Deep Dive: Embracing the future of distribution
Can you harness the power of lessons learned during the pandemic and use them as a springboard for success in 2022?
I am very excited to attend the National Association of Wholesaler-Distributor’s (NAW) 2022 Executive Summit on January 25-27 at the seat of our national government in Washington, D.C. As an NAW Fellow, I look forward to renewing acquaintances (in person!) and building relationships with new members and first-time participants. NAW’s Executive Summit is the one place where distribution leaders from every line of trade come together to share experiences and ideas and learn from cutting-edge thought leaders and practitioners. It is truly a world-class event. In preparation, this edition shares what I learned from distributor leaders over the past year during the pandemic about innovating B2B and the future of distribution. If you are attending, let’s find each other and look toward the future. If you are not attending … well, you should be!
Leading from the intersection of strategy and innovation
Laura Juarez has a pulse on modern strategy, innovation, and leadership standards and a deep understanding of distribution and the traditional value chain. For more than 20 years, she led The L.E. Smith Company, a B2B manufacturing and distribution company in the building materials space. She has served as a business owner, CEO, board chair, founder, consultant, coach, and strategist. Laura is passionate about helping leaders create impact beyond profit, elevate their stakeholder ecosystem, cultivate thriving teams, and live to their potential. Laura recently co-founded the 10X Leadership Lab and launched the 10X Impact podcast. In the heart of the pandemic, Laura offered this advice about the intersection of strategy and innovation, published in my work, Distribution Leans In:
To innovate well, we must blend creativity with discipline and embed the result into everything we do. This creates a flywheel of organized velocity where materializing our unique potential is both digestible to our team and meaningful to our stakeholders. The best companies know innovation and strategy are one in the same. Innovation is the engine of strategy, and strategy is the roadmap of innovation.
In my research for Distribution Leans In, I shared Laura’s advice, and through in-depth conversations with more than 30 B2B leaders, I discovered a shared perspective: Change today is different than change in the past. Moreover, change is accelerating, and the pandemic is adding new forces that further change how business is done. For the strongest companies, strategy and innovation are interwoven and propel a company forward when executed with excellence.
Innovative leaders pushed further, explaining that doing business as it was done in the past, or even as it was done yesterday, is not acceptable. Progress is essential. Progress, however, is not the sole responsibility of leaders. Investing in culture and active engagement with stakeholders (suppliers, customers, communities, and so on) creates momentum and leads to powerful innovations. Distributors can lead their markets, especially if they reimage their business—not as intermediaries, but at the center of commerce, bringing suppliers, vendors, thought leaders, and more together to work on projects that propel customers forward.
Aiming for 10X growth
I once worked with a manufacturer that drove growth in aggressive but bite-sized chunks, captured by the mantra “2Xin3”—double sales or profits in three years. Armed with Laura’s advice, enabled by technology, and aligned with social trends for the future of work, today’s companies may seek higher growth of 10X or more. I pushed these ideas with B2B leaders and discovered four linchpins for achieving breakthrough results:
Amplify culture. Investing in culture allows B2B leaders to launch initiatives, go in new directions, and identify opportunities from day-to-day frontline interactions with customers and suppliers. Amplifying culture means strengthening your company’s core values and behaviors for even greater effect. Distributor leaders recommend open and frequent communication with employees, leveraging robotic process automation to free employees for more value-added activities, and codifying a distributor’s purpose in documented business processes, performance metrics, and employee/team rewards.
Instigate value. To be leaders, distributors must be instigators. Instigators bring about or initiate an action or an event. Almost every B2B leader told me that the goal of innovation is to create new value for customers via the distributor’s own capabilities and actions. This is a significant change from the traditional view that a distributor’s role is to “add value” to products manufactured by suppliers. But it stops short of the total value distributors can create by demanding that the value chain—enabled by technology vendors as well as colleges and universities—work together to offer the most powerful solutions. In this capacity, distributors are instigators of value.
Empower work. Every business creates value by doing work. Enabled by data, digital technologies, and social forces, the methods by which work is done are changing. Distributors are in a unique position to help customers figure out how to change the way work is done because they are service companies, not manufacturers of physical products. As distributors embrace the mantra that their future is to become a customer experience company, they are working toward a business model that is hyper-focused on helping customers get their work done. Empowering work for customers means creating value for them and sharing in that value through monetized services and economic returns.
Remodel linearity. The future of B2B markets is not written. As platform businesses, online marketplaces seek to compete on unmatchable scale and network effects. It is often predicted that almost every industry vertical can be home to platform businesses, and that only one or two will survive. As they grow and take share, these platform businesses will likely disrupt or defeat traditional businesses in a linear value chain. While this future may come to pass, it also assumes largely static business models, value chain dynamics, and government interventions. Three chapters in my book Innovate to Dominate apply scenario analysis methods to explore future market operations. Each of these chapters assumes a “challenge and response” mechanism. That is, faced with the threat of disruption, incumbent players and their value chains will morph. As is often said about evolution, it is not the most robust species that survive but the most adaptable.
