Building Material Distributors & Dealers: What’s Your 5-Year Plan for Relevance?

If you and I have talked about the building materials industry before, then you’ve likely heard me describe the “path” between where products are manufactured and the buildings in which they’re installed.  This “path” represents a value chain and whoever owns the greatest part of it also owns the greatest potential for profit.

So how do you “own it?”  Do you want to own it?  Do you want to own only certain parts of it?

My answer is that a company should be paid for the precise number of steps along this “path” they own and execute against better than any other viable option.  That’s it.

But if you aspire to expand your footprint in the channel you’d also better be willing to exert pressure on those companies up or down the channel from you.

If you’re a two-step distributor, you either need to move up towards manufacturing or introduce services and functions to take you closer to the contractor or builder.  And do this with the full knowledge that many dealers will perceive you as a threat to them.  But there is also a lot to be said on how distributors can act in harmony with their dealer customers and reallocate what work each performs.  Distributors can offer and solve a great deal of burden, costs, and risks dealers have in terms of machining products for them, providing installation assistance as a service to their customers, and a dozen other areas of service and support.

If you’re a dealer and you want to expand and grow, you need to take more control of your supply chain, including buying direct from manufacturers.  And that of course will place your distributor relationship in jeopardy.

So you ask, “Why can’t this continue to work like it has for decades where the manufacturer, distributor, and dealer all participate in their piece of the supply chain to the builder?

To those who ask that question…I give you: Katerra

Founded in 2015, today Katerra ranks as one of the top 25 multifamily general contractors in the United States. They’re neither distributor nor dealer, but through buying direct, performing functions typically done at the distributor and dealer location…they’re both.

This is the “Uber” of the building materials and construction industry… impacting both how building materials are sourced and brought together, and ultimately how buildings are built.

Not convinced?  Watch this video and count the products and/or services of which you currently own the path.

Five-Year Relevancy Plan

This doesn’t impact everyone in the building materials industry.  Rural and smaller regional distributors and dealers serve a strong role.  The companies catering to the R&R segment should be confident in their current models.  And there are other models that are strong and viable.

But if you play in the single and multi-family production segment…what is your plan to remain relevant?  How will you remain the “supplier” of choice when the Katerra’s of the country (and there will be more) come to your market?

Over the next five years, how are you reinventing not only the product lines you sell…but the way they are sourced, inventoried, assembled or produced, shipped, serviced, and ultimately passed through to the end user?

When asked “what industry is Uber disrupting?” most people answer “taxis.”

No, that’s not it.  Uber is disrupting automobile ownership itself.

What is Katerra attempting to disrupt?

 

Here’s to Everyone Who Tells a Story About Their Company

Brochures. Websites. Introductory sales calls. Presentations to a broad industry audience. These opportunities are far too often used by sales reps, marketing departments, and company leaders to provide a picture about themselves, what they make or do, how big they are, how many pins in the map they have.

And not often enough do the messages make a statement to the customer, buyer, prospect, or world at large that resonates with an internal need, a desire to understand “what’s in it for them” and to see value and uniqueness they’re hungry for.

When you look at a group photograph you’re in–don’t you look for yourself first?  Don’t you want to see how you look?  We’re all interested in ourselves, our needs, and “looking” at a company, product, or service we’re considering is no different.

 

  • “How would my situation be different if I used this?”Coke
  • “What could I have or get from using this?”
  • “How has this helped other people like me be better or get an advantage?”

 

And yet so many companies still get this so wrong. We create brochures that quantify our size and locations, list out our products lines, but miss the opportunity to get the customer to see how their situation will be improved through their association with us.

So going forward, let’s start with the outside in. Let’s position our message, our pitch, our company from the customer’s point of view.  And not make it all about us.

If you want to see a perfect example of this, watch Steve Jobs’ talk below made in 1997 a couple of months after his return to Apple.  Textbook perfection on how to appeal to your audience.

Best of luck!

The Big Miss

The goals and targets:

  • Beating your competitor in the same market for the same customers under the same conditions.
  • Executing successfully against a strategic initiative.
  • Attracting great employees.
  • Hitting the top line and bottom line numbers.

Why do some “miss” on these while others hit it out of the park?

