For distributors, the time to transform is now

Distributors for years now have been aware that their industry is evolving rapidly -- new technologies, the rise of e-commerce, the need to attract younger talent, the changing needs of the customer, the threats from competitors old and new.

This week’s NAW 2018 Executive Summit featured speakers and panels that addressed all of these issues under the theme of "Transform Or Be Left Behind."

Some looked back to look forward, as with Jim Tompkins, who explored several years worth of NAW Executive Summit themes, the leading customer themes of the past several years, and how data collection has been overtaken by a need to harness and capitalize on data.

Meanwhile, Jonathan Byrnes of the Massachusetts Institute of Technology and Profit Isle stressed to attendees that the future is now -- there is no waiting to act if distributors want to survive, much less find “islands of profit in a sea of red ink.”

What do all of these things have in common besides addressing issues near and dear to distribution leaders? A sense of urgency, and a sense that the old normal is no more.

As Byrnes said, 2018 is a make-or-break year. “If you act quickly and decisively” in your business transformation efforts, he said, there are great gains to be had.

On the other hand, “if you don’t act decisively this year, you’re cooked.”

Highest service or lowest cost

This rapid change means traditional distributors shouldn’t look at direct attacks from competitors, Byrnes said. Rather, it’s about competitors seeking to do things distributors can’t. Whether that’s manufacturers selling direct, or third-party logistics providers taking on new roles, or the melding of B2B and B2C. Buyers and channels are not what they used to be; warehouse management is becoming a commodity; and even old measures of profit aren’t as reliable as they once were.

What can distributors do? Well, Byrnes says, they can be high-service or low-cost companies. They can’t do both, and if they aren’t the best at one of them, they’ll be passed by. And, to do so, they’ll need to be clear on what their “islands of profit” are today and what opportunities exist to carve out new islands.

Grit, insights and the types of change

Clearly, many companies are going to have to make drastic changes to get to where Byrnes says they should be.

That is where Tompkins came in. He reiterated the need to “take control of your future” in two ways: one, understanding what today’s customers need, and, two, understanding that “transformation” is just one type of change in response to one set of conditions.

His presentation explored past focuses on customers and led attendees to the six key needs of customers, including classics such as cost and convenience but also newer concepts such as collaboration and the variety of channels today.

After that, Tompkins moved on to discuss the importance of understanding how to respond to threats. Continuous improvement is a well-known concept that is effective when a company is successful and plugging along. However, he said, it’s the wrong response when faced with a disruption in product or service. It’s then that “transformation” is needed.

But even transformation can be misused. Let’s say the next disruption is in your business model. Using transformation to roll out a new service or product is ineffective against this type of attack, Tompkins said. Instead, you must adopt “reinvention,” just as a caterpillar metamorphosizes into a butterfly.

How does one meet these customer needs and outflank disruptors? At a high level, you do so with what Tompkins called “rich insights” from the data you have, and you also need a strong dose of grit, or what he defined in part as “passion and perseverance for long-term goals.”

Echoing Byrnes' warning on the urgency of change, Tompkins warned distributors that the pace of innovation isn’t going to slow down. “Today is the slowest day of the rest of your life,” he said.

Today is a period of difficult challenges and choices for distributors. But Byrnes and Tompkins didn’t say these challenges couldn’t be overcome. They came to offer a blueprint for thinking and acting decisively, and to warn that the dangers of not acting are far greater than the risks of taking action.

 

James daSilva is the longtime editor of SmartBrief's leadership newsletter and blog content, as well as newsletters for distributors, manufacturers and other professions. Before SmartBrief, he was a copy desk chief at a small daily New York newspaper. Contact him @SBLeaders, @James_daSilva or by email.