The Four Cornerstones of a Digital Distribution Strategy
Insights from Brenntag’s former CEO EMEA to help kickstart your digital distribution strategy.
I often hear distributors say they want to go digital, but that’s easier said than done for many organizations. Historically, implementing a digital distribution strategy has come with significant challenges. There’s much to figure out before launching a successful digital initiative. And many may not know where to start.
Knowde is committed to bringing the entire industry into the digital world, including suppliers and their distribution partners. We recently hosted a webinar with Brenntag’s former CEO, EMEA, Karsten Beckmann. During the event, he and Knowde’s CEO, Ali Amin-Javaheri, discussed the state of digital distribution and the foundational strategic elements distributors must get right in order to be successful.
Read on to discover highlights from the event, including Karsten’s top strategies for distributors looking to accelerate their digital journey.
1. Align the management team.
When executing a digital strategy, the first task is seeking “broad management alignment on the need for change towards the digital channel,” says Karsten. Without alignment, you’ll never get your initiatives off the ground, as they will often become deprioritized and lose momentum. If your company is serious about digital transformation, no one team can do it alone. You’ll need leadership buy-in, a clear set of business goals, and the resources necessary to get the job done. Karsten suggests working with key business and operations stakeholders is a must to get buy-in, set a strategy and determine key goals. Only once you’ve achieved alignment across the organization the other dominoes fall into place.
2. Organize, structure and digitize your product data.
With the management team on board, the next mission-critical step is to digitize your product data. “In the chemical industry, product data is a very complex topic,” says Karsten. “You have thousands of different products, codes, and documentation in various sources and many characteristics you want to embed in a product data set.” Not only is chemical product data complex, but most distributors suffer another challenge: it’s rarely unified and stored in a central source of truth.
Years of acquisitions and geographic expansion, as well as a lack of system harmonization have created fragmented digital ecosystems. As a result, it is far more challenging to realize a sought after return on investment from other digital initiatives that are reliant on clean and structured data such as CRM, ERP, and your website, to name a few. Just ask your product managers, sales reps and regulatory teams.
“Start with the product data as early on as you can, because it will be the foundation of everything else you do.”– Karsten Beckmann, Former CEO EMEA at Brenntag
Karsten and Ali agree this is the number one challenge distributors must solve to unlock more advanced digital opportunities. But once you have the right solution in place and your data is digitized, organized, and cleansed, far more opportunities emerge to drive value. You can enable your internal teams with digital catalogs and selling tools to promote upselling and cross-selling. You can create amazing online experiences for your customers. You can extend your products to third-party platforms and marketplaces. The possibilities to accelerate your team and their initiatives are endless.
3. Don’t try to reinvent the wheel.
Software and digital tools are crucial components of any company’s digital strategy. And when it comes to software, there are two routes a company can take: buying or building the solutions. Karsten shared that he learned firsthand at Brenntag that while building in-house software is often an attractive, custom option for distributors, this discipline often falls outside the company’s core competencies. And the results of building software in-house tend to fall short of the goals for various reasons (costs, time commitment, resource constraints, effectiveness, etc.). Instead, he recommends going with the demonstrated and proven category leader to achieve the best results.
“One thing I learned during my journey is to buy software from the best,” says Karsten.” [I] found out that our competencies in distribution are so limited when it comes to software development. It is much more convincing to buy software from the best who have these competencies and focus.”
4. Focus on hiring and training digital-savvy talent.
As Karsten notes, technology can only take you so far. The human resources behind the initiative are critical to any successful digital transformation. In parallel to product data digitization and software implementation, he suggests developing (or hiring) tech-savvy talent to drive the next stage forward.
Often this will require looking outside your company. “In my experience, the classical sales organization has only a limited affinity to digital,” says Karsten.” Hire talent with a digitally savvy mindset to bring new ideas into your organization.” Plus, as he puts it, these types of investments can open up new avenues for recruitment. The opportunity to work with the latest technology and tools tends to attract younger, more digitally-minded workers to fuel innovation for years to come.
But Karsten cautions distributors to rely solely on outside talent. Many individuals at your organization likely want to learn and grow. He discovered this during his time at Brenntag, where he opened an incubator to nurture internal talent and focus on digital initiatives for the organization. “I founded a digital hub in Amsterdam where many young people inside the internal company went because they were attracted by the digital mindset of what we were doing,” says Karsten. “So, develop internal talent. With incubators, with these kinds of tools and locations, I think they are stimulating for the organization.”
If you’d like to hear more of Karsten’s insights or share the webinar with a colleague, you can access the recording on demand.
Read the full transcript.
Okay, let’s just dive right in. I know how passionate you are about all things distribution and digital. Let’s start at a fairly high level, giving your overall thoughts on how you see this industry moving towards digital right now.
Ali, I’ve talked to a lot of distribution companies recently, and I think the industry is really waking up toward creating a real digital customer experience for distribution — and I was part of it — we relied very actively on analog traditional sales trends like the classical technical sales rep or an inside sales guy.
And this is changing; when I look back on the last years, it’s accelerating the change. We clearly see that more and more distributors have hired Chief Digital Officers who actively work on digital strategies. And clearly what I see is that COVID was a big accelerator because people found out that customers also like to be serviced online.
And I could even go a bit further: they normally like to be serviced online, and they don’t want to see a sales rep all the time. So, the industry is changing. Today, customer service portals have become more and more standard at the best-in-class distributors. They already embrace this strategy.
