What is “Innovate to Dominate?” What does it mean for distributors? How must distributors innovate given the COVID-19 crisis?
In this episode, Richard Blatcher, Director of Industry Marketing and Business Intelligence at PROS, and Mark Dancer, Author of NAW’s Innovate to Dominate: The 12th Edition in the Facing the Forces of Change Series, introduce the NAW Podcast Series: Innovate to Dominate. They describe that in the coming episodes, they will interview John Caplan, President of North America B2B and Globalization for the Alibaba Group; Alex Moazed, Founder and CEO of Applico; Sean McDonnell, Founder and CEO of TruPar.com; Ian Heller, Founder and Senior Partner at Distribution Strategies, Inc.; and other leaders in the distribution industry. This episode also explains that after the interviews, there will be an episode with lessons from leading innovators, and another about the barriers that hold distributors back, with practical steps distributors can take towards innovation.
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For more information about the podcast series, the webinars, and the book, visit www.naw.org/I2D or www.pros.com/NAW.
In this Episode:
[03:00]: About the Innovate to Dominate in the context of COVID-19
[09:00]: About upcoming guest: John Caplan, Alibaba
[12:00]: About upcoming guest: Ian Heller, Distribution Strategies, Inc.
[17:00]: About upcoming guest: Alex Moazed, Applico
[20:00]: About upcoming guest: Sean McDonnell, TruPar.com
[23:00]: About customer loyalty in these challenging times
Richard Blatcher: Well, hello everybody, my name is Richard Blatcher, I am the director of industry marketing, here at PROS. I'm very excited to introduce you all to the first episode and the introduction to an exciting new podcast series, which is part of an initiative that PROS is doing in partnership with the National Association of Wholesaler Distributors....
Richard Blatcher: I'm very delighted to introduce Mark Dancer, who is the author of the book and the research. Mark, maybe you'll be so kind as to introduce yourself? But most importantly, just give the viewers a little insight and introduction to what Innovate to Dominate is, because I believe it's the 12th in the series of the Facing the of Forcing of Change initiatives that the NAW have undertaken.
Mark Dancer: Excellent. Well Richard, I'm happy to be here again, and happy to talk about the podcast series. I think we have a lot of great insights to share, and it's going to be very, very exciting.
I am a fellow for the NAW Institute for Distribution Excellence, my business is the Network for Business Innovation. When we started out to research and write Innovate to Dominate, which you're right, is the 12th edition of the Facing the Forces of Change series, we decided to do something different. We decided to make it not a report on trends, because in today's fast changing world reports on trends are current for a very short period of time before they lose their value. Instead, we decided to help distributors connect the dots between the forces of change, the things that are reshaping how customers buy, and how businesses operate. We wanted to connect the dots between those forces of change, and how distributors can actually innovate their business model.
Mark Dancer: Innovate to Dominate, really, is about helping distributors go on offense. It's about helping distributors respond to the threat of disruption, and maybe disintermediation with their own ideas, with moving their business in new directions, and new customer experiences, new partnerships with suppliers. It all comes down to, what is the business model of a distributor, and how can we innovate that to be competitive, and to be a leader in the marketplace going forward?
Richard Blatcher: Now, the book and the research was published a while ago. We're both sitting here, on a Zoom call in early May, in the midst of an unprecedented crisis. I think the podcast series, this is going to be a series of several episodes on a weekly format, which is going to include some forthcoming interviews with some important innovative and influential individuals. And, it also includes some very, very interesting and thought-provoking interviews that we've both done. For example, at the important national executive summit, the NAW's executive summit earlier in the year, in Washington.
Richard Blatcher: Maybe you could just talk a little bit about Innovate to Dominate in the contest of this crisis, because of course, this is what keeping a lot of distributors awake at night. There's a lot of information in several of the chapters, which is more relevant than ever before just because the move to digital, and a lot of what you talked about has just exploded over the last few weeks.
Mark Dancer: Absolutely. I think in any crisis, the initial reports on what happening, and the predictions for the future are seldom very accurate.
