Looking at 2014 - Three Test Points

Jan. 21, 2014
It was a half-century ago, 1964. The nation was still reeling from the impact of the Kennedy assassination. My family had just purchased a cool seven-passenger Chevy wagon. In spite of the hitting power of my hero Mickey Mantle, the St. Louis Cardinals had just overcome the Yankees in the World Series.

It was a half-century ago, 1964. The nation was still reeling from the impact of the Kennedy assassination. My family had just purchased a cool seven-passenger Chevy wagon. In spite of the hitting power of my hero Mickey Mantle, the St. Louis Cardinals had just overcome the Yankees in the World Series. And my fifth grade class was studying the calendar. At the ripe old age of 10, I did the calculation; how old would I be in the year 2000? It seemed like a million years away. Time passed at a snail’s pace back in those days. Fast forwarding to adulthood, it seems like time is zooming by, and we find ourselves plunked down into 2014.

It’s a new world. Exploding technology, quickly shifting demographics and economic realities unlike anything seen in the past promise to make this an exciting and sometimes stressful year. With all this in mind, I would like to invite you to join me as we think about our industry and how to make 2014 more exciting and less stressful.

Business is looking mighty good

According to a recent ASHRAE/AHR Expo survey of manufacturers serving our industry, 79 percent of the respondents believe the coming year will be either good or excellent. Great news, but it also presents us with a number of challenges.

Something inherent in really good economic times impacts our behavior. In a couple words, good times make us “strategically sloppy.” We wander through our days reciting that old English wives’ tale about making hay while the sun shines. At the same time, we ignore the strategically important chores – the stuff that positions us for the long haul.

In a growth-based environment with incoming orders falling at a brisk rate, it’s easy to get sidetracked. Rush orders, emergency expedites and delivery truck troubles push strategic thoughts aside. Tactical stuff we won’t even remember next month consumes our workday. For example, we’ve all been taught that good leaders roll up their sleeves and help their team in times of crisis. But if you discover a crisis every day, at the expense of really important, long-range strategic initiatives, you’re not doing your job.

As we move into 2014, we need to continually refocus on three strategic points:

  1. Why will it be better to partner with me than the competitor?
  2. How can I position myself to be an even better partner in coming years?
  3. How can I use process, systems and technology to satisfy 1 and 2 and still improve profitability?

Three vital points to test your thoughts

I believe success in 2014 revolves around three equally important points: technology, people and analytics. Strategic thought needs to always gauge how the combination intersects with the plan.

We can no longer leave technology on the back burner. Sadly, distributors continue to invest without getting their money’s worth. According to estimates from several industry experts, most companies are only utilizing between 55-60 percent of the power of their systems. What’s worse, exploding advancements in technology may only drive down this percentage.

Looking at how the technology, people and analytics interact, let’s think about our business (ERP) system. Does your team understand and make use of all the special reports available in your ERP system? Our experience is that most do not.

What first appears to be a technology issue might really be a people and analytics issue. As our market expands in 2014, it will be doubly important that we’re able to have the analytics necessary to make the proper decisions – like where to focus selling activities.

It’s no longer enough to look at top-line sales for a branch or territory. In the future, and the future started January 1, distributors must understand precisely where the business is growing and where it lags behind.

The analytical data is there – somewhere inside the technology of your ERP system. But your team, the people side, has yet to harness the power. I believe 2014 is the tipping point where sloppy implementation drives disastrous consequences.

Again looking further into the technology side, somewhere during recent years, the drumbeat of technological advancement turned from a slow and methodical march cadence into a double-time sprint. This impacts our customers and our employees.

Customers tell researchers that salespeople are no longer valued as the bearer of product data and information. More than 80 percent of customers gather information about products via the Internet.

And 60 percent of the time, multiple devices are used in the search.

Everyone has some type of smart device stuck in their suit coat pocket or work coveralls. Most distributors have not yet optimized their company’s website for viewing on mobile devices. In 2013, people may not have noticed, but it’s being noticed today. 2014 threatens to be a tipping point year.

