UnleashWD: Eight Ideas to Inspire Your Distribution Business

An Epicor® and 4th Generation Systems Collaborative White Paper

UnleashWDEight Ideas to Inspire Your Distribution Business

Table of Contents

A Call for Change ..................................................................................1

#1 - Market-Making and Disruption ................................................2

#2 - Rethink “Supply Chain” ..........................................................3

#3 - Unleash an Innovative Spirit in Your Company ........................4

#4 - Acknowledge and Lean Into Fear ............................................4

#5 - Prepare Your Organization Culturally .......................................5

#6 - Collaborate, Don’t Command .................................................5

#7 - Recommit to the Human Aspect of the Business .....................6

#8 - Recommit to the Voice of the Customer .................................7

Conclusion .............................................................................................8

About Epicor ............................................................................................

About Unleash .........................................................................................

UnleashWD. Eight Ideas To Inspire Your Distribution Business

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A Call for ChangeWhat will your company do differently this year? In recent discussions with innovators in the wholesale distribution industry, several forward-looking themes emerged. Taking a cue from PepsiCo® CEO Indra Nooyi, participating distributors sought to “lift and shift” ideas from other industries in order to change their business model (i.e., the story of how an organization creates, delivers and captures value) and potentially reinvent their companies.

In taking this approach, it’s important to make a distinction between true transformation versus incremental change.

You may ask, why is it so important that you reinvent your business now? In myriad ways, this era screams for transformation: from the influence of technology, to global economic forces, to changing demographics. We are living in an “Age of Disruption.”

For example, by 2020, the Millennials (those born between the early 1980s and early 2000s) will dominate the workforce—meaning that the majority of your employee base (and that of your customers) will have grown up using the Internet, social media, mobile devices, etc. as a primary means of experiencing the world. How could this not impact your marketing, sales and customer service?

Reimagining your business involves looking at it as if you’ve never seen it before, and thinking about how to deliver value to your customers in a completely different way—creating a market that you can be the leader of!

On the following pages, we have identified eight ideas based on excerpts from the inaugural UnleashWD Innovation Summit, produced by 4th Generation Systems and co-sponsored by Epicor Software Corporation. The summit brought innovators from outside the distribution industry to the TED Conference-inspired stage to help distributors rethink their business and catalyze a new wave of innovation and business model transformation throughout wholesale distribution.

You’ll find following each of the eight ideas, a series of “lift and shift” questions developed by UnleashWD founder Dirk Beveridge. These probing questions are intended to help you elevate the innovation discourse within your distributorship.

“In most organizations,

change comes in only

two flavors: trivial and

traumatic.”

—Gary Hamel, Wall Street Journal


2

#1 - Market-Making and DisruptionGoing forward, successful innovation in wholesale distribution will call for market-making, rather than simply gaining market share. Creating new markets is critical for business survival. A simple way to think about it is that you’re not just “building a better mousetrap,” but coming up with a new paradigm for controlling mice!1 Apple® is famous for this in their product development: led by Steve Jobs, the company would solve problems customers didn’t know they had, with products they didn’t even realize they wanted. Market-making starts with identifying unmet needs.

However, far too many companies find themselves shackled to an existing business model. In the Apple example, Sony® Music had all of the necessary pieces (talent, technology, marketing channels, etc.), but Apple “beat them to the punch” in reinventing the music industry (via iTunes® and the iPod®), because Sony was stuck in their own business model. Don’t let what you know limit what you can imagine.

It goes without saying that a focus on taking share has its place for all distributors. That said, to what degree is your business committed to identifying unmet (and quite probably unarticulated) market needs and then innovating new solutions?

Is there an opportunity for you to partner with your strategic suppliers to bring this level of thinking to your alliance?

Look at the sources of the ideas in your distributorship. Are the ideas almost exclusively derived from tenured employees, industry gurus and research? Is it possible that this ingrained knowledge is limiting what you can imagine?


Ways to disrupt an industry:

• Totally eliminate customer pain points

• Reinvent customer service

• Make “dumb” (static) touchpoints “smart” (interactive, creating a relationship)

• Teach your company to talk (e.g., Siri® for Apple iPhones®)

• Teach your organization to see and learn in new ways (e.g., municipalities using in-ground parking sensors to control traffic flow)

• Be utterly transparent (telling it like it is)

• Act like a startup (asking, “What would we do differently if we were just entering the market?”)2

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1 Saul Kaplan, Chief Catalyst, Business Innovation Factory, “Business Model Innovation - How to Stay Relevant When the World Is Changing.”

