Deep Dive: The omnichannel delusion
Do B2B markets borrow too much from B2C, and if so, how can we forge our own way ahead?
As distributors strive for omnichannel excellence, I sometimes wonder if they are in the hunt for unprecedented results or following a false trail laid down as seductive misdirection. This week, I discovered a two-year-old Forbes article that puts truth to the omnichannel lie. The author is Steve Dennis, a thoughtful, experienced, and highly respected leader in retail. Dennis is the author of Remarkable Retail: How to Win & Keep Customers in the Age of Disruption, which I recommend for all B2B innovators—not because B2B should copy B2C, because we shouldn’t. B2B is different, and we need to up our game when it comes to active dialogue about the future with creative and bold ideas. Dennis does this for retail. We need more of what he does in B2B. But back to the article. It was about the retail omnichannel trend. In 2019, Dennis argued that omnichannel was dead long before the pandemic. His Forbes article (and another) explains why and offers a path forward for retail. In this Deep Dive newsletter edition, I pull out the juicy parts from his articles, stand back, and share what I think they mean for the future of distribution. At MDM’s Sales GPS 2021, I argued that distributors must stop catching up and instead strive to get ahead when it comes to sales models. I offered three new models designed from scratch to kick-start progress. In this Deep Dive edition, I push again for distributors to take ownership of their channels. But this time, I seek to undo the damage done by blindly following a channel model designed for retail—one that is flawed even for its intended application. Is omnichannel dead for distribution? Should it be?
What’s next for distribution if omnichannel is dead?
I worry that by accepting retail solutions as an acceptable frame for distributor innovations, B2B leaders get off on the wrong foot. Inspiration matters and may be a springboard for creativity. But innovating on inspiration requires a deep-felt sense of purpose and foresight for the future. Otherwise, inspired innovations may create suboptimal results, lead in the wrong direction, or both. Omnichannel may be the penultimate case in point. To explore why, it’s helpful to go back to the beginning of the omnichannel craze.
Dennis identifies the origin of omnichannel by pointing to an MIT Sloan Management Review article, Competing in the Age of Omnichannel Retail, published in 2013. I’ve read the article, and it is what the title says—a digital age method for delivering consumer experiences, offered and named, then thoughtfully explained for retail leaders and innovators to implement. Dennis asserts that omnichannel washed over retail like a tidal wave as CEOs parroted the phrase at every opportunity. At its core, omnichannel is about a consistent experience across all of a company’s channels enabled by digital transformation. But, from the very beginning, retail omnichannel had issues:
First, it was always ill-defined. Second, it was often served up as the panacea for what ailed every struggling retailer—-and therefore the center piece of many a conference keynote, white paper and technology provider sales pitch. Third, it’s repeated so mindlessly and ad nauseam I wonder if someone is getting a royalty every time it’s uttered. Lastly, and most importantly, to the extent it was pointing at the right idea, it all got lost in the “omni.” Simply stated, a great customer experience has never been about being everywhere and all things for all people. What matters is showing up for the right customers, where it really matters, in remarkable ways.
Rework that paragraph to say distributor instead of retailer, and every sentence applies, especially the observations about customer experiences. In B2B, customer experiences are never about being all things for all customers. Business buyers buy differently depending on their needs at the moment of purchase. Business needs range from simple to very complex and are expressed by customers as preferences for convenience, repeat purchases, replacement of existing products, solutions for problems, maintenance or repairs, emergency service, customization, and more. Almost by definition, it is impossible to deliver the full range of diverse needs through coordinated omnichannel service designed to create a singular and consistent customer experience.
Dennis offers a better approach, which he terms harmonized retail. Harmonized retail has a different core concept, one that is about “accepting the truth that all the talk about different channels is not at all helpful. The customer is the channel.” This is an eye-catching but tricky turn of phrase, and Dennis explains:
A winning customer experience strategy recognizes that the blended channel is the only channel and that retailers need to leverage deep customer insight to understand how various customer segments navigate the customer journey across digital and physical channels. Armed with this knowledge, retailers can execute harmonized retail by eliminating the friction points (I call them “discordant notes”) and “amplifying the wow” (implementing truly memorable experiences). As contrasted with current terminology, the goal is not to be everywhere, nor is it to be seamless or unified. Those might be necessary but they are hardly sufficient. With harmonized retail, our aim is to have the critical aspects of the customer journey all sing beautifully together.
As a long-time B2B channel strategist, Dennis’ harmonized channel concept speaks to me as an updated, digital-age version of multichannel capabilities. In the 90s, I helped manufacturers and their distributor partners implement multichannel, long before omnichannel appeared. Multichannel is achieved when one channel, often the manufacturer’s direct sales organization, is aligned with large customers and sophisticated needs. Other channels are added to serve different business customer needs. Broad-line distributors serve customers that value a market basket of products and brands. Specialty distributors provide technical product and application expertise to customers that need deep knowledge. Each channel is aligned against specific customer needs and purchase occasions. In multichannel, it is expected that different channels might find themselves in the same account from time to time, but they seldom compete for the same customer purchase. There is conflict, but strong channel management and win/win partnerships keep conflict from becoming destructive.
Can harmonized distribution outperform omnichannel distribution?
