We need to have deeper conversations about the commoditization of everything.
If we are honest with ourselves, most distributors are stuck in a world of sameness. If we were to ask our customers why they buy from us, in most instances the customers can’t articulate a real point of differentiation or an identified value creator that separates one distributor from another.
We live in a world of abundance. A world of suitable options. A world of commoditization. Our customers can get the same thing from someone else. And in most cases at a cheaper price. And in the age of Amazon, they can get this same thing faster than ever before.
This is due to the commoditization of everything: products, services, sales, marketing, operations, customer experiences, customer service — everything!
And as leaders we must figure this out for our business. This is one reason I have asked Andrew Berlin to open our seventh-annual UnleashWD Innovation Summit Oct. 3 in Chicago.
Berlin is perhaps the best business leader I have had the chance to work with and learn from over the last 30 years. He is a creative, hard-charging leader who has created a company valuation of $2.6 billion (up from an $11.5 million valuation in 1988 when he purchased the company), maintained double-digit growth every year for more than a decade with revenue of more than $1.3 billion (up from annual revenues of $69 million) and defined a differentiating value proposition built on compelling innovation.
Berlin Packaging is a supplier of packaging. To many, the distribution of packaging has been commoditized. But Berlin and his talented team of leaders have built the company into a juggernaut in the absolute and certainly when compared to the small, struggling company he joined.
The point is, in a world of the commoditization of everything, Berlin and his company bucked the trend. And it wasn’t by accident. Berlin’s embracing of innovation, culture, strategic partnerships, differentiating value propositions, unique business models, commitment to execution and operational excellence, and their array of complementary businesses that enhance customer relationships and quantifiably improve their client’s profitably is a story full of lessons that can be learned from.
What is your vision for the future?
I was having dinner with the owner of a $50 million distributor talking about the onslaught of disruption that distribution is in the midst of with generational shifts of employees and customers, disruptive technology, intensified competition, alternative channels, the commoditization of everything (see above), transfer of power to customers and end users, compressed margins … and more.
With the speed of this change, and maybe more importantly the confluence of this change, it’s easy to get lost in the fog of uncertainty. In fact, over a glass of wine, this owner said to me, “Dirk, the sad thing is I have no vision for the future.”
And he is not alone. We all get caught in the tyranny of the urgent. Distribution is a busy and complex business and it’s easy to get pulled into the fray of the day-to-day. And without vision, there is no change, transformation or innovation.
At UnleashWD we’re going to hit on six premises that will help lead you through an ever-changing landscape.
- Entrepreneurial distributors who optimistically embrace the possibilities that today’s fast-changing world presents will win.
- Distributors that win the future will be technology enabled, making the needed investments to insure relevance.
- Many distributors face an internal struggle with desire for growth, change and innovation, yet are pulled back to security and even yesterday.
- For distributors to win in the future they must double down on building an inspired workforce that has the skill sets required in the new digital age.
- Innovation begins and ends with leading customers to a better future for which they are willing and capable of rewarding you.
- Companies don’t change, transform and innovate.
Lead customers to a better future
A few years ago I found myself at dinner surrounded by an impressive group of 15 wholesale-distribution owners and industry association executives. The conversation was serious.
One of these owners focused the conversation when he shared that he is faced with and weighed down by the constant pressures that come from all directions. The pressures could be competitive from the marketplace or come as a result of some new government regulation, shifting demographics, the accelerating pace of technology and more. We live in disruptive times, he said.
He reminded us all that business leaders constantly struggle with how to create a sustainable and relevant business. What was crystalized for me and the others at that dinner was what made our business relevant in the past, might not make us relevant in the future. What made us profitable in the past, might not make us profitable in the future.
Relevance and profitability will be found through innovation. Now, innovation does not mean that you must come up with the next iPhone or Tesla Model 3. I define innovation as:
“Leading customers to a better future for which they are willing and able to reward you.”
I identify these innovators as the “innovative distributors.”
Those who redefine their relevance and profitability in the future will focus on these critical success factors:
Vision and culture: Innovative distributors have created a vision for their constituents built around continuous improvement, transformation, change and a bright future. The leaders of these organizations set the vision and keep pushing for it. And they acknowledge that without aligned employees there is no innovation.
Value proposition: In a world of commoditization, such innovative distributors are perpetually working to understand the articulated and unarticulated needs of the customers and markets they serve. The voice of the customer is paramount in all they do as they work to enhance the customer’s experience in differentiated and meaningful ways.
Business model innovation: Once the value proposition is defined, an innovative distributor defines the business model — how it will create, deliver and capture value. A commitment to experimentation unleashes new models of serving customers in the ongoing quest to remain relevant.
Transformative leadership: And in the end, no sustaining innovation happens without leaders who are prepared to lead the organization to a new future.
Innovative distributors understand that stimulating change is the job of every leader in the organization.
Are you ready to innovate?