Delivering for Best-in-Class Wholesaler-Distributors
October 30, 2020  |  ByMark Dancer, NAW Institute for Distribution Excellence Fellow

By adopting a new mindset, distributors have the opportunity to break free of the chains that bind them to meager margins and feeble brands. That mindset is about believing that they can do more than survive. Distributors can dominate!

To do so, they must master the forces of change that enable disruption and offer game-changing customer experiences. Distributors must act not as outsiders, but as real-world insiders committed to helping their customers embrace the future of business. Above all, distributors must create a tidal wave of business model innovation that captures the imagination of customers and suppliers. For distribution to dominate, every distributor needs to join the movement.

In my research for Innovate to Dominate: The 12th Edition in the Facing the Forces of Change® Series, I found that a movement is percolating in wholesale distribution, evidenced by a quest for new business models to deliver value-creating services. Since then, much progress has been gained, but a groundswell of innovation has not emerged. So, I’ve done additional research and found guidance for accelerating progress. Turns out, successful movements are based on three best practices: identifying a shared purpose, establishing a new lexicon and forming small teams committed to driving progress.

 A Shared Purpose Around Customer Experiences

In Innovate to Dominate, Meredith Reuben, CEO of EBP Supply Solutions, nailed the new purpose that I spoke about in my last post. Distributors can’t be just about supplying products and serving demand. Distribution’s new purpose is about going “all in” to help customers turbocharge their businesses for the digital age.

This new purpose requires a fundamental change in every leader’s mindset, but that’s only a start. Distributors must reimagine their core purpose. Distributors will not dominate by operating a well-run warehouse. Inventory management is a necessary capability, but it’s not sufficient to achieve breakout success. Several distributor leaders have told me that a better vision for distribution’s new purpose is to become a “customer experience” business.

I’ve worked with several leaders to define a customer experience business model for distributors. A typical conversation that I’ve had with distributors goes this way:

“I can talk with my customer and make a list of the biggest problems they face in their business. Not in terms of the solutions I offer, but what they need to do. Customers need help with finding experienced people and retaining then. They aren’t skilled at digital marketing. They don’t track product upgrades by suppliers. They don’t have a clue about how to leverage data. Getting fast delivery of the right products is very important, but customers don’t say that is their biggest challenge. My people can show proof of value created by our products and solutions, but our opportunity is to go further. We have learned how to hire people, market digitally, understand supplier product plans and use data. We need to figure out how to deliver a customer experience that translates these capabilities, and more, into tangible benefits for customers. Helping customers in this way is exciting. It’s a purpose we can build a culture around.”

Building a New Lexicon as a Tool Kit for Dominance

Innovate to Dominate is a call to action for distributors and a roadmap for business innovation. In the final chapter, I document the current state of distributor innovation processes, capabilities and cultures. Most distributor leaders told me that they are just beginning to make progress. Continuous improvement methodologies provide a solid foundation, but more is needed. Distributors are learning the language of artificial intelligence and machine learning. They are developing new capabilities for hiring and developing people around critical skills and knowledge. New processes are emerging to identify new customer experiences that overcome the fact that customers can’t tell distributors how to innovate their solutions. In short, distributors are beginning to build a new lexicon of terminology and business processes for leading customers and dominating markets.

In a landmark article in the Harvard Business Review, Michael Schrage asks the ultimate question for every distributor to answer:  “Who do you want your customers to become?” By working together to answer this question, distributors will create a new vocabulary for competing as real-world businesses, enabled by technology and data in the digital age. As discussed in Innovate to Dominate, Schrage’s advice will lead to new core processes that will “design customers, not products,” help customers invest in their future and build a culture aligned with helping customers achieve their vision.

Mobilizing Through Committed Teams

Distribution’s business model innovation movement will not succeed as a top-down initiative or one that waits for best practices to emerge. Like all successful movements, distribution’s movement will be encouraged by leaders, but executed by agile cadres of true believers — working teams that embrace the new purpose of distribution, drive change and create momentum. Movements are revolutions, and distributor-led working groups are the fighting teams that will make progress around business model innovation.

Effective team design for business model innovation must include a diversity of experiences and ideas. Teams must be cross-functional. Breakthrough ideas will emerge from groups that have both customers and suppliers included, with team members representing all generations. Teams may also include vendors, start-ups offering disruptive services and platforms, and thought leaders from within distribution and outside it.

Our collective experiences during the COVID-19 pandemic have created another opportunity for distribution to move forward. Just as distribution’s industry associations have helped distributors navigate through the pandemic, so can they take a leading role in fostering working teams to identify problems, solutions and opportunities. This powerful role for associations may lead to a reinvention of their business models as well, as they enable progress and assemble an innovation ecosystem to help distributors make progress every day and go further than they would go on their own.

This post is the last in a series designed to explore critical requirements for distributors to become the acknowledged B2B innovation experts. In future posts, I will offer new insights gained by applying these concepts with distributor leaders. If you haven’t already, please read my earlier posts:

 

 

 

Order Innovate to Dominate: The 12th Edition in the Facing the Forces of Change Series!

 

 

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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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