Amazon is teaching everyone to want an increasingly better e-buying journey. Because Amazon is corralling next-generation B2B buyers’ searches, manufacturers are scrambling to create omnichannel solutions for B2B e-buyers.
How will distributors change to accommodate both the new needs of customers and suppliers?
Distributors’ standard service-bundle, including outside and inside sales overhead, will be pressured into un-bundling and then re-bundling in multiple ways. To do this, distributors will need to know their service-activity costs on an a la carte basis, and have a data-drive culture of innovation.
What? Why?
With a cost-to-serve model, distributors can do a two-step transformation:
1. Identify the big net-profit and net-loss cross-subsidies that hide within aggregated financial numbers.
2. Then, feed the winners and fix the losers to boost both their profits, and the courage needed to invent new business models.
By knowing the a la carte costs for each service activity, distributors will have 3PL-type flexibility. For key accounts, distributors can co-design customized replenishment systems and then e-integrate them. How customer-centric!
Getting best net-profit analytics is the easy part. The tough part is acting on new insights to first get super-profitable to enable digital business-model innovations.
My veterans won’t change
If culture is: “the way we do things around here,” as well as the get-along, go-along standards that we have accepted for too long, then most distributors have too many “set in their ways” associates who will resist any real change. What to do?
Start a new department
Headline: New department takes non-invasive, small, but high-impact steps.
Net-profit analytics at the line-item level, allows you to zero-in on one, best, focused experiment at a time.
To execute: Set up a standalone innovation department with a “champion of change” to secure targeted wins. Trumpet wins to induce the next-most ambitious employees to bid for innovation department help.
Change the culture one person/department/territory/branch at a time. Hardcore resistors will feel increasing peer pressure to embrace growth and change or leave. Why should a few entitled associates be allowed to sit in the company boat and watch everyone else row them to greater prosperity?
For the big burrito, going into much greater detail, request my Core Renewal Roadmap by email at bruce@merrifield.com.
