3 Important Strategies For Innovative Distributors In 2020
Distribution is changing. It’s not just that it’s changing; it’s changing with such ferocity, speed and complexity that it’s unlike anything we’ve ever experienced before.
I make this case in my new e-book Distribution As We Know It Is Dead: Here’s What To Do About It. And since I first introduced the model of The Innovative Distributor, we have been working with the UnleashWD Tribe, our group of innovation-minded distribution professionals, to redefine what it means to be relevant, sustainable and profitable in the coming years.
While there are many forces that distributors need to think deeply about today, there are three that really stand out in my mind. These are the forces I believe collectively and individually we need to devote more thinking and creative power to embracing and developing.
I used to include a slide in some of my presentations throughout 2014 and 2015. It begins to tell the story that on Jan. 17, 2014, the Wall Street Journal reported that Amazon had patented what it calls “Anticipatory Shipping.” The article begins by telling us “Amazon.com knows you so well it wants to ship your next package before you order it.”
Without using the words machine learning or artificial intelligence, the WSJ described how Amazon would use previous orders, product searches, wish lists, shopping cart contents, returns, and even how long cursors hover over an item to not only suggest what to buy, but ship before you buy.
So when I showed this slide just four years ago, I remember asking distribution audiences, “Are any distributors around the board room table thinking like this?” And a hush fell over the room. No one was.
Well, I had to retire the slide. Here’s why.
Distributors are starting to think like this, because machine learning and AI are within the grasp of every distributor. Infor’s Coleman platform, Proton.ai, even IBM Watson are all making AI accessible to every distributor. Who would have thought this advanced technology would be deployed by distributors just four years ago?
The lesson: Change is slow, until it’s not.
As leaders, we have managed our business in linear times. Yet today we are at an inflection point, where we are asked to lead our companies into an unknown future — a future of exponential change. The chart below depicts this new normal for distribution leaders. As we continue to manage the business around those things we know and can rely on in linear times (referenced by the red line), under the surface are these new technologies and other forces that are slowly gaining traction. Slowly gaining traction until it’s no longer slow. Let me show you what I mean using smartphones as an example.
Here is a chart of Smartphone sales in the U.S. Note the flatness of the first five or six years, until acceptance, sales, and utilization begin to take on a hockey stick type upward curve. Now consider The New York Times writing on Jan. 10, 2007 the day after Steve Jobs introduced the first iPhone: “The creation, the iPhone, priced at $499 or $599, will not be for everyone.” The linear mindset deceived The New York Times. Because in the end, the iPhone and other smartphones were for everyone with Statista reporting that the number of U.S. Smartphone users is estimated at over 230 million people.
And with this exponential acceptance of Smart Phones consider how our business lives have changed. consider how business is done has been changed seemingly overnight:
- Communication between customer and sales rep has transformed
- Access to customers has been disrupted
- Ordering processes have become mobilized
- Knowledge as a competitive advantage has been commoditized when our customers have the answer to all they need in the palm of their hand
Now here is the thing. It’s not just the speed of this change, but the convergence we need to get are arms around. Smartphone adoption is just one of many disruptive trends lurking beneath the surface. The list of technologies and forces at play dancing around that line between linear and exponential are many.
As one CEO said to me recently, “The pace of change is going to accelerate and impact every aspect of our business. The faster the change, the fewer people can assimilate. The advantage goes to the smarter, more nimble, more open-minded players who are coupled with access to capital.”
Here’s the most important thing about this: Companies that treat change as a slow-moving or one-time events are bound to fail. Companies that recognize exponential change and its role in everyday business are restructuring their organizations to account for this reality. They know that they must be nimble, agile, open-minded and strategic-minded about adopting and integrating new technology, process, and systems — even fundamental beliefs — that can give their businesses competitive advantage. Don’t dismiss opportunity out of fear, confusion or doubt. Don’t allow unfounded rationalization such as, “Well, my customer base doesn’t use this technology today,” as a reason not to act. Instead create a business structure that is ready to evaluate and manage change as it comes. Dynamic change in our organizations will be key to survival.
I was recently with a group of distribution owners exploring the topic of purpose in the business. As one owner was describing the meaning of his business, to drive home the point that he has built a business for his people, he said, “I’m not just waiting for the Brinks truck to back up and bring the cash to my bank account.”
Hearing that I was brought back to a conversation I had years ago with a non-family senior leader of a family-owned business. He was baring his soul, telling me about the toxic undercurrent within the business and how the employees think the owner “just sits in his office cashing all the checks for his family.”
When I shared that, the owners around the table suggested that unfortunately that might be true in more businesses than we’d like to admit. Ouch, right?!
Today more than ever, leaders in distribution need to consciously (re)discover, articulate, and nurture the essence of their business.
David Packard, the co-founder of Hewlett-Packard, was an early adopter of this thinking. Speaking to his leadership team during a company-wide meeting, Packard explained:
“I want to discuss why a company exists in the first place. In other words, why are we here? Many people assume, wrongly, that a company exists simply to make money. While this is an important result of a company’s existence, we have to go deeper and find the real reason for our being.”
