A Distributor’s North Star Is Not a Shiny Object

I’ve been fortunate to spend a fair amount of time on a boat over the years, as well as sailing a large body of water (Lake Superior) pre-GPS when lighthouses and stars were actually important navigational aids. I sometimes wonder what navigators today who rely entirely on the technology do if that magic black box tracking satellites breaks down at a critical moment. The same thought pops up for me around the ways some distributors are navigating their transformation journeys today.

Many distributors are in their second, third or even fourth generation of eCommerce development. Some developed critical capability in change management, while others sprayed money at shiny objects without a North Star to guide them. They built stuff and hoped customers would come. They made decisions based on echo chambers — either what friends and peers in associations or marketing groups were doing, or the loudest voices internally.

Every distributor is at a different stage of some type of transformation effort. Some were pandemic- or fear-of-Amazon- fueled; others pre-2020 were jackpots in pandemic response and rebound. It might not be labeled as transformation; it may be defined as an innovation or change management project with a defined goal of capability development, process or productivity improvement, cost reduction or other business objective.

Regardless of labels, the pandemic has proved out that companies able to adapt quickly to keep customers (who have many more supply options today) engaged are outpacing competitors. They have a strategic North Star that doesn’t waver. What’s different today from pre-pandemic times is that the profit and go-to-market models of traditional distribution are even less sustainable than when fewer disruptors, with Amazon as Exhibit A, were rewriting the rules.

Distributors are in a unique position to reset the North Star for the next generation of the company as we wind down the third quarter, from a combined business and pandemic cycle perspective. Consensus economic forecasts are for a slowdown, with different opinions by economists on timing and degree (surprise!). It’s a great time to be conservative with cash and the standard conservation-minded bromides on weathering whatever winter may bring.

I’d rather talk about the pandemic spring. With pricing challenges, many distributors today are experiencing record growth with lower profit. Economists are bullish on the multi-year growth fundamentals underlying the near-term outlook. This is a time to define the business model transformation that will drive growth and EBITDA.

The North Star is not the brightest star in the sky, but it doesn’t move. I don’t want to push the analogy too hard, but some distributors have lost sight of True North with the distractions of the past two years and followed some of the shinier objects nearby. It’s more important than ever for every distributor to validate and perhaps recalibrate their own unique North Star.

My thought process on the above got sharper as our team has been prepping for our SHIFT | The Future of Distribution conference Sept. 25-27 here in Denver, where we’ll have more than 200 attendees in the room calibrating their own transformation journeys across sales process, digital and data analytics. We have been passionate in our mission over the past six years to drive research and build a community network for creating a better sales model; this is our strongest program of speakers, panels and network opportunities yet.

If you’d like to triangulate your North Star with others in similar journeys across these key levers, there’s still time to join. Here’s more details on the event. As 2023 approaches, what changes to your team, processes and business model will drive EBITDA most effectively?