GUEST COLUMN | THE RISE OF BIG DATA
New pathways to profitable growth
Mike Marks, founding partner, Indian River Consulting Group, and former speaker AWRF’s Spring General Meeting, Nashville tells us how the evolving wire rope fabricator industry calls for an evolved business model.
f the past few years have taught us anything, it’s to expect change. Economic shifts, technological leaps, public health crises, and geopolitical conflicts can change the way things work and what customers expect. Whether you’re a manufacturer, fabricator, or distributor, to continue growing, you need to change, too. That means evolving your business model. A business model has two parts: Adding value
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to a group of customers, and Extracting value - ie getting paid. Today, companies that successfully create value are those that change their business model to meet the moment, while companies that stick to tradition get left behind. It comes down to economic gross margin, which is created by customers switching costs. When your customers don’t see any barriers preventing them from switching to another provider, you’ll experience low gross margins and less growth. To create a competitive advantage, improve your value proposition to increase those switching costs. But here’s the challenging part: You can’t expect anything to be driven from your sales function. For example, is your customer just
buying a sling? Or are they buying the sling and a risk mitigation policy that you’ve bundled into the package? Only the latter scenario can provide enough value for customers to make switching no longer worth the hassle. If you’re just selling slings, you’re falling behind. In the modern market, you need to be willing to make significant front-end investments in new activities that have the potential to actually create a competitive advantage for your company. For decades, the market was healthy and stable enough that manufacturers and distributors could thrive by simply adopting best practices. Everyone did the same thing, and it just came down to who was the best at them. Now, you must look at what your competitors aren’t doing and beat them to the punch.
What’s behind this significant shift? Well, competitive intensity and pricing transparency have increased significantly, and when that happens, margins always decline. As a result, lowering your recurring cost to serve is the most crucial driver for growth. And you can do that by finding new, more nimble ways to deliver value.
Then there’s the appeal of field sales. Even
before the pandemic, a younger generation raised on ecommerce entered the B2B space expecting to be able to shop online. Then COVID hit and made in-person sales unviable for a significant period. Boomers who still cared about having personal relationships with their vendors retired, and everyone else realized they didn’t really want or need traditional relationships with their vendors. In many cases, those old best practices – sales skills, relationships, promotions – mattered a lot less. What mattered was being able to sell five points cheaper than the competition or add value to the sale, which you can only do if you’re bold enough to make significant investments in new activities over a three- to five-year period. In other words, you need to play the game to win.
The Rise of Big Data Old school firms still have great storytelling skills, but the stories they tell are mostly opinions backed by emotional conviction, not hard data. That won’t fly anymore. Manufacturers and distributors have always
generated lots of data in their day-to-day work. What’s changed is technology. Now, high-tech software can help firms collect, analyze, and utilize data more efficiently and effectively than ever before. The more advanced your company is, the more likely you’ll be able to discover a new business model that creates a real competitive advantage. When it comes to data analytics, companies can be split into five levels: Level 1: I won’t even bother describing. Quite frankly, if you’re still here in 2024, you’re dead in the water.
Level 2: Data Siloed. You’re still relying on internal data sets, but you’re at least conducting pattern analysis and tracking changes, making ongoing investments in data scrubbing, and creating public dashboards and scorecards on multiple KPIs. You may even be adopting some low-level AI tools.
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Fall 2024 |
ochmagazine.com
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