Disruption Discussed at the 2018 NAED National

Upon reflection, the recent 2018 NAED National Meeting seemed to have three themes … disruption, digitalization and a sense that the association is moving from seeking to be inclusive and attracting new members to one focused on supporting “dues paying” members who are active / participate regularly.  Inevitably these are medium to larger sized companies that attend the industry meetings and are active on committees.

Disruption

Whether it’s called Disruption, Innovate, Reimagine or Change (all prior themes for NAED National), the message is the same. The topic is about thinking forward and considering the impact of technology on business models.

Tom Naber started the conference with a quote from Richard Daly that essentially said “face the future with nostalgia” and don’t think about the past, think about tomorrow and referenced Amazon as a threat to distribution.

The keynote speaker talked, repeatedly, about her books – Provoke and Immersion Factor. Unfortunately, she was challenged, or not prepped, to tie any of her content to the industry, but referenced change created by technology (which is her frame of reference as has been with a number of tech companies.)

Some key elements from her presentation:

• Look 3-5 years forward
• Speech title was “Disrupt to Innovate; Disrupt of Die” (which begs the question, if everyone disrupts at the same time, what happens?)
• Considering the question “What if …?” helps to create vision.
• Talked about the role of culture to being disruptive and the acceptance of disruption

Other sessions sought to reinforce the concept of disruption with examples from Telsa and other technologies. (Note to NAED, perhaps for next year speakers who talk about disruption / change and have case studies from other distribution and manufacturing industries?  It’s nice to hear about tech, but not all distributors can embrace, fund and implement tech as quickly … especially since it’s funded with about 1-1.5% of distributor sales per PAR … or talk about technology in aspects of the business.)

Digitalization

The conference started with the Manufacturer Advisory Council (MAC) Town Hall on Saturday.  The refined focus of the MAC is to “work in concert with NAED” and what NAED wants it to work on.  This “tailoring” of a message became evident during the session when time ran out and no audience questions were solicited / asked.

The two topics presented at the Town Hall were employee retention and eContent.

Employee retention

While insights were interesting relating to employee retention, in reality there is little / nothing that can be done from an association level so this became a best practices sharing session. Some key points:

• Shared feedback from a recruitment firm on why people leave their companies / stay with their companies. According to the firm “management trumps company”, compensation is in the top 5 but not #1, people stay due to culture.
• Then they shared input from a survey that was conducted that provided some directional trends. Panelists also shared how their companies facilitate communication throughout their companies to keep people involved, how they try to have fun, promote from within, invest in training / career development.

eContent

The panelists reached out to industry “experts” for input on eCommerce as well as eContent, recognizing that quality, correct, content is necessary to have an effective eCommerce platform.  Additionally, new NECA research was overviewed that highlighted contractors are not significantly purchasing online and “want an overall experience on how they are served, not just how they buy or buy online.”

Some commentary on data.  David White (Border States) commented that they receive 20+ feeds (aggregators and manufacturers) and have 5-6 people dedicated to gathering, developing and integrating product content. (note: Border States is in multiple industries so some of these feeds may be industry / supplier specific.)  Manufacturers also commented on the growing trend for distributors to reach out to them for more than the “feature / benefit” data currently being provided and that they “know how to market their products and can collaborate on their product / marketing content with distributors and gear the information towards the distributor’s customer mix.

All expressed the need for more robust enriched product content and marketing content integration.

If Amazon was mentioned 20 times by the moderator …

There was mention of customers using Amazon as a search engine due to content quality and that the web is more about product information, for electrical buyers, than for commerce. (This was confirmed in Channel Marketing Group’s State of eCommerce, Electrical Contractor and Buyer Perspective conducted recently. To support distributors and manufacturers we’re offering a FREE copy of this 84 page report through June 3^rd, 2018. Click here for a description of the research, email me for the FREE copy.)

Interesting regarding Amazon Business … content comes from manufacturers. Schneider Electric mentioned they are pushing content to their top 10 distributors.

And feedback from distributors throughout the conference is that product quality is still “lacking”.  It’s better but not to the quality of Amazon Business or Grainger.

Suggestion

• Distributors – reach out to the four primary eContent providers and ask them to provide samples of their content for selected SKUs. Same SKUs for all suppliers.
• Manufacturers – reach out to the four primary eContent suppliers and ask them how they represent 1-2 A or B level of your SKUs and your key competitor’s similar product.

The variation may surprise you.

The four companies we recommend reaching out to are Distributor Data Solutions, IDEA, Trade Service and Unilog (which also provides the content for AD’s eContent Services.)  And if you don’t know contacts at these companies, email us.

The MAC Town Hall unfortunately closed without mention of any of the data providers or an opportunity for the audience to ask questions.

