Deep Dive: Shooting for the moon

Big ideas lead to big innovations; are distributors ready to launch a moonshot to create radical change and invent the future of distribution?

My newest podcast discovery is NASDAQ’s World Reimagined. Every week, host Gautam Makunda explores “what it takes to lead through times of change and crisis,” offering “unexpected conversations” with leaders from business, science, politics, and more. I love it. One episode, Rules of Innovation: Where Big Ideas Come From, offered essential insights on thinking big and aiming high as business leaders and innovators. Safi Bahcall and David Kidder share ideas and experiences from their work, research, and writing. Bahcall is the author of Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries. Kidder’s powerful book is New to Big: How Companies Can Create Like Entrepreneurs, Invest Like VCs, and Install a Permanent Operating System for Growth. Combined, Bahcall and Kidder, guided by Makunda, emphasize the essential role that big ideas play in successful innovations. Both authors share work experiences gathered at startups, consultancies, large corporations, and venture capital firms. I was drawn in by the podcast’s moniker—World Reimagined—because, in many ways, my NAW Fellowship is about reimagining the very large world of distribution — distributor revenues contribute $7 trillion to the US economy. Distributors are attempting to innovate through a time of crisis defined by disruption, digital transformation, supply chain malfunction, shifting generational values, disintermediation by manufacturers, and more. One key takeaway is that distribution might find and implement big ideas through collective action, explained as “moonshots” by Kidder, and at the same time, through the passion of visionaries acting well ahead of the curve, defined as “loonshots” by Bahcall. In a time of unprecedented change, distributors must act boldly, with purpose, foresight, and ideas.

How big ideas lead to big innovations

Moonshots and loonshots act on ideas by pursuing exceptional and previously unimagined innovations. They differ in how resources are organized, investments are made, and risks are incurred. As explained in my edition on storytelling, moonshots are expensive, challenging, and risky tasks of enormous importance and impact for societies and, sometimes, all of humankind. Importantly, moonshots are attempted through collective action. Think Kennedy’s cold war mission to go to the moon, in competition with the U.S.S.R., with success memorialized in Neil Armstrong’s famous quotation: “That's one small step for man, one giant leap for mankind.” Loonshots are the province of solo innovators, operating as individuals, teams, startups, labs, and more. Loonshots are enabled by passion and commitment, with a confident, I-don’t-care-what-anyone-says attitude. Kidder explains the difference between moonshots and loonshots and why that difference is significant:

What I love about loonshots is it really draws a distinction between discovery [loonshots] versus planning [moonshots] … and the mindsets of how you look at discovery versus planning is so radically different … We have lots of evidence now and actual data that shows that about 70% of all growth comes from about 7% of capital deployed. Whether it be in absolute dollars or numbers of bets, when we look back to the beginning, it's usually all the unbounded returns come from the fewest number of things … The question is, why did we invest in those things?

Why indeed? Distributors are buffeted by many calls to spend on technology implementations, including e-commerce, CRM, ERP, artificial intelligence, robotic process automation, and more. But which of these investments will lead to survival and growth? When technology is implemented as a best practice, results are incremental. But if implemented within the frame of a radical business model or revitalized value chain, technology is given a purpose, and much more can be achieved.

Distribution needs moonshots and loonshots. Distributors may embrace big ideas, set goals, and pursue them through associations and communities. At the same time, crazy ideas followed by passionate B2B innovators may light the way forward, even if loonshot thoughts are not widely embraced in the near term. Over time, through loonshots and moonshots, distributors and the overall distribution industry may win its wars, cure its problems, and transform value chains, markets, and economies.

First principles for finding big ideas

I wrote Innovate to Dominate to help distributors by framing opportunities, offering examples, and laying the groundwork for an innovation process designed by distributors for distribution. Every newsletter edition continues this work. I look for ideas as I explore the future of technology, society, culture, work, and more. I have published a combined total of 67 Deep Dives, Quick Takes, Heads Ups, and Fresh Takes with this edition. I have had countless discussions online and in person, pushing my findings further and refining the newsletter’s collective knowledge. Looking back, I have identified three first principles offered as a foundation for finding big ideas for your innovations:

• Idea #1: The purpose of business is to help us live our lives and do our work in the digital age, as humans for humans.

• Idea #2: B2B innovation is collaboration, integration, and optimization to better serve the customer’s customer.

• Idea #3: The future of distribution is delivering experiences to create social and economic value from the center of commerce.

Frequent readers will recognize the words and phrases in these principles. I believe that they work collectively, offering a relationship between purpose, B2B innovation, and the future of distribution. Each principle also works on its own, and all are explored below, illustrated with quotations from distributor leaders and innovators. I will use these ideas as context for my work with companies and associations and my conversations on podcasts and live chats. I aim to use these principles to engage distribution practitioners, suppliers, customers, vendors, scientists, stakeholders, and more. By doing so, I hope to generate new ideas—and perhaps launch a few moonshots and loonshots.

