Eight years ago, we were in the thick of the last industrial recession. Most distributors enjoyed a good run during the last half of the 1990s; sales were strong. Then the bottom fell out, and the channel compressed.
Distributors focused on profitability survived and were well-positioned for the several years of strong growth. It’s interesting to note that many economists (as well as General Electric’s CEO at the time, Jeffrey Immelt) predicted a long-term low- or even no-growth environment in 2002. And then most distributors enjoyed the best stretch of growth in their history.
You can pretend to know so much about your customers, competitors, suppliers and the economy that you build a plan based on what has happened in the past. Another option is to admit just how much uncertainty there is, and then find the best way to manage unpredictability and to gain an edge on your competitors.
This year will be defined by how well you can protect and take market share from your competitors. You have to think differently. More importantly, you have to get your team thinking differently.
As a starting point you might assign this article as required reading at the Knowledge@Wharton Web site: “Eyes Wide Open: Embracing Uncertainty through Scenario Planning.” This article can be found here.
If this latest recession hasn’t made you a fan of scenario planning, I’m not sure what will. When companies have undergone such difficult adjustments, it is tough to get the team looking ahead and thinking creatively about how to rebuild. That’s where scenario planning helps. As the article states, if you can sense changes before your competitors, you can anticipate and act on emerging opportunities.
The key is to get your management team thinking forward and differently about what’s happening in the industry. Some distributors built that into their DNA 10 years ago. It will make your team more adaptive and capable of managing risk and opportunity.
On a not completely unrelated note, I’d like to add my welcome to Jack Keough, former editor of Industrial Distribution magazine to the MDM team as a contributing editor. His first blog appeared last week.It’s a win for the industry to continue to have the benefit of Jack’s 25 years of industry experience and insight. I am personally delighted to be working with a good friend and someone so passionate about the value this industry creates.