General Motors last week invested half a billion dollars into a car service. Imagine that. But GM’s deal with ridesharing service Lyft involves more than money, and there are a few timely lessons that distributors can take from this.
Rethink business model – every year, at least. Who would have thought five years ago we’d be hearing the president of GM talking about personal mobility? It’s a significant shift away from product-centric thinking to new ways of creating value for customers.
Some distributors adapted their models long ago and built stronger customer relationships with specific service offerings beyond product. Instead of just selling a few o-rings for pennies, they preassembled kits to lower customer labor costs and increase productivity; the result was much higher profitability and lifetime customer value as they were embedded in the production workflow.
Companies like Uber and Lyft are fundamentally changing the equation of car ownership in metro areas. Many stores, including Staples, are changing retail by significantly reducing store square footage to match fast-changing consumer behavior. Look at Grainger’s strategic branch reduction – as reported in our pages last year – as customers shift to more online sourcing or delivery.
The rate of change is increasing even in more traditional industries and companies. If you aren’t challenging your team to find new ways to provide value to customers or vendors, you may feel like you lost at musical chairs to competitors that thought bigger or outside the UPS box.
Rethink supply chain. There is a lot of hype around disruption and sexy Silicon Valley startups. But through repeated cycles of change and consolidation, distributors have proven their value in highly fragmented markets to their suppliers and the customers they serve. Innovation is not new. Berlin Packaging is a great example, as we have also reported on in the past.
When you look at how markets for distributors are changing in 2016, it’s not around being better at e-commerce than Amazon; it’s about crafting a unique value set of product portfolio, services and expertise. And just as importantly, it’s in the execution where the real long-term value is created. A good example is how the very healthy niche of integrated supply has evolved.
Rethink partnership. There are increasing examples of ways that distributors are combining specific strengths with other providers to build value. Look at the Air Liquide-Airgas deal or even Sonepar’s acquisition of IDG to think how strategic value can be defined. We’ll continue to see that in the M&A deals this year and beyond.