The 2020 Mid-Year Economic Update_long

New MDM Podcast: The Value of Innovation, Part 2

In this second of our three-part conversation on innovation in distribution, J Schneider of strategy and consulting firm Dorn joins host Tom Gale to discuss what innovation looks like in 2020 for distributors and manufacturers. In this episode, we look at the ways smaller distributors often have an advantage to identify opportunities for innovation, the need to be selective in building manufacturer-distributor partnerships around a shared vision for innovation, and how to build a culture of innovation.
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Done well, innovation either makes you money or saves you money. Done poorly, it costs millions of dollars in lost capital and productivity. That was one of the key takeaways J Schneider of Dorn, a Chicago strategy and consulting firm, gave us in our first conversation for this three-part series (Season 3, Episode 1).

In this second episode (see below), we built on that core concept to explore shared innovation. “Are you talking on a regular basis with your manufacturer or distributor partners about innovation, and how you can work together,” asks Schneider, Vice President of Strategy for Dorn. “Not around sales or rebates – what does the market need that is innovative and that you as partners can capitalize on?”

My goal in this conversation with Schneider was to get beyond the generic bromides about what innovation looks like. It requires some specific strategic choices for both distributors and manufacturers for how they build their internal cultures around innovation, as well as picking the right partners externally. That translates into talent selection and development, and above all communicating with the customer to deeply understand where specific innovation opportunities lie.

Schneider’s view is that distributors are on the front lines to have meaningful dialogues with customers to identify their problems and challenges, and truly understand both their current processes as well as where customers are going in the next 12-24 months. As customers are evolving – in some cases by the week – distributors have a unique opportunity to find new ways to deliver product and service solutions. 

With the right manufacturer partnerships, those solutions can create value for the customer and growth for the supplier organizations. “What are your priorities?” Schneider asks. Companies have to think differently internally and pick partners more strategically. In a world of shared innovation, business models need to align. If you have a reluctant supplier partner to support you in innovating for your customers, it may be time to find a better fit with your priorities to grow the business.

Schneider said he’s seen smaller distributors often in a position to be closer and able to spend more time with a customer to see how the business is evolving and the challenges faced. Also, the entrepreneurial culture that has often made smaller distributors successful lends itself to a culture of innovation, of constantly seeking ways to compete better and solve problems on a day-to-day basis.

An Executable Process

My key takeaway from these first two episodes is the need to be intentional about innovation and breaking it down into a process that ultimately can be executed across an organization. It requires strategic clarity and research to deeply understand the headwinds and tailwinds in the core markets you serve, but also how you can specifically connect the dots to create competitive advantage through new ways to create value. “The value chain will grow if innovation can be the core driver,” Schneider says – for the customer, distributor and manufacturer.

We’ll wrap up this series in the third episode with more detail on ways that distributors can pursue innovation on their own if their key suppliers are still focused on selling products and providing little support. 

In addition to this series, we’re ramping up The MDM Podcast in 2020 with some great programming and topics ahead – executive interviews, the rise of digital platforms, the state of M&A in distribution and more. Stay tuned, and please send me your ideas for who and what you’d like to hear about in 2020. Use the comment area below or email me at tom@mdm.com. I always value your comments.

Season 3, Episode 3: The Value of Innovation, Part 2

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