Think Like A Big Zero

shift thinking

Very few industry organizations are hitting their targets. Most are paying the piper after wasting time and burning precious resources working too long on the wrong things.

The response to a shifting industry is not more of the same. Everyone knows that. It’s not incremental change, trading one person or thing for another. Everyone knows that too.

Or so they say. But insane practices continue as they have all along: Rally cries to “Double our volume in five years” with no teeth, artificial growth targets, nonsense incentive programs, markups to cover costs that add no value for customers, investing in more trucks or manpower to spread outdated propositions to wider audiences, management programs that do nothing for the bottom line, mistaking industry tenure for stunning minds and talent, flooding the market with new items nobody wants.

Of course, none have or will do a bit of good in adapting to the changes occurring in our industry right now.

Radical shifts in the environment require business reinvention. Business reinvention requires radical shifts in thinking.

Meditate on this: Your category leadership exists in a fading paradigm. Your market share in new paradigms is Zero.

Most established companies don’t think or behave this way. Identifying and discarding old value to create new value for new paradigms is hard work. It’s much easier to do more of the same or tinker with what’s growing obsolete–joining hundreds of dead or dying companies also once in the lead.

Who’s challenging your organization to think differently about growth?

We are, and here’s a start: As of now, Your company is a newcomer with a market share of Zero in the new construct.

Hopefully looking back 6, 12, 18 months from now, you’ve built against this thought and got something to show for it.

One Mean Competitive Advantage

competitive advantage3Do you know how “X” makes and loses money? (Insert customers, brokers, or your own business activities).

This is not an area to guess, assume or remain in the dark. Insights into how your organization–as well as those involved in bringing your products to market–make and lose money are tied to better financial outcomes, more effective partnerships and yes, a mean competitive advantage.

A few examples (among many):

Product development: Suppliers budget NPD costs as a % of sales, target a number of new items to roll out each year along with their estimated contribution to growth. The longer the development and commercialization process, the more costs mount up, and marketing must be proportionately steeper and rate of sales higher and speedier for payback. When incremental growth shrinks with each roll out, the new product is blamed–not the system or effectiveness of execution (which almost never varies). How money was made or lost remains a mystery–as do ways to uncover improvements and better returns.

Retailers: Suppliers don’t realize that their products and strategies are often at odds with retail’s operational functions and priorities–where money is really made and lost. Progressive retailers rank suppliers on a cost scale with terms as simple as “Top supplier”, “Valued; minor issues”, “Average; correct issues in 90 days”, “Below average; correct immediately or discontinue”, “Not approved.” Ask your customers how your organization performs on compliance criteria and scorecards to uncover ways to help reduce their costs in the process flow.

Distributors: Faulty assumptions about how broadliners make and lose money can mislead an entire supplier organization. No, distributors are not lining their pockets with earned income. Carrying costs can run 25% or higher for every $1M in unsold inventory. (Category management is an imperative). If your company is not generating demand and supporting pull through to increase inventory turns, distributors can be losing money stocking your line.

Brokers: Remarks that brokers pay more attention to their top 5 suppliers are misleading. It’s true that big lines require more resources but If not understanding how they make and lose money, you are missing an opportunity to increase your line’s value to your selling partners. As one example, do the math: How many cases of product must be sold to an operator for your broker to break even with commission? Target activities that are mutually profitable, put the brakes on everything else. Watch collaboration and results improve.

Making it your organization’s business to know how money is made and lost in bringing products to market is not only smart, it makes for one mean competitive advantage.