2 Michael Hinshaw, President, TouchPoint Metrics, “Smart Customers, Stupid Companies: Why Only Intelligent Companies Will Thrive, and How to Be One of Them.”

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#2 - Rethink “Supply Chain”For wholesale distributors, “supply chain” may be what you know, but that is 20th century language—an established business model that limits your thinking and leaves you vulnerable to disruption, just like Sony. In the 21st century, we are all part of a networked world, where capabilities cross-connect inside and outside your enterprise, and are not just linear.3 You need to play in the right part of the value chain, as cutting-edge companies like Google® are doing.

Currently, Google is developing augmented-reality eyewear (a.k.a. “Project Glass”) that interconnects to all facets of what Google does—displaying real-time information about live events as they unfold before your eyes. Beyond developing the technology itself, Google has thought through the accompanying business model. Because a ubiquitous, non-stop Wi-Fi connection will be required, Google is already positioning itself in the middle of the network. In contrast to Sony, Google

recognizes that putting the pieces together—either as a supplier to or an owner of a strategic control point in the value chain—will be essential to keeping other competitors out (at least initially, while market leadership is being established).4

Words matter. Context matters. How might looking at your role as a distributor as part of a “networked chain” or “value chain,” rather than your role in the “supply chain,” unleash new thinking?

Where are the opportunities to earn a position of strategic control?

If you’re like most

distributors, you may

classify the replacement

of a legacy Enterprise

Resource Planning (ERP)

system as “traumatic,”

and so may have put

it off. But in rapidly

changing times,

there are also risks in

standing still. Enterprise

Resource Planning can

drive change within an

organization and track

transactions across

the network. In the

future, ERP vendors

will be judged by their

ecosystem: that is,

how they interact with

customers, partners/

developers, etc.


______________________________________

3 Saul Kaplan presentation. 4 Dr. William Putsis, Professor of Marketing, Economics and Business Strategy, University of North Carolina at Chapel Hill, “Creative

Destruction - The Imperative to Make Your Product & Service Offering Obsolete.”

4

#3 - Unleash an Innovative Spirit in Your CompanyTechnology mavericks like Google and Apple do not have a monopoly on innovation. For example, most airlines have been operating in the red over their entire lifespan; yet Southwest Airlines® has enjoyed consistent success for over 40 years. Southwest achieved that level of performance because they rethought and reimagined what it could mean to be an airline. They determined their value proposition to be: “We’re in the freedom business—to ‘democratize the skies’ and make air travel affordable and accessible for rank-and-file Americans. Our competition is other forms of transportation, not other airlines.” Everything they do is in service to that disruptive mission, which allowed them to target an unmet need.

Or, consider the transformation in delivering home entertainment, from Blockbuster® to Netflix® to online streaming of movies and TV shows. Each successive business model has upended the whole market. (When is the last time you visited a Blockbuster store?)

The lesson from these examples is to not let past experience get in the way of innovation. As Alan Kay said, the best way to predict the future is to invent it. You need to avoid “analysis paralysis,” or retreating to the safety of what is known.

Do your guiding ideas—your mission, vision, values, and purpose—elicit a spirit of pioneering, or one of security and risk avoidance? And how about your established leadership?

Look across all functions of your distribution business—does the culture require analysis that demonstrates a guarantee of success? How might this cause a retreat towards safety and what is known, rather than advancement towards new possibilities?

#4 - Acknowledge and Lean Into FearOur history and success create a strong bond with the status quo. Anything but “that’s the way we do it here” produces an intense surge of fear that can freeze an organization out of any significant level of innovation.

When you innovate—when you bring your company to the edge—there is no crystal ball that will show you how the change will play out. Fear of the unknown is one of

several common fears in business. Others include:

• Fear of failure

• Fear of losing control

• Fear of success.

The latter may seem counterintuitive, but in some cases, you may be reluctant to implement change due to fear of cannibalizing your current business model. The antidote is preparation to face the fear head on; i.e., asking the question, “Can we be ready to eventually move away from our core business?”5

Apple made the creation of value for customers its priority. When you do this, the fear of cannibalization disappears. In fact, when your mission is based on creating customer value, cannibalization and disruption aren’t “bad” things to be avoided. They are goals you actually strive for—because they help you improve the outcome for your customer.

