As multiple trends accelerate the pace of change, distributors must maintain a continuous focus on innovation. We find ourselves in a VUCA environment - the velocity, uncertainty, complexity and ambiguity that distributors are facing today are putting significant pressure on leaders. Take for example the recent strategic decision by Amazon to acquire Whole Foods. This singular decision has caused massive ripple effects throughout boardrooms across the country.
As Graybar CEO Kathy Mazzarella told me on an Innovate For The Future episode, Creating the Vision To Disrupt Yourself, “the forces and challenges that are facing us today, we’ve never seen before.” In other words, the rules of business are being changed in real-time. Consider:
- Digital transformation - data and analytics, the industrial internet and the internet of things are putting digital at the center of the new customer experience, while augmented reality, information modeling, and more are overwhelming many.
- Demographic trends and their disruptive forces regarding human capital and workforce planning. Our ability to attract and retain employees with the digital skills the digital world will require not to mention the workplace skills gap in the trades are impacting our businesses.
- Enhanced and non-traditional competition. Mergers and acquisitions and non-traditional competitors like Amazon continue to change the competitive landscape.
- Alternative channels - Research by tED Magazine and RW Baird showed that 69 percent of manufacturers believe that within five years there will be a significant increase in their using ecommerce to sell directly to the end user.
- Commoditization - The products we represent and the services we provide are all being commoditized. Distributors are finding that their relevance can no longer be primarily defined as getting the right product, to the right customer, at the right place and time. These capabilities have become table stakes rather than differentiators and as one distributor told me that if it comes down to that, “there are already companies that can do that better over the Internet.
And in this disruptive environment, our research shows 85 percent of distributors believe they need to reinvent their business before someone else does.
The Opportunity With An Innovative Mindset
Yet, I believe there is amazing potential and importance with wholesale distribution. Today there are plenty of reasons to be excited when it comes to wholesale distribution. There are somewhere between 250,000 to 300,000 businesses throughout the distribution industry. These businesses range anywhere from pure entrepreneurial businesses to Fortune 500 businesses. Distribution is a massive $5 to 8 trillion industry employing roughly 5.9 million people.
Think about those numbers! The auto industry – which is currently inventing driverless cars – is "only" a $900 billion industry, and here we are at 5 to 8 trillion dollars. In fact, wholesale distribution represents 6 percent of the overall U.S. economy. It’s absolutely integral to manufacturing, retail, health care and other sectors of the supply chain.
We can innovate! I mean if an industry that is one fifth our size can invent driverless cars – why can’t we bring new and valued solutions to the market? The answer is – We can! And to do so we need to insure the right mindset throughout our organization.
Everything Begins with Mindset.
Our research has shown that the pace of change is too slow in distribution. What hasn’t been addressed until now is “Why?” What’s holding back businesses from the needed change, transformation, and innovation?
In short, in the end, companies don’t change, transform, and innovate. People do. Leaders do. Leaders with an innovative mindset.
In 30 years of interviewing and working with leading distributors, I have identified the eight core mindsets of innovators throughout distribution. I’ll be sharing those insights and the ways to assess your current distribution business in a July 27th Innovative Mindset webinar.