Becoming A Digital Distributor: Is The Gain Worth The Pain? April - - PowerPoint PPT Presentation

Becoming A Digital Distributor: Is The Gain Worth The Pain?

April 23, 2017 Colorado Convention Center Room 203 8:30 AM to 9:30 AM & 9:45 AM to 10:45 AM Denver, Colorado

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Agenda

What is the challenge and why most will fail? What does it look like when you are done? What is the price you need to pay? The past proven best practice of reacting quickly to an

• pportunity or threat

will not work as there is no tipping point and the failure rate is parabolic

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NIDA + SIDA = IDA + Time = ISA So What Is Next?

Plus how many nontraditional competitors have decided to get in here as well? When there is a disconnect between GDP growth and your growth, the gaps are revenue losses to unseen and non traditional competitors

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The Current State Of The Industry

There are declining benefits to scale when there are no longer any extra 5%’s from suppliers for extra volume and organizations become so large that they lose their ability to be responsive Consolidation means to make stronger and it is measured by concentration; the total share of the market enjoyed by the five largest competitors This industry is consolidating quickly Now throw in the transition to digital, the emergence of non traditional competitors, the aging of the workforce, the entrance of millennials, changes in customer buying behavior, continued supplier consolidation, the Internet of Things, the transition from selling products to selling services (e.g. Lasik & RR & GE), and the high reliability of today’s supply chains reducing the value of unneeded heroic recoveries Will tomorrow’s winners be doing the same things they are doing today, only better? If Your Firm Died Would There Be Any Shortage Of Firms To Replace You?

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So What Is Your Investment Horizon?

You are committed to keeping the business by either bringing in a professional CEO, or competent children, along with a board Then you need to start spending money and managing a huge

• rganizational change project

You are planning to sell it in five years or less to a PE firm, a strategic buyer, or an ESOP Then you need to put some lipstick on the pig and maximize your EBITDA to improve your exit position You aren’t going to decide now and keep your options open You business is worth as much today as it ever will be

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Solving The Perfect Problem- Getting Unstuck

The only problems you have left are the perfect ones. The imperfect

• nes, the ones with a clearly evident solution, well, if they were

important, you've solved them already. It's the perfect problems that keep us stuck. There's no way to solve the perfect problem because every solution involves breaking an unbreakable constraint. And there's your solution. The way to solve the perfect problem is to make it imperfect. Don't just bend

• ne of the constraints, eliminate it. Shut down the factory. Walk away from

the job. Change your product completely. Ignore the board. If the only alternative is slow and painful failure, the way to get unstuck is to blow up a constraint, deal with the pain and then run forward. Fast.

http://sethgodin.typepad.com/seths_blog/2010/07/getting-unstuck-solving-the-perfect-proble.html

The Digital Transition Fits Many Of The Criteria For A Perfect Problem

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Agenda

What is the challenge and why most will fail? What does it look like when you are done? What is the price you need to pay? Selling stuff on the web is actually, and unfortunately, a small part of the required change as your real issue is becoming digital Notice that it is getting harder to get personal appointments?

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Sourcing Preferences

Electronic Hybrid Highly Electronic Personal Hybrid Hybrid Personal Electronic Medium Customer Large Customer Small Customer Millennial/Gen Z <34 Gen X 35+ Boomer 50+ Highly Personal

Source: SalesGPS 360 If the only tool you have is a hammer, everything looks like a nail So if you only have field sales or specialists, but lack digital and inside selling resources, you will increasingly lose alignment with how your customers buy Buyer Age

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Specializing The Sales Generalist Lowers Overall Selling Costs

Category Role FAM

Field Account Manager

IAM

Inside Account Manager

ISR- Inbound

Inside Sales Rep

CSR

Customer/Counter Service Rep

Technical Specialist Telesales Outbound

Typical Titles SAM, AM, TM, FSR, OSR AM, IAM, Segment AM ISR, CSR CSR Many TMR, TSR

Primary SOS* Business solutions and Relationship Technical and transactional Transactional Technical Awareness Customer assignment Yes, by dirt Yes, by dirt or segment Yes, by dirt or segment No Periodically, by need or project None

but working off a call list

% in field >80% Own car Partial with a shared car <5% No car None >50% Own car None % CSEs intercepted >75% Ranges from 5% to 50% <5%` 5% to 25% Sent out as they occur CSE interception, RFM tickler Customer Relationship Equity Role Primary Primary Primary but often shared with Field reps Supportive Subject Matter Expert None.