In his book The Innovator’s Dilemma, Clayton

Christensen of Harvard Business School suggests

that large companies have certain barriers to

innovation. Being industry veterans means that they

adhere to set ways in approaching new and potentially disruptive

technologies.

Most businesses also have an established customer base to which they are accountable. Customers

are a substantial barrier to innovation; as Henry Ford

has been quoted as saying, “If I’d asked customers

what they wanted, they would have told me, ‘A

faster horse.’”

Last but not least, companies make decisions according to their place in the value network—or, to put it simply, according to where they already are in

the market.


______________________________________

5 Lara Lee, Former Chief Innovation & Operating Officer, Continuum, “Leaning into Fear - The Courage to Push Beyond.”

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To what degree is fear limiting a rigorous discussion of your business model, and the relevancy of how you currently create, deliver and capture value?

Are there stories within your organization of individuals who questioned the status quo despite the risks inherent in doing so? How do these stories end?

Is the need for short-term results limiting your leadership’s openness to innovating and creating something new?

#5 - Prepare Your Organization CulturallyHow do you realistically get past the fear factor? You can begin by fostering a culture of change. Empower your teams to innovate: create environments (a.k.a. “sandboxes”) for experimentation, where people can take risks and “play with the pieces” (and each other) in safety, leaving room for failure. You need to be able to “fail cheap and fast” to learn.6

Of course, most distributors are not set up to think this way. They are very uncomfortable with “just trying” and experimenting iteratively (outside of product R&D). Yet, a series of ongoing, informal experiments can lead to lots of little changes in strategy and culture that add up to transformation over time.7 Disruptive change can start with seemingly innocuous offerings, but it’s not enough to just improve the way things are today; you also have to envision, prototype and test new business models that will pave the way to the future.

Does the culture of your distributorship foster, recognize, and reward experimentation?

How many “sandbox” experiments are currently underway within your business? What does this say about the inventiveness of your distribution business?

What can you do today to help your organization identify potential new ways of creating value and then “step into the sandbox” to play with the ideas, allowing for “fast and cheap failure” on the innovation journey?

#6 - Collaborate, Don’t CommandYour organizational leaders can be catalysts for this ongoing process. They need to collaborate instead of command, emphasizing the importance of working together as a group. You should recognize that your team is stronger together than all of you apart; take advantage of that shared brainpower; and engage the collective expertise within your own organization, as well as your external network. Creating an “Architecture of Participation” allows you to tap

into fresh ideas (by colleagues, customers, vendors/partners, etc.) that may have previously remained hidden.8

The Power of “Yes, and…”

At The Second City Comedy Improv, responding “Yes, but…” to a group

member’s suggestion is considered to be “like ‘no’ in a tuxedo.” On the

other hand, “Yes, and…” is the basis of improvisation; it

connotes acceptance and building of ideas. It’s about possibility, not perfection, and

turning off your internal “checks,” to really be present and

listening.9


______________________________________

6 Lara Lee presentation. 7 Bill Taylor, Founding Editor, Fast Company Magazine, “Practically Radical - Not-So-Crazy Ways to Transform Your Company, Shake up

Your Industry, and Challenge Yourself.”8 Ibid. 9 Tom Yorton, Chief Executive Officer, The Second City Communications, “The Power of Improv - Business without a Script.”

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IBM® coined the term “humbition” to describe its leadership mindset—a combination of fierce ambition (power of the individual) and intellectual humility (power of the group, as leaders seek ideas from a wide variety of sources and unexpected places in the organization). These innovators know they don’t have all of the answers, and keep themselves open to outside influences and committed to continually learning as fast as the world is changing.

Contributions from employees, customers and partners must be easy to try out, adopt and maintain. Playing off of each other, group members can heighten ideas, add layers, and combine and recombine to reinvent the organization.

To what degree has your leadership consciously moved away from the industrial era’s top-down, command-and-control style of management?

Is the word “silo” still often used to describe the lack of communication within your business?

How can you open the flow of ideas to collaborate with others, including those outside your four walls?

