Jeff's BLOG: When All You Have Is A Hammer...

“When all you’ve got is a hammer, every situation begins to look like a nail.” Managers and leaders of companies often resort to the same familiar strategies and tactics over and over again. But when the strategies and tactics are time-proven and sound—then go ahead and hammer away.

In 2008, I found myself switching the industry in which I worked. Behind me was a past comfort and familiarity with traditional, two-step distribution of products. Not without challenges—the model worked—and I felt that the organization I worked with “did wholesale distribution particularly well.”

As one of Andersen Windows shrinking number of independent distributors across the nation—Hampton was awarded an exclusive agreement in 2002 as an exclusive distributor in Northern California. Hampton was chosen, I believe, because the people there excelled at more than moving boxes and putting on product knowledge meetings. Our success was the driven by:

An acute understanding that we served two customers: those we sold to—and those we purchased from. We knew we had to satisfy the needs of our suppliers—or we wouldn’t have the products, services, and support we needed to satisfy the needs of our customers.

Better quality, lower costs, and continuous improvement weren’t just slogans. They materialized in the form of tens of thousands of dollars in investments in Lean Technology , customer rationalization to align with leaders, and a commitment to excellence in every area of our business that was measureable and specific.

Understanding that nothing happens until something is sold. Sales and marketing are king. And we had more sales people, more customer service, more education, and more sales promotion than most companies in our position.

And so when I found myself switching industries and going to work for a company in the midst of a product launch—the decision to accelerate market penetration through wholesale distributors was an easy and comfortable one.

The company I went to work for, FAFCO Inc, the world’s oldest and largest manufacturer of solar collectors, was in the early stages of launching a new product for home solar water heating. Most of the company’s 40-year history was spent selling its products through a small number of direct dealers—mostly in California and Florida. However, to gain the traction and drive the volume the company had targeted through new market segments—a distribution strategy would be critical.

FAFCO was actually embarking on a path quite opposite of some popular trends—and moving from a direct sales model to dealers, to one incorporating wholesale distributors. The strategy was underway when I arrived—which was one of the primary attractions to joining the organization.

With the scale of the opportunity for its new products, the company was going to need a supply chain model that could reach the thousands of plumbers throughout the U.S. that will become its primary installers of the new product. The distributors in the markets we targeted, and the reps who called on them, could quickly put us in front of dozens, if not hundreds, of our targeted contractor professionals. It would have taken massive amounts of promotion and field selling for us to accomplish the same through a direct model.

What’s more, we put inventory into the market, had service and delivery up right away, and moved forward with a great deal of scale, strength, and momentum in our choice markets.

Distribution serves so many important roles. In our case, as a smaller company launching new products—distribution gave us:

· Instant access to our target customers
· Knowledge of the market
· Inventory, service, and volume

These are also among the oldest reasons there are for using distribution with success—pointing again the the fact—that a hammer, employed correctly—is always the most effective tool for “nailing it.”

Why Do Manufacturers Use Distribution? Really.

As you may have heard me say before, manufacturers choose to use distribution for 4 primary reasons:

1) The distributor's knowledge of the market.

2) The execution of market and channel plans to get product to market thoroughly and efficiently.

3) Access to customers known by the distributor--where relationships flourish and penetration is deep.

4) The volume of business a distributor can deliver to a manufacturer.

But let’s add some of the more tactical issues to that list, shall we?

5) Distributors provide customer service and order fulfillment.

6) Distributors maintain inventories in the desired geographies next to the end-use customers.

7) Distributors provide logistics into the market.

8) Distributors absorb the credit fluctuations and the AR role throughout their markets.

Hold on—what’s wrong with this picture? How about this? Number 1-8 above can ultimately all be figured out and executed by manufacturer themselves. But before the customers of distributors get too excited about the possibility of “cutting out the middleman” and buying direct from manufacturers, we need to keep in mind that there are costs associated with all of these—at some level. So—the price is the price is the price. What an end-user pays for products will likely be the same whether they buy from distribution or from manufacturers direct—because there is a cost to all of these services.

Now, let’s look at the last two services distribution can provide.

9) Sales & Marketing, through excellent value-added sales representation and sales promotion into the market, and…

10) An unbeatable value proposition for customers. Distribution must create such a compelling reason for its customers to buy from them—that the customers could not even imagine carrying those particular products if it were not for the unbeatable value proposition the distributor provides.

These last two are the most challenging for distributors to figure out, design, pay for, and execute. But they are the key to a lasting dominance in the channel. And together, all of the areas above are a 10-point plan for sustainability and long-term success.

Decision-Based Agendas

Has this happened to you?

You're participating in a group meeting. You come upon an important topic on the very full meeting agenda labeled "Widget Sales Program." The meeting leader initiates the conversation with an somewhat impressive introduction and overview. He or she then asks for input.

As the input comes from all directions from all the participants--the course of the meeting shifts left--then right, then backwards, then totally off topic--then back to the middle.

