18 Innovation Tips for Distribution Industry Leaders
Published on by Chris Perrino in Consulting, Wholesale / Distribution
Fellow and author for the National Association of Wholesale-Distributors and CEO of the Network for Business Innovation, Mark Dancer, recently led a thought-provoking webinar for regional distribution industry leaders where he gave his perspective on why innovation is critical for distributors today – and for success tomorrow and beyond.
Dancer’s insights and poll question results can be distilled to 18 distinct tips that can guide you on your innovation journey in this fast-changing industry.
Distribution Industry Tip #1
71% of webinar attendees said that innovation/digital transformation at their company is a top priority, but not the most important, while 12% said it was the most important priority.
Distribution Industry Tip #2
Most distributor innovations during the pandemic were implemented to keep customers operating without disruption.
Distribution Industry Tip #3
Implementing best practices is simply catching up. True innovation requires leapfrogging ahead – or fundamental changes to the business model.
Distribution Industry Tip #4
Elements of the Business Model: Innovation requires a business model change in one or more of these elements (elements from Strategyzer)
- key partners
- key activities
- key resources
- cost structures
- value propositions
- revenue streams
- customer relationships
- customer segments
Dancer adds another element to this list: customer experience.
Distribution Industry Tip #5
Here’s how distributors are innovating:
- digital transformation
- AI/machine learning
- process automation (vendors may be able to help)
- robotic process automation (best for hard, dirty, or complex duties)
- adding data sensors (moving toward the Internet of Things)
Distribution Industry Tip #6
A key theme for innovation in distribution: Transforming the concept of distribution from “products in the warehouse” to “customer experience in the real world.”
Distribution Industry Tip #7
The path to innovation can be summarized in these four steps:
- determine your vision for the future
- document your purpose
- decide which trends will help you achieve your purpose
- leapfrogging initiatives will help create partnerships with vendors
Distribution Industry Tip #8
Customer relationship management (CRM) = change management (it’s not just flipping the switch on new software). Document your sales process before implementing CRM.
Distribution Industry Tip #9
During the session, an attendee asked: “should distributors sell direct to consumers via e-commerce?”
According to Dancer, there isn’t just one answer to this question, and he suggests the following considerations:
- What does direct selling entail?
- Why do customers buy?
- Usual supplier stock out?
- Will others in the channel be disgruntled?
- Will your customer’s customer be served better?
If the answer to that last question is yes, then selling directly to the customer’s customer will likely strengthen the relationship with the distributor’s customer.
E-commerce could strengthen customer relationships if you solve your customer’s customers’ problems.
Distribution Industry Tip #10
An audience poll asked about plans or progress for innovating or digitally transforming their business. 70% responded that they were either actively driving business innovation/digital transformation or that they must modernize to do business with next-generation customers.
Distribution Industry Tip #11
Key innovation concepts to keep in mind:
- create and regularly revisit a digital vision statement to keep progress on track
- innovation doesn’t require scale – small companies can use perceived weakness as a strength:
- more agile and often closer to the customer
- able to work with smaller customers that bigger distributors may shun or not serve well
- smaller size often enables stronger building of relationships and trust
- only pick battles you can win
Distribution Industry Tip #12
Another attendee poll question asked what participants see as their greatest advantage for innovating or digitally transforming their business. Responses were fairly evenly split between:
- culture or people
- digital technology capabilities
- customer knowledge or relationships
- industry or product knowledge
Distribution Industry Tip #13
A great resource for a closer look? Mini e-book “Distribution Leans In,” summarizing Mark Dancer’s February 2021 interviews with distributors. It’s available here from the National Association of Wholesalers.
Here are some COVID-related changes distributors reported making:
- distributors made changes so they could step up for their customers
- distributors were resilient – to keep their customers in business
- focus on problem-solving rather than order-taking
- adopted a view of their role as the “center of commerce”:
- “We provide solutions” instead of “we have products – do you want them?”
- “We’re a resource for how business gets done today – and how business is evolving.”
Distribution Industry Tip #14
Looking for real-world examples? Here are a few from “Distribution Leans In.”
- using digital to make the customer’s life easier or safer – installing lockers (like Amazon lockers at grocery stores and other retail outlets), at Will Call to limit face-to-face contact
- innovating through culture – distributors doubled down on safety to keep employees healthy, protected, and working – building loyalty
- showing commitment to customers and their employees – one distributor hired mental health professionals to help a customer’s employees deal with layoffs and other pandemic-related anxieties
Distribution Industry Tip #15
Another poll question asked distributors what their most significant barrier to innovation is. The top responses? People/culture and digital capabilities. Note: cashflow wasn’t one of the options, but Mark noted it can also be a significant barrier.
Distribution Industry Tip #16
How to increase customer focus? Visit them. Ask customers what changes they’ve implemented since the start of the pandemic. This provides intel and allows the distributor to determine how to respond to changes customers have made and their impact on the distributor.
Distribution Industry Tip #17
When asked via poll what innovations are underway now or soon will be at their company, attendees’ top three answers were:
- process automation
- customer experience
Distribution Industry Tip #18
Distributors reported that the most important support they need to innovate and/or digitally transform their business are:
- working in groups or collaborations
- coaching or mentoring
The ideas, insights, and observations Mark Dancer shared provide distributors with an expert’s perspective on why innovation is critical in the industry today – and what it means for tomorrow’s success. Ideas are a place to start to build an innovation plan that works with the specific factors of each segment of the distribution landscape. Ultimately, the execution of the plan will determine which companies will lead in the decades ahead.
Get your distribution business on the right track
Have a question about sparking innovation for your distribution business or what the financial impact could be? Get in touch with one of our distribution industry pros. You can also watch Mark Dancer’s presentation on-demand and download the slides.