The 2020 Mid-Year Economic Update_long

Where Does Your Business Fall on the Commoditization Spectrum?

A sense of urgency in developing or enhancing a digital strategy for your business could be a core theme of 2020. The key word? Marketplaces.
commoditization written on the keyboard button

This was my first year attending the National Association of Wholesaler-Distributors Executive Summit and I found the energy at the event to be distinguishingly palpable. If I had to boil the source of the enthusiasm down to one word it would be: Marketplaces. A sense of urgency in developing or enhancing a digital strategy for your business was a core theme. 

When NAW moderator Mark Dancer, author of Innovate to Dominate: The 12th Edition in the Facing the Forces of Change Series, asked speakers what distributors can do to help customers in a time of crisis, Alex Moazed, founder and CEO of platform consultancy Applico, suggested the marketplace model has changed the very definition of who a distributor can define as a customer. “Embrace the new customer: The supplier,” he said. “Traditional competitors are your new allies.” This is because, Moazed and several other speakers said, perhaps one of the most viable strategies to compete with already existing online juggernauts — Amazon Business being the primary example — is to team up with others to multiply your resources and magnify areas where you still hold the advantage. [See our exclusive Q&A with Alibaba Group’s John Caplan in this issue for more on the topic.]

But that window of advantage will not be open indefinitely. Moazed noted that the marketplace or digital platform model tends to have a winner-take-all dynamic enabled by the “network effect,” where the value of a product or service increases according to the number of others using it. For this reason, while there is room for many vertical-specific marketplaces in distribution, the opportunity to be one of those one or two dominant players won’t last forever. At the Summit, Moazed suggested distributors evaluate how much of what you do today is susceptible to a marketplace takeover — “What does that spectrum of commoditization look like?” he asked.

And it’s not just susceptibility to commoditization. As was also noted throughout the Summit, that exposure intersects with another growing vulnerability: The talent gap. 

Full disclosure: I am a millennial (albeit on the older side) so perhaps it’s not surprising that the session I found to be the most entertaining was the discussion between Jeff McLendon, president and CEO of U.S. Lumber Group, and next-generation distribution-related business owners Sean McDonnell, founder of TruPar.com and Benj Cohen, founder of Proton.ai. Beyond an amusing sidebar on whether or not a suit and tie will be necessary at future NAW meetings, some of my most powerful takeaways from the conference came out of this session:

  • Don’t be afraid to explore new avenues. “Curiosity seems to shrink, and that’s frustrating,” McDonnel said about working with older generations in distribution.
  • Be willing to fail. “Mistakes don’t have to be expensive,” Cohen noted. “Mistakes should be cheap. If you’re making expensive mistakes then you’re doing the mistake thing wrong.”

Hear much more from Cohen, as well as other millennial and Gen Z distributors, in our next few issues of Premium, where we’ll introduce the first recipients of MDM’s Future Leaders Award. 

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