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A View of the Post-Recession Economy

Join me as I climb my own personal Mt. Nebo.  Once on the craggy summit, I place my cupped hand over my brow, strain my eyes and peer off into the not so distant promised-land.  Unlike the land viewed by Moses, my horizon isn’t flowing with milk and honey.  Instead, it is filled with a new kind of economic growth.  Suddenly, I notice – there are others standing along side me on the mountain top.  The National Federation of Independent Business an organization of small and midsized business shares my view.  They report the highest confidence level amongst their members in 16 months.  As the recession slowly grinds to a halt, more and more companies are walking with a confident dash in their step.    

But before we run down the opposite side of the mountain and disappear into the happy sunset, it’s important to understand the effects recessions have on business trends.  Strategies emerging during recessions have a tendency to quickly become the post-recessionary norm.  Immediately following each of our recent past economic downturns, a whole set of business realities emerged.  Each downturn brought an accelerated rate of change. 

To illustrate, let’s look over an MVP list of recessionary trends.  Right-sizing and re-engineered organizations climbed out of the recession of the 80’s.  A decade later, integrated supply agreements sprung up after the downturn in the 90’s.  And just a few years ago we saw, off-shoring and outsourcing explode out of the ashes of our post 9-11 recession.  Well guess what; this recession is pushing along some major new trends of its own. 

For those of us in Electrical Wholesaling, recognizing newly developing trends and positioning ourselves for the future is a “must have” skill.  So with this in mind, let’s devote the next few minutes to examining what lies just over the horizon.

The supply chain is tightening up
The supply chain is the interconnection of all the organizations that interact in the manufacturer and delivery of a product.  The very magazine you hold in your hands today has a supply chain.  It probably started with a forest products company providing pulp to a paper mill and it ended with the mailman dropping the finished product into your mailbox.  All the intermediate steps of printing facility, ink plant, distributor, trucking companies and the rest are lumped together and called the supply chain. 

The best supply chains provide the lowest cost materials.  Duplications in the supply chain lead to excess cost.  This recession put the squeeze on the whole system including our suppliers and customers.  We generally don’t think of ourselves as part of the supply chain but we are.  And one of the duplications in our world comes in the form of redundant sales teams.  Think about your vendor partners and consider that supplier sales team you used to work with – where are they?

Across distributor-land, more and more folks are finding their supplier’s sales team missing in action.  If your key lines had five people supporting a territory in early 2008, today they have maybe three.  The bigger the company the greater the chances – the local sales team was down-sized.  This impacts the Specialist world.  Do you find yourself responsible for factory quality issues?  How about expediting?  Repeatedly Specialists are telling me they are doing work once reserved for the vendor’s sales team.  Good or bad, it’s a fact. 

The very best organizations will turn this into an advantage.  The rest will talk about the good old days and grouse about the way things have changed.  I believe competitive advantage will come to Specialists who focus on three things.

  1. Technology and Product-based Training
  2. Value Metrics
  3. Competitive positioning

Technology and Product-based Training
The biggest impact may come with training.  In years gone by factory people carried much of the training burden.  While there have been big gains made in the world of computerized and web-based training, an urgent need exists for a local-based “live person” trainer.  This is true not only with customers but inside our own selling organizations. 

Think of the new technology hovering in that not quite ready for prime time state.  LED lighting, green technology of every kind, new generation automation controls, wireless sensors of all kinds, new electrical safety regulations and a whole lot more are about to meet a newly reconfigured workforce.  

In the post recession times, the distributor Specialist will be the go to guy for locally based training.  As the economy heats up, you need to have a plan for training.

Nearly everyone will be thinking about customer-based training but few will look at ways of bringing their own teams quickly up to speed.  I suggest you begin creating an internal plan – first.  The first step is to build a core competency plan, here’s a sample to get you started:

Core Competency Plan: Green Tech Lighting

Skill sets needed by field salespeople to properly sell and support Green Tech Lighting.  This plan assumes salespeople have limited knowledge of new technology.



