Many companies think of themselves as innovators. If you believe everything you read in corporate mission statements, there are millions of innovative and visionary companies out there. Unfortunately, few actually are. In fact, most wholesalers and distributors are entrenched in their existing business model and legacy distribution software, incrementally tweaking it to try to boost sales or cut costs by a point or two. That short-term thinking ultimately prevents businesses from taking advantage of changing conditions.
This focus on short-term goals is reflected in NetSuite’s report, The Outlook for Wholesale Distribution in 2013. More than half of the distributors surveyed plan to increase revenues this year by selling more to existing customers or by expanding into related product categories. That may be a smart strategy, but it's not going to re-invent a business model or create a new market.
Innovation is the topic of a recent webinar for distributors, manufacturers and retailers: "The Key to Remaining Relevant in the Age of Disruption: Business Model Innovation for Distributors” hosted by NetSuite and Unleash WD, a conference for the distribution industry. Featured speakers included Dirk Beveridge, president of 4th Generation Systems, and Saul Kaplan, founder of the Business Innovation Factory. According to these experts, distributors that fail to experiment with new business model will fail to keep up with changing markets.
How do you transform your company into an innovative organization? According to the webinar presenters, innovators often share these five common traits:
- Any employee can explain the corporate business model. If employees can't understand the way the company makes money, they can't intelligently re-invent
- Innovation is a line item in the annual budget. Like R&D, high-level strategic thinking has to be a regular activity, with resources behind it.
- Ideas are road tested in a contained "sandbox" or laboratory environment. Just as software needs testing, so do new business models. Early testing in a regional market or a virtual market, helps prove or disprove the concept.
- Managers track trends in other industries. Good ideas can come from anywhere, so savvy business leaders keep up with developments in other industries. That helped Capital Coffee Systems, a provider of workplace coffee and beverage services, to re-invent its business model. Like many office beverage suppliers, Capital Coffee had a small menu of products which companies could order over the phone or fax. Capital Coffee's management noticed Amazon.com and Staples.com were gaining notoriety for their streamlined ecommerce sites, where the systems let customers buy a wide array of products and receive them quickly. It was those business models—not those of other coffee suppliers—that Capital Coffee used to reshape its business strategy. The strategy was a hit with customers and, today, Capital Coffee's offers a full line of services, equipment, and products—from onsite service, to single-serve brewers, to a variety of coffees and snacks—customers place orders online and can select from a wide range of products, from coffee cups and chips to first aid and janitorial supplies. The ordering system is founded on NetSuite and SuiteCommerce, which ties together related processes.
- That leads to the fifth practice of successful innovators: an ability to execute. Without an upgrade of Capital Coffee's front and back office applications, it wouldn't have been possible to automate all of the processes necessary for shopping, placing, purchasing, stocking, routing and delivering dozens of different products to its widely distributed customers. Capital Coffee's CEO Charles Brunson notes that migrating everything to one place, the NetSuite cloud, made it possible to integrate multiple processes.
Many businesses are investing in new technologies--namely e-commerce, CRM, mobile sales, and cloud computing--to help them improve both operational efficiency and customer happiness, according to NetSuite’s survey. These investments will put distributors in a better position to execute on innovations, as well as to envision new markets and business models.
Watch the entire webinar, "The Key to Remaining Relevant in the Age of Disruption: Business Model Innovation for Distributors” to learn more about innovation at http://innovation.UnleashWD.com.
-Ranga Bodla - Director, Industry Marketing, Wholesale Distribution and Manufacturing