What we accomplished with Applico in two months would’ve taken us two years on our own. As the CEO of Klöckner, I knew the marketplace was the right vision for the company and the metal industry. Applico was the catalyst to make that vision a reality.

Gisbert Rühl, CEO, Klöckner & Co SE

Overview

Klöckner is a leading metal distributor in Europe and the United States with sales exceeding $7 billion in 2017. At the end of 2014, Klöckner.i was created as the e-commerce portal for the company. Klöckner was making strides in its digital transformation journey and led by its CEO, Gisbert Rühl, it wanted to launch a marketplace that aggregated third-party metal suppliers and distributors to create a single centralized platform for metal buyers.

Client Challenge

Klöckner’s Gisbert Rühl knew there was a big opportunity for a marketplace in the metal industry. With the industry’s inherent fragmentation and an increased threat from Amazon Business, he wanted his 110-year-old company to be at the forefront of disruptive innovation.

However, a marketplace business model also presented many challenges for the organization. Will the marketplace compete with Klöckner’s existing revenue streams? Organizationally, how will this business model align? Where and how should the new business be launched? And, of course, what’s it all going to cost?

Applico’s Solution

Applico’s Platform Design team worked alongside the Klöckner team in their Berlin offices for a 10-week period of time. The platform business model is so different from existing models that a close working relationship is needed, with face-to-face interaction being critical. Daily interaction with the e-commerce leadership team and weekly executive meetings with Mr. Rühl provided a regular cadence for feedback and blockers to be cleared. The team also traveled to Klöckner’s European and U.S. headquarters to meet with the rest of the chief executive management teams.

Within a few weeks, the team validated multiple critical assumptions by setting up a platform prototype, which was designed to validate the core transaction of the marketplace with real customers and suppliers.

Example of Platform Prototype from Platform Design

Customers experienced savings up to 50% of their expected purchase price and all customers provided NPS feedback in the top quartile. In tandem, the team’s platform analyst modeled the downside financial impact of inaction as well as the upside financial model of a successful metals marketplace.

Applico built out a product and network roadmap to provide a go-to-market blueprint for the marketplace, as well as to map out its long-term evolution in both the U.S. and European markets. Key product functionality and strategies to grow the ecosystem of both supply and demand were identified over a multi-year journey.

Klockner’s Platform Strategy, from CEO GIsbert Ruhl’s presentation at Klockner’s Capital Markets Day, September 2017

Given Klöckner’s existing scale in the industry, the team helped build a plan for how to leverage core capabilities from Klöckner’s core business that would provide the platform with a unique advantage against competitors and help it overcome the chicken-and-egg problem of onboarding both suppliers and buyers at the same time.

Finally, the Applico team recommended that Klöckner launch the platform business as a separate entity from either KCO or KCI. Trying to launch the platform within the core organization would have been a challenge, as the platform and the core business had potentially conflicting business goals and KPIs in the short term. Additionally, Mr. Rühl wanted the platform business to be able to raise venture funding, and Applico recommended that this goal would be best accomplished if the business had its own cap table with a dedicated founding team.

To accomplish these goals while maintaining the considerable synergies between the platform and the core business, Applico recommended that Mr. Rühl act jointly as the head of both companies.

Outcome

Klöckner held its Capital Markets Day in late September 2017 and announced to the industry, investors and analysts its plans for its marketplace initiative. Mr. Rühl was invited to speak at Davos in 2018 about how Klöckner’s marketplace will disrupt the industry by providing pricing transparency, competition and ease-of-use to metal buyers.

In Q1 of 2018, XOM by Klöckner launched with participation from Outokumpu, one of the largest metal manufacturers in Europe and the U.S.

Additionally, XOM was launched as a separate organization with its own team, headed by Mr. Rühl, who jointly leads Klöckner and XOM.