How Social Networks Redefine Distributor-Manufacturer Relationships

The old distributor, supply-chain model is dead – or at least dying rapidly.  Which is not to say that distributors are no longer needed.  But the relationship among manufacturers, distributors, and consumers is changing radically. 

Many years ago, P&G brought consumers into the conversation through the use of coupons.  Then Intel, a high-tech engineering company, pushed this idea further and created a consumer image.  Intel didn’t sell directly to consumers, but it created consumer loyalty and demand for its products.  From far down the traditional supply chain, Intel reached around to the other end – the consumer.

Social media networks are now redefining the manufacturer-distributor-retailer-consumer chain from a series of sequential links to a circle of collaboration.  Distributors are still critical; they still provide primary sales and support to consumers.  Manufacturers, however, can use social networks to provide a great deal more assistance to distributors while creating stronger recognition and greater customer loyalty for their brands.

The top 5 opportunities are business-based, not channel- or tool-based.  New apps and new channels can slide into execution plans to help meet business goals.  And that is critical, because you don’t need a Facebook strategy; you need a business strategy.  So how can social networks help manufacturers who rely on distributors?

v Locate parts and products – When customers contact a distributor for a part, they often need it now (or an hour ago).  Few distributors, however, keep a full-line of parts in stock, and manufacturers might be OOS as well, particularly for older models.  Of the several ways that manufacturers can address this issue, two stand out for me.

o   Manufacturer-hosted forums for distributors provide a central location and parts exchange opportunity.  Especially when distributors are geographically dispersed, they welcome the opportunity to reach out on a one-to-many rather than one-to-one basis.  It’s more efficient; it creates new distributor-to-distributor relationships and greater engagement, and it solves problems.

o   Pro-active notifications help avoid crisis situations.  Wholesale Pallet Rack Products acquired some Prest Lock 1 frames and beams after Excel Storage Products went out of business.  Joshua Smith, director of sales and operations at Wholesale Pallet’s sister company AK Material Handling Systems, tweeted to WPRP’s dealers that they had the Prest Rack beams.  As Smith tells it, “it turns out one of our dealers had a customer that had recently damaged its uprights with a forklift.  We were able to provide the dealer with the product in less than 48 hours.”  Happy dealer.  Happy customer.  Sale made.  (For more, see www.themhedajournal.org)

v Provide point-of-purchase customer assistance – Social media is mobile, which means that consumers can – and do – access information at the time of purchase.  Flurry Analytics recently reported that people spend more time on mobile applications than on the web each day, 81 minutes vs. 74 minutes.  According to LightSpeed Research (http://bit.ly/bizreport) almost 2/3 of consumers put heavy emphasis on product reviews, and over 2/3 say that 2 negative reviews would deter them from purchasing.  Jordan Winery is taking advantage of these trends.  The winery has built custom videos for digital wine menus, most prevalent at high-end restaurants.  In about 2-minutes, Jordan’s winemaker describes his wine’s profile just when a customer is preparing to choose a bottle to order.  Chicago Cut Steakhouse uses iPad menus loaded with a Jordan video, and Jordan reports that “within 45 days, our sales at the restaurant increased 17 percent.”

Dry Creek Vineyard is putting QR codes on its wine bottles, enabling customers in the wine aisle of a grocery to scan the code and be brought to a Dry Creek Vineyard webpage.  (For more on wine industry social innovations, http://bit.ly/pressdemocrat)

Just-in-time information can be used in many situations – from car dealerships to electronics purchases.  The information gives consumers confidence, gives the manufacturer a competitive edge, and makes it easier for dealers to close a sale.

v Spotlight the experts – You don’t have to know everything, but being the go-to location for expertise keeps customers and dealers engaged, and ultimately buying and selling.  Manufacturer-hosted forums and blogs provide a unique opportunity to create communities that actively involve a range of stakeholders. 

o   In-house experts – Your engineers and back-office experts provide humanity and a face for your organization.  Allowing them to have individual blogs on the corporate website also helps the employees establish their professional brands.

o   Hobbyists and enthusiasts – Bring the most knowledgeable of these folks onto your site.  Let them share their knowledge, answer questions, and raise ideas.  Raise their profile and your own. 