They generate activity that warrants the attention of a rep

Customer Capacity ~30 ~100 Several hundred <200 ~30 Set changed periodically * Service Outputs Supplied to your customer- what they are actually buying

2-8

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Multichannel Requires Situational Self-Selection

Single channels to market (think field sales territories) still exist because they are hard to change but increasingly create revenue leakage as customers choose alternatives Markets and channels evolve with power constantly flowing downstream to the customer so the primary rules for channel design are:

• 1. It is not about you
• 2. It is about them
• 3. If confused, follow rules one and two

Customers get to self-select based on their circumstances and values and will frequently and legitimately make variable choices Good multichannel design should make the choices clear- think cost to serve

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The Multichannel Consequence For Field Sales

• 4. Punchouts & LOOP*

Inside sales leads with specialists You have sticky customers with reliable service Field sales is on call, as necessary, by your team

• 3. Field Sales Leads

Expand share of wallet using team members and introducing specialists along with special services

• 1. Telemarketing

E-catalog or Amazon Easy to buy & “once and done”

• 2. Field Sales Leads

Prospect with provided marketing analysis on cost to grow and potential to grow Your value proposition is explicit and key * Lights Out Order Processing What % of your sales calls are on the right side of the model?

2-9

All Account Assignments Become Temporary With Leading Evolving To Supporting

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Small Apps That Make Customers Sticky

Barcode sticker with your name that links to the system bill of materials and a one click to reorder any part Deck icon of your sales rep that links directly to the text service (or WhatsApp) on their cell phone (then pulled into CRM client data) Dominos pizza app to show where their order is in process Mini catalog, last 100 SKUs purchased, current quantity on hand, their price, click here to reorder button Order/Invoice automation

This Is External But Internal Is A Huge Opportunity For Most Lifestyle Distributors

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You Must Become Analytically Led And Strategically Driven

It is the compete opposite of the entrepreneurial quick reacting business model

• Think intentional versus reactive, process versus people, horizontal

decision making versus vertical, accountability over loyalty

All Dollars Of GP Are Not Created Equally- Your Strategy Defined The Differences

Start by defining the end and then working backwards

• It is the good idea tester of what to do next
• More importantly it tells you what not to do
• You must have a management review rhythm or

nothing will happen This is the ante to play in turbulent times

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Agenda

What is the challenge and why most will fail? What does it look like when you are done? What is the price you need to pay? You will invest almost all of your available cash, borrow money, and terminate a few loyal and long tenured employees who can’t,

• r won’t, make the

transition

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What Today Is NOT About!

The complexity of alternatives is exploding exponentially and they all can tell a great story to a beginner. The right approach is for you to get educated on how digital processes work and what is best for your firm. Then pick a software tool or tools that help you achieve your

• bjective.

If you start here first it is like, “Everything looks like a nail if you

• nly have a hammer.”

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The Digital Transition Roadmap

• 1. Don’t buy any software until you fix your long standing sloppy practices*

You must have clean product and customer files (integrated into a CRM system), pricing discipline (not field sales driven), > 75% ERP generated purchase orders

• 2. Develop the organizational change plan including commitment and

funding, if yes go to 3, if not divest

• 3. Identify and address market gaps with your customers and suppliers

This addresses current competitive weaknesses with respect to how they want to buy and how your suppliers want to deal with you (input doesn’t come from sales)

• 4. Invest in the big three based on ROI

1.

Make Money (scale with suppliers, mass customization, and leveraging competitive intensity)

2.

Save Money (operating scale, role specialization, and performance management processes)

3.

Save Time (productivity improvement with labor or capital or energy)

* This increases your exit value as well

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Vision Misalignment Will Create A Path To Failure

Symptom: Many will believe that we are changing too much too fast while others will think that it is moving too slow Test to see if is it is clear: Any associate can explain the three core strategic priorities in their specific role and how they can affect them What is your grade today?

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The Real Bottom Line

Adding digital processes on top on an analog business will lead to tissue rejection. Your business must be rebuilt as a digital business preserving customer intimacy. Just like Cortez, you must burn the ships and you will lose some employees.

Your selling processes will adopt multichannel approaches You will use a management-driven, rather than a self-driven, sales force You will have pricing practices driven by strategy and customer segmentation, not stories and take away power Your supply chain and logistics processes (including freight) will become driven by science You will have significant expertise in data science and analytics

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• 1. Recognize that revenue increases are no longer the key

driver for growth in shareholder value The drivers are; competitive barriers to protect enterprise value, organic growth faster than the industry, a high EBITDA margin, and the ability to acquire and integrate acquisitions

• 2. Consider that your best growth strategy play may be to

invest and become a platform company (this is hard and painful) Platforms grow at 2x to 3X market growth rates of their competitors

Six Key Learning Insights- Growth Strategy

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• 3. Invest in projects that create competitive advantage on

either the price or cost sides, looking for the best ROI- not ideas It requires doing new things rather than doing the same things better

• 4. Invest in ways that increase your customer’s switching

costs, looking for ROI (Its about what you do for them) VMI, consignment, special terms, custom order configurations, special pre or post sales support, lifecycle or information management, etc.

Six Key Learning Insights- Growth Strategy

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• 5. Redesign your field sales function to bring in specialized

roles and reorient around the way customers actually want to buy Don’t try to change old line sales reps as you will still need generalists, just take away their low value activities shifting to a lower cost person

• 6. Invest in marketing to create customer segment specific

value propositions for a management directed sales force to execute This takes a long time get a high ROI, so first decide are you playing the game to win or just playing not to lose

Six Key Learning Insights- Growth Strategy