Distributors are a channel. So are dealers, retailers, grocery stores, coffee shops and contractors. Technically, a channel is any business that provides an assortment of products, adds services and makes a sale. Some channels sell primarily to businesses (B2B), while others sell primarily to consumers (B2C). All channels strive to create a unique customer experience, leverage products and programs offered by suppliers, and struggle to compete and earn a profit in today’s dynamic and rapidly changing markets.
All of this is known, of course, and not much of a surprise. But if words are powerful, then the term “channel” is not. It’s not even a word that channel businesses have created for themselves. “Channel” is a word used by manufacturers to describe how their products flow to customers. In this sense, channels are in the service of manufacturers. This perspective underestimates the independence of channels and the critical value they create for customers.
For now, the word “channel” is all that we have. It’s okay to be known as distributors, dealers, retailers, coffee shops and contractors, but it is also important to recognize that all are of a kind and can learn from each other’s innovations. Just as the disciplines of product and technology innovation can cover a wide range of products, so can the best practices of channel innovation help all channels evolve and thrive.
The problem is that as an established practice with wide understanding, channel innovation has a long way to go. Do a bit of research and you will find that compared to product or technology innovation, there are far fewer books, research studies, scholarly articles and educational programs about “channel innovation.” Information can be found within individual silos helpful for a particular kind of channel, but an overarching framework and, more importantly, a passion for channel innovation is hard to come by.
The first step to advancing the cause of innovation by channels is to create a unifying definition that covers all channels and then to identify the unique value they create. While we wait for a better word than channel to emerge organically, here is one definition to consider: Channels are the businesses that help us do our work and live our lives.
This definition is powerful for three reasons:
- It envisions channels as something other than a means for products to flow from manufactures to customers.
- It includes the distinctions represented by B2B and B2C without diminishing the concept and power of channels to a three-letter acronym.
- It opens the door to innovation.
Viewed through this definition, channels are much more than the distributors, sellers, servicers and installers of products. Through innovation, channels have the potential to help us with all that we are—how we work, and how we live.
The second step to advancing the cause of channel innovation is to identify the unique value that is created by channels of all types. Here are three categories of created value:
- Channels create the customer experience. Physical products (and services sold as products) are incomplete without the value added by channels. Channels offer both digital and physical space where products can be explored, experienced and acquired. They help with installation, training and troubleshooting. Channels offer advice, suggestions and guidance. Without the customer experience created by channels, products would sit on a shelf, falling short of their promise.
- Channels create the exchange of value. We live in an economic world and the voluntary exchange of value between buyer and seller is the essential force that ensures quality, productivity, satisfaction and fulfillment. At its core, this exchange of value is about the transaction—payment by customers for a customer experience that includes products delivered and services rendered. Channels do much more than take orders, of course, and customers bring more than payment. The customer contribution to the exchange of value is often underexamined, and can include loyalty, word of mouth, people gathered together in the same space, ideas and suggestions for innovation, and much, much more. Exploring both sides of the exchange of value is essential for channel innovation.
- Channels create the future. Products emerge and evolve in waves, driven by the application of technology. Not too long ago, the manufacturer DuPont heralded its value for society as “Better Things for Better Living … Through Chemistry.” Today, digital technology makes a very similar claim and is the dominant technology for the innovation of products. In the future, perhaps artificial intelligence or other yet unknown technology will make a similar promise. If we are right about the two unique values created by channels above, then channels are essential and eternal. Channels will always deliver the customer experience. Channels are the future.
Much work remains to define the discipline of channel innovation and the potential of innovation to improve the way we do our work and live our lives. In part, the work will be accomplished by sharing best practices across types of channels. But more is needed. For channel innovators to drive their businesses forward, a unifying concept, best practices and success metrics will help to build on success. Channels will become less the victims of disruption and disintermediation, and more the drivers and leaders of change.
If you have feedback, ideas or suggestions about this post, please reach out to me at firstname.lastname@example.org. I have repositioned my business to focus on awareness, advocacy and research in support of channel innovation.
And, if you haven’t yet heard, the NAW Institute for Distribution Excellence has kicked off its 12th Facing the Forces of Change® wholesale distribution trends study … a continuing project that has charted the most important industry trends since 1982. I am privileged to be the lead researcher of this report. The key to a quality project outcome is PARTICIPATION by industry executives, including you. Please help us make this latest Facing the Forces of Change® report the most reliable, helpful and accurate one ever by giving us your feedback about industry trends. Your insight will help shape this important report. Please use this survey link and thanks in advance for your participation: https://www.surveymonkey.com/r/TM6PFZR