Many excellent ideas come out. Some are even written down on the flip chart. After 35 minutes of discussion, sharing of ideas, and even bold proposals for "change," the meeting organizer realizes she'd only allowed 30 minutes for the discussion and time is running out, and so she's going to have to move on.

She sums up what she thinks she heard and then moves on to the next topic.

So what was wrong with this? Perhaps nothing--if the group and leader arrived at an important decision or action point based on the discussion.

But more often than not--a meeting agenda prompts a lot of great discussion where many great ideas are shared--but no "goal" was set for the agenda item in the first place. It felt good to the meeting organizer and participants to have the agenda item on the list--but they leave the topic not really feeling as if they did something substantial about it.

How do we make this process better? The answer is through decision-based agendas. The trouble can be--is that these don't come naturally to us. A ecision-based agenda item looks odd on the page, and even if we don't phrase it properly, the meeting leader must exhibit the discipline to remember to crystallize the goal for the topic in everyone’s mind so that a decision is reached.

One way to enable this process--is to just rewrite the agenda topic. Instead of "Widget Sales Program," the meeting leader might have listed it as "Widget Sales Program: What Are The #1 and #2 Enhancements Needed to Achieve Our Goals?"

This tells everyone at the outset that their mission for the discussion--is to identify just two components to improve the Widget Sales Program. It's easy for the meeting leader to come back around in the middle of the discussion and remind the group of the goal. And more importantly, it sets the right tone at the very beginning for the participants, so that they know what is expected during this section.

Other agenda topic examples:

Before: "Customer Service"
After: "Customer Service: Determine Priority and Responsibility List Based on Last Month's Survey"

Before: "Warranty"
After: "Establish New Warranty Labor Provision: 1 Year or 2 Years"

Before: "Widget Inventory"
After: "Decide What Stock Items Can Be Reduced to Achieve 10% Inventory Reduction"

Obviously, not every topic on an agenda can be expressed as a question. Often, there are important updates and sharing of information that just need to be expressed as such--without any question attached.

But using a Decision-Based Agenda strategy will help ensure more of our meeting topics produce something useful to take away from the discussion, rather than that empty feeling when we're 30 minutes behind schedule and we just have to "move on because we're out of time."

Execute...or be Ex-e-cu-ted

There is no doubt that one of the top five lessons I have learned in business is that of execution. And in fact at times it might be number one.

Having worked for a company in the first half of this decade that was fairly good at execution—I have learned how to spot execution when it exists, and more importantly—when it doesn’t. The CEO of our parent company felt execution was so paramount to successful business that he developed The Execution Award for managers who demonstrated effective focus, clarity of management, and clear speed in getting things done. Unfortunately, he would tell you that he could count on one hand the number of times he gave the award away across the various business that were part of the organization. My company was able to secure the award once. And we thought we were good at it.

Yes, execution is elusive.

When it exists, people explain things simply to one another, they reach clear agreements, and they hold one another accountable for results. You can observe it in those who are successful in gaining clear commitments from others, those who write down steps and dates and ensure everyone knows what they are, and then follows up to see to it what was promised truly gets done.

You can also see when execution is lacking—such as in these examples:

• A president asks his team at a meeting when something will be completed, and the answer from one of the vice-presidents is “a couple of weeks.” The president then says, “Good—as long as it’s not going to be six weeks.” No one writes anything down and the conversation moves on.
  
  (The problem here is that the president accepted a vague answer, did not write down a precise commitment date, and let the conversation move on without coming to a clear agreement on who, what, and when)
  
  
  
  
• A manager sends an email to three recipients and addresses remarks to no one in particular—saying she needs some certain result by sometime next week.
  
  (Here again, the lack of specifics cause each of the three recipients to think “Hmmm, certainly one of the other two will respond to this—since it wasn’t directed at me personally” and so it goes. Each of three recipients all go on thinking ‘someone else’ will handle it—and almost certainly no one will)
  
  
  
  
• The supervisor of a work group needs to know that a brand new process has been used in 100% of the week’s production schedule to meet a quality guarantee. The ideal question would be something like “Was this new process used from the start of Shift ‘A’ this week—and continuously in every shift since right up through today?”
  
  Instead, the supervisor who isn’t practicing a solid discipline of execution attempts to ask the question—but expresses it instead as a statement: “And, the new process has been used from the start of Shift ‘A’ this week? His trailing tone leaves it hanging there as a confusing combination between a weak question and an even weaker statement. Its easy for the employees to silently nod their head, but the real answer is never flushed out.

Execution simply means getting things done. And as you can see, it has a very clear connection with a person’s ability to communicate clearly and with intention. You must use direct language. You must look people in the eye when you ask them questions—and get clear agreement.

Assumptions cannot be made.

Dates and promises are to be written down. Follow-up is to be consistent. And rewards afforded to those who execute—and withheld with those that do not.

Once you begin understanding and recognizing when good execution is present—and when it is not—you will be more purposeful in your dealings with people, with your communication, with your follow up, and with your attention to results.

It is, after all, what separates those who do—from those who do not.

