137. Amazon’s Channel-Model Innovation Challenge

LEVELS OF INNOVATION: INCREMENTAL, BUSINESS-MODEL, CHANNEL-MODEL

All businesses innovate. But, rearranging the deck furniture on the Titanic (an incremental innovation) is not as powerful as getting an iceberg-resistant ship or an ice-berg-free route.

Business-model innovation is when you rethink the system of how you organize your resources to create a breakthrough value for some target group of customers. You may also, simultaneously, eliminate wasteful or dying activities. Common phrasings: Weed to feed. Prune to grow. Downsize, Upgrade, Refocus and Revitalize. Do a “Blue Ocean Strategy”, etc.

CASE EXAMPLES: 

  • Blockbuster added DVD’s to their stores’ video-tape selections: an incremental innovation. But, Netflix created a new business (and channel) model that ultimately bankrupted Blockbuster.  
  • Supply-chains that first adopted container-usage killed those who were too slow.
  • Walmart pioneered lights-out, cross-docking warehouses that enabled many more innovations. K-mart slept, then bungled imitative execution.  

3PLs do all things distributors do, but on an a la carte, activity-cost-basis to create precision fulfilment solutions. This customer-centric approach has grown explosively for years (unlike product-pushing-centric distributors). 

The few distributors that pursued integrated-supply contracts had to go to cost-plus, a la carte service-pricing. Their strong growth has come out of un-changing distributors’ hides.  

Channel-model innovations can also benefit downstream channel partners. For example: in 2001, Colinx.com (and its companion order-entry web site, PTPlace.com) was invented by some big brands in the power transmission channel. This 3PL, co-op, utility achieved breakthrough cost reductions for the factories along with key benefits for distributors. This channel-model innovation can be reimagined as a first step towards a vertical, omnichannel, delivery-to-the-doorstep capability. (For more, please be in touch.)   

AMAZON’S CHANNEL-MODEL INNOVATION

Amazon has invented a different value-channel. It starts with our screens and doorsteps and goes back to producers world-wide. It’s a killer (esp. for spot-buys), but it can’t (yet) do all that legacy channels have been providing. Prime customers now, however, want the AMZ shopping experience on the job for their B2B needs too. To meet that digital buying need, both business and channel innovations will be required. 

QUESTIONS:

What specific SKUs will AMZ’s accelerating capability nibble upon within your channel?

How will Brands and their legacy distributors rethink both their business and channel models to:

  1. minimize AMZ’s sales takes and
  2. win more share from traditional competitors that don’t change?

Won’t Brands and their distributors have to share the same vision and analytics for channel activity costs to collaboratively re-model their shared ecosystem?

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