More than 20 years ago, Clayton Christensen coined the term “disruptive innovation” to refer to a situation in which a formerly complex and expensive process suddenly becomes simpler to perform and more affordable. Once disruptive innovation occurs, distinctive business assets or processes that formerly acted as competitive advantages will become quickly standardized across the industry, leveling the playing field.
When you’re faced with constant disruptive innovation, as today’s wholesale distributors are, the key to success is to maintain your competitive advantage. You can do this by always looking ahead to the next big innovation in distribution, so you can prepare to leverage it or overcome it.
Innovation Wins Price Wars
While we’re discussing competition in today’s wholesale distribution environment, let’s talk about the elephant in the room. That’s right, we’re talking about commodity pricing.
These days, wholesale distribution has become a highly competitive arena in which the #1 differentiator is based on costs. In an internet-driven world, it’s become all too easy for your potential customers to compare your prices against those of your competitors and to make their purchasing decisions on that factor alone.
Of course, you know that your high levels of service set you apart from your competitors – and your well-trained salespeople know that too. But since your potential customers assume you’ll be able to meet the crushing demands of now-standard two-day shipping, and because they rarely speak to a representative before making a purchasing decision, those prospects of yours won’t know anything about your service or customer satisfaction levels before they click the “buy now” button on your site.
And, in fact, they may not actually click that button at all because you’ll always have a competitor that sells something for less than you do.
Long-Term Strength Lies in Differentiation
In the best-selling business book, Blue Ocean Strategy, authors W. Chan Kim and Renee Mauborgne define a modern business’s two main growth strategies as either a “red ocean” approach or a “blue ocean” approach.
- In a red ocean strategy, you and your peers bloody the ocean waters with a cut-throat competitive model, one in which you all take part in a battle royale that pits each wholesale distributor against the other in an endless struggle to steal more market share in an ever-shrinking pool of existing customers who are all shopping for commodities. It’s not a pretty picture.
- In a blue ocean strategy, you remove your business from the bloody red ocean and settle in a limitless blue ocean, one in which you’ve differentiated yourself so much from your peers that you seem to operate in a world (or ocean) of your own. The blue ocean is a calm and peaceful place to be, but you must continue strategizing because the next disruptive innovation could open your blue ocean up to the red ocean combatants, leaving you to fight for market share again.
Strategies for Differentiation Using Innovation in Distribution
For the calming “blue ocean” approach, your business must continuously focus on innovating new products, services, and operating models, especially in two critical areas:
1. Technology – Much of today’s innovation is powered by technological inventions. Examples include virtual reality headsets, voice picking, warehouse automation, seamless integration between e-commerce and ERP, effective CRM, and blockchain-powered supply chain automation. How can you use the newest tools and solutions for business leverage?
2. Service – Companies that understand customer service often focus on delivering an omnichannel experience. However, though this strategy has worked well for CPG retailers, many wholesale distributors haven’t yet figured out how to deliver a similar experience to their B2B clients. Perhaps you can. In our modern world, companies that provide an innovative customer experience pull ahead of their competitors.
Innovation in Distribution: Unlimited Possibilities
With recent advances in mobile technology, artificial intelligence (AI), Internet of Things devices (IoT), robots, and warehouse automation, the competitive landscape for wholesale distribution has experienced a wide range of disruption on a very short timeline. No one knows what’s coming next, and, in truth, no one ever will know what’s coming next. As Winston Churchill famously put it, “It is always wise to look ahead, but difficult to look further than you can see.”
The best way to counteract limited vision so you can successfully innovate in distribution is to continually keep collecting data, assessing your data, and acting on that data. Not sure where to start? One great way is to find an innovative software solution that will seamlessly integrate your e-commerce and ERP functionality, provide you with end-to-end supply chain management capabilities, and help you gain insight into your data with actionable intelligence that drives better decision making.
Get on the path to innovation in distribution when you contact the warehouse experts at SWK Technologies.