Are You Innovating with One Arm Tied Behind Your Back? – Distributors in the Digital Era #86
As some distributor leaders drive their businesses to offer unique customer experiences, enabled by new operating models, they are finding that their company’s traditional knowledge and skills are coming up short. Leading-edge distributors already know this, and so they are competing on continual innovations and embracing the practice of building an innovation ecosystem, which consists of outside advisors, vendors and partners to help them generate ideas, provide design assistance and help with implementation. Which distributor are you?
World-class innovations are enabled and accelerated by ecosystems. Without an ecosystem, distributors are fighting with one arm tied behind their back, and their innovations are likely to fail.
Our research for Innovate to Dominate: The 12th Edition in the Facing the Forces of Change® Series confirmed that distributors are not natural collaborators. In a competitive environment where the differentiation among distributor product portfolios and customer services is slight, leaders tend to hold their plans close to the vest. At the same time, outside disruption and digital transformation are changing the competitive landscape. That means success today in distribution can no longer be achieved by defending long-standing business accounts against competitive poaching. Distributors today must go on offense and reinvent their business culture and services so they can help customers find new opportunities.
David McIlwaine, President of HVAC Distributors, put it this way, “The ability to drive innovation and gain synergies from it results from working collaboratively with a few very sophisticated customers and industry partners. … We look to partner with companies that know things about artificial intelligence, smart lockers, robots … whatever cutting-edge technologies may exist, because building the capability from scratch is risky. The majority of our customers are not sophisticated, and they can’t tell us what they want in the future. We can lead and will be able to bring them along when we can show that we make their lives easier, and they can be more profitable when partnering with us.”
To help distributors to build their own innovation ecosystems, here are insights from Michael Schrage, a research fellow at MIT Sloan School’s Center for Digital Business, about the fundamentals of ecosystems. We modified them (slightly) for distributor relevance:
- Innovation ecosystems are not inherently expensive, but absolutely require a culture and competence of stewardship. Leadership is essential. Without leadership’s commitment and active participation, an ecosystem cannot flourish.
- Successful innovation ecosystems create a continuous cycle of creativity. Innovation ecosystems can turbocharge a distributor’s current business culture and help the transition to a mindset that is about serving demand by creating value through innovative services.
- Successful innovation ecosystems are mutually beneficial. An innovation ecosystem can transform the value chain into a hyper-competitive or disruptive force for the future.
In Innovate to Dominate, we devote an entire chapter to exploring the practice of innovation ecosystems and we apply expert advice and best practices for distributor challenges and opportunities. Distributors won’t go far by going it alone, and they can’t win with one arm tied behind their back.
Back before Coronavirus rocked distribution, I dedicated my NAW Distributing Ideas posts to exploring 10 essential questions around B2B innovation. I suggest that it’s time to look to the future while applying the lessons we’re learning during this crisis. This blog post is the sixth in a series on B2B innovation. If you’d like to catch up, here are the five earlier posts in this 10-question series:
- Sabotage Outsider Disruption by Turbocharging Communities
- How Will You Win by Being Human?
- How to Succeed in a Customer-Driven Digital Value Chain
- What Is the Value of Being Local?
- How Can You Enable the Future of Business for Customers?
Going forward, I’ll explore building a culture of innovation and storytelling, the potential to dominate markets and disruptors, and starting an innovation movement among all distributors. I welcome you to the journey and encourage you to reach out to me at any time at firstname.lastname@example.org