CSA Distribution Audits Fueling Growth

Comparing the distribution channel pressures of today with those of even ten years ago reveals a striking decline of distinctive marketplace differentiation. These changes represent a significant opportunity for companies that regularly re-assess whether they are doing everything they can to guide, manage and motivate their channel partners to achieve new levels of growth and profitability.

·   How are end-customer channel needs in your marketplace evolving and how do they create barriers to you and your distribution partners achieving your growth objectives?

·   What gaps exist between your channel partners’ current business models and the economics of emerging customer channel needs in your fast-changing industry?

·   How motivated and prepared are your channel partners to respond effectively and efficiently to industry and competitive performance pressures in their local markets?

·   Are your channel management and incentive programs as aligned as they need to be with the demands your channel partners are facing in today’s fast-changing markets?

Approach. The CSA Channel Opportunity Audit is an independent and systematic diagnosis of your company’s distribution channel opportunities and threats, and is composed of four key elements of diagnosis:

Our Channel Opportunity Audit approach has been used successfully with hundreds of companies over the past twenty five years and focuses on one dominant goal:

Surface tangible ways to work with channel partners to differentiate your products and services with end-customers and accelerate market share growth.

Process. The CSA Channel Opportunity Audit is typically executed in four to five weeks of elapsed time in your marketplace, and proceeds systematically through a series of detailed assessment and analysis steps:

Step 1:  Internal Management Interviews. A highly-seasoned distribution channel expert from CSA will interview senior thought leaders and line managers within your organization to surface critical insights and beliefs about current distribution channel opportunities and threats.

Step 2:  External Market Discussions. CSA will conduct one-on-one working discussions with end-customers and distribution channels in your marketplace to surface their insights and observations about how changing industry and customer dynamics are affecting their current business models and economics.

Step 3:   Synthesis and Diagnosis. A Channel Opportunity Audit report will be provided to you that outlines how your company is positioned to address pressing channel threats and opportunities.

Step 4:     Private Facilitated Workshop. You and your senior leadership colleagues will receive an advance briefing packet and participate in an executive-level Channel Opportunity offsite facilitated by management advisor and educator Richard E. Wilson, a global expert on distribution channel strategy, execution and management.

Benefits. The CSA Channel Opportunity Audit is specifically designed to be a fast-paced and efficient way for you to build stronger readiness for action with your distribution system.

 

Richard E. Wilson is managing director of the advisory firm Chicago Strategy Associates, and a former clinical professor of marketing at the Kellogg School of Management and Director of the school’s Center for Global Marketing Practice. rick@chicagostrategy.com

Technology Distribution Meets New SMB Realities

Distribution channels are moving front and center in the competitive arms race. Virtually everywhere in our scan of a hundred-plus markets, companies are finding that channel design, execution, and management are becoming critical to profitability, defensibility, and long-term growth.

This isn’t too surprising in mature commodity product categories, but it’s also the case in technology markets as well.

And even though technology offerings for small and mid-sized businesses (SMBs) seem tailor-made for direct-channel delivery, upstream providers and downstream customers often continue to favor the value created through new one- and two-step distribution models. The reason, we’re finding, is that SMB owners and managers still find themselves stymied by the dizzying pace of technology change, a proliferating universe of sources, and an insurmountable array of adoption hurdles.

And because they usually lack sophisticated and dedicated technology staff, SMBs are looking for best solution packages tailored to their business processes and integrated seamlessly into existing operations. In fact, share gains in the SMB market will increasingly accrue to distribution channels that efficiently and effectively deliver new value in areas related to solution customization, one-stop sourcing, on-site demonstrations, small-scale pilot testing, non-disruptive and affordable installation, enhanced adoption training, easy upgrade, and lower total adoption costs. And more.

Superb technical expertise is no longer adequate. SMB technology sales are evolving from one-off, pick-and-pack hardware and software licensing sales into persisting cloud-based subscription services. As hardware and software products become less stand-alone and more like component parts in a larger on-premise or off-premise cloud solution, physical product adoption and distribution services are taking a back seat to more consultative approaches to solving vertical- and user-specific business challenges.

Many sophisticated solution providers understand this shift and are attempting to ramp up the skill sets of their 3rd-party distribution partners. From a practical standpoint, this requires clear and actionable answers to two closely related questions:

• What specific channel behaviors will move market share? and,
• How do we incent desired channel behaviors?

