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Deep Dive: Going radical
Can B2B learn from Steve Jobs’ radical innovations and create a revolutionary future for distribution?
I’m a big fan of Apple products, but I’m a massive fan of Steve Jobs. As a channel strategist, I am in awe of how Jobs led Apple to disrupt an industry with radical innovations that blended physical and non-physical products while offering a radically new customer experience. I’m talking about delivering music on the iPod and, later, iPhone. So when I noticed this article on MIT Sloan Management School’s Ideas Made to Matter series, I dug in. I was reminded of Jobs’ attributes and experiences, and about how he fought long and hard to implement his ideas. To me, Apple is a consumer-first company, even though businesses use its products as well. Jobs was perhaps the greatest B2C innovator ever. I wonder where his counterpart is in B2B? Will the “Steve Jobs” of distribution emerge? Is it possible to imagine radical B2B innovations that wrap products and services together, creating value through a combination of experiences in the virtual and physical worlds? Is anyone trying? This edition suggests four radical ideas for transforming distribution, all based on my investigations and ongoing conversations with B2B innovators.
Inspired by Steve Jobs: Four radical ideas for B2B
I’ve been pushing my premise, first shared here, that: “In business, there is product. Everything else is distribution.” Distribution leaders and innovators have responded by suggesting that distributors must perform a set of immutable jobs to serve business customers. But with the advent of digital technologies and changes in our societies and economies, there is an open question around who will perform these jobs, how they will be performed, and how new customer solutions and services will be monetized.
I have found broad agreement that B2B innovations must explore the purpose, capabilities, experiences, and partnerships of distribution in the digital age. But I have also found that there is an extreme shortage of ideas in distribution communities that might radically transform distribution. This is a weakness. Without the generation of new, over-the-horizon ideas—and active exploration and debate of those ideas—B2B’s progress will stall or not go as far as it might have otherwise.
To help address this weakness, I suggest four radical transformations of distribution’s core purpose and functioning. My four ideas are radical transparency, control, intermediaries, and talent. Each of these ideas is rooted in research or brainstorming, but they are all hypotheses. Much work remains to flesh them out and road-test the concepts. Still, I hope to get the ball rolling with these radical ideas as well as others that I will suggest in future editions.
In a recent A16Z podcast episode, the host read aloud an article authored by Ryan Petersen. Peterson explained the origins of modern shipping containers and then made a radical suggestion. Just as the HTTP standard enabled the internet by creating a standard for sharing and tracking data between computers, could a standard for shipments and inventory shared among shippers, distributors, and customers revolutionize the global supply chain? Could such a standard achieve a more effective balance of efficiency and resiliency? What if the shared data included not only arrival dates, but also provenance, location, ultimate destination, condition, value-added, and a wide and deep range of additional information?
Building on Peterson’s suggestions, I can imagine several radical ideas. By placing shipment and inventory data in the cloud, new companies might emerge to manage the flow of goods and optimize overall system productivity. Inventory levels might be adjusted to move away from just-in-time efficiencies to include smart levels of just-in-case deliveries for added resiliency. Shipment of products from far-away locations to their actual point of use, while allowing for in-transit adjustment, might disrupt the need for industrial-scale warehouses. Artificial intelligence tools would optimize the delivery of mobile inventory and the need for pick, pack, and ship robots could be diminished.
In the current supply chain crisis, large companies are taking control of their supply by sourcing direct and cutting out distributors. Their goal is to ensure operational continuity by building in buffer stock. In several conversations across multiple industries, I have learned that a primary motivation for taking control is that distributors do not have direct knowledge of customer strategies, risk tolerance, or emotions. Distributors may add just-in-case inventory by asking customers for guidance, or for making their own assumptions about resiliency, but these adjustments are secondhand. Moreover, adding inventory is a cost that must be passed on to the customer. If large customers are going to pay for a more resilient supply chain, they want to be in control.
The emergence of integrated supply as a channel provides a precedent. Working at Frank Lynn and Associations back in the 1990s, I learned that integrated supply came to be as large OEMs sought to simplify factory sourcing from hundreds of distributors to numbers in the single digits. Distributors responded to this requirement by launching integrated supply services through revamped business models. Customers reduced acquisition costs and gained leverage over a smaller number of committed suppliers.
