Many distributors have approached transformation in a piecemeal fashion. Most have only so many resources available and focus on one critical area at a time – in isolation from other dimensions of the business. Our team at IRCG has seen distributors addressing transformation in overlapping succession according to the most pressing priority, often starting with digital and moving on to sales, analytics and culture.
Yet, as Tom Gale of Modern Distribution Management and I discussed on the MDM QuickTake podcast, those distributors who take a holistic approach and account for all the ways each dimension will interact tend to realize greater competitive advantage and overall success.
“The companies that are really going to advance are those that can manage these different elements of trying to create competitive advantage in an integrated fashion.”– Tom Gale, MDM
This is especially true as we close out 2023 and head into a new year. The pressing nature of these four elements – digital, sales, analytics and culture – has converged. All are as important as each other, and all are going through consequential enough change that they warrant an integrated strategy – a business model transformation.
Fortunately for smaller distributors – and smaller businesses in general – innovative technologies are now more accessible and affordable. And smaller businesses are more agile, so change can be initiated quickly. Now, it’s less about your ability to afford and integrate them and more about your willingness to invest and work on your business, instead of continually working in it.
Don’t let urgency take precedent over strategy. Give yourself an advantage by taking a holistic approach and looking at all four dimensions in relation to one another. Also, understand that your strategy will look different from anyone else’s. There’s no one-size-fits all for a business model transformation, and different strategies for each element will have a different impact on your business compared to others.
4 Elements of Distribution Business Model Transformation
Digital Transformation: When it comes to digital transformation, technologies that help your sales efforts, and that take the friction out of the customer experience, are key. Investing strategically will mean salespeople won’t ever have to make a cold call again, and there will be no long term payback periods for your return-on-investment.
You might consider adopting:
- A modern Customer Relationship Management system
- An easy-to-use Quote-to-Cash electronic processing system
- A modern, cloud-based Enterprise Resource Planning system
- Inventory sharing
- Pricing software
- A modern Warehouse Management System
- Marketing Automation software
Sales Transformation: For sales transformation, it’s all about creating multichannel and omnichannel selling and buying experiences. Distributors must rethink their sales pipeline and understand that today, it’s not as much about pricing and more about how customers find and interact with you. Additionally, distributors must think strategically about taking field sales from being a lone ranger to being the point of the spear in a sales team, where they drive the market-making activities instead of being a traditional market-serving generalist.
Analytics Transformation: Already, analytics have made a major difference in productivity for distributors, significantly improving profits and generating reliable predictions. With analytics transformation, you’re giving management and your sales teams the data and tools to understand and segment your customers to make better decisions. Today, this doesn’t involve a massive overhaul and investment, and it doesn’t require extensive training to enable your team to make more informed decisions because they have timely facts.
Talent and Culture Transformation: For talent and culture, you want to build a culture that attracts the best people. Once you have that, there’s a snowball effect of acquiring good business and the best suppliers. This means accounting for the fact that today’s workforce has different priorities. And where profitability used to drive business, now it’s key to acknowledge that customers don’t come to you because you’re profitable – they come to you because your team creates value for them.
This is where smaller companies have a greater advantage. While larger companies have more bureaucracy and middle management following old handbooks, smaller distributors can adapt and pivot more quickly.
No matter your size, distributors need to adapt and change. A strategy for growth requires distributors to analyze their performance in all four elements and be willing to change to stay competitive in a rapidly evolving marketplace.