For example, What steps should be followed to educate SMBs about their technology design and delivery options, in terms they find clear and compelling? What are the best ways to demonstrate tailored web-based solutions? What concrete channel activities are needed to maximize ease of adoption and use for SMBs? How can channel players best collaborate to ensure one-stop process integration and make upgrades effort-free for the SMB? Is this SMB’s business security best guarded through on-premise or off-premise cloud solutions? How can the channel help reduce an SMB’s all-in cost of adoption?

While major technology solution providers have largely figured out the product and price side of new offline and online technology offerings, many of the biggest players have yet to pin down a distribution-based competitive advantage. And while Gartner estimates that over the next five years companies will spend $112 billion cumulatively on cloud-based solutions, the road to SMB adoption has been bumpy.

SAP, for example, recently acknowledged that poor downstream value-added meant that over the past three years adoption rates of its internet-enabled offering ran barely 1% of target. IBM is finding that barely 20% of its partners are driving meaningful results in their local markets.

In the end, better results for all technology providers and their distribution partners will take detailed, customer-based understanding of the market combined with disciplined execution in the heart of the channel system – in other words, the what and the how.

Why CMOs Struggle for Influence

Cracks in Amazon's Strategy

Source: Wall Street Journal; Media & Marketing; Oct. 17, 2012

Cracks are starting to show in Amazon's "win through low prices and free-riding on brick&mortar services" strategy. That model was always vulnerable to product providers waking up and refusing to let that game be played in their distribution channel portfolios. Those long-overdue vendor channel management moves are starting to happen and the potential impact on Amazon will be significant.

You see, it's not really good for consumers or brands, let alone high-service channels, to allow free-riding in the distribution system. In a world where Amazon only gets the consumer's order because another channel was willing to promote, educate, or demonstrate the product, the channel incurring those costs stops performing the activities in the marketplace. But it turns out consumers still want to be educated and to see and touch many products. They still want a trusted source, not a vendor's paid online recommendation or search engine optimization. When the option to have it all - get great service in one channel and buy at a discount from Amazon - goes away, many consumers will drop Amazon like a hot potato. And they already are!

Let's look at Amazon's flagship product category: books. Here's what the WSJ had to say about the impact on sales of books that are excluded from brick and mortar stores by awakened book purveyors Barnes & Noble and others:

[a] likely factor in the book's poor sales is its severely limited availability. It wasn't stocked in the 689 stores of Barnes & Noble Inc., Wal-Mart Stores, or Target. Some independent booksellers don't stock the title either. Nor is the digital book for sale in e-book stores operated by Sony Corp, Apple Inc. or Google.  In the case of the nation's largest bookstore chain, the absence is the result of a deliberate boycott. Barnes & Noble said in January it wouldn't stock titles published by Amazon in its stores…

We'll see more of this and the impact on Amazon sales will be significant. Sure, there will always be consumers who only seek discounts and will pursue them even without the touch and feel of a high-service brick and mortar store. But will that segment sustain Amazon's growth ambitions? Rocky waters ahead!

Best Buy Throwing in the Towel?

The evidence now is clear that the consumer electronics manufacturing and retailing industries are both at a profound strategic crossroads, and weak-kneed responses from top retailers and product brands alike are dramatically reshaping the competitive landscape in potentially destructive ways for tomorrow’s consumers.

In the early-2000s we saw CompUSA and Circuit City go bankrupt and ultimately defunct on the back of tragic customer experience decisions to buckle under rampant flat screen price commoditization pressures. Passivity by lead product vendors was a missed opportunity then and a bigger one now. Thankfully we still had Steve Jobs around to offer an exciting new Apple Store shopping experience that consumers lined up for, even while the same Apple products were available in old school retail locations down the street (sometimes even at a lower price).

So it is disheartening to learn that Best Buy is throwing in the towel and all but abandoning any hope of reinvigorating its core customer experience (see this article in the WSJ on 12 October 2012). Does anyone really believe that Best Buy can out-online Amazon and other stripped-down, low-cost, no-frills, “services are free” and "taxes aren’t paid" online discounters?

The future is cloudier than ever for top branded product manufacturers as well, especially those investing heavily in innovation. When all the so-called “retail showrooms” are closed down or turned into local online shipping warehouses a la Wal-Mart’s lead, where is it that consumers will touch, experience, learn and get excited about new product innovations? Will vendor paid online recommendations and testimonials really do the trick for tomorrow’s shoppers?

