.
Some would of course say that this is not ethical or how the system is supposed to work, but as a hacker (of culture and processes), I believe it’s your duty to try to change structures for the better when you can whenever you can.
Overall, I think we did more good than bad while we were there (and many of my brilliant colleagues continue to do good as public servants). In our case, we were lucky to have a small, crazy crew who believed in the mission, and together, we created an impact many times larger than what we could have achieved if we had played by the strict rules. I believe that Denmark today is better off in many areas, such as open-source policy, open networks for trade, accessibility for supply chains, and openness and transparency in government IT-projects. I know that, technically speaking, we were probably supposed to be neutral and perfect public servants, but who cares? I didn’t study to be a public servant, but sociology, and I’m mostly just a geek who thinks that social and cultural systems are as interesting as technological ones.
So back to the idea of creating something bigger. We always knew that we would not be in the public sector forever, partly because our impact would diminish as we started to worry about our careers and not making mistakes and partly because there are only so many lawmaking meetings you can sit through without going crazy. So whenever we asked each other, “What next?” we always agreed it should be “bigger” – not bigger as in more money or prestige but bigger as in impact on a global scale that matters. But how could we do that?
As a sociologist, I’ve always thought that the current view of the world, which many have of good or bad – is wrong. Capitalists want a better world as much as socialists do. Companies don’t work the way they do because anyone is out to screw everybody over; they work the way they do because they are stuck in suboptimal structures and processes, and the same is true for governments, by the way. The way you change them is by creating incentives where everyone wins; in a way, you have to “terraform” the landscape of business, change the conditions and optimize the outputs while increasing value for the system as a whole – this to me is not a political goal but a human one.
In the world today, there are a lot of things we can do to make the world better, and I think that a lot of things are already happening, such as greater transparency and media freedom through new services like Facebook or Twitter and access to education and knowledge through Wikipedia, but when it comes to the core economic structures and their outputs, we are stuck, and this is one area where we really can make a change. Far too often, business is still a zero-sum game, and far too often, the way we think of production creates a net negative impact on society when you include pollution and waste in the supply chain.
So with Tradeshift, we set a big vision, to change how business is done. Previously, I’ve talked about how we see this affecting the value chains of businesses by democratizing access to data and information (link), but I think that there is another area where we can have an impact: the environment. Of course, there is the obvious impact of getting rid of paper in the supply chain: today, 97% of all B2B transactions are done on paper (estimated by some to account for more than 10% of the world’s paper use). This is a massive waste, not just because of the resources going into producing, recycling, transporting, and processing it but also because it has absolutely zero value in its paper form. Whenever we receive a paper invoice or something similar, the first thing we do is digitize it by entering the information into a database or transforming it in some other way to a format we can actually use.
Initially, we spent some time trying to figure out the impact of all the paper being removed (15 million pieces of paper every year for the NHS alone), but it became clear that, for us, it doesn’t stop there. We were blind to the real problem by looking at the obvious one, which was the paper in front of us.
All this paper, all these transactions, make up the global supply chain. This is where the real waste is today. The way we produce goods is linear – we mine materials, we build things, we ship them, we sell them, and we trash them. One of the reasons for this is not bad will or intent but the fact that our processes are not configured for anything else. In a better world, we would repurpose a lot of the goods sold or, even better, lease them (do you really need to own a refrigerator?), but our supply chains are stuck. Imagine that all goods were built not merely for becoming output (waste) but for becoming input (value) in the production of new goods. This is not just some hippie idea of building a better world through recycling but actually makes great economic sense (McKinsey has calculated that repurposed goods provide net 12% more margin than non-repurposed goods). We also see a lot of companies beginning the transition from manufacturing or production to delivering managed services (Rolls Royce now leases jet engines instead of selling them), improving their business overall, employing more people, and reducing the environmental impact. But often, companies wanting to go through this transformation end up stuck not because of technical limitations but because it’s too hard to change processes because the underlying systems are manual, paper based, and frozen.
My personal view is that it’s possible to make another “hack” on the global economic system by enabling different processes at the core level – change how the supply chain is linked and what is considered inputs and outputs, and you can change how production happens. Just like the government, companies are governed by laws. These laws are not created by Parliament but most often by their ERP systems. The business logic and rules express limits on what is possible, so if we want to change the supply chain to work for the good of the environment (and these companies), we are up against the walls of legacy software (… it will take a long time … it’s too complex … this is not how our processes work). Hack those processes by enabling a different kind of supply chain, and you open up the world for change.
Of course, you can’t do this just because it’s a good idea. Everyone involved needs to believe that the new way is better. Most often, the driver is not the environment but real pains that are caused by the inflexibility of current systems: suppliers being paid late and going bankrupt, difficult cash management for the Fortune 500, process cost, information lag, and the lack of ability to innovate and change processes. At Tradeshift, we help companies solve these challenges all the time, but at the same time, we “hack” their culture a little bit, show that running a modern supply chain can be a net positive not just for one company in the value chain but all of them, and we are very lucky to have cool customers who are using this process to enable them to create new kinds of supply chains, like DHL working on a sustainable supply chain or NHS eliminating 15 million pieces of paper per year (environmental and people waste).
I personally think that this is just the beginning because, as the supply chain data become digital and opened up to innovation, the possibilities are endless. Imagine what could happen if Fortune 500 companies could not just monitor the economic health of their supply chain in real-time, but also the environmental health. I think the parallel is obvious in the consumer space. Think about how our smartphones with their sensors and digitized app platforms enabled us to monitor our health in real-time and let others innovate on top of that data. Why shouldn’t we do the same to our business processes?
I know that the change won’t change overnight, but as the Internet generation, we believe that change for the better will always happen if you enable it and that, as long as you are on the side of the principles of the Internet (collaboration, openness, and access), everyone wins.
(Also next time you see a young talented person working for the public sector, give them a high five for trying to make an impact where it is the hardest)