We explored this concept of essence during our last Unleash Innovation Summit with our speaker Lara Lee when she introduced the concept of essence. Your company’s essence defines your why. It explains your purpose for being. Essence explains not what keeps you up at night, but why you get out of bed in the morning.
At UnleashWD, we articulate our essence in our purpose statement: To unleash the human spirit to live fully with freedom, passion, and fulfillment.
(Re)discovering your essence also aids you with employee and customer acquisition and retention. Nearly two-thirds (63%) of global consumers prefer to purchase products and services from companies that stand for a purpose that reflects their own values and beliefs, and will avoid companies that don’t, according to Accenture research. Even more (65%) base purchase decisions on the words, values and actions of company leaders (that means you).
Employees need this too. While leaders recognize the commercial value of purpose (they see it in terms of differentiation and reputation), business leaders don’t always recognize the value to their employees: 83% of whom need to find meaning in their day-to-day work, according to a PwC report. More than half (53%) are energized by a company’s purpose.
Smart companies in every industry are discovering, codifying and enacting (you know, walking the walk) their essence and rallying customers and employees around it.
Can you relate to this? A contractor has ordered materials from his distributor of choice and upon arriving at the job site he finds his crew standing around because the materials promised are not on site. So the contractor calls the distributor outside sales rep to get an answer to “Where are my materials?” The sales reps says … “It should have been delivered 2 hours ago! Let me check into it and get right back to you.”
And the chain reaction of calls is unleashed to discover “Where are my materials?” The sales rep calls the branch manager, who has to call the warehouse manager, who has to call the driver. And then it’s all reversed. The warehouse manager calls the branch manager back, who calls the sales rep back, who calls the customer back.
I suspect you can relate because for decades this has been the norm. It is the way business has been done. It is the customer experience standard that we were held to.
But today, industry norms relative acceptable experiences are about to be blown up, if they have not already. Distributors will need to dig deep and be prepared to obliterate industry norms.
Just a few years ago, when we wanted to book an airline ticket we would need to call an 800 number and after 90 minutes of being on hold finally talk to an agent who would try to explain the myriad of options. Today, all that friction has been obliterated and flights are booked on our smartphones in literally less than 90 seconds.
Today distributors have Lift and Shift™ the airline experience with their own apps to reduce the friction in communicating with and informing their customers. One building materials distributor for example has focused on the customer experience completely obliterating the phone call tree described above. Today the contractor uses the app to not only place orders but can see in real time where the delivery truck is at, how far from the job site, pictures of the materials delivered to the job site and more.
Our customer’s expectations are rapidly changing. They expect frictionless and joyful experiences — and if they don’t get them, your customers will become someone else’s customers. A whopping 75% of customers say they have previously stopped doing business with an organization because of poor customer service. The way you treat your customer from end to end matters.
Sir Richard Branson, founder of the Virgin Group, says it best: “Being different and on a mission to truly reinvent an experience for the customer is increasingly rare.”
How do you create a customer experience that keeps up with today’s expectations? To get you started, consider this two-step formula to defining differentiated customer experiences.
First, do the expected, extraordinarily well. Your customer may expect on time delivery, for example. Ensure the operational excellence is in place in your purchasing, warehousing, and shipping to deliver on this promise. Or your customers might expect that they are dealing with a knowledgeable organization. Ensure your sales team, customer service team, inside sales team, etc. are the best-trained in the industry. This access to knowledge today suggests too that you’ll want to digitize this knowledge in a self-service platform because your customers expect 24/7 access to the information they want.
Second, do the extraordinary, the unexpected. Now is the time to get creative and find those opportunities to wow and even thrill your customers by delivering beyond their expectations. Think: a personal phone call from your CEO to your customer to thank them for the business, sending a $50 Starbucks gift card to the individual completing the credit application as a sign of thanks and appreciation. Take customer feedback seriously and implement suggestions quickly and follow up with customers so they know their feedback is appreciated. The unexpected doesn’t have to be huge and expensive; it needs to show you care and appreciate.
One study found that nearly 80% of customers only consider shopping with companies that show they understand and care about them, and 56% are loyal to companies that demonstrate a deep understanding of their priorities and preferences, according to marketing technologists.
You have to know and care about how your customers interact with your brand. You have to get beyond product and price and really dig into the customer experience you offer (and my eBook has a clear way of doing just that).
Distribution is being disrupted every day by forces far beyond the industry. Implementing a new CRM or improving your e-Commerce platform will likely help your company succeed. But in the end, you must look deeper to solutions far beneath the surface. It’s not easy work, but it is satisfying. As you dive into 2020, consider these three areas of focus — embracing exponential change, (re)discovering your essence, and focusing deeply on customer experience. e will continue to focus on each on this blog throughout the year.
Come join our Tribe and continue the journey of innovation for yourself and your business this year.
Founder | UnleashWD