Look around investors, where are the new strategic visions worth betting on? And consumers beware, it’s still true that’s there’s no free lunch.

Developing Next Generation Marketing Leaders

Reinventing Executive Development

for a New Era of Global Marketing Leadership

These are exciting times. Social marketing. Big Data. Globalization in new forms. Gender-based programming. Experiential selling. Real time pricing. Ecommerce of all shapes and sizes. Crowd sourcing. Cloud offerings. Multi-channel distribution.

Marketing is changing. Profoundly. The management implications are changing. The corporate role of marketing leadership is changing. The question is: How prepared are today’s complex global organizations to keep up with, let alone get out ahead of, the high-speed evolution we now see in marketing?

Many senior executives recognize the challenge and are prioritizing inter-regional efforts to raise the strategic marketing competency of their next-generation leaders . This white paper describes the coming need they see for Global Marketing Leadership. And in response it proposes an integrated, cross-border program to structure and enliven the extended development journey these future leaders will have to make if they are to be fully effective in the 21st century’s marketing-saturated world.

Marketing in the 21st Century. New technology possibilities and new customer demands are changing the marketing conditions that make a business model successful or not.  As a consequence, an unprecedented transition is rocking the discipline of marketing. Consider, for instance:

•    Cloud computing is changing the work of hardware resellers from “moving boxes” to selling subscription services. What’s the best way for a technology innovator to move into cloud offerings without bankrupting its channel partners?

•    Online recommendation site decide.com reports that over the course of a single day retailers on Amazon.com changed prices on a Samsung 43-inch plasma television four times, between $398 and $424. Around midday, Best Buy boosted the price to $500 from $400 before dropping it back down, while Newegg in the morning raised its price to $600 from $500.  What’s the right approach to price management for companies navigating such a chaotic marketplace?

•    Procter & Gamble is moving the headquarters for its beauty business from Cincinnati to Singapore. What’s the best way for a company to organize and manage far-flung resources for advantage as global markets reallocate and new centers of customer power take hold?

•    Amazon.com has launched a new B2B industrial supply venture in an effort to cash in on the fragmented and comparatively competition-light industrial supply market served by thousands of small-to-midsize distribution businesses across the U.S. and hit the ground running with over 500,000 products. What are the channel implications for traditional B2B product makers and their traditional distributors?

•    Haute couture “runway” events in Paris and Milan are now being live-streamed from apparel-makers’ web sites to remote invitees. What are the pros and cons of new digital marketing avenues for global luxury brands?

A hundred cases like these could be cited on all sorts of dimensions to illustrate that companies are under immense pressure to make big shifts in global marketing strategy and execution. Some are doing it by choice. Others, by urgent necessity.

Either way, a more fundamental trend is clear: Marketing leadership is in ascendency. From a tactical functional role it is taking the  lead on the corporate growth agenda. The growing diversity, complexity and importance of global marketing challenges mean that functional responses have to be led, and with at least as much single-mindedness as product design, development, and manufacturing have always commanded.

Overcoming Shortfalls in Marketing Leadership. While strategically placed new executive hires can certainly make a difference, no company of any global stature can rely on pinpoint talent acquisition as the sole means  to spur tangible shifts in its global marketing leadership. Sustained improvement in corporate competence must at its core be organic, it must be developed and embedded. This means that at key levels in the organization, next-generation leaders, whether they come from sales, marketing, finance or operations, will have to take on the 21st century mindset of a strategic global marketer. Today few managers in most corporations would make that claim for themselves. Even in the marketing department itself, a field sales management background is common

Conventional senior executive development paths can be helpful here but they really speak most effectively to more generalized corporate management challenges such as innovation, culture, and Leadership with a capital L. These programs tend to be oriented toward  soft skills.  Developing next generation strategic and executional competency in  Global Marketing Leadership requires something else, a development path that integrates together the following elements:

•    Best-in-class thought leadership from a mix of academics and admired practitioners that is contemporary and incorporates the latest and biggest marketing issues facing global marketers today and in the future. A company’s next-generation leaders have likely already gotten a business 101 MBA, so studying yesterday’s cases and frameworks is no longer adequate in moving the strategic agility needle.