Radical control may be taken by customers or offered through disruptive services. Customer actions may be upstream, impacting the supply chain, or downstream, disintermediating distributors. New disruptive offerings may be designed to give customers control through inventory transparency and the ability to make manual changes or through algorithms designed to automate shipping and delivery to customer-defined specifications and operational requirements. Either way, achieving radical control need not be only for large customers. New platforms, software, and business models could emerge to share inventory and strengthen resiliency across an industry, for products with common characteristics, and for customers of all sizes.
In my research for Innovate to Dominate and Distribution Leans In, I discovered that as distributors push the boundaries of customer experiences and business model designs, many are seeking a new name to describe their role in the value chain. I wrote about this idea back in 2019 in an article, Is It Time to Rename and Rebrand Distribution? on the NAW Distributing Ideas blog. In that article, I reported on a Computer Reseller News (CRN) roundtable arguing that technology distributors were performing more and more non-traditional functions. I suggest that rebranding distribution should reflect how distributors help customers transform through new services. And how new supplier partnerships achieve improved collaboration and resource allocation for revolutionary outcomes.
Today, distributor business models are changing quickly. Some are renaming their business using terms such as specialist, integrator, facilitator, and more. The central theme seems to be that a radical intermediary is emerging, with game-changing capabilities. Radical intermediaries may offer:
Proprietary knowledge gained through selling and implementing supplier products and working on designing solutions for customer needs;
New processes for working closely with customers across a wide range of functions, including operations, finance, marketing, sales, leadership, human resources, product development, and more;
Responsibility for outcomes and assuming risk through contracted commitments and compensation, including performance-based pricing and negotiated profitability.
Radical intermediaries may result from a merger of platform and distribution business models to achieve best-of-both-world solutions such as network effects and value chain partnerships. Alex Moazed’s article, 2 Ways to ‘Marketplace’ Your E-Commerce Site, may be an early signpost of merging disruptive and traditional capabilities into a new, radical intermediary.
In many ways, today’s business crises are all about a talent shortage among blue-collar workers in the skilled trades. There is a shortage of truckers needed to pick up and deliver shipments from port facilities. Carhartt, the workwear company, has called attention to the value skilled tradespeople create and encourages people to seek careers in blue-collar professions. The most recent panic du jour, the great resignation, is about a mass movement of people leaving the workforce or refusing to return to previously held jobs. Recruiting, retaining, and motivating workers—especially those in hourly positions, blue-collar jobs, and the skilled trades—is a titanic problem.
I have found that many distributors, compelled by a sense of community and a desire to solve customer problems, are imagining new ways to help address the talent crisis. Distributors already provide training to users of suppliers’ products. In my research for Innovate to Dominate, I found distributors working with community colleges to offer apprenticeships, lending facilities for in-the-field education, and recruit students to work at their companies. In an article published for the Foodservice Equipment Distributors Association (FEDA), I reported on a distributor that repurposed facilities to build a kitchen, banquet facility, and garden. Motivated by the need to help revitalize the city of Detroit, Marc Israel’s distributorship helps shine a light on food service careers.
As distributors jump in and help with talent issues, a new, radical role around talent development is emerging. This change is a shift away from tagging customers as users and measuring success as selling them products. In the radical talent model, customers are named for what they are—workers, craftspeople, managers, leaders, or professionals. Success is measured by helping the customer perform their job, achieve satisfaction through work, and create wealth for a sustainable lifestyle.
Join our innovation community by asking questions
In all editions, I suggest questions to help readers apply my findings and ideas, and to search for innovation opportunities. This time, I especially need your help. Each of the radical ideas discussed above are just that, ideas. I’m looking for better definitions, evidence, and developments that can help define each radical idea as a transformational innovation. I’m looking for more radical ideas. In the end, I expect to sort, combine, evolve, and advocate for radical ideas to help B2B innovators achieve Steve Jobs-like transformations for the future of distribution.
Your answers to the following questions are greatly appreciated:
Have you noticed, or can you imagine, radical ideas emerging in your markets?
Who are the industry players or thought leaders associated with radical ideas?
What is your reaction to these radical ideas?
What would you need to know to consider radical ideas as worthy of your consideration or investment?
Do you accept the idea of identifying and exploring radical ideas as a method for driving B2B innovations and the future of distribution?