As distributors have struggled with how they're going to maintain their customers and keep their business running during the crisis, they've worked on those issues. As they get through them, the crisis is still significant, and it's still a drain on business, it's still very hard. But, distributors are starting to think about, well, what comes next? How does what's happening in the crisis affect the way that business is going to be run in the future, and the way customers are going to want to buy?
I think there's an opportunity for distributors to be curious, to avoid group think, to not accept the early definitions of the new normal as gospel, and to really work with their customers to say, "How is this crisis changing the way you're running your business? And, how can I support you now, as you're coming out of the crisis, and going forward?" In that sense, the crisis is an opportunity to create a new dialogue, a sustained dialogue with customers about the future.
That's really what Innovate to Dominate is all about. The first chapter in Innovate to Dominate is titled Enable the Future of Business, and it's major finding is that, from all the conversations we did with distributors, and customers, and innovators, is that the path to the future, the best path to the future for distributors is to help customers find their way, to help them find their way. Every customer of a distributor is asking the same questions of their own business that distributors are asking about the future of distribution. They're asking questions like, what does digital transformation mean? Do I have to worry about being disrupted? How can I respond to the changing generational values from my customers, the customers of the customer, as well as their own employees?
Distributors, rather than thinking defensively about how to protect their business from people that might want to take it, disruptive marketplaces and that sort of thing, the path to the future for distributors is really about working with customers to say, "Where do you think your industry is going? How can I help you get there?" As they do that, they'll find things out for their own business that can be very relevant in changing their own business model.
After the first chapter, we have three chapters which are, really, scenario analysis. We worked with distributors, and brought innovation ideas and new perspectives, and then we brainstormed, in chapter two, about how would you go to market if all markets were virtual. Chapter three is about revitalizing the value chain, the traditional partnership between manufacturers and distributors, to serve customers. The chapter after that is about realizing that, while we talk an awful lot about online buying, and the power of digital technologies, which are huge, business is still done as people working with people. So, that fourth chapter is about how do we think about human centric innovation? What can we do that's of value to our customers when we're working side by side with them, in the real world?
We have a chapter on innovation ecosystems. The idea is that the further the distributors push their businesses in new directions, the more they're moving into uncharted territories, and they need to aggressively, and professionally, and in a disciplined way, find companies and thought leaders to help them get that way, to help them get to the future.
The last chapter has a very important point. The last chapter's title is actually the same title for the whole book, which is Innovate to Dominate. We point out that the ultimate differentiation for distributors is not the products that they sell, and even the services they offer, the ultimate differentiator for every distributor is the business processes they put in place to innovate their business and keep it current, and the culture they create amongst their employees.
That was a long discussion, perhaps, but Innovate to Dominate is a roadmap for innovation for distributors. Every chapter is a piece of that journey, and it's something that distributors can go to now, to think about how they come out of the crisis, and how they work with their customers to find the future.
Richard Blatcher: It's probably more relevant than ever. Just this morning, I was looking at results, and the language used there are, and I quote, "quick pivot, dramatic shifts in customer behavior." So, these things, more than ever, are requiring innovation, and as you say, a lot of that roadmap in the book gives some tangible actions, and ideas, and approaches that can help distributors win in that new normal.
Now, we've been interviewing and talking to some really interesting people, to that point. I just would like to explore some of the conversations that we've already had with the forthcoming episodes within this series. I'll probably start with John Caplan, who's the president of B2B North America, and globalization for Alibaba. Maybe you could talk about a couple of those points, around his platform approach, his customer relationship approach? Which is just so interesting, particularly in these times.
Mark Dancer: I think it's potentially very powerful for distributors, and it is definitely very different than the other platform based online marketplace that dominates in North America, that they could be on.
I really like the way John Caplan explained that the sellers own their customer relationship. Alibaba offers CRM benefits as part of their platform, but they're really about connecting customers and distributors, or suppliers. They can do that globally, so if a distributor wanted to develop business overseas, they can make that connection. They can also do it in North America. I think John talked about a distributor who sells on Alibaba may service customers in Los Angeles, even if their platform is in Detroit, so it's not just a global company.
