Growth planning has always been essential when operating a distribution company. That’s why we created the distributor’s playbook to generate-manage-sustain competitive advantage. But this year, distribution leaders must account for ways their operations have changed due to the Coronavirus pandemic. Today’s growth planning calls for a few changes of its own, and for many distributors, it might be more consequential this year than ever. Your strategy might mean the difference between stabilizing your business and downsizing — or closing your doors.
Mapping Our Growth Framework to the New Normal
The Growth Cube is a framework developed based on analyzing hundreds of independent distributors and more than 40 public distributors’ financial statements over the decades. We help distributors with strategic planning, review their performance and look for trends that led to success.
The Growth Cube consists of three focus areas: generating, managing and sustaining growth. To be successful, distributors must account for all three in their planning and execution. Yet, distributors tend to lean more into their plans to generate growth than their plans to manage and sustain it.
The Growth Cube principles are more relevant than ever. Distributors must adjust their strategic planning to accommodate how their businesses have changed. We’re viewing the Growth Cube through the lens of this new environment so distributors can use it successfully. We’ve done so using our experience with distributors during the pandemic and our extensive research in the industry.
Distributors have many traditional and non-traditional options for generating growth. However, conventional approaches like securing new customers and growing current accounts may require new routes to execution. Social distancing means sales teams can’t interact with customers on site and collect field data. So, if you’re only giving them the most basic data, like purchase history, they’re less empowered to pursue growth strategies.
To enable them, you must provide them with customer intelligence and implement customer stratification. With customer stratification, you give sales teams actionable customer data they can use to inform their strategies. You put helpful historical information, like revenue and product mix, as well as analytics-driven predictive information, like sales recommendations and opportunities, at their fingertips.
To be successful, provide useful data in an easy-to-use, actionable playbook, and help your salespeople adopt and develop trust in customer stratification.
For non-traditional growth generation, strategies include diversifying into related verticals, updating your value proposition or adding a new go-to-market channel, like e-commerce. Social distancing, remote selling and digitization continue to push the distribution industry toward digital channels, making these non-traditional strategies even more essential for survival.
You might consider adding e-commerce or diversifying into a new vertical. With every decision, be strategic and targeted. Choose your focus for growth this year and determine how it will change your value proposition.
Growth management is as critical as any other dimension in the Growth Cube. It involves cultivating capabilities that will lead to successful growth. Ideally, growth management accounts for all process groups: source, stock, store, sell, ship, supply chain planning and support services.
Foundational capabilities that are essential to growth include inventory management and pricing optimization. Inventory management and product availability are vital with the industry moving toward digital channels and e-commerce. And pricing optimization will ensure distributors are capturing sufficient value for their inventory and services. Optimize these capabilities within your business to ensure they’re relevant and growth-oriented in the current digital landscape.
Emerging capabilities that are vital to growth are e-commerce and sales transformation. Where e-commerce is becoming a clear “must-have,” distributors must also focus on adapting their sales teams for a changing sales environment. If you have an e-commerce channel, make sure it meets today’s standards. And be active in transitioning your sales teams to successful remote selling.
Importantly, with every capability you develop, be sure it meets a critical need for your business.
Sustaining growth is essential to continued success and momentum. There are several reasons distributors see their growth stall out over time, many of which can be traced back to the planning phase. In the generating growth phase, they might inaccurately predict success with specific opportunities. In growth management, they might assume they have the essential capabilities, but those capabilities fall short of expectations.
With analytics, you can make more accurate assumptions about opportunities like customer retention and supplier alignment. You can apply stratification at the item, customer and supplier levels to sort what is profitable versus non-profitable, predict churn, and develop better forecasts.
Distributors discovered capability issues in 2020 across insecure supply chains, immature e-commerce initiatives and poorly executed remote selling efforts. To avoid such pitfalls in 2021, you must have a growth mindset and remains in a state of constant re-evaluation, ensuring your capabilities are relevant to your needs today.