Delivering for Best-in-Class Wholesaler-Distributors
September 18, 2017  |  ByMark Dancer, NAW Institute for Distribution Excellence Fellow
NAW-Is Your Digital Vision Holding You Back?-Distributors in the Digital Era #29

In research conducted for our upcoming research report on digital progress and strategic solutions, we found that a clear majority (more than 70% in our online survey) of distributor CEOs were either confident or very confident in the strength of their digital vision. We are both encouraged and worried by that result.

 

On the plus side, in research conducted just over a year ago for NAW’s book, Getting Results From Your Digital Investments, our interviews revealed that when asked to describe their digital vision, most leaders could not articulate a coherent answer and many denied the need for a vision at all. Visions, it seems, were considered not practical or actionable by many distributor CEOs.

With our current research, we followed up with distributors that participated in our online survey and found that confidence was more about “finally getting underway” than actually achieving measurable results from digital tools. For these leaders, progress is measured against a position of standing still. This is important, as we also found that in the very near future, all digital tools—e-commerce platforms, websites with videos and configurators, CRM, advanced analytics, mobile devices and more—will be important for achieving business success as a distributor. Said differently, in the very near future, digital tools will be how business is done!

Manufacturers also offered perspectives that should give distributor leaders pause about confidence in their digital vision. Simply put, manufacturers are not impressed with distributor progress toward the adoption and use of digital tools. Manufacturers rated more than 80% of all distributors, who are authorized for their products, as neutral, weak, or very weak on digital progress. For their best distributors, more than 50% are rated the same.

Worse, while manufacturers see potential benefits for their own business in the use of digital tools by distributors, they are not proactively incorporating new digital capabilities into their channel management programs. Rather, many manufacturers are waiting to see what happens, knowing that as a supplier, they have options. If the distributor value chain does not modernize, it will be judged less effective than disruptive channels or digitally enabled manufacturer-direct approaches, and used less frequently with reduced funding for distributors provided through discounts, rebates and marketing programs.

To be sure, some distributors are making exciting and significant digital progress, and we are encouraged by many of our interviews and discussions with distributor CEOs. However, while distributors compete against each other as individual businesses, they are judged together as a whole—not just by manufacturers, but by disruptors like Amazon. More than one distributor leader told us that successful incumbent disruption by existing distributors, meaning successful e-commerce platforms and sales unbundled from personal or value-added support, are a beacon for disruptors like Amazon. Business buyers have been slow to make a major shift to online buying, but even the hint of actual change will attract more and more disruption. As momentum is established, disruptors will seek to invalidate the entire distribution value chain channel, rather than just destroy the weakest businesses.

In our upcoming research report, these finding and many more will help to identify strategic solutions for distributor CEOs around the adoption and use of digital tools, both for their individual businesses and together as a value chain. Here is a preview of some of the recommendations that are in the research report:

  • Share you vision with your best suppliers and act on their feedback, looking for ways to update the overall partnership around conducting all aspects of business digitally
  • Create a three-year plan for building your own digital capabilities—i.e., the knowledge and skills of your people and the processes that define how you do business
  • Work with your trade association to suggest changes to supplier objectives for their channel programs, starting with digital capabilities expected of all distributors
  • Suggest changes to supplier channel compensation plans, shifting incentives away from volume or growth, to supporting investment in digital capabilities
  • Challenge your digital mindset by asking yourself if you are thinking in a proactive and aggressive manner about how your company will survive and prosper in the digital age. See my blog post, Developing a New Leadership Mindset.

The bottom line: If you are confident in your digital vision simply because your firm is making progress, wake up. We recommend that all distributor CEOs take a few minutes to celebrate success and then reset for higher goals. Make a list of your most important business processes and explore how they can be completely enabled through digital tools. Make another list of your most important or successful leaders, managers and individual contributors, and gauge their mastery of digital tools. Identify gaps and make plans to close them. Judge your digital vision as a horse race and measure success not as getting out of the gate, but as being among the leaders across the finish line.  And don’t forget to ask your trade association what they are doing to help.

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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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