Association

• There was repeated reference to the NAED Strategic Plan and its focus on greater integration between NAED, the Channel Advantage Partnership and the NAED Foundation with a goal of all focusing on the “same / similar / complementary” issues to support the membership.
• Michael Marks lead a panel discussion with Jason Stein (Border States), Wes Smith (Mayer Electric), Dan Dungan (Springfield Electric) and David Maxwell (Graybar).
  • Discussion spent much time on NAED strategic plan, focusing research on “customers” and the Market Data program.
  • There was reference to “40% of stock business will go to eCommerce platform(s)” as a threat to the industry. The challenge with this is that 1) those platforms could be an alternative ordering system from an electrical distributor or system to system ordering and 2) does not take into account heavy commodities (wire, pipe) unless placed through a local distributor. This is the challenge with using non-industry insights.
  • Jason Stein brought up the need to segment customers to understand their needs and then to understand the customer buying journey and design pricing, ordering systems and value proposition and services accordingly.
  • Jason also mentioned the need to have a “learning culture” to generate “continuous innovation.”
• NAED hyped it’s new Market Data program almost ad nauseum. The concept is for NAED members to upload POS information to a central database managed by D+R that will provide industry performance and marketplace data geographically, by customer type and by product category on a monthly basis to participating distributors.  The hope is that 150 members will subscribe. The challenge is that is about 40-45% of distributor members.  With AD and IMARK representing close to 1000 electrical distributors and the system not including companies such as Grainger ($2B electrical), Fastenal and others, hopefully the data can be forecasted to represent the industry and not solely the NAED membership.  And without small distributors participating, the accuracy of the data in small to mid-sized markets could be questionable.  Additionally, the information, and hence reporting, is not planned to be made accessible to manufacturers.  Good concept but will take some time for NAED to “smile and dial” to get members involved (and hopefully their sales effort will extend beyond presenting at meetings and writing articles.)
• The “A” word was also mentioned extensively – Amazon / Amazon Business. The CAP council received a presentation on commissioned research regarding Amazon Business which is to be published soon.  Most presentations mentioned Amazon Business as if it was imminently taking over the electrical industry (which research CMG has conducted with electrical buyers refutes and every member of the contractor panel said they do not buy electrical material via Amazon other than hard to find items.)  It’s interesting that the association focuses solely on Amazon rather than also focusing on Automation Direct, bulbs.com, Ferguson.com, HomeDepot.com, Grainger (which is growing its small to mid-sized customers by 30% and has about 20% of sales in electrical), and other niche entities.

Miscellaneous / Observations

• Feedback from a number of people was that they hotel is “disjointed / discombobulated” for a meeting. The challenge is distributors had meetings in both hotel towers, in the lobby, and on three lower floors with the lowest, the Exhibition Hall, having manufacturer booths of which there were not too many. In other words, lot’s of running around and many meetings starting late.
• Met with some who questioned about attending and then decided to at the end. Some commented about the challenge in getting meeting as the NAED National is viewed as “top to top” so few of the small to medium distributors and manufacturers as can’t get meetings (some of the larger manufacturers take 1.5-2 hour time slots with distributors.)
• Distributors and manufacturers are talking about 3-5% construction growth this year and slightly higher for industrial with some asking how long the industrial improvement will last given macroeconomic influences … tariffs, oil price increases, benefits from tax cut (will companies spend) and then the international issues of North Korea and Iran.
• Educational Sessions
  • The Tesla speaker with entertaining. High energy and shared Elon Musk’s goals and drive.  Good presented, had strong attendance.
  • Contractor Panel
    • Kudos to Mark Barthel (Springfield Electric) and NAED for pulling together a quality panel of medium to large Chicagoland contractors. These individuals shared more than “price, availability and relationship” as what is important to them.
    • Talked about need to maximize installation time. One panelist commented that it costs him $1.50/minute in labor.
    • Labor shortage due to retirements
      • Discussed union recruitment for apprentice program. Local union trust will pay for apprentice training and then pay 50% for college at a local institution.
      • Comment was made that “after 5 years can make almost $100,000 vs being $100,000 in debt” (for college)
    • Prefab buildings (modules and pods)
      • 3 of the four had their own pre-fab shops, however, also said that not all customers / projects value pre-fab.
    • Lighting controls – they, and manufacturers and distributors, need to educate specifiers.
    • Asking distributors to help on logistics if they want to “be a partner”. Also using VMI, defined as deliveries to place of material usage
    • Integrating concepts from manufacturing such as Six Sigma and Lean to decrease inefficiencies
    • Cordless tools to decrease overall costs which can include OSHA issues, safety, extension cords, labeling and more
    • Using technology such as PlanGrid, Blue Beam, 3D technology, BIM, Trimble, using Facetime to interact with distributors and show products needed on job site.
    • Seeking to be paperless in the field
    • eCommerce
      • Utilizing web for product search, some ordering for “hard to find”
      • Service trucks will use, especially mobile devices. Not using for projects as “too many SKUs”
      • Desire e-Invoicing as well as direct from estimating system to order placement with distributor and mentioned SupplyLink (from Trimble) and Accubid.
      • Few are using apps to place orders and, at least their, foremen, didn’t wanted to use an app … easier to call in change orders / ask questions.
      • None were using Amazon except for office supplies and hard to find items.
      • Commented “Amazon will not replace distributors” and “technology outpaces industry but customer experience matters.”

A packed 2 ½ days of information, meetings and hallway conversation. Digital distributor, and distribution, continue to be a topic and there were a number of discussions about going down the journey … from resources to preparing a company to eCommerce platforms and product data sources to gaining salesforce and customer adoption, marketing and CRM … all while trying to do it cost-effectively in the face of margin challenges.

If you attended, what did you observe?  If you didn’t, why not?