Understand basic applications of new technology lighting in customer applications Ability to comment on lighting applications form
Knows the competitive landscape for new tech lighting in our territory and within companies Manufacturers and local distributors
Present Green Tech product overview Using color glossy tool
Set up Green Tech Lighting on location using special software tool Demonstrated while on call with Specialist
Select a part number from Green Tech’s catalog Easy applications w/o mods
Quote price and delivery on standard lighting system Group A lighting products only

It’s important to note that we have set the minimum standards for our sales team.  The competency list should be published and understood by everyone – management, sales, supplier and Specialist alike.  This sets a metric by which each person can be measured.  And it builds a plan for focusing your training.  Training without a goal is frustrating for both trainer and trainee. 
Value Metrics and the Age of the CFO
It’s the dawning of the age of the CFO.  Across the country chief financial officers are inserting themselves into business decisions – not just the big stuff.  New financial realities created by tightening financial policies drive major changes.  One Executive VP of a major corporation relates, his signature buying authority has been cut from a half million dollars to ten thousand.  New emphasis on detailed financial planning includes the development of value-based decisions.   What does this mean for us as Specialists?  In the future our success is tied to how we help customers understand intrinsic value - in a detailed financial way.

Dollarizing your organization’s value is a critical skill for the future.  Product features – bells and whistles – take a backseat to financial impact.  We must lead our sales teams in the creation of financial snapshots of the value built by our solutions.  We need to gather financially oriented information from our accounts and incorporate it into our selling process.  The customer’s cost of downtime, parts inventory, shop space and inventory costs are critical to sales success.  If you don’t know and understand these points you may find yourself in the soup line.  To help in this regard, we have created a short list of questions you must know and understand.

  • What is dollar amount associated with downtime or work stoppage?
  • What is the burdened labor rate for labor?
  • Does the company provide training to its employees? What is the cost?
  • Does the company have a corporate safety program? 
  • Total number of products (or services) produced per hour/day/week/etc?
  • What is the cost of waste/scrap/work lost? 
  • What are the energy and electrical costs?
  • Does the company have a mandated and funded green policy?

But I believe it is short sighted to only think about the value you provide to customers.  Specialists and the organizations they serve provide a whole new set of values to their suppliers. 

Let’s explore this phenomenon.  Specialists often assist their factory counterparts with product quality.  If they render assistance that avoids a single field visit – it saves the vendor partner hundreds of dollars.  Is there a value here, you bet – but how many distributors take the time to document and measure this type of value?    Similar values can and should be assigned to activities related to troubleshooting, discovering and developing new applications and assisting with product beta testing.  Specialists who understand and measure this value will align their company for future competitive advantages.

Competitive positioning and pricing
Don’t shoot the messenger – this is an unpopular topic.  But soon we may face a perfect storm of margin squeeze.  As the economy starts to come back to life, new emphasis will be placed on getting competitive prices.  Newly rehired sales people will be pitching products to recently re-added purchasing people.   All these new hires will be gunning to make a name for them self; and low ball quotes will zing through the air.   Without a bit of competitive positioning, you may find yourself competing with the lowest priced products on the planet.
I believe Specialists must play a pivotal role in this strategy.  Specialist driven products demand higher margin.  If you support a technology grouping or product line of highly-supported and application-specific products, the value you add justifies a better margin than commodity-like products your company may also sell.

Don’t expect your customer service or quotations department to understand the difference.  To illustrate, allow me to relate the story of Hobbs.  Hobbs worked as an inside sales person in a medium sized electrical distributor.  Every day he priced dozens of invoices.  And he knew a ‘reasonable’ margin when he saw one - until his company took on a line of cutting edge sensors.  It was one-of-a-kind product with a margin double the norm for his company.  When Hobbs noticed the ‘outrageously high’ margins on the computer, he decided to set the margins back to a ‘reasonable’ level.  With a few quick flicks of his index fingers (he was a two fingered typist); he managed to blow away thousands of well deserved margin dollars.

If you can’t insure that your sales team prices your products properly, I suggest you begin working with your management team to establish checks and balances.   While pricing isn’t the only aspect of competitive positioning it is the one that pays the bills.  There are some great new tools available from Strategic Pricing Associates. What’s more they are designed to “bolt onto” your existing computer system.  My experience is these produce measurable results in weeks, not years.  Contact me if you have questions...

A parting word before we hit the trail
They say we should color outside the lines.  Lines, what lines?  I believe the lines are blurring.  Specialists in the future need to dig for creative tools to push their agenda.  When the opportunity presents itself - challenge your supply partners, sales team and management for creative tools for driving your business.  Everything counts. 

Spend time with your supplier’s marketing team.  Talk about extending their marketing plan to your territory.  Use technology to sell technology and be creative.

Remember – the future is far less scary when you take a hand in creating it.


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