Are you happy with the collaborative nature of the conversations with your strategic suppliers? Your strategic customers? If not, what can you do to lead a more collaborative exchange?

How far down the path are you relative to understanding the needs of Millennials—the group of individuals who will dominate your workforce in the very near future?

#7 - Recommit to the Human Aspect of the BusinessWhile it may seem like a fundamental, far too many organizations fail to incorporate a sense of humanity into their overall mission—engaging their employees and customers at a basic human level. For example, in ERP implementations, the solution itself may be seen as very powerful, but the challenge can be in the execution. You can’t just “throw technology in there on top of everything” and expect instantaneous improvement. To encourage employee buy-in (the human element) and achieve maximum benefits from the technology, there should be a change management process in place to concurrently adjust the system and educate the employees in iterative steps.10 “Super users” who are up to speed and passionate about the technology can help guide others.

By bringing more of who you are into what you do, and nurturing those human connections, you have a shot at becoming what is called a “Passion Brand,” because from this internal “fire in the belly” comes a broader organizational perspective: “How do we make everything we do more significant and memorable to the outside world?” This is what will separate you from everyone else in the market!12

At Umpqua Bank, based in Portland, Oregon, they asked, “Can we create an entirely new banking experience—one that is attuned to all five senses and the complexities of the human spirit?”

Tapping into passion—or what the Greeks called “agape”

(deep, compelling love, motivation or

belief)—is especially important to

Millennials.11 As a generational group, they are concerned in the short term

with “What gets me up in the morning?” and in the long term with “What will be my legacy; will my

work have a lasting impact?”


______________________________________

10 Dr. Ron Ashkenas, Senior Partner, Shaeffer Consulting, “Simply Effective: How to Cut Through Complexity in Your Organization to Get Things Done.”

11 Hunter Hodge, Co-Founder, Cirion Group, “Talent Wars - Why Young Talent Flocks to the Innovative & Relevant Businesses of Today.”

12 Bill Taylor presentation.

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Although this question may sound “New Age” in theory, Umpqua’s answer came via tactics such as incorporating pop-up stores, local indie music soundtracks, coffee service and free chocolate into the bank’s branches, and keeping them open after-hours as community centers. In essence, Umpqua is changing the conversation with customers about the role a bank can play in their lives—reshaping the sense of what’s possible by becoming part of the infrastructure in the community.

To what degree is your leadership focused on the processes and systems required to run your distribution business, at the expense of ignoring the human emotions that drive your employees, suppliers and customers?

What emotional responses surface when your employees, suppliers and customers interact? Are these negative, neutral, fairly positive, or do they suggest they love to interact with your business?

What would you need to do to turn your distribution business into a “Passion Brand” like Harley-Davidson®, Apple, Disney®, and others?

#8 - Recommit to the Voice of the CustomerInnovative companies like Umpqua seek out the Voice of the Customer (VOC), to see the business relationship through their eyes and truly understand their needs. If you are going to design your business around the customer experience just as Umpqua, Southwest, Apple and others have done, you need to talk to customers, ask them, and perhaps more importantly, observe what they want and visibly react to their hidden agenda.

Harley-Davidson is another company that was able to turn their business around by looking at innovation through the lens of their customer community. After a test ride, they began asking prospective customers, “What do we need to change about this bike to get you to buy it?” The customers, seeing that someone talked to them, actually listened and visibly reacted in response to their comments, began to develop the sense of

“You get me” that engenders goodwill and buzz about a brand. (This phenomenon is also readily visible on Facebook®, where your post implicitly invites the world to acknowledge your existence with a “Like.”)

In addition, Harley-Davidson learned to base their brand messaging on emotional appeal. At a very primal level, we buy with the heart (a.k.a. “emotional intelligence”), not the head.

In today’s hypercompetitive environment, you must create value outside of product. This means connecting to the customer’s hidden agenda and ambitions—their emotional intelligence. The underlying (but typically unspoken) question that the average customer is asking is, “Why should I do business with you versus one of your competitors?” All too often, front-line people have no good answer! If your own employees can’t explain clearly, simply, consistently and convincingly what your differentiators are—what is unique and compelling about how your company is doing business relative to what’s going on in the marketplace—that’s a problem. It’s not good enough to be pretty good at everything; you need to be the most at something in your field!14

“Brain = pain”…so stop making sense!