Acting on the grace to innovate
Distribution Leans In was published before I launched the newsletter you are reading, Mark Dancer on Innovating B2B. In many ways, my decision to write on Substack, now posting twice a week, was inspired by the courage, commitment, and passion of leaders who stepped up to help customers during the pandemic. Inspired by other Substack authors, I have discovered that writing deepens the insights and ideas I share with B2B leaders, and my growing community of subscribers is pushing me further.
But it is customers that are making today’s innovations possible. In the heart of the pandemic, behind every customer struggling to survive through lockdowns, stood a distributor working to help keep them in business. Customers wanted help, but they didn’t expect perfection. Innovative B2B leaders were granted the grace to make changes, sometimes through trial and error, but always focused on helping customers survive, and sometimes thrive, during the pandemic and now, beyond.
Sharon Newport, CAE, organizational consultant, and adjunct professor at Georgetown University’s Institute for Transformational Leadership, opened my eyes to many new ideas for B2B innovations—all centered on a very human approach to business relationships and organizational change. In my very first edition, I shared this:
As Sharon explained: “Grace is a courteous goodwill, offered with kindness by customers, with the expectation that new solutions are attempted and made better through collaboration.” Just as the pandemic is creating unprecedented challenges for businesses and the people who define them, so is the realization that new solutions are mandatory. “Grace is a mission to transform; to do business differently. And an acknowledgment that it may be impossible to get it right the first time,” Sharon also said. Trying is rewarded. Not trying is noticed.
Trusting your instinct for innovation
In Innovate to Dominate, I found that in the vast body of knowledge to support innovation by forward-thinking companies, very little is focused on innovating as an established distribution business. During the pandemic, distributors stepped up and innovated for customers because it was the right thing to do. The best distributors discovered that they had an instinct for innovation, leaning in to help customers with new offerings built not on the gee-whiz aspirations of technical wizards, but the practical, results-focused, make-it-work orientation of a “here to help” service culture.
Dawn Foods’ robust immediate response to the pandemic was echoed in three lessons learned by many other distributors: 1) investments in digital technologies made before the pandemic strengthen a distributor’s ability to respond during the pandemic; 2) distributors can do more than aggregate products to serve operational needs—they can assemble information, resources, and advice to help customers overcome adversity across all facets of their business; and 3) by helping customers, distributors help themselves. In what we now know to be very early in the pandemic, Eric Metzendorf explained Dawn’s initial response as:
We launched a new online ordering platform during the pandemic, which helped us respond to customer needs to reduce human contact. But online ordering is only one element of how we are innovating during the pandemic. Lockdowns and social distancing requirements severely impacted our customers. We helped them adopt safety protocols because we had a greater capacity for gathering information and requirements quickly, and we shared them in a way that was aligned with how they run their business. Then, we helped our customers in the front of their house. We created downloadable marketing materials such as social-distancing floor markers along with instructional documentation and videos. We provided information to our customers on how to use social media campaigns to help them engage in their communities and let their customers know when they were open for business. Our digital investments are built on helping our customers do what they do and then offering tools that help them do those things better. If our offerings are compelling, they create a kind of voluntary lock-in for doing business with Dawn. That stickiness helps to take price out of the conversation. We are automating, but we are very conscious of building human relationships and not detracting from them. Our strategic planning process has enabled us to elevate our game because it focuses on our customers and looks for new solutions to help them grow. Our people and culture are a critical point of differentiation because we have team members who’ve been around baking for their entire lives ... we know bakeries, we know bakery production, we know bakery merchandising, and that experience and knowledge is something we share. We had a lot of momentum before the pandemic, and while there have been some setbacks in our industry, we see the momentum building again, stronger than before.
There is one more lesson about innovation informed by pandemic experiences that is fundamental and a foundation for the future: Ultimately, distributors will succeed by doing business as humans for humans. Innovation is about acting on a purpose. The ultimate aim of distributors—and all B2B innovators—is to help customers better live their lives and do their work as we move beyond the pandemic, and at the far side of the digital age, to whatever lies ahead.
Join our community by asking questions
In a previous Deep Dive edition, I explored other pandemic lessons about innovations, including three discoveries about why distribution matters. As distributors stepped up to help customers during the pandemic, new reputations have been earned. Going forward, as the pandemic ebbs, distribution may tell its story in new ways that matter to customers, the economy, and our society. I offer the three discoveries here and suggest questions you may answer to chart your course forward as an acknowledged leader in your markets and our society:
Distribution is a reservoir of resiliency. Can you measure and monitor the value you offer in keeping your customers, including your suppliers, in business through the thick and thin of future crises and business cycles?
Distribution exists to solve problems. Can you create a Pareto chart of the most potent solutions you deliver for your customers, and again, your suppliers? Then, imagine that you rebuild your business from scratch to provide those solutions as customer experiences. What would that business look like?
Distribution is at the center of commerce. Is your business more than an intermediary adding value to products manufactured by suppliers? Can you bring together all elements of your market’s ecosystem of vendors, educators, government agencies, nonprofits, and more to benefit your customers? Is doing so baked into your business processes and job descriptions?
As always, please share your comments, ideas, experiences, and direction below. Don’t be a stranger. Click here to schedule a call or send me a note at mark.dancer@n4bi.com