The purpose of business is to help us live our lives and do our work, as humans for humans, in the digital age.

The most consequential innovators pursue change with a strong sense of purpose. Foresight is essential for innovation and leads to actionable ideas, but purpose turbocharges innovations with intent, significance, and value. Innovating with purpose is following a North Star, setting out on a thoughtful journey, attempting something important, focused on creating value. Purpose helps companies achieve exponential growth and productivity gains without losing sight of what matters most—helping people, companies, and communities, in good times and in bad. In Distribution Leans In, one distribution leader explained:

We have a very clear sense of purpose …  Everything we do is focused on innovating around services and products for our customers, who are predominantly maintenance mechanics. [During the pandemic, we operated from a] one-page document … a picture of who we want to be when the pandemic is finally over. The picture helped us create guideposts and stay true to them. It allowed the leadership team to avoid overreacting. This was essential because leading in the crisis is more about operating against unknowns than knowing what we want to accomplish and executing. The one-pager helped us guide our communications with our employees, our board of directors, and our customers. It helped to think about where to divert resources and save costs, especially as we were acting very, very quickly.

By documenting its purpose, this distributor pulled leaders, workers, and managers together to lean in, step up, and do more. Having made investments in digital technology, the organization found that it was digitally confident, deploying digital tools in new ways to help mechanics. By “doing the right thing” in the moment, the company’s purpose became a rock-solid vision for accelerating progress in a post-pandemic world.

B2B innovation is collaboration, integration, and optimization to better serve the customer’s customer.

The most potent innovations help customers strengthen or transform their business to serve their customers better. When assisting customers in innovating, B2B companies first measure success as the customer's sales growth, share gains, and productivity improvements. Doing so requires customer relationships built on mutual understanding, openness, transparency, shared histories, foresight, and connections across all leadership levels and functional teams. Innovations from real-world experiences empower virtual-world products and services. Again from my work for Innovate to Dominate, I learned this lesson from a B2B innovator:

We listen to our customers and watch what is actually happening around us, knowing that as a distributor we need to build capabilities around experiences, data, and the technologies that are driving change. We are testing solutions around virtual and augmented reality. Customers can come into our showrooms and design their kitchen or bath using a virtual reality experience that we created in partnership with a manufacturer. We have an augmented reality application that’s downloadable on Apple’s app store and Google Play. It’s clear the Internet of Things is beginning to grow as manufacturers are introducing IoT capabilities in products like leak detection, HVAC, water heaters, and more. Online selling is just the beginning of expanding technologies in our industry. It is evolving, and a growing number of customers want it. It’s important that we listen, experiment, and help lead our customers forward.

Many distributors deploy digital technologies to modernize their business, defending against disruption and disintermediation. While this approach seems like progress, it is playing defense. Digital technologies are changing how all businesses, including customers and suppliers, do their work. By optimizing results in how markets and value chains work today, distributors are locking their business models in place. By collaborating and integrating with customers—and suppliers!—distributors may aim for the future.

The future of distribution is delivering experiences and creating social and economic value from the center of commerce.

The genuine magnificence of the digital age is that everything that exists in the physical world can be represented as data on digital platforms. Data creates B2B value by sharing it among suppliers, distributors, customers, and other stakeholders, with actions and improvements directed by monitoring, analysis, human insights, and artificial intelligence. The role of data in creating social and economic wealth in the value chain is not new. Still, digital technologies have accelerated change because every communication, database, product, service, worker, and manager can be digitized and connected. Reinventing the value chain to run on data requires new leadership mindsets and partnerships between manufacturers, distributors, and customers. Where data is currently protected as proprietary information for competitive advantage, data must become shared and pooled to achieve results beyond what individual companies can achieve by acting alone. In Innovate to Dominate, a senior executive explained:

I think there is an openness with suppliers to talk about new approaches. Manufacturers recognize the value of distribution, and with all the disruption and digital transformation that is happening, they are willing to discuss how things might be done differently. We have been working on leveraging our data, automating our warehouses, and creating a multichannel or omnichannel structure. Artificial intelligence is now a part of this. On the one hand, artificial intelligence is about helping our inside sellers get up to speed very quickly on critical customer information. It’s about putting the right product information in their hands to enhance the sales process. On the other hand, artificial intelligence has a lot of potential to eliminate keystrokes so orders can move through your systems without human involvement. We’re starting to hear more about robotic process automation. We are making good progress, but if we work with suppliers on the value chain, we can do much more. Distribution is the sleeping giant in the middle. Distributors don’t spend a lot of time thinking about innovation, but if we set some time aside, and include our best suppliers, we can create new models. Lots of things are possible, it starts with taking time out and asking, “what if.”

