Living and breathing innovation in the distribution industry means I’ve worked with a lot of companies as they’ve introduced new technology platforms.
One of the biggest struggles many of these companies encounter is thinking of their technology platform in a silo. They think of these platforms as nice-to-have, IT-driven tools, and fail to recognize the major impact they can have on the company’s employees, culture, customers, value proposition and business model.
Here’s an example:
I worked with the CEO and management team of a $300M distribution firm, examining the company’s culture and facilitating strategic planning for the next several years. But as we dove into the technology discussion, things went off the rails. What had been a positive conversation degenerated into finger-pointing, disillusionment and an overall lack of hope. The challenges exploded, from the struggles in providing simple reports and forecasting, to reticence to implement any kind of change at all.
The company was moving forward trying to implement technological changes with no clear plan for how the technology would solve staff and customer pain points, create efficiencies and improve business outcomes. Without a sound strategy, the impact of the technology – both in terms of how it impacts employees’ jobs and the potential value it can bring to customers and the business – has gone unrealized.
This is when it became very clear to me that technology can be an inhibitor of growth if it is viewed tactically, as individual platforms and one-off applications. What became very clear is that the organization needed an overall mindset shift to look at technology holistically, strategically and with a vision for the future.
“There has to be an organizational mindset of thinking of technology as a journey, not just something we have to do, but rather it’s something that will enable the long-term success of the company,” says Ranga Bodla, who is head of industry marketing for Oracle NetSuite, a longtime partner of the Unleash Innovation Summit and cloud-based business software provider. “Distributors have not thought of technology as a core competency or even thought about how technology plays into their business.”
That must change.
Distributors must rethink how they approach technology adoption, implementation and upgrades. Here are three truths every distributor must come to terms with to create a technology strategy that works.
If you want to stay in business, you cannot wait any longer to adopt the right technology platforms
As Ranga puts it, “We’re finally getting to that point now where it’s really becoming a strategic disadvantage to not invest in technology.” Sitting on technology that is 10 or 20 years old to keep your tech budget slim means your company can’t take advantage of the changes taking place in the industry and in the world. Put simply: Traditional distribution is gone, and distributors who don’t embrace tech-assisted modern distribution will struggle to survive.
Here’s what’s really changed in distribution: You could once rely on the tried-and-true model of distribution – pick, pack and ship. But that model alone is not providing the value to customers or distributors themselves that it once did. “You have to think about value-added services, manufacturing, retail, how do I get closer to my consumers? The notion of a pure-play distributor, that’s really gone away,” Ranga says.
I agree. The reality is that your competition is no longer just the traditional local or regional competitor, it’s the entrant you don’t even know about. That entrant, like Amazon Business or any number of eager startups, likely does have technology as a core competency. In fact, these digital-native nontraditional competitors are changing the game through their technology-first mindset. It’s becoming very clear: You cannot wait any longer to embrace new technologies, and you cannot wait any longer to build a strategy around them.
Define your vision, value proposition and business model, and your technology strategy will follow
David Nettemeyer, director of business planning and analytics at Valin Corp., which has undergone a successful digital transformation that continues to innovate the company, offered some great advice:
“Define your vision, value proposition and business model, because your technology platform will then be designed to support those. These pieces must be in place to reap the rewards of your tech upgrade.”
Consider Berlin Packaging, a fantastic distributor I’ve worked with for many years. The company’s investment in enterprise resource planning (ERP) was born out of a desire to provide delightful, consistent, extremely excellent customer service by delivering 99% on time. That statistic is a key component of the company’s vision; it defines part of their value proposition to customers and is important to employees. This is the framework around which the technology investment is built.
PMC Commercial Interiors, a NetSuite customer and distributor, similarly deployed its technology investment with a clear vision guiding it. PMC, formerly known as the Raleigh Office Supply Co., grew significantly after it was purchased by current CEO Harry Chalker, who has been rapidly transforming the brand from top to bottom. PMC grew from 20 employees and $22 million in revenue in 2011 to 91 employees and $44.6 million in revenue in 2015.
Chalker’s vision is clear: Allow people and their imaginations to work better through spaces that powerfully reflect a company’s brand and culture and help attract and retain. As a distributor, they have doubled down on service, designing workspaces by carefully listening to and collaborating with their customers. PMC’s process is highly dependent on deeply knowing the customer and delivering solutions that address today’s rapidly changing workplace challenges.
But it was difficult to get that kind of collaboration and deep customer knowledge when the company’s legacy software systems were dated and required extensive manual, duplicative labor on the part of employees. Customer data was entered in a whopping 12 different places per customer order!
The company bet on technology upgrades and worked with vendors that intimately understood its business. The employees now work on unified systems that all talk to each other, and their customers can make small add-on orders through NetSuite without staff intervention. This frees up the staff to focus on larger projects – creating spaces that allow people and their imaginations to work better – and improves the customer’s overall experience. PMC knew exactly what it needed from the technology upgrade to match its vision, and as its strategy evolves, so does its use of NetSuite’s offerings.
The bottom line: Don’t think about your digital transformation or technology implementation in terms of technology. Don’t think about it as a process upgrade or the ability to track some interesting data. Think about it in terms of how it will bring your vision to life, how it will innovate your business model and create a whole new value proposition for customers.
Bite small, chew faster
“Implementing technology is not easy, and technology people have not made it easier,” Ranga says. “Everybody has a horror story about implementing ERP. It’s just a lot of work and things go wrong, things go south.”
Here’s part of the reason why: “The traditional way these technologies were implemented was like a big bang; you do it all at once. You rip off the Band-Aid.”
That strategy just wasn’t working. Seeing the struggle of implementation, technology vendors like NetSuite have learned how to better manage the shift to new technology. Ranga described their protocol as a “bite small, chew faster” method.
NetSuite’s current protocol is based on a stairway, with the intention of taking the customer on a journey, led by the company’s own early adopters and evangelizers who are identified early in the process and champion the journey.
“That journey is going to be different for every customer, but in every case you build those pieces up first and then build on that for each subsequent phase of the stairway,” he says.
For example, customers would start with technology that helps with inventory management, expands into supply chain management and lands with Internet of Things or AI integrations. Each step is manageable based on the company’s comfortability with and utilization of its current tech stack.
This philosophy also firmly fights against the idea of a one-and-done technology upgrade, a “digital transformation” that has a start point and an end point. That’s just not reality anymore; technology and business move too quickly. Agile methodologies are gaining in popularity, where short development cycles called “sprints” allow for continuous improvement in major technologies. This means that your digital tools are constantly being tinkered with, honed and upgraded.
If you’re ready to start implementing new technology but you want to do it right – with vision and strategy behind it – or you’re on a digital transformation or technology journey and you’re feeling like the pieces aren’t all fitting, our Innovation Summit can provide you with the framework you need to handle this process in a way that maximizes the impact of your investment and gets your team excited about implementation.
Our summit each year involves conversation about how technology is impacting the business of distribution. This is not a conversation about bits and bytes or feeds and speed (though our experienced distribution leaders are always happy to talk tactics between sessions). Through our conversation about becoming an innovative distributor, we look at the trajectory of technology and how it is transforming business – in the context of your future vision, business model, and even culture and value proposition of the future.
For over 25 years as a consultant to a wide range of companies, Beveridge has helped leading firms align, focus, and strengthen their sales and leadership strategies to remain relevant, outperform the market, and provide deeper value to customers.
Dirk can be reached at email@example.com or 847-381-7797.