THE Great Recession is a distant memory. Business is back—and in many cases booming—and profits are soaring.
The temptation is to sit back and enjoy the ride.
But Dirk Beveridge believes that is a huge mistake.
In his presentation, “Leadership Best Practices for the New Supply Chain,” Beveridge said that old business models will not work in the “age of disruption.”
“By and large, most distributors aren’t very creative or innovative,” said Beveridge, a consultant, entrepreneur, and author of Innovate, a book that reveals the innovative distributor model to guide companies in creating a relevant and sustainable business in disruptive times. “They’re mostly talking about the same best practices we were talking about in the early 1970s.
“There are 250,000 distributors in this country, and for the last 20 years, we’ve been listening to the same gurus, same consultants, same industry experts, and regurgitating all this information. I believe, generally speaking, we’ve been too incestuous. Who do heavy-duty aftermarket distributors like to hang around with? We like to hang around with other heavy-duty aftermarket distributors. We surround ourselves with people who make us comfortable so we can swap war stories. We’re talking about the past, which is good, but not enough about the future.”
He said that his research shows that 76% of the distributors in the United States and 67% of the HDAW distributors believe we are living in an environment we could call the “age of disruption.” What does that mean? That change tends to come from the outside—not the inside—and it comes very quickly.
As former General Electric CEO Jack Welch said, “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.”
“We need to be thinking about what leadership means,” Beveridge said.
He said 72% of all US distributors and 70% of HDAW distributors believe the pace of change is too slow in their business, and 37% of US distributors believe their business is learning as fast as the world is changing.
“So why change when sales are growing, but not as good as in the past, and margins are good but not where they were in the past? Because we live in the age of disruption,” he said. “You feel it every day, don’t you?
“One distribution CEO told me, ‘Less than 10% of distributors are prepared, or preparing, for the future.’ Another CEO told me, ‘Much of the industry is working off business models that are 50 years old.’ Still another told me, ‘We’re not learning as fast as the world is changing.’ And still another said, ‘If we don’t change, we die.’ Still another told me, ‘I tell my distributors that their business is like a 1970 model automobile that smells brand new. They don’t change.’ One other said, ‘Many distributors are already out of business; they just don’t know it yet.’ ”
Dirk Beveridge, Beveridge Business Systems
So what is this “age of disruption”? A company called Inferential Focus does research in global shifts in the economy. It publishes a guide, The Big Shift Plays Out: A Restructuring Economy and Its Effects, in which it discusses the restructuring of the economy, concluding that while the economy grows, fewer are taking part in its growth, and that growth will be harder to generate and will likely remain below historical levels.
Consulting group Deloitte has written a report, The Hero’s Journey Through the Landscape of the Future, in which it is asserted that there are “seismic waves”—rapid advances in technology and the liberalization of public policy—that have “shaped a world in which companies face increasing performance pressure amidst sinking return on assets, intense competition, and changing workforce dynamics.”
Forbes talks about the merging, for the first time in human history, three different economies that are impacting our businesses:
• Traditional economy. “It’s inherited from the 20th century,” Deveridge said. “It’s a real economy producing goods and services. It’s those businesses that make the suspensions and brakes. It’s you and I that sell this traditional economy, that sell this tangible stuff. It’s what you and I know.”
• Financial capitalism. “The people up in Wall Street are not creating anything, just manipulating new financial instruments and creating wealth that’s blowing our minds.”
• Creative economy. “A real economy producing goods and services through an interconnected constellation of tech innovations and mass customization. There are 19-year-old kids in Singapore and Jacksonville, Florida. They put zeroes and ones together and create an ap. Three years ago, Facebook buys them for $19 billion. Wow. I should have gone to coding school.”
He said he spent 18 months researching the industry, and here’s why it must change: “There are generational changes where by 2020, half of your employees and half of your customers are going to be millennials. Millennials want to be managed and led differently. If they’re your customers, they want to buy differently. We develop close relationships. We go to lunch with fleet managers. But in this disruptive reality, those millennials don’t want to see you. They want to do business right here (on mobile devices).
“Most distributors have these non-differentiated businesses: 56 competitors within a 15-mile radius of your location. Go to your customers and ask, ‘What’s the difference between one distributor and the next?’ Most fleet managers will tell you there’s not that much difference.
