More than ever before, distributors have the opportunity to break free of the chains that bind them to meager margins and feeble brands. But, there is a problem. The prevailing distribution mindset is that the forces of disruption and digital transformation highlight the weaknesses in the distributor’s business model. Distribution is threatened, but distributors can do more. The forces of change that are enabling disruption are also available to distributors. Breaking free requires a new mindset: Distributors can dominate!
Digital technologies are liberating for distributors. The most powerful data, connectivity, artificial intelligence and process automation applications are on the front end of a distributor’s business. Distributors who use digital technologies have the potential for exponential gains in the value that they can create for their customers. Instead of only leveraging the technologies to defend their business, every distributor should make plans to dominate their markets using these technologies.
In the sixth and final chapter of Innovate to Dominate: The 12th Edition in the Facing the Forces of Change® Series, we aim to kick-start a conversation about “the distributor way” business model innovation. Our research revealed that culture and processes are distributors’ most potent tools for building sustainable competitive advantage and unbreakable customer loyalty. In the past, distributors were defined by their line card of products and brands. Distributors added value to products manufactured by suppliers. Today, winning distributors are defined by their ability to capitalize on technology by creating a steady stream of improved customer experiences. New possibilities are emerging every day, and a competitive advantage requires continuous innovation.
To help shift the prevailing mindset, I offer three breakthrough frames for distributors to reimagine their opportunities in the digital age. Each is explored in Innovate to Dominate and accompanied by additional explanations and examples:
- Define what you want your customers to become. Every customer’s business model is evolving, just as is every distributor’s business model evolving. To aim for the future, distributor planning initiatives must envision how their customers hire and develop their people, leverage data in their business and reinvigorate their customer experiences.
- Predictive analytics are useless if they don’t create loyalty. Using artificial intelligence to help optimize margins and capture more customer spend is useful for distributors, but it doesn’t create value for customers. Very soon, competitive sales models will not be about creating demand. They will be about creating value. Profits will flow from predicting the future for customers and helping them act on those predictions.
- Monetizing data is the future; protecting margins is the past. Threatened from the outside by virtual markets and disruptive forces, the traditional linear value chain is evolving to run on shared data for mutual competitive advantage. Inventory management is being replaced by data management as the most critical competency for distributors. Margins earned by reselling products are out. Imagining new ways to monetize data is in.
Innovate to Dominate shares insights gained through my conversations with hundreds of distributors, and more than 50 distributor leaders share their vision as a quotation in the book. With the goal of dominating in mind, these comments from Meredith Reuben, CEO and Owner of EBP Supply Solutions, stand out:
“Distributors can’t just be suppliers of products anymore. They have to be willing to spend the energy and effort to bring both product and service innovations to market. For new product-related innovations, it’s important to partner with suppliers that have the right capabilities and programs to successfully launch new products that truly add value to target customers. For service-related innovations, success is dependent upon getting closer with customers, asking the right questions to uncover needs and understand expectations, and offering creative solutions that will benefit and move both businesses forward. At EBP, we refer to this mindset of helping our customers to be more successful as helping our customers “shine,” and every decision we make is viewed through this lens.”
As a Fellow for the NAW Institute for Distribution Excellence, I am very open to questions, challenges and feedback on the ideas I share in this blog. Your input will help me shape my ongoing work. I should also explain that this post is number 9 of 10 in this mini-series that addresses the critical requirements for distributors to become the acknowledged experts on B2B innovation. These are questions that distributors have shared with me, and the posts represent my work so far in answering them. If you haven’t already, please read my earlier posts:
- Is Storytelling the Missing Link for Leveraging Distributor Data?
- Are Your Managers Managing Your Culture?
- Are You Innovating with One Arm Tied Behind Your Back?
- 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?
After my next post on critical requirements for B2B innovation, I will share feedback from distributors who reached out to me during this mini-series. If you would like to share your feedback, please contact me at email@example.com.