How to Dominate the Future of Distribution

Mark Dancer is less concerned with offering distributors best practices but rather helping them “see over the horizon, develop foresight and implement business model innovation.”

And that’s exactly what he plans to do during his session at MDM’s Future of Distribution Summit, held virtually April 13. Dancer, the CEO of Network for Business Innovation, will deliver a keynote address, “Pandemic Innovations and the Future of Distribution,” designed to help distributors act on the lessons learned across distribution during the last year of COVID-19 — and prepare them for the post-pandemic economy.

“I’m more about the long view, the big trends, and how can distributors think about those trends now,” he told MDM in a recent interview. “The distributors will start to act on them — and those are the companies that will dominate the future.”

The Future of Distribution Summit will be held April 13 from 10 a.m. to 5 p.m. EDT. Visit mdm.com/future-of-distribution-summit/ to register. Here is the rest of what Dancer shared with MDM in advance of his upcoming presentation.

MDM: Has anything in recent history impacted the future of work quite like COVID-19?

Dancer: There are a lot of analogies with the 2008 financial crisis, or, in our world of distribution, disruptive trends like Amazon Business or digital transformation that have had a long-term effect. But those comparisons miss the point. The pandemic is a very human crisis. Those other crises were not. This has been about our health, our welfare, our isolation. Everybody across the world has been impacted by it.

When you think specifically about the impacts for distribution and how distributors responded — not just protecting their own business, but especially in helping customers — you have to look for sort of human implications associated with that.

MDM: What lessons did distributors learn from the past year of COVID-19 about the future of work, and what lessons should they have learned?

Dancer: There are a couple of major impacts. One, there’s a lot of discussion about how customers’ willingness to buy online jumped ahead by years in a matter of weeks. If you look at the observable behaviors, distributors that had strong e-commerce platforms and promoted them saw their sales improve significantly. But that’s just the tip of the iceberg. This is a crisis where we were all in it together — distributors’ employees, their customers’ employees. Everybody was affected.

What customers gave distributors was grace during this period of the pandemic. They gave goodwill around innovations, transformations. It’s not just that customers embraced distributors’ websites. They said, ‘Hey, this is really big, and I’m willing to give you a grace period where you can try different things, you can innovate.’ And some distributors did that.

The phrase I heard often was, ‘We leaned in.’ And ‘lean in’ is not a phrase that’s common in distribution. Leaning in means acting without hesitation when an opportunity or crisis happens. Distributors with a strong e-commerce platform; really what they had was a strong culture around digital. Yes, they promoted their websites and saw increased sales, but they also charged forward with other things that leverage digital technology.

Beyond Zoom calls, which were reactive, some distributors found the opportunity to create special virtual events that would not have happened otherwise. It’s been about this grace period to transform and innovate and then lean in by acting without hesitation.

MDM: Did most distributors lean in?

Dancer: No. In January, I did a lot of interviews, including in-depth interviews with about 30 distributor executives, for an NAW [National Association of Wholesaler-Distributors] report called “Distribution Leans In: Stories of Resiliency and Innovation During the COVID-19 Pandemic.” One of the things I found was — as the former CEO of Intel said during times of crisis — “good companies survive, and great companies get stronger.”

I found that to be true with distribution. Those that just survived are the weak distributors. Those that saw their e-commerce sales improve are the good distributors. But those that leaned in and used their digital capabilities and culture to do things they hadn’t done in the past are the great distributors.

MDM: When we think about the difference between those types of companies, what does the future look like for them? Are we going to start to see a real inflection point among those distributors?

Dancer: Yes, I think, but I don’t talk about it in terms of, ‘If you haven’t invested in digital technology, you’re going to be left behind.’ There’s probably some truth in that statement, but that statement was around before that pandemic. What distributors need to thrive, and to lead, is foresight. If you have strong foresight, if you can talk compellingly about the future of your markets, you’re among the distributors that are best positioned to succeed going forward.

For them, it’s a little bit like the ball rolling downhill. They will continue to innovate. One of the other lessons of the pandemic is the growing importance of culture. A lot of distributors watch GDP because they don’t want to get too ahead of inventory, but leaning in cuts very much against that grain.