As Alibaba explains what owning the customer experience means for distributors who might choose to take their products to market on Alibaba, Alibaba has no problem at all with a distributor thinking of Alibaba as lead generation, of finding a new customer, and then servicing that customer. And, maybe continuing to serve that customer on Alibaba, or migrating that customer to the distributor's other channels that they go to market through.
Mark Dancer: So, it's an interesting option, and I think it's one that distributors should consider. At least, in comparison to the other online marketplaces that they can choose to participate in.
Richard Blatcher: Yeah. It's digital, it's agile, it's instant, it's fast, which are all key phrases that we keep hearing about with a lot of the discussions that are ongoing, particularly exaggerated by this ongoing crisis.
Mark Dancer: Absolutely. Absolutely, and it's world class. Alibaba is unfamiliar to many businesses in the United States, at least in terms of actually doing business on Alibaba, but they're a large global company, and the platform, and the customer experiences they offer are world class. I think if distributors are going to be more innovative in the future, the mindset of the leaders and whoever's responsible for driving innovations, everybody in distributor, they all need to be curious.
Mark Dancer: Curiosity is a requirement for innovation, and I think that checking out Alibaba and comparing it to other online marketplaces now, during the crisis and later, is something that distributors should do. They should understand what's available and decide whether or not to use it.
Richard Blatcher: Now, you talk about marketplaces, so I think that's the perfect segue to another episode, where we talk in detail to Ian Heller, who's the former president of Modern Distribution Management. He's held many executive positions with large distribution companies, and founded Real Results Marketing, and is also very involved in a new initiative around distribution strategy.
Richard Blatcher: Now, Ian was talking a lot about how important it is for distributors to have those marketplaces as a channel. And also, made a really interesting point around the fact that Amazon does not want to include this human interaction. So, these are two things which, again, come up in the book a lot. Maybe you could talk about a couple of those points, that you talked to with Ian about?
Mark Dancer: Yes, absolutely. I think in Innovate to Dominate, we point out that choice between having online and virtual channels and having human interactions with your customers. There's not really a choice at all, you have to do both.
What Ian shared in our conversation was several things that were very, very powerful. One, he absolutely advocates that every distributor must have both a marketplace strategy and an AI strategy. You can't go to market, you can't think about the future of your business if you haven't thought about whether or not you want to play on online marketplaces, and how you will do that. You can't think about your business and its future if you haven't decided how you want to incorporate artificial intelligence tools into your core capabilities.
Ian also argues that distributors future may be more about services than anything else. I think of services, in Innovate to Dominate especially, as the execution of value of one business to another, of one person to another. Distributors have to be online; customers want to buy that way for some or all of their buying process. But in a sense, that's going to be an anti in the future. Customers will have lots of options for buying online, and what will differentiate distributors is, I was exploring this topic with Ian, is their ability to offer new, value added, really value creating services for their customers.
The last, I think, major point that Ian raises in our podcast discussion is that every distributor really needs to think about its value proposition. It wasn't so long ago that if you knew of a distributor, it was a broad line distributor or a specialty distributor, you knew what their value proposition was going to be. But going forward, in the very near future, if distributors are offering very powerful services, the value proposition the distributors offer may vary a lot from one distributor to another. So, getting skilled on branding, and marketing, and how to design and communicate your value proposition is another important of being a distributor in the future, the very near future, that Ian talks about a lot on the podcast.
Richard Blatcher: Yeah. He also talks a lot about these new skills and this new approach of listening more to the customer. When you talk about AI, that's in the context of turning so much transactional, historical market data into actionable insights, and having strategic pricing, and basing on true value, and adding those services, and building those models, right?
Mark Dancer: Yes, absolutely. Distributors are on the front line of serving businesses, and they have been for a very long time. So, there can be a little bit of a blind spot when somebody tells them that they have to listen to their customers, but I think it's really, really important, and it's really, really powerful. We're going through changing times, the expectations that customers have for their suppliers, distributors, and manufacturers is changing.
