Category Archives: AmazonBusiness

84. Kickstart Your Innovation: Knock Off Amazon’s Pitch Process

Distributors sell products and react to supplier and customer needs. Innovation is not their long suit. But digital channel disruption is here, and if a company doesn’t change as fast or faster than its environment, its future is grim.

To boost your company’s innovation game, why not borrow and simplify a key technique from Amazon.

2004: Jeff Bezos kills PowerPoint presentations       

Over a decade ago, Bezos concluded that PowerPoint presentations should be banned. He felt that presenters were speaking extemporaneously from their bullet points, their communication lacked clarity, breadth and depth, and attendees were confused. The big-boss, data-free opinions always won, unswayed by a PowerPoint, and time was wasted.

The new meeting format began with everyone reading a document (6 pages max.) thoroughly prepared by whomever wanted to champion something new. These narratives were not assigned in advanced to be read unevenly and forgetfully. At the meeting, each participant was expected to take the time (5 to 30 minutes) to thoroughly read and digest the information at their own speed and in their own way.

Next, the presenter(s) answered attendees’ questions, as if they were defending a dissertation. The subsequent page-by-page review evoked questions and discussions that were informed and focused and contention was substantive, not political bickering.  After the reading, all attendees had a fresh, shared, in-depth understanding of the topic.

The presenter took notes, and sometimes asked for a re-do, usually to get more data. If the presenter pressed for a decision, the only responses allowed were: “Yes”, “No”, or “I disagree and commit”.

So, why is this better?

The innovation presenter, or team, is forced to do deep research and present clear thinking. The document should stand on its own and include:

  • An imaginary future PR statement describing a successful outcome for all stakeholders
  • Sufficient research facts
  • A proposed roadmap with assumptions, experiments, milestones and required resources
  • All anticipated questions from all potential stakeholders with well thought-through answers

This process levels the playing field between introverted champions of innovation and glib, popular politicians. The process simply delivers better collaborative plans and decisions with less total time invested.

Conclusions

Writing these narratives is tough. Most distributors don’t have MBAs adept at writing or reading such documents. So, simplify the process to fit your firm. You can perform an experiment. Go to  https://merrifieldact2.com/exhibits/. Skim the “scripts” (Exhibits 60 – 63) and pick one to read with your team. Then, discuss, improve and possibly pursue with funding from a champion.

81. Find (and Fill) Your Cross-Subsidy Fault Lines

Want to expose the ways you in which you can beat Amazon (AMZ)? Start with a line item cost-to-serve model for your distribution company or for several of your most innovative distributors. Then, create profit and loss rankings for every SKU and vendor, as well as for customers, territories and niches. Get ready for some shocking revelations. The biggest: big profit/loss cross-subsidies fault lines likely exist between your most profitable and unprofitable customers and SKUs.

The most profitable warehouse items:

  • Are popular (highly picked) commodities
  • Have high-dollar sales per pick averages
  • Have margin percentages that seem low but gross profit dollars (GP$s) per pick that exceed the cost to serve dollars (CTS$s), yielding the highest profit dollars (P$s)

Another way to think of this is using the Profit Equation: GP$s (-) CTS$s = P$s.     Continue reading 81. Find (and Fill) Your Cross-Subsidy Fault Lines

78. A Dual Strategy Against Amazon’s Digital Channel Disruption

Amazon’s digital channel has eclipsed much of the information value and cost efficiencies once enjoyed by traditional distributors. When a disruptor eats into your space, you need a dual response strategy:

  1. Downsize to your core profit customers (niches) and renew the relationships
  2. Use your incumbent capabilities to create a new business model to join the disruption growth party

Don’t Be Kodak   

Back in the day, Kodak had a massive camera film franchise. They also invented the first digital camera. But, they let the technology languish. As others began to chomp into their film sales, Kodak put film veterans in charge of a catch-up digital-camera strategy. The strategy was to get digital photographers to print out their best photos in order to stimulate film sales. Mighty Kodak collapsed. Continue reading 78. A Dual Strategy Against Amazon’s Digital Channel Disruption

77. How Amazon Will Skim Your Cream SKUs

At the upcoming Advanced Profit Innovation Conference, I will delve into what Amazon (AMZ) is doing and why you should be paying attention. I’ll present a case, based on real data, showing detailed facts about six of the most profitable, and the most unprofitable, items from a contractor-supply distributor’s total of 5000 active warehouse items.

The Profitable SKU Facts

The case distributor uses line item profit analytics to calculate a profit or loss on every SKU. For 2016, the average stats for the six most profitable SKUs were:

  • On average, 150 customers bought these items 750 times per year or five picks per customer
  • The average sales per pick for all six was over $1100
  • The average margin rate (22%) generated an average margin dollar per pick of $250
  • The average cost-to-serve dollars per pick ranged between $82-88
  • The profit equation:  $250 – 85 = $165 (less another $62 for rep pay)

Continue reading 77. How Amazon Will Skim Your Cream SKUs

76. Amazon Begs Your Innovative Response

Recently, Wall Street investors ignored Amazon’s (AMZ) latest lower earnings report and bid for $49B in new bonds. AMZ nibbled only $16B (at lower than projected interest rates) and bought Whole Foods for $13.7B. What will they do with the extra $2.3B? It is likely they’ll add to their already huge innovation budget. In 2016, AMZ spent $6.74B on fixed assets, with overall estimates for “innovative activities” exceeding $17B.

How does AMZ’s investment in innovation increase value for B2B buyers? 

Following the news feed for AMZ’s daily innovation announcements is a full-time job. Most of these innovations indirectly increase value for Prime customers, while also bringing in new Prime customers and increasing retention. Then, there is a domino effect as these Primers take their AMZ shopping expectations to work, causing an accelerating increase in B2B sales.

Continue reading 76. Amazon Begs Your Innovative Response

74. Millennials Want Their Corporate Amazon, So Does Big Government

Recent data shows that 23% of consumers are digitally-obsessed buyers, and this number just keeps on growing. Even at work, millennials immediately compare their internal buying system to Amazon’s (AMZ) offerings. What are they finding? Some pretty important features including more choices, more product information, faster ordering, faster fulfillment, and increasingly often, lower prices.

Some corporate procurement departments have taken notice and set up a contract with AMZ-BIZ to complement their existing supply contracts. What are the results?
Continue reading 74. Millennials Want Their Corporate Amazon, So Does Big Government