This Economy Is Not a Distribution Dress Rehearsal… Continuous Innovation Is Not A Luxury Anymore.
By Bill Wade
Grade school teachers and high school councilors constantly remind our kids that life is no more than a series of choices. As a manager in the heavy duty parts and service business, you also have some pretty big decisions as to what you see as the future of your business:
- Do you (with the comfort of your marketing group) retreat to the perceived safety of your current business processes and look only for incremental efficiencies?
- When was the last time you consciously sat and considered how to build new business ideas that create, deliver and capture value in new ways?
- Will you continue the tired habit of repeating undifferentiated industry ‘best practices’, or do you have the guts to try to create a culture of real innovation to pioneer ‘next practices’?
- Will you accept disintermediation and continue to allow your business to be disrupted – or will you become the disrupter?
- Do we continue to look, act and behave like the 1990s hierarchical ‘good ol’ boy network’ that we are, or do we design new environments and renew our commitment to human capital to win the war for talent?
Why are we trying to steer a new course by paying such close attention to the rearview mirror?
A fundamental challenge to our industry is our historical over-reliance on each other for insight. We seem to celebrate regurgitating and repackaging what ‘everyone knows’, rather than challenging ourselves to think different.
Bill Taylor, cofounder of Fast Company magazine put it this way: “Most leaders are doomed to see things the same way everyone else sees them, because they look for ideas in the same places everyone else looks for them.”
Undifferentiated box pushing members of the wholesale industry are unable to generate sufficient cash to fuel growth and innovation, according to research by Georgia Tech's Financial Analysis Lab. Relative to other businesses, these wholesalers suffer intensely from a lack of profitability. In fact, wholesale is the fifth worst of the 44 non-financial industries the Lab follows.
Thus far, no one seems to see a static future for the heavy duty parts and service business. While solutions are elusive, the top disruptive issues are not:
- Mega-distributors flex their scale and consolidation ability, while new, unexpected entrants deliver essential end user value in new ways.
- Smarter, more demanding customers are increasingly product and price knowledgeable, while suppliers are blazing paths directly to these end users.
- The uneven economy makes financial access to fund your traditional role as providers of local time and place utility more difficult.
These alone should shake our industry to its core. As Thomas Friedman warns in the book, That Used To Be Us:
“Continuous innovation is not a luxury anymore – it is becoming a necessity. In the hyper-connected world, whatever can be done, will be done. The only question for a company is whether it will be done by it or to it: but it will be done… So a company that does not practice continuous innovation by taking advantage of every ounce of brainpower at every level will fall behind farther and faster than ever before.”
The Edge of a Black Hole Is Where the Action Is
Reinvention requires a fresh perspective. Like a politician, every day we fight a gravitational pull to the center – to what's comfortable and practical. Yet, the best way to stay on the leading edge is to look and move toward the fringe of what we know and don't know. This is where the roots of innovation grow.
Scientists call this area the ‘event horizon’. If you want to find out what it is you don't know that you don't know, you need to hang out with people who might already know it. Innovators like Steve Jobs used this approach. “It comes down to trying to expose yourself to the best humans have done. And then try to bring those things into what you are doing.”
Look Outside the Industry… That’s Where Our New Competitors Are.
Look in the mirror. The truck parts and service business is getting old (mature if you’re sensitive). New leaders must begin the process of transformation. Tech companies retool or transform every three to six years. The average HD distributor relies on the same business model that's served them in the past... sometimes all the way back to dad. That puts them in serious trouble in an ever-changing world.
As a whole, the distribution industry is years behind in innovation, business model design and entrepreneurial spirit. HD is no different. As a result, traditional distributors are being disrupted by the likes of Amazon, Home Depot, Grainger, UPS and others.
Nuke Nostalgia and Beware the Paradox of Expertise
Like old vacation slides, legacy thinking can be creatively deadening. Some refer to the ‘paradox of expertise’. Deep knowledge of what has existed in an industry can make it harder to challenge long-held assumptions or consider out-of-the-box strategies.
As an innovative distributorship idea takes form, there is a strong will and determination to adapt to changing circumstances, as well as to listen to and even anticipate the needs of the customer. Capture this essence…this is where you can innovate and create something out of nothing.
We Need To Rekindle the Entrepreneurial Spirit of the ‘70s
Every distributor and wholesaler began as an entrepreneurial venture. This spirit is the engine that solves customer problems and creates opportunities. The business creations and expansions of the HD aftermarket in the 1970s were fantastic… a real ‘golden era’!
But over the years, most distributors and shops retreated to risk aversion.
They built the company to a point where it's sustained as a “lifestyle” business rather than a vibrant, growing, self-driven venture. This attitude and direction ultimately sucks the life out of any “lifestyle” business…and they eventually go out of business.
We need to find new ways to rekindle the entrepreneurial spirit within our businesses… and our whole industry.
Can you bring the mindset of a hot Silicon Valley startup to your business? This is how we will all escape the hold of the past.