The companies that will succeed in the future are the companies that, more and more, over and over, have strong foresight, have a culture of innovation, have a focus on serving customers, and have a willingness to take action because they want to capitalize on opportunities.

MDM: Can you expand on that notion of better serving customers?

Dancer: Part of it is about building digital technologies, like artificial intelligence, so you can run your business better. But that’s the inside view. Real success is about finding new ways to bond with your customers. Just like innovation, it happens slowly, and then it happens overnight. Customer relationships are like that, too. If you responded well during the pandemic and your customers noticed it, then you can keep that momentum going. Over time, those are the companies that are going to build unbreakable customer loyalty.

MDM: Will these trends continue or is the industry doomed to return to pre-pandemic realities and norms?

Dancer: I think every year that goes by, what it takes to be a successful, leading distributor ratchets forward and we can’t go back. The pandemic has created a few ratchets. What I see happening is that there are three big ideas emerging about a distributor’s business models. All three relate to running our business as a front-end business.

For the longest time, distributors defined their business model by the back end, which meant their ability to run an efficient warehouse. If you asked them what their business is about, they would start with their line card — “I carry these brands and these products.” That’s a back-end business model. That’s an ante now, or table stakes. The business models that are emerging are revolutionary because they’re about distributors winning on the front end of their business.

MDM: How do distributors shift that focus from the back end to the front end?

Dancer: The three emerging big ideas for business models are:

1) Customer experience. What that means is that, instead of managing a portfolio of products, I have a very well-defined portfolio of experiences that I create with my customers. That can be as simple or as obvious as moving from VMI to supply chain visibility.

2) Data. Today, distributors are using artificial intelligence primarily to improve their own operations, to get the best margin when they can, to cross-sell products, to put information in front of their salespeople so that they can drive sales forward. The extension of that, as we move forward, is how do you use artificial intelligence to actually benefit your customer? Not to drive results for your business, but to drive results for their business. Not your margins, their margins.

3) Community. Thirty years ago, distributors were local businesses. And because they were local, it helped the customers with the risk of supply. A customer would trust their distributor because they had the inventory needed right across town, because they lived in the same marketplace, because they could call on their distributor with problems. That was the definition of local that created trust in the past.

Today, it’s about serving communities, and that’s not limited to a local marketplace. It’s a shift from segmenting, targeting, selling and pipeline view of customers to, “We’re in it together.”

MDM: Many distributors have shown a keen sense of resilience in the pandemic. Do you think the pandemic has made them resilient for another disruption of this magnitude?

Dancer: In Innovate to Dominate [Dancer’s “Facing the Forces of Change” book from NAW], the first chapter says a distributor’s best path to a good future is to help your customers get to the future. If you do that, you’ll figure out your own business model. I think of resilience that way, too. Distributors have long provided resilience to their customers with things like payment terms. We act as a bank. And we did things like that during the pandemic, too. We relaxed and changed our payment terms, depending on the industry. But we did that to help the customers with their resilience.

There are examples of how distributors have done more about helping customers with their resilience during the pandemic. Distribution’s future is about doing business as humans for humans. Things like empathy, and emotional intelligence, and being able to be a data wrangler — which is to help your customers wrangle their data and take advantage of their data, not just yours — all those kinds of human skills are about resilience. It’s about having empathy and the willingness to commit to helping your customers move forward. That’s a core competency for distribution going forward.

MDM: So distributors need to be more of a trusted adviser and less of a transactional vendor?

Dancer: It’s about trust, in general, and helping your customers. Amazon Business, in my humble opinion, is many things but they’re not here to help. Distribution is here to help. Distribution has the opportunity to measure customer relationships not in terms of which account is more profitable, not in terms of retention, not in terms of growth. Those things are important, but what’s more important is measuring their customer relationships in human terms. Do they trust me? How do I measure that? Where big tech has stumbled, distribution has the opportunity to say, “Hey, I’ve always been here. And you trust me because I’m here to help.” Measuring customer relationships is hard, but it’s an opportunity for distribution.

Learn more from NAW Fellow Mark Dancer at MDM’s “Future of Distribution Summit,” held virtually April 13 from 10 a.m. to 5 p.m. EDT. Visit mdm.com/future-of-distribution-summit/ to register.