o    Dealers – Front-line dealers have tremendous vision into the market, competitors, and product.  Give them a voice.  As smaller businesses, dealers often lack the time or resources to set up their own digital and social networks, but they welcome the venue that manufacturers can offer.

element14 (www.element14.com), built for electronic design engineers, brings together all of these various stakeholders.  One of my favorite aspects is the use of YouTube, allowing people to showcase skills and techniques.  The Ben Heck Show (http://bit.ly/e14benheck) is part of the element 14 community, yet it’s unique and fun and often fascinating.  Take a look at Ben Heck’s Remote Expedition Camera Trailer (http://www.youtube.com/watch?v=coMZY5FNado).  It’s the type of exchange that simply wouldn’t happen without element14 and social media. 

v  Improve dealer “help desk” functions – Forums that allow questions and answers to be easily searched, that put internal experts in touch with dealers, and that enable dealers to help one another drive down call center costs and improve the information flow.  I addressed this in a previous post, http://bit.ly/welcomingdistributorsontonetworks .

Establishing vibrant social networks creates greater engagement between manufacturer and dealer, helps dealers close sales, and forges greater bonds among the dealer, consumer, and manufacturer.  B2B companies have been edging into social media reluctantly but steadily.  The opportunity exists NOW to realize significant competitive advantage by establishing a social dealer network.  It’s not the old supply chain any more.

Internal Knowledge Sharing and ROI - It's Personal

Why would you give away your knowledge, not to a competitor, but to an internal colleague?  Team work is great, but in the end one person gets primary credit for the sale; one engineer is the lead developer; one customer service manager drives the highest customer satisfaction scores.  And that person gets the promotion, the biggest bonus, and the greatest ego boost. 

Yet organizations are adopting internal social networks with the hope of improving productivity and innovation through greater knowledge sharing.  Prescient Digital (www.prescientdigital.com) reported in their Intranet 2.0 Global Study 2010 that the main reasons that companies invest in intranet 2.0 tools are employee collaboration (76%) and knowledge management (71%).  Does knowledge sharing naturally follow?

Knowledge is far more than data; it includes the analysis and experiential wisdom that we bring to information.  Understanding when we need to share true knowledge and when we need to facilitate the transfer of information helps organizations build effective internal social media networks.  It is critical to driving the ROI of internal social media.

Knowledge versus Information Sharing

Two of the three factors that drive ROI for internal social media depend on knowledge sharing.  Only one factor is primarily data or information driven.  (see http://goo.gl/fb/pdpSI 3 Benefit Measures - The ROI of Internal Social Media Networks) Recognizing the distinction helps the change management process; employees can share at the level that benefits both themselves and the organization.  

v  Enhanced Employee Engagement depends on the give-and-take of knowledge sharing.  Numerous studies have linked higher levels of employee engagement to increased customer satisfaction and loyalty, lower turnover and higher sales.  By facilitating greater sharing of both personal and professional knowledge, internal social media networks boost employee engagement.  Within about 3 weeks of launching its new social networking site, The Hub, SAS had almost 50% of its employees using the site and 425 groups established.  The Hub intentionally blurs the line between the professional and personal, creating stronger, more multi-faceted ties between employees and the company.  Becky Graebe, internal communications manager at SAS, describes the site as “kind of like a Facebook/LinkedIn behind the SAS firewall.” Sharing knowledge creates friendships and connections, across and up-and-down the organization, which drives employee engagement and positive ROI. (For more information, see http://www.ragan.com/InternalCommunications/Articles/SAS_internal_social_network_attracts_5000_users_in_42751.aspx)

v Better, faster innovation requires more structured knowledge sharing.  Success depends on governance structures that facilitate and reward cross-silo and cross-functional work - while continuing to recognize the primary sources of both inspiration and execution.  A key is bringing together individuals with complementary skills and reducing redundancy. Merely sharing data is insufficient for innovation; sharing must involve insight, analysis and creativity.  $21.8 billion pharmaceutical company Eli Lilly implemented an internal social networking solution to enable more efficient and cost-effective processes for new drug development.  R&D scientists and subject matter experts are now in touch throughout the product development process, across multiple divisions and around the globe.  Increased knowledge sharing has helped reduce costs and accelerate innovation.  Personal brands are enhanced not threatened.

v Streamlining operations depends on information sharing, not knowledge sharing.  Many tools enable employees to find data and experts more quickly, and allow executives to ensure that activities are focused on the key strategic initiatives.