“The world is changing, but there is this inherent inertia that says, ‘Don’t change. We made it this far. Let’s keep doing it this way.’ Or, ‘I built the business and have five years to retirement. I don’t want to screw it up.”
So how do we create a sustainable and relevant business?
Beveridge calls his model “the innovative distributor,” which has these elements:
• Vision and culture.
“Vision drives change. Vision drives innovation. Without vision, without seeing some new future reality, without seeing some form of path that says, ‘Here’s the status quo, and we need to achieve X,’ you have no change. It’s vision that begins the change process. Here’s the challenge: It’s very easy to get lost in this fog of uncertainty. Should I invest in this technology now? I don’t know? Should I invest in a $350,000 piece of equipment? I don’t know. Where do we start? A fog of uncertainty pulls us back to the status quo. In our survey, 78% of distributors and 89% of the people in this room feel they get trapped in the tyranny of the urgent. Because of the need to perform today, we get trapped in doing the work of today and do not set apart time for thought power and thinking for the future.
“You are in the vision business. Your people want to see, hear, and believe in a coherent future reality. I define vision as a future reality you really believe is possible with committed effort. I love what Steve Ridell, the COO of Blinds.com, said: ‘What you want to become is much more important than what you are today.’ Do you know? Have you articulated what you want to become? Once you get that vision down, you don’t know how it’s going to be done, but you know you want to go from Point A to Point B. It won’t happen overnight. You get your high performers in the room with millennials, with Generation Xers and Baby Boomers, then you get service personnel and your maintenance crew. You get this mix that’s normally not in a room together and say, ‘Let’s determine how to get it done.’ We set the vision as the leader. It’s clear, it’s articulated, it’s bold.
• Transformative leadership.
“Transformative leaders drive change and innovation. Companies don’t disrupt—people do. I’m tired of hearing about Amazon Supply. Amazon Supply has done nothing. Who did? Individuals drive change. Companies don’t do it. This moment in time is a once-in-a-lifetime career opportunity to create a culture of change—transformation and innovation. You didn’t ask for it, but status quo is the enemy. Ninety-five percent of those we surveyed in the US and 75% of you in this room feel personally empowered to be a disruptive change agent within their business.”
• Value proposition.
“We must rethink our value proposition. Compelling value propositions drive change and innovation. You have to stand for something. What do you stand for as an organization and as a leader? What do you believe so strongly in? You define what you stand for as an organization and you will attract customers and employees.
“What does Apple stand for? It stands for thinking differently. I’m pulled to what they believe in. How about Coca-Cola, one of the biggest and best brands globally? How strong a business would they be if they stood for ‘the best-tasting sugar water’? How relevant is that in today’s thinking? Everything Coke does is bringing happiness to the world.”
Beveridge said that for as long as humans and cows have come together to produce milk, we have come to believe that dairy farming is dirty and not a lot of fun. It’s thought of as truth and something that’s never going to change, which might be why dairy farmer is the second-worst job, according to CareerCast.
“Until a company called Lely from Holland comes around,” he said. “Their vision is a sustainable, profitable, and enjoyable future in farming.”
He said he went to a Lely manufacturing facility in Pella, Iowa, and then out to Hol Family Farm 10 miles away. There, he was introduced to: Juno, a three-foot-high robot that pushes feed back to the cows, then charges himself; Vector, an 8-foot-high robot that mixes the feed on its own and drives across the farm into the barn and delivers the right nutrients to the cattle; and Astronaut, a milking robot that allows cows to walk into the robot and milk themselves.
“It’s not a story about technology; it’s a story about the value proposition. I asked the farm owner, ‘Would you say that the robots have had more impact on the business or your personal lives?’ He said, ‘Last Thanksgiving was the first time the whole family was able to sit down at the table together.’ One person dared to declare that farming should be enjoyable.”
• Business model.
“What is your brave, bold point of view? Let’s spend 90 days to figure this out. You don’t have to do it over a period of years. New business models drive change and innovation. It’s the story of how a business creates, delivers, and captures value. Eighty-five percent of the distributors I surveyed feel they need to reinvent their business before someone else does, and 87% of you feel the same.”
Beveridge said he received a tweet from business author and speaker Tom Peters: Instead of courage, I prefer a level of fury with the status quo such that one cannot not act.
“That’s what a leader feels,” Beveridge said. “They know there’s a better way. We need to go from status quo to transformation. Decide to change and innovate, and the how will reveal itself.” ♦