Privileges and Responsibilities of Leadership

If you ever want to be reminded of the significance, responsibility, and opportunity possessed by those of you in leadership roles—consider for a moment the lives lead by our Founding Fathers—in their formerly “normal” positions and then being thrust toward the path of creating true greatness—for those around them, their towns and cities, and later for the country. My wife and I recently took an East Coast vacation including four days in Washington D.C. and a trip to Jamestown, VA--the birthplace of America. I have to tell you--the monuments, examples, and "living history" exhibits we observed were an awesome reminder to me of the responsibility each of us has to uphold, protect, build upon, and carry forward the beliefs and principles of our Founding Fathers. Specifically, how starting with the leadership of a few good men (and women)—amazing events can occur.

When standing in front of the likenesses of Abraham Lincoln, Thomas Jefferson, and Benjamin Franklin and reviewing some of their founding beliefs expressed through their many writings captured forever in granite--one feels humbled by the enormity of their thinking and foresight. It's at a time like this when one’s appreciation and understanding of the great risks and sacrifice these men made for the rest of us is brought clearly into focus.

It also shines a bright light on the responsibility that we now have.

All Americans have the opportunity, and yes--the responsibility, to continue to live and perpetuate these phenomenal beliefs. But perhaps it rests more squarely on the shoulders of those of us who are community and business leaders to help reaffirm these incredible ideas and principles and ensure they find their way into the daily aspects of living for all around us.

This is the greatest country on Earth. Our Founding Fathers envisioned and created a constitution and government that outlived them and will outlive us all. We can help ensure that the freedoms, rights, and privileges outlined by our predecessors are enjoyed and put to benefit in our communities for many years to come. And as leaders, it begins with acknowledging and sharing with others the greatness of America, leading by example, and using our voices to be the inspiration for those in our community.

How will you lead today?

Take A Chance...What Do You Have To Lose?

I recently shared some thoughts with Shelter Magazine that were published in a March article about the tactics I believe a wholesale building products' distributor could take to solidify the value they provide to their customers, to their suppliers, and to the market in general. Editor Samantha Carpenter focuses in on the variations from "the norm" that can become a focused set of initiatives within a distributor's operating plan.

Response to the ideas I shared has been positive, for the most part--with only one former retailer expressing that the ideas are too far stretched and that they may collide with current retailer initiatives.

However, the majority of the feedback has been very supportive--from distributors and retailers alike. The supply chain CAN be improved, redundancies eliminated, and a new tier of service can be created to benefit the end-user.

If you're a wholesaler, I invite you to read and decide for yourself whether adopting a greater interest in services and programs can and will be the initiative that drives you forward--onto new and better results.

The article can be found at:

http://www.usglassmag.com/Shelter/Backissues/2008/March08/survivaltips.html

Forget Commodities. I’m a “Specialty Supplier” Right?

When it comes to margins and serving customers who remain loyal to us due to the high-end products we provide—everyone knows the value of being a specialty products’ provider, right? And in addition, its our least loyal, price-shopping customers that make us often consider cutting out commodity products altogether.

So what would be wrong with increasing our focus on specialty products—and backing away from commodities? Well, not so fast. There is that issue of having a “full shopping cart” from which to sell—and if you compare this to a grocer—you’ve got to have both milk, eggs, and butter on the shelf—and your own bakery, fresh fish, and maybe even organic produce.

But perhaps a more convincing reason to think carefully before giving up the “everyday stuff” and focusing on the high-end only is the threat the competitive low cost commodity provider poses of moving up the chain and competing with us nose-to-nose for the most profitable business too.

Consider the examples from the steel industry described in Clayton Christiansen and Michael Raynor’s book The Innovator’s Solution. They describe a steel industry in the 1960’s that was dominated by the big “integrated” mills who watched as smaller “minimills” started up and, due to their low manufacturing capabilities, could only produce rebar—a low grade form of steel.

When the minimills entered with rebar—which accounts for only 4% of total steel use—and offered it at drastically lower prices—the large mills were almost happy to stop offering it as it only produced margins of 7%. They then began to focus their resources on higher margin products and customers.

When the minimills improved manufacturing and began to offer angle iron and other components—once again, the large mills were almost relieved to walk away from this low profit business—as the margins had always been low in this category as well. Once again they aligned resources and product offerings on more discrete customers segments—allowing the minimills to capture the low margin commodity business.

This happened again with structural beams, which the minimills perfected after great effort. Once more, they exerted heavy competitive pressure on the large mills and, once more—they took away more share.

Finally, the minimills perfected the ability to produce sheet steel—and the end of the story is, that today the minimills have grown larger than the former traditional mills—such as Bethlehem Steel—and the industry now is forever changed.

There is a point at which a company needs to assess, “Do I walk away from low margin commodity business and just focus on the profitable high-end? Or, do I invest in a broad spectrum of product and services offerings, compete on the lowest margin business, and keep my share of market?”

This will be a different decision for every company, in every market, and against every different form of competitor.

However, before you retreat “upstream” to Specialty-Land too quickly—you may wish to consider what door you leave open—for your competitor to enter.