Many internal social networks facilitate data sharing; doing the same things more efficiently yields a positive ROI.  Knowledge sharing multiplies the benefits that an organization receives.  Unlike data, however, knowledge is personal and reflects an individual’s value and builds his or her personal brand.  Internal social networks that enable true knowledge sharing must recognize the individual as well the organizational benefits.  The ROI of these networks rocket upward. 

Is Social Media Killing Innovation?

Would social media have helped Thomas Edison?  Or Alexander Graham Bell?  Or Henry Ford?  Or Steve Jobs?  Subjectively, it seems that most disruptive innovations spring from the mind of one individual, or at most from a two-person partnership.  Remember the commonly held and oft cited view regarding the output of committee work?  I think there is little question that social media, when effectively engaged, can and does have a positive impact on improvement.  Product improvement.  Business model improvement.  Service improvement.  Operational improvement.  Many of the by-now “classic” social media cases showcase these benefits.  Starbucks, Ideastorm, even Comcast’s foray into Twitter for customer service – they all use the power of customer engagement and the speed of social media response to uncover and drive improvement.   How do I do better what I already do? But does social media, the ultimate collaborative tool today, really help drive innovation? True innovation requires discontinuous or lateral thinking.   Innovation reframes or redefines the underlying issue.  It’s risky.  And it rarely has immediate mass appeal or acceptance.  Is social media, then, diminishing real innovation, driving business to the mass mediocre and to only incremental improvement? Maybe.  But I think that social media can also enhance the ability to innovate.  v One spark to innovation is the intermingling of previously unrelated ideas – Social media provides an unprecedented opportunity to acquire and mix new perspectives.   Customer views, vendor perspectives, and the ramblings of random people we otherwise wouldn’t encounter potentially create more seeds to cross fertilize.  Internal collaboration tools and social platforms bring together the thoughts and knowledge of colleagues in different locations and with different expertise.  Innovation is about putting ideas and facts together in new ways; the more ideas and facts, the greater the inputs to innovative thinking. v “Edison didn’t invent the light bulb by trying to improve the candle.”  Innovation usually springs from addressing a broad, underlying need, not a short-term complaint or usage issue.  Monitoring and listening can help to reveal fundamental opportunities that few people articulate before seeing the solution. v As the economist E. F. Schumacher said, “Any intelligent fool can make things bigger, more complex…It takes a touch of genius – and a lot of courage – to move in the opposite direction.” At their core, great innovations generally reflect simple ideas – the execution might be complex, but the motivating concept is typically elegantly well-defined.  Social media helps simplify and focus.  Express your idea in 140 characters.  Or blog until you know what you are blogging about. Does opening up the organization to social media and the vast array of unrelated, non-linear thoughts and ideas pay off?  I think so.  Consider the Cuisinart.  No focus group or market research ever identified the need for a Cuisinart.  Carl G. Sontheimer mixed his expertise in business, technology and cooking to develop the Cuisinart.  Almost everyone has heard of the Cuisinart today, but at its introduction in 1973 most people didn’t understand WHAT it was beyond a fancy toy or souped up blender.  It took two years for the home cook to begin to embrace the Cuisinart as a new, and now indispensible, kitchen appliance.  Not an improvement on a blender, but an innovative tool.  Innovation pays off.  Sontheimer sold the Cuisinart company in 1987 for $42 million. Sontheimer’s education, experience, and personal interests gave him insights and the ability to span knowledge silos.  Social media can help others grasp those seemingly unrelated bits that drive innovation… if companies encourage engineers and techies and marketing folks to engage in social media.  If companies acknowledge that wide-ranging ideas are NOT a waste of time, that listening and learning and sharing are the sources of the seeds of innovation.  If social media is integrated into the everyday of business.  How do you make social media part of the everyday at your organization?