Company-specific mobile device applications designed to assist customers in buying decisions have dropped in price to the point where cost is no longer an excuse. These “apps” are becoming as necessary to expanding our business as catalogs were in the 1950s. But here is the rub. A good many of our top salespeople and managers come from a generation that is slow to adopt new technologies.

This brings us to an important point. Salespeople need training on how to apply the technology. There must be two kinds of analytics put in place around all these new tools. Ahead of the training, your team needs an explanation. How will data (and the ensuing analytics) driven from any new technology be used? Secondly, distributors must use analytics to measure the level of implementation.

One illustration of this intersection of technology, people and analytics comes from the examination of past CRM system use in distribution. My guess is 70 percent of the distributor community is disappointed in their current CRM system utilization. As an industry, we spent millions of dollars and ended up with glorified electronic Rolodex files. Why isn’t your CRM system working? Most likely, it’s a combination of people and analytics.

First, we haven’t trained our distributor teams to understand the importance of gathering customer data for future analysis. Experience dictates that most CRM systems fail because of resistance from the sales team. Some don’t see the point of gathering information. Others feel as if it is Big Brother looking over their shoulder and resist. Yet, the real underlying reason comes via lack of understanding as to how we will ultimately use the information.

2014 is projected to be a good year, but we can count on coming downturns. Tracking and analyzing opportunities are critical for scientific forecasting. With the tools readily available, how can we sit idly by and be blindsided by the next recession? But there is more to think about.

Leveraging market position

Without meaningful customer information, broken into segments, things like customer size, industry type, location and other demographics, any kind of real marketing, is just a shot in the dark. And I believe leveraging our place in the market is necessary for growth during an up year.

Let’s explore what “leveraging the market” means. You have a position, and strengths, in the market. Understanding your core strengths, whether they be with customers, systems or physical resources, plays an important role in building market leverage. For instance, a central distribution center (CDC) is a system strength. Strong position with hospitals, schools and other institutions is a customer strength. Counter locations in multiple locations is a physical strength.

Ask yourself these questions. Do you have products that can be easily delivered that your competitor down the street does not have? Can you handle transactions in a more cost-effective manner than your competition? Are there areas where you can take advantage of large quantity buys to gain a potential advantage? Taking advantage of these strengths leverages your position.

Technology, people and analytics play a part in market leverage, too. Most distributors have hundreds, if not thousands, of customers who purchase only a portion of their needs. Harnessing the power of technology, and building reports that allow your sales team to “target” the sales they’re not getting, are relatively simple. The people side comes in training your team to properly prioritize and harvest these missed sales. Again, applying the analytics to your sales team gives you an opportunity to understand who is selling the easy stuff and who is just along for the ride.

The People Thing Isn’t Getting Any Easier

In spite of all the news media coverage of employment concerns, good employees continue to be scarce and expensive to find. Because we retain and develop people, not by the charismatic CEO, but by their first level supervisors, in 2014 we must bring our next level managers up to speed as a strategic mission. Distributors need to take stock in how they grow and empower these line supervisors. Leaving that so-so warehouse supervisor in place just because you don’t want to deal with the situation isn’t acceptable. Distributors must enhance this group, looking for ways to push tactical decisions down a level to the person closest to the decision.

Aside from upping your game with front line managers, the good times presenting themselves in 2014 are a great time to review staff. Ask yourself this question: If a recession hit tomorrow, who would be the first person to go?

Finally … Do you have a plan?

Allow me to probe. Did you lay out an annual plan for 2014? If so, now might be a good time to review it through the jaundiced eye of technology, people and analytics. If putting together a plan somehow managed to escape you, let’s talk. It’s never too late, and I will give you a no-cost, no-obligation slot to talk about getting your plan launched.

Frank Hurtte provides Strategic Insight for New Times. He speaks and consults on the new reality facing distribution in a post-recession world. His new book, The Distributor’s Fee Based Services Manifesto, is available on Amazon. Contact Frank at River Heights Consulting at [email protected] or 563/514-1104.