As the analog value chain goes digital, its fundamental mission is shifting from moving products from one physical location to another, to transferring data where it is needed most for making the most significant difference—data that includes every imaginable bit of product and service information, including physical dimensions; locations, configuration and condition; price, performance guarantees and results; project plans and facilitation; worker skills and certifications; and on and on and on.

Distribution needs an Internet of Things (IoT) moonshot. Today, distributors are essentially locked out of IoT, as data created by products at the customer location is vertically narrowcasted back to manufacturers. If that data could be accessed across a range of products and brands, distributors could create horizontal wealth, social and economic, for the customer’s entire operations. Doing so might unlock the IoT’s massive value-creating potential, as researched by McKinsey & Company and argued in a previous Deep Dive edition. Some distributors, including the one quoted above, may be acting as loonshots, but I suspect many are not aiming for the stars. The IoT’s inherently vertical structure holds back value creation, and a “Free All Data” movement is needed for radical change.

Organizing distribution for moonshots and loonshots

I frequently argue that distributors suffer from a crisis of ideas, embracing best practices as a lazy culture of copying others’ innovations. I’ve offered storytelling and design thinking as solutions because both can help create a culture of innovation to achieve breakthrough ideas, sustained effort, and brands known for bettering communities through innovation. But from Makunda’s conversation with Bahcall and Kidder, I learned something new: Organizational structure may have more to do with innovations than culture.

In most companies, innovation is the responsibility of a dedicated team, working far away from the day-to-day distractions of running the business, marketing solutions, and chasing sales. Innovation happens without inspiration or feedback from the front lines of doing business, failing to achieve intended outcomes when it is transferred to the company. There is a gap between innovators and doers, a gap that hides possibilities and destroys executions.

In the quote below, from Innovate to Dominate, I share one distributor’s excellent and noteworthy investment in a dedicated innovation group:

Data and predictive analytics are critical for airplane maintenance. This is especially true now, as fleets continue to age and fly longer, which means they require more maintenance. Customers want us to help their fleets run at peak performance, so they are asking us more than ever to provide predictive insights on what repair parts they will need and when they will need them. So, we’ve created a business innovation group staffed by a talented group of people with strong analytical skills and business knowledge to provide such insights. Most of the data we use resides within our business systems and, with the help of artificial intelligence and machine learning, we can constantly improve our customer support. Our customers know that data can improve results, but they look to us to provide the analytics and innovations to put that data to work. That’s the job of our business innovation group—they collect data, build custom algorithms and tools, work with customers to validate our findings, and then strive to continually improve results. It’s very collaborative. At the same time, we work to optimize our supply chain to ensure that our suppliers are lined up to have the parts when we need them.

This distributor is ahead of the game and achieving fantastic results, but I wonder if more is possible by following Bahcall and Kidder’s advice. Will organizational structure hold back sustained progress? In Makunda’s episode, I learned that Elon Musk places innovation teams on the factory floor, where workers and robots work and deploy data to foster radical innovations for his game-changing electric vehicles. Sharing this idea with a few distributor leaders, I learned that one distributor of fasteners and related products is doing something similar, creating spaces for employees in customer-facing jobs to become customer-located workers. (I’m looking for confirmation from the company or coverage in media and will write about their plans in future editions.)

What can be done by a company might be done by industry, working together and through new programs and institutions. Riffing on Elon Musk’s approach, distributor associations might create internships and exchange programs with customers not just for skilled workers and tradespeople, but for managers and leaders in customer-facing and staff positions. An industry moonshot might place distributor CFOs, warehouse managers, data specialists, salespeople, marketers, and more to work side-by-side in a customer’s business on an exchange program or a workforce ecosystem project. If guided by innovation leaders and practices, every swapped employee could be trained in the arts of storytelling, design thinking, and Christensen’s Jobs To Be Done methodology to become a force for change on a more massive scale.

Join our community by asking questions

Are you in search of big ideas and imagining moonshots and loonshots? Talking with Makunda, Bahcall offered this gut check: “Especially if you're a CEO, or on a leadership team, or a manager, but even if you're just a solo entrepreneur, you want to discover that crazy idea, that assumption that you had is wrong, you want to discover it yourself, not be surprised reading in the paper when your competitor announces it, and you discovered that idea too late when it's a bullet coming to your head.” Crazy ideas and meaningful actions are essential for distributors, and all distribution practitioners, to shape the future of distribution.

B2B innovations may aim for the stars, but not without big ideas. Turning this edition’s three big ideas into questions, offered below, I hope to spark progress:

• Does your business innovate from a well-understood purpose? How does your company help customers do their work and live their lives?

• Do you have a scorecard for measuring how your B2B innovation processes collaborate and integrate with customers to optimize the customers’ results?

• Are you designing and delivering new customer (and supplier!) experiences? Are you adding value to data collected through the IoT or other methods? Or are you stuck on delivering products and adding value to them?

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.