Beating the Competition in the Battle for Customers

Companies often plod ahead doing more of the same, and often just open more locations, make more acquisitions, sell for less, increase their service, go online, advertise and promote differently, distribute or manufacture a new product, or offer more purchase incentives. But in many cases the customer’s needs and wants were never placed at the center of the strategy.

Companies so frequently design their value proposition as a list of products, locations, and services that looks like a “line card” or brochure of how big and expansive they are.  Or they sell on price, quality, or service alone–and don’t fully address problems the customer is experiencing.

The Challenger Model can be the turning point here.  The Challenger Model drives companies to first develop insights in their target industry and bring those insights to their customers with sales reps who “challenge” their customers to consider new and better methods. These are methods the customers many not have ever heard of before.

Thus instead of the traditional process of asking customers “what keeps them up at night,” the Challenger Sales company “tells the customer what SHOULD be keeping them up at night–and how to solve it with their solution.”

But by far the most critical aspect winning against competitors is to know your customers better than they do, develop your value proposition around their needs, and place customer delight at the center of your focus.  This is particularly critical for large companies where often the distractions of acquisitions and mergers, technology overhauls, and other internally-oriented initiatives direct the focus and energy away from going out to find, develop, and keep a customer.

MISS #1: Allowing more focus and energy to be spent on your company than the customer.  You’ve always got to listen to the voice of the customer, place them at the center, and better yet–go stand in their shoes to help understand what they need, why they need it, and how to deliver it.  Learn how to fix problems customers didn’t even know they had.

 

Executing an Initiative

First, begin with “why?”  If you’ve never seen Simon Sinek’s “why” talk, or even if you have–watch it here now.  Then come back and keep reading.

What is your purpose, your cause, your belief….and why does it matter to and help your customers?  You’ve got to strike an emotional, then rational chord to achieve buy-in and acceptance.  And it starts with asking “why.”  What’s more, a company’s leaders have to communicate the same FOR IT’S TEAM MEMBERS helping execute the initiative.  What’s in it for them when the initiative is achieved?

Just because “it’s our top initiative” and “we’ve found it’s important to customers” aren’t enough.  You have to help employees see those same things for themselves, their own benefit and improvement.  You have to help employees see how achievement of the initiative will bring them personal gain, upward opportunity, or other benefits important to them.

Aligning compensation up and down the organization is one way to do this.  As a matter of fact, there are many that would tell us that it’s the ONLY way to truly align an organization to accomplish greatness.  But no matter how it’s done, you’ve got to start with “why.”

MISS #2: Expecting your initiative will be seen as your team’s initiative.  Help your employees see the personal benefit in achieving the initiative.  Compensate and reward teams for successfully executing the initiative.  If there isn’t a benefit for them…well–you get what you give.

 

Attracting the Best Employees

People don’t want a job.  They want a purpose, a challenge, ways to advance and add skills, and achieve their financial goals.

So then why do companies advertise for jobs this way?

“We’re looking for employees in the our new market.  Acme is a national leader with 127 locations servicing 23 states employing 10,000 people.  We carry the leading brands of widgets and were named #2 on the biggest company list in our industry in 2016.”

Where do I sign up?

Here once again is an idea from Sinek, this time on creating a realistic picture of the position you need filled so that you’ll attract the right people for the job.

Hiring managers…it’s about the employees—not the company.  Start with “why” and paint a compelling picture of what your company does from a “contribution to the world” standpoint.  Same as you’d do in sales—make it about the customer.

MISS #3: Focusing exclusively on “what” instead of “why” when attempting to attract new talent. Tell a truthful and inspiring story about your mission, your company’s vision and mission, and what’s in it for the candidate.

 

Hitting Top and Bottom Line Numbers

So here we are at the bottom line…the numbers.  If you thought I was going to write  here about how specifically to hit the numbers…I’m not.  The point I’m making is that 1) customer focus, 2) inspiring teams by connecting personal benefits and compensation to reaching initiatives, and 3) attracting the right people to your company by appealing to their needs for contribution will help build the strongest of foundations on which to build the rest of the strategy and execution plan…to help hit the numbers.

 

 

 

 

 

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