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“If firms ignore the profit opportunities in the existing business, they are severely limiting their ability to take part in the new distribution future.” No one can hit you over the head with common sense in such a nice way as distribution profitability expert Dr. Al Bates. In his article in this issue, he stresses that management needs to do a better job getting the team aligned around the existing opportunities to improve profitability — basic blocking and tackling.
He shares his research that “it is not uncommon for half of the firm’s key managers to feel that prices should be reduced to gain sales volume, while another half feel that prices should be increased.” And with his trademark level of understatement, he sums up: “With such disparity of understanding, there is little chance of making meaningful improvements.”
In any time of disruption, there are countless shiny objects that will appear as the definitive answer for solving the fundamental challenges the business faces. Some companies seem to bounce from one solution to the next like a pinball; others are gridlocked into the lack of consensus and “same-old” operating procedures Dr. Bates prescribes a cure for.
It’s easy to respond to threats distributors face by thinking there is some new technology or strategic initiative that will fix or make things better — an e-commerce platform or some other tech solution. These may offer immediate fixes or competitive advantage in the short term. But others will catch up.
There is a middle ground that will define the more successful companies of the future. Distribution companies have traditionally been led by hierarchical, top-down management structures. But too many companies aren’t adapting effectively to the changes impacting their markets — digital, generational and new competitors among the top disruptors.
So, when Dr. Bates calls for better management practices in operational improvement and consensus, part of the solution includes the back-to-basics approach he outlines. Companies that have been able to strengthen their profitability have options to invest in positioning the business to be more competitive.
But also, there needs to be a shift in mindset to a new definition of leadership that is more oriented to education, communication, alignment and consensus. And to be clear, I’m not advocating for a democracy! As quickly as the workforce is changing and as competitive as it is to find deeply talented people, the best companies will have an agile leadership team that the best people want to be a part of. It’s important to make your company as attractive to the current and future team as it is to your customers.
If your response is that you’ve got a longtime management team in place and things have worked pretty well, you may be on the wrong side of a leadership gap. If they haven’t already, competitors will attack your margins, your markets and your talent with a more effective value proposition. Do you have the leadership in place to create a more profitable and agile future, or will competitors define what that looks like?