Delivering for Best-in-Class Wholesaler-Distributors
September 27, 2017  |  ByMark Dancer, NAW Institute for Distribution Excellence Fellow
NAW-You Can’t Beat Amazon by Acting Alone-Distributors in the Digital Era #30

I’m looking for ideas, questions, failures and stories about how distributors might compete in the digital age, defend their turf against disruptors like Amazon and offer customers new, innovative services. If you have any thoughts, please share them with me. My goal is to kick-start an active discussion of ideas among distributors and bring in innovation expertise to help distributors move forward. Here’s why this is important, even critical, for distributors . . .

In research for my upcoming research report on digital progress and strategic solutions, many distributor CEOs told me they are ready to move beyond worrying about disruption and looking to drive their business forward. It’s not that disruptors like Amazon are no longer a threat . . . they are . . . but leaders are tired of playing defense. The adoption and use of digital tools by distributors open the door to going on offense through new strategies. Some strategies are about upgrading customer solutions and business processes to reach new levels of productivity and value. This is possible because leaders increasingly understand how the practical application of digital tools—e-commerce platforms, data analytics, CRM, social media and other digital tools—are not only essential for retaining business, but they provide an opportunity to improve margins, win rates, market share and customer satisfaction.

Other strategies are about true business model innovation and organizational change. As distributor leaders drive their companies to use digital tools in their business, they see opportunities to reinvent their business. These strategies are about game-changing customer service, reaching entirely new markets, adding new non-distribution businesses, and more. Some distributors are grabbing the brass ring, innovating and finding success for their business through innovation, even as they use digital tools for incremental change.

But individual action by distributors is not enough. Disruptors do not seek to drive individual distributors out of business. Rather, they seek to dominate and replace entire value chains. While distributors must respond to the existential threat of disruption as individual businesses, they must also respond as a value chain, collaborating and acting through their trade associations, or perhaps, buying groups. It is true that as more and more individual distributors respond to the existential threat of disruption, the cumulative results will lead to a transformed value chain. But this approach is slow … too slow. Speed is a competitive advantage for disruptors. They can move fast, make mistakes, learn and move on. They are entrepreneurial by nature and the financial markets reward them for innovation, even while financial results lag.

Here’s another reason why distributors must share ideas and act together even as they act alone. Recently, I learned of a distributor that had shifted its business to a web store that had very similar features to those offered by Amazon. This distributor acted as an incumbent disruptor. In the course of a few years, its business rose from nowhere to be among the top five in its value chain. Naturally, this distributor’s individual success created competition and tension with other distributors. But, it also had a far more significant effect. It attracted the attention of Amazon. Competing with Amazon through a “me too” web store, but without the experience, data sophistication, deep pockets and brand power of Amazon, is not a formula for success. Amazon has yet to displace business-to-business sellers en masse, but it is more than capable of noticing when its business model is replicated and gains traction. Incumbent disruption without differentiation is a suicide mission.

In my conversations with distributor CEOs, I uncovered three opportunities for distributors to act together, even as they act alone:

  1. Harness the power of the manufacturer/distributor partnership. Manufacturers like to have options. They tend to embrace multiple channels, rather than putting all of their eggs in one basket. They do this to maximize share, but also to minimize risk. If distributors decline as a channel, disruptors like Amazon will dominate manufacturers. Distributor trade associations can work with suppliers to identify methods for adopting digital tools for mutual advantage, to reinvent supplier incentives to align with new digitally enabled business practices and to carry the message about the value of the manufacturer/distributor partnership to customers.
  2. Look outside for ideas to bring inside. Distributors cannot learn enough from each other. Even the strongest, most digitally enabled distributors are not widely known as the best examples of game-changing innovation. Some manufacturers, like Apple and Tesla, are known as extreme innovators, and many more are internet-based businesses like Google and Facebook. Among smaller companies, design shops and start-up entrepreneurs are innovators. Distributors would do well to send emissaries to innovators to understand not just their ideas for innovation, but importantly, their process for innovation. Innovation is a skill that can be learned and applied. This is a critical competency for distributors, because their success depends heavily on the innovation they will achieve by building on their base as distributors . . . not by copying others.
  3. Share ideas, questions, failures and stories. There are many reasons that technology innovation seems to center in geographic areas like the Silicon Valley and others. These areas have critical mass of people that interact on the job and off. They work, socialize and talk day and night, night and day. Ideas surface and are acted on. Not every idea works, but the sheer volume of ideas surfaced, challenged, improved and implemented ensure that the best will surface and take root. In this sense, distributors are geographically challenged. They are dispersed. It’s difficult to get together formally or informally, and when they do, they share cautiously, with a zero-sum mindset of competitors fighting over fixed opportunities. The new mindset for CEO distributors must include a belief that through innovation, they can make the pie bigger.

Distributor trade associations can help with the ideas above for acting together. Universities and colleges can help. So can innovation networks and incubators, many of which are associated with business schools. Some trade associations are already moving in this direction, but there is a challenge. Many of them tell me, confidentially, that they worry about being too far out in front of their members. This must change. Distributor CEOs must go to their trade associations and push for their help. They must also seek to get help from universities, colleges and innovation networks.

As a Fellow of the NAW Institute for Distribution Excellence, I am working to multiply my efforts and make a contribution to the cause. Thus my request at the beginning of this post. Please send me your ideas, questions, and stories. You may reach me at mark.dancer@channelvation.com. I’ll use this blog to share ideas, add expertise from innovators and help the community of wholesaler-distributors to move forward. I’m looking forward to hearing from you. All for one and one for all.

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Mark Dancer, NAW Institute for Distribution Excellence Fellow

Mark Dancer, NAW Institute for Distribution Excellence Fellow

Mark Dancer founded the Network for Business Innovation to drive awareness, advocacy and excellence for B2B innovation, and to enable an exchange of ideas between leaders on business transformation, technology adoption, social impact and community engagement. For more than 30 years, Mark has worked with leading companies to achieve go-to-market excellence across a wide range of industries in developed and emerging markets.
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