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The NAW/DREF Foundation published another "Facing the Forces of Change" study in early 1999. This study examines the convergence of E-Commerce, Supply Chain Integration, Globalization, and Alliances on the distribution industry.
When I try to read this through the eyes of a small to medium sized independently owned distributor it is very daunting. It makes a very clear case that things are going to get crazier. The key question from an owner's perspective is, "What can I do about it?"
There are two really dumb responses. The first is to ignore these large-scale changes and the second is to go into "the sky is falling" fear. I think the real answers lie in many of the earlier NAW/DREF studies. From a STAFDA perspective, I think the most valuable previous study was the "Reforming Your Business with Best Practices." This report mapped out the specific things that high profit and high growth distributors do that other distributors don't. Instead of a 50,000-foot perspective, it got down into the nitty gritty details. The earlier study took the mystery out of what to do, and the new study makes a strong case to act now.
All of this change and turmoil creates significant opportunity for those companies that can get ahead of the confusion. The key driving success factor is leadership to create innovation and change within the distributor. Without this leadership all the studies in the world will make no difference. Ask yourself how your executive team measures up in the leadership arena. How do you know you are putting the right amount of pressure on your company? This requires that executive leadership place their organization in a functioning level of pain that hurts current operating results. This means that leaders are willing to put some "skin in the game" and they are playing the game to win, rather than playing it not to lose. Some of the implications include:
- You have a clear plan and all your employees know how they fit into the plan.
- You are taking some things that are OK and raising the bar to make them not OK.
- Your salespeople think that you are risking long term customer relationships.
- You are defining how you will say no to certain customers and suppliers and you are actually doing it.
- You are making investments in technologies that have nothing to do with your legacy "computer package."
- You are changing how you do purchasing, warehousing, and sales to take advantage of these new technology alternatives.
- You are measuring activities and customer satisfaction in a formal way.
- There is no room in your organization for loyal yet incompetent people.
Think about your reaction to these implications. Your gut feel is probably the best measure of how your company "walks the walk." If you felt good, you are on the winning side of this confusion and turmoil. If you felt bad or confused, review the list that follows. These are the symptoms of poor leadership and probable failure.
- You say that you sell service but you have no hard performance data.
- You have a constant problem with FISH (First In Still Here) and JIC (Just In Case) inventory.
- You focus almost exclusively on making the numbers for the month and whine or make excuses when you lose a major piece of business.
- You look to your suppliers for loyalty and "margin help" to deal with rising competitive pressures.
- Salespeople set their own pricing and operate on their own without any activity planning.
If this list fits your organization, your executive leadership has fallen into the trap of maintaining the status quo. There are many companies in this situation. The real acid test of which list describes your company is how well you can attract and retain top talent and how high your growth rate stacks up to the industry.
In today's world, any distributor owner has the ability to be on the first list. Wisdom, scar tissue, knowledge, access to capital resources, and courage to take entrepreneurial risk define ability. These things were required to create and grow the organization in the first place. What is missing is not ability to deal with change, but willingness to face the pain. As owners age, their focus shifts from future gains to protecting an annuity. The fire in the belly fades for many as they become concerned with things like "quality of life." There comes a point where the old bull needs to step aside for the young bulls or even sell the business. One of the largest tragedies is that many fail to recognize when it is time.
What is our bottom line? The NAW/DREF studies provide a "data driven" model that distributors can use to win. When it comes to market based innovation, small companies move faster and can kick the butt of big companies. It is even lots of fun. STAFDA has provided many seminars and forums where distributors can learn the "how to do it" details. The "what to do" and "how to do it" is no longer a mystery.
The gap or missing piece is leadership. Peter Drucker said that constant discussion and no action is, in fact, a decision to do nothing. Whatever reaction you have to these ideas is your own to determine. Whatever you decide to do, at least do it on purpose.
Indian River Consulting Group is an experience-driven, general consulting practice that focuses on the wholesale distribution industry. They work hand-in-hand with their clients to implement solutions rather than just make recommendations. Focal points include Best Practices Audits, E-Commerce, Mergers and Acquisitions, and Incentive Design. Noted industry expert, J. Michael Marks, is the founder and principal of Indian River. For more information, visit www.ircg.com.
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