What Can Distributors Learn from Amazon’s Acquisitions?-Distributors in the Digital Era #24

What can distributors learn from Amazon’s acquisitions?

Amazon’s intended acquisition of Whole Foods Market has caught the attention of many distributors. Much of the discussion has focused on the changes that Amazon will bring to retail channels and the distributors that serve them, but there may be other implications for all distributors. Acquisitions are common in distributor-intensive value chains, with consolidators buying up distributors and winning on scale. Consolidation can create an arms race, with competing distributors matching acquisitions to keep pace. Other distributors seek to specialize and compete on in-depth knowledge, creating value and customer loyalty. Either way, distributor leaders approach acquisitions by doing what they do best—strengthening their version of the distributor business model, not changing it.

 


Disruptors are not distributors. They have different business models, and their leaders have different mind-sets. Strategic intent may not be publically discussed, but actions speak louder than words. Consider three acquisitions by Amazon (or its leader, Jeff Bezos): Whole Foods, The Washington Post, and Kiva Systems. Kiva Systems, now Amazon Robotics, is a leader in the field of robotic fulfillment systems. The Washington Post has a legacy of visionary leaders and fearless reporting, and leads from our nation’s capital. Whole Foods began as a small, natural food store, and followed a vison to become the first certified organic grocer and a national chain with a unique physical presence and customer experience. Each of these companies is built on remarkable core competencies. Each pursues a vision of innovation and market leadership.

By reading the tea leaves of these acquisitions in the context of disruption, not distribution, strategic implications can be identified for distributor leaders about competitiveness, innovation and vision. This exhibit offers a comparison of strategic intent and is offered to help distributor leaders challenge how they think about acquisitions, innovation and competitiveness.

What can distributors learn from Amazon’s acquisitions?

Viewed through this framework, distributor acquisitions are left-brain driven and focus on mathematical calculus for gaining a return on investment. Disruptive acquisitions harness right-brain thinking and seek to create something that is much more (and different) the obvious sum of parts.

Any distributor leader concerned about the potential of disruption or looking to pursue its own disruptive strategy, can begin to think “out of the box” by exploring three questions:

Question 1: Why hasn’t Amazon (or another disruptor) acquired your business?

The easy answer is that your industry isn’t attractive, measured in profitability, growing or bound by unique requirements for serving its customers. Distributor leaders often take comfort in thinking that their products are too big, too customized, too service-intensive or just too boring. But there is another answer, one that is harder to accept because it is uncomfortable and personal. Maybe your business isn’t built on world-class, differentiated competencies. Or, perhaps you are pursuing the strategy of the owners and leaders that precede you, rather than creating your vision for competing in the disrupted markets and the information age.

Question 2: Does innovation matter for your strategy?

Specifically, I refer to business model innovation, defined as “reinventing your customer experience, competencies, manufacturer partnerships, source of revenue, financials and more.” If innovation matters to distributors, it is because doubling down as a traditional distributor is no longer a formula for success. Your markets and their competitive dynamics may be forcing a fundamental rethink of vision and strategy. Or, business model innovation may not be born of defensive or reactive thinking. Rather, innovation may be the new priority and strategy of distributor leaders, and the new culture of vibrant organizations. Efficiency may be one attribute of success, but not the dominant one. Something new and different may be required.

Question 3: If innovation does matter, can you change your mind-set?

We are all prisoners of our experiences, education and life lessons. This is true for distributor leaders. Baby boomers act on a mind-set shaped by world wars, expanding national infrastructure and scale economies. Millennial leaders are increasingly taking the reins—having learned their own lessons from technology innovation, changing social norms and a desire to contribute and make a difference. Leaders at publically held distributors chase quarterly returns and are held to standards shaped by distributor business models as they are, not as something they can become. Family-held companies follow a path set by previous generations, still influenced by the original founder.

All of this is true, but if change is possible, it must begin by leaders changing the way they envision the future of their company. They must compete not as the constrained business model of a value chain intermediary, but as one that delivers a unique and powerful customer experience on its own created value.

A New Research Report Coming Soon!

Innovation is a hot topic for me. I am currently researching my next research report for the NAW Institute for Distribution Excellence. Our working title is Progress on Digital Tools and Strategic Solutions. Our work will reflect inputs gathered from nearly 100 distributor CEOs and a significant number of their manufacturer partners. So far, two lessons are clear:

  1. Distributor leaders are gathering insights from multiple sources, often in quick bites and accumulated to shape new strategies.
  2. The adoption and use of digital tools by distributors is opening the door not just to increased efficiency and effectiveness, but to the possibility that the distributor business model can (and should) evolve in fundamentally new and uncertain directions. Many are sharing questions with me about how to successfully innovate their business models.

Because of these two findings, we will publish our work this Fall as a research report, not a book. Others may follow as we week to provide distributor leaders with more frequent and digestible insights. Moreover, our research report will offer “strategic road maps” to help distributors find advantage in the uncertainty by combining the advice and experience of distributor leaders with expert perspectives on innovation, culture and change. Our work will be, in part, an extension of our three books on digital tools, but will add new emphasis on the challenges and opportunities of pursuing business model innovation as a leadership vision and business strategy.

While you wait for the new research report, feel free to reach out to me at mark.dancer@channelvation.com, and I’ll be happy to share what I am learning and I’ll welcome your insights and questions.

About the author:

Mark DancerMark Dancer, President of Channelvation, Inc., is a channel strategist and leading authority on digital transformation. He is also an NAW Institute for Distribution Excellence Fellow. You may reach Mark at mark.dancer@channelvation.com.

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