In a recent Insights post on takeaways from TPMTech and TPM, we highlighted a notable description of our industry: “sclerotic, slow to innovate and overregulated.” That’s a honest take, and in narrowing it to implications for Splice, we see an industry that continues to define itself as disconnected, inflexible and fragmented.
It is fair to say that disconnected and inflexible are negative traits, two problems Splice seeks to solve with workflow integration. But what about fragmented? Fragmentation has several meanings, none of which are inherently bad. For instance, container supply chains are fragmented because they use multiple modes of transportation.
To be clear, we are thinking about market fragmentation, which happens when segments form based on customer preferences for variations in products and services. Again, it is neither good nor bad (this could be called specialization, a seemingly positive term), but understanding market structure influences how to plan investments.
Take technology. Fragmentation can lead to poor data coordination, which arguably has slowed our supply chains and pushed the White House to intervene to encourage information sharing and interoperability. If we believe that the market is and will remain fragmented, then companies need tools to bridge gaps in information management systems.
This begs the questions: Will shipping remain fragmented? Yes, we think it will and news of XPO’s latest spinoff provides some evidence.
The former logistics and trucking powerhouse is becoming three companies: a logistics provider, a truck brokerage, and a LTL trucker. Brad Jacobs, CEO of XPO, said on CNBC that the strategic rationale was to be “more focused, more fit for purpose, more agile, more flexible, more nimble, more customer-centric.” These are traits of segmented and specialized services.
Importantly, he noted that investors “want either an LTL, industrial play or non-asset, truck brokerage, tech-enabled play,” and “not as many investors that want both.” Jacobs likely would accept replacing investors with customers in that statement, because shippers have preferences best satisfied by distinct products and services.
Essentially, Jacobs is pointing to the persistence of a fragmented market as a key reason for breaking up XPO. This is where Splice’s ability to connect otherwise disconnected systems provides lasting value. The integration of distinct and disconnected systems will be a long-term and essential need.
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A few parting comments.
It’s fascinating to see a company built on the strategy to combine these services decide to separate them. Market structures are hard to reshape.
TPMTech had an interesting session on fragmentation that helped shape these views. Thanks to those who presented on this interesting topic.
Read more about a related issue in a prior post on competitive advantage. We dig into how Splice allows companies to ride the waves of competitive advantage to make the most of the latest data-sharing technologies.
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