The more you try to use rational, logical

arguments to sell (under the assumption that data will enable your customer

to make an “informed decision”), the faster you

commoditize your business. Look at the messaging

found on your competitors’ (and probably your own)

Web sites: “We offer outstanding customer service; reliable, value-added, quality product;

our people make the difference…” These are NOT differentiators! If

everyone is saying the same things, potential customers will just become immune to the message and pick the cheapest alternative. You

need to consciously choose not to do this (saying what

people expect you to say, and doing what they

expect you to do).13


______________________________________

13 Ken Schmidt, Former Director of Communications, Harley-Davidson Motor Company, “Harley-Davidson’s Ride from Disorder to Dynasty.”


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At your next board or staff meeting, could you tell a compelling story of your commitment to understand the emotional and business needs of your customers?

And then could you expand that story to demonstrate innovations to better meet these needs?

Beyond the articulated needs (let’s say, getting the right product, to the right place, at the right time, at the right price), what are the hidden agendas of your customers that are not being fully met?

Conclusion: Opening Your Business to Inspiration and ProvocationThe only sustainable form of market leadership is thought leadership, and that involves identifying the “big ideas” that define how you do business, and the impact you want to have. (E.g., Google’s mission is: “to organize the world’s information and make it universally accessible and useful.”) While it may seem an overwhelming task, you can be a change agent; it just takes patience and persistence.15

Remember that when Steve Jobs returned to Apple in 1997, the company was dying at the hands of Microsoft®, IBM, Dell®, and a host of other competitors that were doing what Apple did, only cheaper, with faster processors. The iMac®, iPhone, iPad®, iPod, iTunes and the Apple Store were still to come. Jobs’ real genius was seizing upon existing concepts, simplifying and perfecting them, and then putting them forward at exactly the right moment. Likewise, social media is an “overnight sensation” that took 15 years to come to full fruition—the world just wasn’t ready for it back then.

Understanding how to stage your change management programs, and introduce new business models inside your established distribution company, requires some vision of what the business could look like in the future and how you will compete.

LEARN MORE:

In 2012, Epicor Software Corporation co-sponsored the first-ever 4th Generation Systems-produced UnleashWD Summit for wholesale distribution. Over two days, 17 provocative storytellers from outside the industry challenged and inspired distributors to think differently about their businesses and to create a new wave of innovation and business model transformation.

To view the videos of each of the 17 storytellers, visit: http://unleashwd.com/leaders-of-innovation-2012/

2013 UnleashWD Summit Details:

October 29-30 Venue SIX10 Chicago, IL www.unleashwd.com


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About EpicorEpicor Software Corporation is a global leader delivering business software solutions to the manufacturing, distribution, retail, and services industries. With more than 40 years of experience, Epicor has more than 20,000 customers in over 150 countries. Epicor solutions enable companies to drive increased efficiency and improve profitability. With a history of innovation, industry expertise, and passion for excellence, Epicor inspires customers to build lasting competitive advantage. Epicor provides the single point of accountability that local, regional, and global businesses demand. For more information, visit www.epicor.com.

About UnleashUnleashWD is the first innovation summit specifically for distributors and their channel partners. The summit was created by Dirk Beveridge, 4th Generation Systems, and distributors to ignite new energy into the industry through a lively, unforgettable storytelling and collaborative discussion format. For each summit, we search high and low outside the distribution industry to deliver the most innovative storytellers to drive forward-leaning thinking within your business. We’re setting a new agenda for the industry, and invite you to join the movement. www.unleashwd.com.

This document is for informational purposes only and is subject to change without notice. This document and its contents, including the viewpoints, dates and functional content expressed herein are believed to be accurate as of its date of publication, February 2013. However, Epicor Software Corporation makes no guarantee, representations or warranties with regard to the enclosed information and specifically disclaims any applicable implied warranties, such as for fitness for a particular purpose, merchantability, satisfactory quality, and reasonable skill and care. We welcome user comments and reserve the right to revise this publication and/or make improvements or changes to the products or programs described in this publication at any time, without notice.. Epicor is a trademark of Epicor Software Corporation, registered in the US and certain other countries. All other trademarks mentioned are the property of their respective owners and are acknowledged. Copyright © 2013 Epicor Software Corporation and 4th Generation Systems. All rights reserved.