I think that listening ... Really, as I was listening to Ian and thinking about it, he made me realize that listening to customers really happens on two levels. One is listening to data, looking at the data in your own system using analytics, artificial intelligence, and looking for opportunities to solve new customer problems, suggesting what they should buy, that's a form of listening. The other sort of listening is, actually, how do the people that you have, that interact with your customers, talk to them?
We explore this in Innovate to Dominate, in the first chapter. Do you really understand why your customers want to hire you as a supplier for their business? Why do they come to, and has that changed? Is it different than it was 20 years ago, or 10 years ago, and is it changing in the future? Really, a form of active listening is required. Looking at the data and seeing what it means, listening to what customers can tell you about the future, taking them ideas, and engaging in the conversation. I think that's the path that Ian talks about a bit in the podcast, and it's a path to the future.
Richard Blatcher: Now, to thank you, we talked a lot about marketplaces, and in your introduction, you also talked about platforms. Now, another one of the episodes, we have a detailed conversation with Alex Moazed, who is the founder of Applico, and author of Modern Monopolies: How to Dominate in the 21st Century, the book. He talked a lot about how distributors much understand and embrace the platform approach, so maybe you could talk a little bit more about that approach for a distributor?
Mark Dancer: I don't think I've said this before, but I think about Alex as a great mind from the other side. He's not from distribution, his business has been about building, and optimizing virtual marketplaces, and all the other forms of platform-based business models that he describes. He's learned how to talk to distributors, but he's not from distribution. So, listening to Alex is very much about understanding what a platform business model is, because if you don't understand their business model, you can't decide how you can benefit from participating on them, and you can't understand how to compete with them, if that's the path you choose.
He can really help you understand their business model, and he can also help you understand how to build your own competitive advantage in the age of platform business models. Alex, on our podcast, explains that he thinks that ... he calls them vertical specialist platform businesses, may emerge. For distributor leaders who have been around for a while, you might think about this as a specialty distributor on steroids. Especially distributors that offer deep product knowledge, and a tighter selection of products, they really understood the industry, and they helped their customers with applications and solutions. There's a model that distributors can either join or be part of that might feel very comfortable with them, even as it is revolutionary and game changing. It's a platform-based business model, it's not a traditional, linear business model as a distributor operating in the value chain.
I think Alex, the insights he has for distributors are both be aware of what's happening, know as much as you can about the platform businesses, chart your own course, and go on offense. Figure out how you can participate in the world of platform businesses, to thrive and survive.
Richard Blatcher: Now, it's important to give real world examples of these approaches in action, and another important episode is with Sean McDonnell, who's the founder of TruPar. Now, of course, that I would argue is a really good example of a lot of these approaches in action, so almost throwing out the traditional rule book. 45,000 customers, 7.5 parts and growing rapidly, over 600 brands I think it is.
Richard Blatcher: Sean talks a lot about his approach, how he's set it up, how the growth of the business is going, and it's almost an example of a lot of what you just talked about, and what Alex, and Ian, and John have talked about, in action.
Mark Dancer: I think that Sean is, in some ways, the future of distribution, in the sense that he is the son of a distributor. His father runs a distributor in the industrial space. When Sean decided he wanted to think about building a web store, he started to do it with his father's business, and he found out that there was a bit of clash of cultures. I think everybody needs to listen to the podcast to understand Sean's perspectives on that, I wouldn't speak for him.
But what I learned from Sean was that, when he decided to start a web store, he sought out best practices for running an eCommerce platform, and he looked primarily outside of distribution. He brought those ideas back into a very successful business model that any distributor could build, but really incorporates the best practices for a state-of-the-art web store, into serving the customers of distribution.