Harmonized retail is not a simple rework of an aged multichannel approach. Harmonized retail is revolutionary. As Dennis explains, in a digitally transformed multichannel system, customers may dip into any channel at any time, even if that channel is designed for other customer needs or purchase occasions. In this way, multichannel provides “bits and pieces” of support to meet every customer's whim. For B2B, this means that while a customer may be in the middle of a convenience buy, that customer might reach out to a technical channel to explore a specific aspect of the purchase, or perhaps a separate purchase that just happens to come to mind. In harmonized distribution, customers get what they want, when they want it, seamlessly.
Harmonized distribution requires sophisticated channel capabilities comprised of experienced people, automated processes, and machine learning to deploy artificial intelligence. Sales, marketing, customer service, and order fulfillment must shift on the proverbial dime to promote products, offer solutions, build relationships, track pipelines, and monitor customer experiences. I don’t know if harmonized retail reaches the same difficulty levels for B2C companies. Still, for B2B leaders, harmonized distribution is challenging, and made even more difficult because customer support activities are executed among different businesses with differing business models — manufacturers, distributors, dealers, contractors, and more.
Harmonized distribution is a big idea that may be necessary for defeating the outside forces of disruption. Friction is fuel for disruptors, and disruptors are aiming for B2B. For me, the wisdom in Dennis’ observation is that the concept of “harmonizing” channels should first be applied as a thinking exercise. B2B innovators should imagine that a disruptor could create a harmonized channel and that customers loved it. Then, imagine the frictions it would expose in the traditional value chain as it is collaboratively executed by distributors and manufacturers working together. Frictions left untreated are fatal. This analysis, applied by real-world distribution businesspeople—not abstract-thinking consultants—would identify opportunities for B2B innovations and help morph the harmonizing retail concept for harmonizing distribution. Distributors might even rename or rebrand the approach, making it their own by doing so. In this way, a new generation of B2B leaders might upgrade or replace omnichannel with a strategy and operational framework that is for distribution by distribution.
How can distribution elevate its expectations?
I suspect that Dennis' critique of retail omnichannel is rooted in the fact that it is just too pedestrian, ordinary, and average. He often argues that “physical retail isn't dead. Boring retail is.” Omnichannel blends digital and physical channels for a satisfying customer experience. Dennis’ admonition to avoid boring retail does not mean that digital retail is the enemy of physical retail. Instead, as customers shop more and more in the digital world, innovators of physical retail must elevate what physical retail can deliver in the real world. I have explored opportunities for innovating B2B stores and offices here, here, here, and here.
Dennis’ call for remarkable retail is a call to action that distributor innovators must embrace. But distribution needs its standard. Remarkable goes with retail. What sentiment goes with distribution? I don’t have the answer, but words are important. A word that captures distribution’s standard for excellence must emerge organically from vibrant discussion and debate among B2B businesspeople.
To help distribution’s search move forward, I look back to another Forbes article by Dennis. I relay three fatal flaws of retail omnichannel below and then explore how each may point to a standard for “remarkable” distribution:
Customers don't care about channels. In retail, some customers love the act of shopping. In distribution, some customers love the practice of procurement. But channels are the world of sellers, not buyers. If B2B is to set a common phrase for high standards, it should be a phrase that resonates with customers and is actionable for distributors.
It's not about 'all.' It's about relevant and remarkable where it truly matters. No business—retail or distribution—would ever compete under the banner of Homogeneity! At its worst, omnichannel irons out differences in pursuit of common experiences. B2B standards should be about anything but common experiences, and perhaps unbelievable, phenomenal, brilliant, wondrous, or commanding.
The omnichannel migration dilemma. Dennis argues that omnichannel is expensive and worse, it migrates customers to channels where costs incurred are not aligned with revenue generated. For a time, my consulting practice used activity-based costing techniques to determine cost-to-serve across a multichannel structure, and relative costs were not significant. Instead, each channel needs to incur reasonable costs for its specialization and earn a fair price for value delivered. Perhaps the inspiration in the migration problem might be to let customers find their channel without marketing's version of an invisible hand and to herald channel specializations rather than mitigate them.
I conclude this Deep Dive edition with one last inspiration from Dennis’ book, Remarkable Retail:
If we have learned anything from the history of retail, it is this. Shift happens. Shift happens in ways big and small, sometimes incredibly fast, other times far more slowly. It can be readily predictable, or not so much. We can never be ready for every eventuality. Sometimes we will, in fact, get sucker punched. If we want to avoid being taken down by the next punch in the mouth, there are a few key things we have to always bear in mind. We have to start before we are ready. We have to accept that safe is risky. We have to choose to be remarkable. We have to remember that remarkable is a journey, not a destination. [Emphasis added.]
Join our community by asking questions
If one accepts that omnichannel is suboptimal for retail, how could it be better for distribution? My harsh words for omnichannel are not hard evidence that it fails in its B2B application. But I do warm to Dennis’ arguments and experience. If B2B copied omnichannel from B2C, how can we expect out-of-this-world results for our customers? Should we not have challenged omnichannel when it invaded our world and demanded proof of excellence? Even better, shouldn’t B2B innovators have the right stuff for inventing their own innovations?
I ask you to question the premise of my arguments, supporting or refuting them with your ideas and experiences. If your corner of distribution serves retail, can you offer your customers something better than omnichannel? Can you reclaim your business with retailers with a bold vision if your company has lost business with retailers? And if you are in the part of distribution that has nothing to do with retail, can you offer all of distribution a vision for distribution’s own “remarkable?”
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