Only 40 percent of distribution companies utilize a formal strategic planning process, and even those who do make critical mistakes. In The Little Black Book of Strategic Planning for Distributors,wholesale distribution industry expert Brent R. Grover offers examples from his experience advising distributors to help company leaders avoid common mistakes.
- Failing to assess the internal environment. C-level executives, who operate at a distance from customer- and supplier-facing positions, may have an inaccurate view of the company’s internal environment. Many leaders, Grover says, tout their companies as great places to work or easy places to do business with without having the data to back it up, and inaccurate feedback exacerbates the problem. “Management is too often told what they want to hear from employees, suppliers and even customers,” he says. To obtain the unbiased internal assessment critical to understanding a company’s enablers and constraints, distributors should consider having an outside party help with the information collection.
- Confusing the company mission statement with the company goal. Mission statements tend to be bland and unoriginal, and are often too subjective to be very compelling. On the other hand, strategic goals should be SMART: specific, measurable, actionable, realistic and time-sensitive.
- Misunderstanding the company’s key profit driver. Many distributors think that the driving force behind their company’s revenue is their selling method or their logistics system. For most distributors, though, “the driving force is either an extraordinary knowledge of product applications or a remarkably deep understanding of their customers’ needs,” Grover says. Companies that can accept that their logistics, technology and sales methods are probably similar to competitors’ will be better prepared to design effective business strategies.
- Focusing on the wrong customer segments – or none at all. Grover says many distributors continue to invest in their largest revenue segments without regard to growth potential or profitability. Targeting must be done judiciously since, as Grover notes, all companies have limited time and resources at their disposal. “The strong temptation of distributors to target everything must be resisted,” he says.
- Failing to align the plan with business processes. “Many companies have spent huge amounts of time and money writing the perfect (or nearly perfect) plan only to show a presentation to the board of directors and then place the binders in the corporate archives. But musty books on a dusty shelf don’t do anything to address the imperatives of a compelling goal, role clarity and mutual trust,” Grover says. Summarizing company strategies into a one-page plan, which is built off the data that backs up the plan’s conclusions, helps get employees get excited about where the business is going and clarifies their roles in getting there. Leaders should openly communicate the details of the plan to subordinates and should adapt management processes and incentives that support it. “Executing the strategy should not be a new activity or project for the company; it is built into the way the business is managed,” Grover says.