The other thing that Sean talks a lot about is having an insatiable curiosity. Curiosity doesn't end when you decide to build a web store, because you're wondering how it might work, and if you need it, and how your customers might buy on it, it lasts forever. So, he's always thinking about how he can improve the customer experience, how he can let customers know the value they're getting from the web store when they buy on TruPar, and how he can build loyalty in new ways. What is loyalty in the digital age for customers that are choosing to buy their products on a web store?
Ultimately, I think Sean's lessons come down to culture. How do you build a culture around a web store, which is a different type of business? And, how do you do that within, apart, or aside with the distributors traditional business culture? Lots of lessons for everyone from Sean.
Richard Blatcher: Another central thing that comes across with everybody is this trust and loyalty. Sean talks about competitive loyalty, and Ian talks about loyalty, John, Alex, they all talk about loyalty.
Richard Blatcher: Maybe you could just explore that for us, about how important this trust and this loyalty is, particularly in these challenging times?
Mark Dancer: I think, across all of the interviews that we did, with John, and Alex, and Sean, and Ian, for the podcasts, there is this theme, either expressed or behind the scenes, about how, in the B2B world, do we create trust and loyalty. I think it's a major difference than in the B2C world.
In the business world, customers are businesses, and they have expectations about the honesty of their supplier, about transparency, which has become, really, really important. Transparency means, visibly, the prices, it means visibility to delivery expectations, it means visibility to performance, good or bad.
As the lessons that everyone, John, and Alex, and Sean, and Ian shared with us, as distributors start thinking about how to apply those lessons, it ultimately comes down to how do I think about my customers, and build trust, and build loyalty in new ways. Digital transformation is happening in every business, distributors business, in their customer business. Platform businesses are emerging to ask for customer business. But in the end, business is still down between businesses. My business and your business, my people and your people, and it comes down to trust and loyalty.
I think every distributor would do well by listening to the entire podcast series, and out of each podcast thinking about what did I learn about building trust and loyalty in the modern age.
Richard Blatcher: Well Mark, thank you. We're excited to launch the podcast, which will be a series of weekly podcasts, and will, of course, include the details of how to sign up, and subscribe to the series. But, this is part of the whole initiative that we're working on, and there's a lot of information already available.
Richard Blatcher: Of course, we'll share the links to purchase the book itself, and we've already recorded a very interesting webinar and broadcast with Mike DeCata, who's the president of Lawson Products, of course. We'd encourage people to get hold of the book, to watch the webinar, sign up for the podcasts, because we have other episodes planned. We've interesting influencers, ultimately leading to this roadmap for success for distribution.
Mark Dancer: I think all of that is true. One of the key lessons I learned in research and writing Innovate to Dominate, and working with distributors, and brainstorming with them about the lessons and ideas that we would share, is that no company ...
Mark Dancer: One of the important lessons I learned is that you can't innovate without foresight. Foresight is your personal view on how your market, and your industry will change over time. Foresight is a learned skill. Innovate to Dominate is a roadmap for innovation, but our podcast series is the journey. By listening to all of the podcasts, I would encourage every distributor, anybody who listens to all the podcasts, to think about what is their personal view of the future. If you have that view of the future, if you have that foresight, then you can create a better vision for your own company. And, if you have a better vision for your own company, you can unlock and feel comfortable about the investments you're making in your people, in your systems, your platforms, and your software.
Mark Dancer: Hopefully, or I think very much so, that the podcast series and the book, Innovate to Dominate, they go hand-in-hand in helping distributors lead their customers to the future, and innovating their business models.
Richard Blatcher: One of the exciting things that we'll be doing is during each episode of the podcast, we will be offering a free edition of the book, there's a prize for each of the podcasts. We want to encourage, to get the book into folks' hands.
Richard Blatcher: Mark, thank you so much for taking the time to walk us through what's already available and what's coming up, specifically around this podcast series with some exciting interviews that are coming up, and a lot of insights that will help distributors practically today, and to this new normal.
Richard Blatcher: We encourage everybody, please subscribe, please get involved with the book. We look forward to the next episode in this exciting series. Thank you so much, Mark.
Mark Dancer: You're welcome, and thank you for having me.