In my ongoing conversations with distributor leaders, I find that there is a growing need for a new mindset for competing in the digital age. One aspect of that mindset is to adopt and apply the principles of business model innovation. In my latest NAW Institute report, CEO Insights on Innovating the Distributor in the Digital Age, I offer four future business models that distributors can evaluate relative to their current business as a way of kick-starting innovative thinking. In this post, I cover new ground and explore three fundamental concepts or differing approaches for distributor-led innovation. Distributors can lead and many are. But, there are differing forms of innovation and it’s important to consider your options as you drive change in your marketplace.
This post is the third in a series about key words that pop up in my conversations with distributors, customers and suppliers about distributor channel transformations. The previous posts are about community, indispensability and partnering.
Continual Improvement as Distributor-led Innovation
This is perhaps the easiest or most natural way for a leader to conceptualize innovation as a strategy for their business. Most distributors have already driven continual improvement in the backend of their business by driving efficiencies and productivity in their warehouse and logistics operations. Some are now attempting to do the same on the frontend of their business by using digital analytics to drive high-quality solutions for customers and productivity and effectiveness of their sales force, and to develop digital marketing capabilities that are on par, or even better, than the strongest brand-name manufacturers.
The key to thinking of innovation as continual improvement is to strive for game-changing business results. Make changes that make your business an indispensable partner for your customers and suppliers. To aim for less is to strengthen your business and financial results as a highly competitive distributor, but one that still plays largely by the old rules that existed before the explosion of digital tools and the emergence of dominating disruptors. Customers and suppliers are seeking to make their own businesses competitive in the digital age, so by aiming to be an indispensable supplier, distributors can offer their own game-changing solutions that will help ensure their competitiveness and survival.
Entrepreneurship as Distributor-led Innovation
For many distributor leaders, setting out to start new businesses is an entirely unfamiliar goal for which they are totally unprepared. Many distributors are family-held businesses, started several generations ago by an entrepreneurial ancestor. Even publicly traded distributors and those owned by investors hold this legacy in their personal and organizational DNA. In this context, distributor leaders are stewards of their businesses, seeking to guide them to success and ensure their viability in a changing world. This is a very difficult task, one that requires strong skills and experience. However, it is not entrepreneurship in the sense of starting a new business from scratch.
This does not mean that pursuing an innovation strategy through entrepreneurship is not, or should not be, a goal for a distributor leader. It does mean that careful planning is required to ensure that an entrepreneurial bent is somehow brought into a distributor’s business. Options include hiring entrepreneurial experience to fill roles at many levels of the organization or sending family members out to work at entrepreneurial companies with the ultimate goal of returning with new knowledge and experiences. Or, mergers and acquisitions may be possible, not with other distributors, but with entrepreneurial companies that can leverage what a distributor can bring to the table. There are likely other options, but the key to success with the entrepreneurship as innovation approach is to recognize what you are not in order to become something else.
Disruption as Distributor-led Innovation
Disruption is a matter of degree, with important consequences for distributor visions. Companies like Amazon, Alibaba, eBay and others seek to create an entirely new marketplace where business is conducted. In their virtual worlds, disruptors get to set the rules, reap rewards and, importantly, exercise channel power. They are in control and able to establish new relationships from scratch with all participants in a value chain that is owned and operated by the disruptor.
Distributors are responding to the challenge of disruption and the most innovative are coming to be known as “incumbent disruptors.” There is, however, an important difference in the degree of virtual disruption that can be achieved by distributors. Distributors are creatures of the physical world, with a long history of relationships and expectations held by customers, suppliers, the business community at large and a distributor’s own employees. These relationships are an asset and a challenge at the same time as disruptors help to enable a fundamental shift in shopping, sourcing, buying and managing purchases by businesses. Distributor-driven disruption may be of a hybrid kind—that is, leveraging digital tools to reinvent customer experiences and improve channel efficiency and effectiveness while, at the same time, repurposing physical spaces and human interactions to do what can only be done in the real world, not the virtual one.
As the disruptive innovations of distributors take root, attention should be given to offering the correct label for their efforts, one that captures the unique innovations that distributors can offer. The first priority is to avoid being tagged as offering a kind of “disruptor light,” with innovations that aim for the disruption of Amazon and others, but don’t quite hit the mark. The second priority is to come up with a term that is aligned with distributor-led channel innovation. This term has not yet emerged and the effort to find one is essentially a branding effort for the entire distributor channel. More than branding, it is about creating awareness of distributors as a vital and innovative cog in the economy. Distributors are a sector that can lead, drive innovation and reinvent how business is done.
Please share your ideas and experiences
I have been asking for your perspectives in my posts for some time now, and have had many productive conversations. If this blog is to become an active forum for helping the community of distributors to take the reins and lead with new innovations, I need more input. If you have comments for, against or different than the ideas shared in this post, please feel free to reach out to me at email@example.com.