In ’08: The Central Banks rescued PE firms from their over-paid, over-leveraged ’07 deals. By lowering interest rates to near-zero for 10 years good things happened:
Continue reading 149. What Distributor Roll-Ups Will Become Zombies?Studies trumpet that: 60-80% of outstanding companies’ profitable growth comes from “innovation”. Could you use some bigger profits and more agility? And, all legacy channel players need to innovate to meet the developing digital desires of millennial B2B buyers.
Continue reading 145. Innovate at 32 DegreesA distributor needs to hire six hourly people across four locations. But:
“We can’t find acceptable candidates for our normal starting wage. We don’t want to hire new people at a higher rate than our veterans. And, we don’t want to hire flakes who can’t pass our drug test. What do we do?”
Continue reading 142. Hiring Hourly People SolutionsIt’s a term popularized by Jim Collins (author of: “Good To Great”, etc.) The idea is that within great companies there is often a virtuous-cycle with about 4 to 6 steps that drives profitable growth. Each step reinforces the next. The entire cycle compounds itself. The rich get richer, and the poor? Well, they work hard to deliver commodity-value for poor results.
Collins recently published: “Turning the Flywheel: A Monograph to Accompany Good To Great”. It’s a quick, concise, recommended read. His concepts aren’t new, but his terms are catchy and inspirational.
And, Collins distills – an entire process for creating a flywheel – into a simplified (not simplistic) brilliant whole. For summary pictures Google Image: “Flywheel + Collins”. To see the flywheel that is eating into all physical, product-push, un-digital channels, Google image: “Amazon + Flywheel”.
First: most companies don’t have the requisite capabilities to make big changes away from their complacent, hidebound status quo. Collins’ updated framework has four stages with 12 underlying capabilities – including looking at the “Brutal Facts”. Who, for example, wants to confess to tolerating incompetent and/or complacent players, having flawed, data-free beliefs, or having 30-50% of their customers being net-unprofitable?
Second: his monograph is necessarily generalized. What’s a best, distributor-specific flywheel strategy? Answer: at youtube search for: “merrifield + service profit” to find my 7-minute adaptation of “the service profit chain”. Then, for implementation specifics, request my free “Core Customer Renewal Roadmap” (bruce@merrifield.com.)
In many presentations, audiences have agreed with the logic of my version of the Service Profit Chain. But, when management teams read through my Roadmap, the “concerns” start to arise. Write them down. Gently unpack their origins. Forgive past mismanagements; “we were doing the best we could with the analytics we didn’t have.” Test the data-free assumptions with statistical data and surveys of parties “who won’t like this”. Maintaining the status quo is not an option in a fast-changing world.
Physical, Product-Push Channels are under siege. Whether Amazon-Business nibbles or chomps into your channel over the next few years is one concern. A bigger concern? All next-gen, B2B buyers want digital-buying experiences and empowerment. Without flywheel profit-power, can you innovate to meet customers’ growing digital needs? Or, will top 5% already-Great distributors innovate faster and eat your lunch?
Come and meet me at MDM’s Pricing and Profitability Summit, in Denver, on April 15-17. I’ll make it easier for you: use coupon WayPoint2020 to get 100$ upon registration. See you there. https://pnp.mdm.com/
Practice good-pricing hygiene. Don’t underprice SKUs or customers if they will continue to (happily) buy from you at higher prices. But, consider also the positive trade-off of lower prices in exchange for larger average order-size buying. What are your general buying and selling incentives for increasing order size?
For 2018, a $100MM contractor-supply distributor had roughly 4000 active accounts. More facts:
Continue reading 136. SELL WIN-WIN, LOWER PRICING (?)Amazon’s analytics can identity SKUs on which they “Can’t Realize a Profit” (CRaP). Even with their improving, world’s best fulfillment and last-mile delivery costs, they can’t cover costs on items lower than $15 per pick/order.
AMZ’s fixes to date?
Continue reading 135. Fix Your CRaP Items and Their Root Causes