When asked what keeps him up at night, Secretary of Defense James “Mad Dog” Mattis responded, “Nothing. I keep other people up at night.” Hmmm. Secretary Mattis’ answer throws down a gauntlet for distributor leaders—a challenge about what they offer as individual businesses, and importantly, how distributors act together as a channel.
Who do distributors keep up at night? Do competitors worry that distributor innovations will reinvent value chains and dominate markets? Or, do customers worry that the long-standing distributor value chain will not keep up with change and become a less attractive source for their purchases? Do manufacturers worry that their distributor channel will not be an effective option for taking their products to market? Do disruptors, like Amazon, worry that distributors will respond to their challenge and stall their advance?
In my work with distributor leaders, I find evidence that more and more are willing to take up the challenge posed by these questions. To do so requires a new mindset. One that is more about charting a new course and less about weathering the storm. In a word, one that is more “entrepreneurial.” But, before a new mindset can be adopted, it is necessary to understand the one that exists today.
Over the 30 years that I have worked with distributor leaders, many waves of change have come and gone. Three- and four-step distribution structures collapsed. Consolidation happened. Big-box retailers emerged and captured a slice of business. Third-party logistics providers encroached. Manufacturers added new channels in parallel to distributors. Global distributors entered the U.S. market and U.S. distributors went abroad. The internet emerged and evolved. Millennials entered the workforce and advanced. Truth be told, each of these changes was met as a threat, not as an opportunity. Distributor leaders responded with new operational and business strategies. They stood fast, and with steely resolve, protected their business and survived, preserving their founder’s legacy for the next generation of employees, managers and owners. Doom and gloom predications, it seems, were greatly exaggerated.
Stewardship, however, is not entrepreneurship. Being a steward is about taking care of a business and strengthening its business model. Stewardship requires courage, along with deep market knowledge, business acumen and leadership skills. It is admirable, and for many, the right approach. Being an entrepreneur is different. Entrepreneurship is more about starting new businesses and taking significant financial risks in the hope of even greater returns. Stewardship is by nature defensive. Entrepreneurship is about going on offense.
Many distributor leaders, including both seasoned executives and up-and-coming managers, are asking themselves an existential question—am I a steward of my business or can I be an entrepreneur? And as a distributor, what kind of entrepreneur can I be?
It is possible that new entrepreneurial distributor leaders will emerge from people that head west seeking to slave away for a few years working for technology companies followed by opening a distributorship? Possible, but not likely. It seems to me that these individuals are more likely to see distribution as something that can be disrupted, destroyed or otherwise undone. For them, distribution is an outmoded model to be discarded, not one that is a platform for building something new.
And so, the challenge for distributor leaders and their industry associations, is to define what it means to be a truly entrepreneurial distributor leader and then to act on that vision. I don’t have the answer, and when I have asked as part of my work as a Fellow for the NAW Institute for Distribution Excellence, I have not found one. But, I have discovered seven out-of-the-box questions, offered here to help kick-start a much-needed conversation:
- Is the act of buying and reselling products the essential core business of a distributor or is there another thing a distributor does that if pushed to optimum execution could dominate?
- Can a distributor exist without a warehouse? What would that business model be? What if a distributor didn’t have any employees? Or suppliers?
- What can a distributor do in a brick-and-mortar branch location that absolutely cannot be done online? Is there value in what can be done?
- Can a distributor define the partnership with its suppliers? Not by leveraging scale or claiming to “own the customer,” but from the ground up and in control?
- What is the distributor business model that would dominate how next wave technologies like the Internet of Things, augmented reality or 3D manufacturing are used in the marketplace?
- How would a distributor compete if it acquired SAP, Magento or Salesforce? Could a distributor that acquired Sprouts outdo what Amazon does with Whole Foods Market?
- Can distributors invent something that might be called “human-centric innovation” and win in competition against all of the technology-centric innovation that dominates today?
Please Share Your Ideas and Experiences
Are these questions relevant or not? Are they food for thought or do they point to a new entrepreneurial distributor? Is your trade or professional association helping? You tell me! I welcome your ideas and experiences on any aspect of this post. Your input will help me continually direct and manage the contributions I can deliver as a Fellow for the NAW Institute for Distribution Excellence. Please reach out at any time to email@example.com.
My new research report, CEO Insights on Innovating the Distributor for the Digital Age, includes a call to action for distributor leaders to adopt a new mindset for competing in the digital age and to be armed with foresight about the direction of your market and a vision for leveraging digital tools. I hope you’ll read it.