Darwinism, a theory founded by Charles Darwin in the 1800s describes the process of evolution of species through natural selection. Species must adapt to their constantly changing environment in order to survive and evolve.
“It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change” –Charles Darwin
Businesses, like organisms, evolve over time, and in many ways, the intricacies of a business and its supply chain behave much like the ecosystems Darwin observed. One thing that is different from Darwin’s observations, however, is the pace of evolutionary change.
Darwin’s theory assumed that evolution occurred so slowly that it is only evident after thousands of years. In reality, species change constantly, with genetic differences that are detectable in generations of a species, explains Jonathan Losos in his book Improbable Destinies: Fate, Chance, And The Future Of Evolution. Even so, natural evolution is slow compared to the pace of changing technology.
Digital Darwinism is a theory that technology and society are evolving faster than businesses can adapt. In a rapidly changing environment, if a company hesitates or is slow to respond to customer demands or a changing environment, it will lose to competition. It is more important than ever to take advantage of new technology to stay ahead, to disrupt competitors — without disrupting yourself or your supply chain.
Mutualism is the key to survival
In nature, organisms and ecosystems are interdependent. Mutualism is the way two organisms of different species exist in a relationship in which both benefit from the activity of the other. Interdependent relationships prevail in business as well where sharing and collaborating foster stability, progress, and performance.
Perhaps the most textbook example of mutualism in business is the relationship between a corporate and its supply chain. The evolution of technology can bring these different “species” together in a highly collaborative, mutually beneficial ecosystem, or, it can act as a disruptor, strategically removing intermediaries and disrupting supply chains.
To survive, a corporate organism must evolve in a way that supports its supply chain.
Trade finance as an evolutionary path
Your suppliers, just like you, face constant disruption. They have to be able to respond to your increasing demands as well as pressures from their own competitive set and needs of their suppliers.
Businesses cannot survive disruptions unless they are financially stable. Yossi Sheffi explains, “Cash-strapped companies often delay payments to suppliers and lengthen their payment terms. Meanwhile, suppliers try to accelerate payments they are owed.”
Larger businesses, notes Sheffi, tend to be more agile and able to absorb fluctuations in payment terms, while smaller businesses find these fluctuations more detrimental to their health. A corporate delaying payment and lengthening payment terms on a supplier may be fostering financial instability in the supply chain, increasing volatility and risk. Since supply chains are interdependent, the financial instability of one supplier may end up affecting the whole supply chain.
Trade finance provides financial stability for your supply chain and a source of cash flow to help them fund innovation and growth to meet your increasing demands. Trade finance has also evolved.
With the rise of fintech, companies of all sizes have more funding options than ever, decreasing the need to rely on third-party intermediaries. Whether you are a corporate investing at low returns, or a supplier seeking funding with high-interest rates, a third party financial intermediary is inconvenient, unprofitable, and lacks transparency. It is a system that invites disruption, and evolution of numerous alternative technologies such as crowdfunding platforms, peer-to-peer (P2P) payment services, and new approaches to receivables acceleration.
One thing to remember is that the trade finance option you choose is not a strategy in and of itself. A strategy requires prioritizing your goals for payment terms, supply chain health, and return on investment. Once you have a strategy, then find the right mix of trade finance options that support your goals and the full spectrum of your supply chain.
Learn how to evolve your trade finance strategy for survival
Listen to our Digital Darwinism webinar, featuring Colin Sharp, SVP, EMEA and Antoine Trepant, Director, EMEA, to learn about:
- How organizations create value from their suppliers with the help of innovative solutions
- What the disruptive forces are in trade finance
- How to evolve in a way that benefits your organization and your suppliers