•    Customization to a company’s own business in ways that adapt outside expertise to the specifics and nuances of both the complex global organization and the mind-boggling variety of market environments the company plays in. When it comes to learning, relevance trumps generalization in today’s high-stakes global environment.

•    Fast-cycle concept application that makes hands-on apprenticeship and in-market activity inseparable from the next generation leader’s real business issues and global growth, profitability, differentiation and market share accountabilities.

•    Effective cross-border engagement for future leaders consumed today with the challenges of winning in vastly different regional markets and operating dimensions. Forming cross-market, cross-geography, cross-functional learning models is only step one. The greater challenge is to keep the leadership development process moving forward in a high-touch, sustained, and high-intensity way.

A New Executive Development Approach:

Global Marketing Leadership

Winning companies will demand a new form of integrated leadership development solution that enables next-generation executives to assimilate dramatic new forms of marketing leadership competency while they tackle the global business challenges of most significance to their company’s  success longer term. The best academic and practitioner experts, an optimal global learning structure, the newest engagement technologies and the most relevant learning tools.

All of the pieces must be integrated into a single tightly-managed development journey for any company’s cohort of next-generation leaders.  Shouldn’t the development of forward-looking global marketing skills in your next-generation leaders leverage new-style executive apprenticeship? The process must move smoothly toward its agreed-upon developmental and business objectives. Executive learning simply cannot stop at the offsite classroom.

1.   In-person global learning events that are optimally structured and judiciously spaced in critical markets around the world. The goal is to unleash, amplify and expand the engagement and learning potential of these in-person learning events by integrating them into a cohesive overall competency journey.

2.   Academic and practitioner curriculum design that is tightly tied to issues of top priority in the company’s fast-evolving marketplace. Sessions delivered by leading academics from across schools, pace-setting frontline business leaders in relevant fields, and far-flung experts in the global organization itself – cannot be backward-looking amalgams of conventional practices. They have to be joint explorations of what initiatives and programs have the best chance of working in the rapidly unfolding future of 21st century marketing.

3.   Leadership curriculum highly customized for the company’s own global business in terms of its learning objectives, its structure, and its materials. That means working side-by-side with a company’s line business leaders to surface global marketing challenges, develop customized learning cases, and working with instructional academics and practitioners to create tailored teaching materials.

4.   New executive learning technologies that enable higher-touch interactions between in-person events, and deliver faster progress in demonstrating real application of marketing leadership competency and improved results.  A technology platform that leverages exciting new developments in live, interactive executive engagement from any location. The dynamic media environment must be professionally produced and tuned to the quality standards, entertainment styles and pace of today's contemporary information revolution.

5.    New mechanisms of accountability that highlight  how well future leaders are developing new global marketing leadership techniques and putting them to work in their own very real and immediate business situations.

These are elements that must be orchestrated for complex global organizations. There is also one more element, which the corporation must commit to itself to ensure a successful global marketing leadership:

6.    A corporate learning environment that makes it more than just “ok” for managers to work their marketing leadership development assignments day after day, week in and week out for up to two years. This environment must be kept vibrant and sustaining, by signaling that what each next generation leader does on his or her development path is far more than an offsite exercise. It has real consequences to the company’s future. C-suite leaders must actively mentor and ensure accountability of how well things are progressing.

21st-Century Engagement

Pressure is intensifying on complex global organizations to find ways for highly dispersed managers to interact and build close working relationships as they once might have done in a corporate hallway. Distanced as they are, they still need to build trust and collaborate easily with people they rarely see face-to-face. And they want to cultivate more intimate working relationships with top company executives who can move help them navigate their increasing accountabilities and ultimately move them into more challenging positions.

But 21st-century marketing skills are best built with 21st-century tools and technologies that move beyond the old constraints of co-location and video conferencing. New technologies for close engagement and engaging information sharing are becoming the next generation’s preferred style of interaction. Why? Because frequent new technology-enabled touches maintain more personalized channels, more coordination of activity, keep people more current and connected, and use time more efficiently.

Like the 21st-century teen, the 21st-century marketer wants his or her peers and teams to get things done now and in the moment. . . so everyone can move on to the next important thing. Waiting for in-person interactions feels quaint, if not plodding, to tomorrow’s marketing leaders.

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Strategic marketing leadership to the degree we believe complex global organizations will need takes new sorts of knowledge, at minimum. More than that, however, it really has to become internalized. And that takes persistence, practice, and peer interactions.