I totally agree with you. A lot of the same things that we constantly are hearing. I have an ask of you for the rest of this conversation that we’re going to have, I want to get into some details. I want the audience to get some real tangible things out of this conversation that they can start to apply.
No high-level exec talk. I hope you don’t mind, by the way.
Karsten Beckmann: That’s fine.
Take us back a few years. You had a digital charter at Brenntag. Where did the conversation start as you were thinking of your digital roadmap at Brenntag?
Yeah, it started with an alignment on the management. This is a key task at the beginning of any digital journey you want to pursue. So, my job was to align the management on the need for change and accept that digital customer interaction needed to improve to grow. Once you have done this and gotten the traction out of this alignment process in the management team, our big first task was organizing product data.
And as a lot of the audience will know, product data in the chemical industry is a very complex topic. You have thousands of different products, codes and documentation in various sources and many characteristics you want to embed in a product data set.
So this was by far the most challenging task and the first one on the journey.
So what you’re describing right now is certainly not easy. How were you thinking about solving it?
We followed, and I think most of the industry does it like this, quite a classic approach. So, we bought master data software.
I brought together a big team of product experts who gathered data and aligned product codes and product information around certain filters. A second big and important step was to set up a maintenance process because, in distribution, you see the portfolio consistently changing every year. So my experience is that probably 20% of the portfolio and product codes change all the time. So basically, you need to have a very solid maintenance process.
And the third important step is the search engine because if you don’t have a good search engine to search the product data you gather, you cannot use it — either internally for your own workforce sales organization, for example, or the customer.
Look, you jumped right into the heart of the problem from our perspective, and a lot of what you’re describing right now are things that we’ve heard consistently. The product data and the structuring of said data is certainly a complicated task.
I don’t know exactly how far you guys got with that. Have you seen organizations do that really well?
Really well? Not yet. And it’s not a big surprise as it is such a complex task. You need a big manual workload for this. I haven’t seen it.
So a couple of players in the meantime have their product data organized. You can access them also via search engines, but those search engines, what I’ve seen so far, are relatively simple, and the number of filters are quite limited. And I doubt from time to time if the customer’s really pleased to go on this since this is a real benefit for him.
We’ll come back to this topic because it’s so important. We certainly recognize that the organization of product data unlocks so many things. It’s a very complicated task to solve. And for those that are in the industry, you know exactly what we’re talking about.
What advice would you give distributors as they think through how to solve this problem, or really broadly how to build out some of their digital strategies?
When it comes to digital strategy? I think I mentioned this already, the most important one is the alignment. So, have a broad management alignment on the need for change towards the digital channel.
Without this, you will not. And then it is product data. Start with the product data as early on as you can, because it will be the foundation of everything else you do, and it takes a long time. So, start with product data and quality.
First thing you do in parallel, I think you should very early on consider hiring talent. Because, in my experience, the classical sales organization has only a limited affinity to digital. So, hire talent with a digitally savvy mindset to bring new ideas into your organization. These are very important cornerstones.
And then one thing I learned during my journey is to buy software from the best. I probably made some mistakes on the journey where I learned a lot that I relied too much on building my software in-house basically. And found out that our competencies in distribution are so limited when it comes to software development. It is much more convincing to buy software from the best who have these competencies and focus on product quality and product data.
I think you just touched on another important topic that gets discussed a lot in these conversations, which is the question around staffing and the team enabling a team to go execute on a lot of things that you’re talking about. What does the process look like to staff the team appropriately in this sort of new world?
I would follow two avenues here. So, for me, and I mentioned this already, bring in fresh blood from the outside. I think it is an important way to change the behavior and bring new competencies into the organization. I think you can do this with people from within the industry or from outside of the industry.
I think young people learn very quickly and particularly when they have this digital attitude. For me, this is more valuable than having all the detailed product information. I think you can learn quite quickly when you are supported by the right digital tools. That’s one avenue which I think is definitely needed.
And the other one is developing internal talent. Who has these capabilities? For example, I founded a digital hub in Amsterdam where many young people inside the internal company went because they were attracted by the digital mindset of what we were doing.
So, develop internal talent. With incubators, with these kinds of tools and locations, which I think are stimulating for the organization. Overall, I must say that — and I can’t stress this enough — this digital transformation is an opportunity for a company to attract young talent.
I cannot see a company in the future, a chemical distributor, not offering digital tooling and a digital customer journey attracting young talent. So, you need to have both, and I think companies from time to time have not fully understood how important this will win the best talent in the future.
I certainly agree that the transformation starts with product data. We need to get that organized and wrap a team around this that provides different perspectives so that they can Think about the problem differently. Let’s assume that all that is in place. Let’s assume that the organization of the product data is now in place and that we’ve got a team now in place. What business problems were you trying to solve?
I think every distributor has two main areas which you need to solve. One is the internal one, and then you have an external facet of product data.
I think the benefit on the internal side is underestimated because the sales organizations have quite a complex portfolio to sell. A sales rep normally has hundreds of products to sell with different applications and characteristics; normally that’s my experience.
He knows a couple of products very well. And then the level of detailedness on the rest of the products fades away very quickly. Imagine you have a search engine at your fingertips as a sales rep, and you are able to propose very proactively to the customer, different products out of the whole universe of the company.
This is something that is not happening today. And I personally had a lot of issues fueling cross-selling in the organization. That was one of my biggest headaches for a long time. I put a lot of pressure on it and dedication into it. I think this product data used and embedded into a search engine could be a huge growth engine for the organization.
Product data is the backbone of everything you do with the customer in the future. So, you use the product data to ease the customer. And you can do this by doing marketing efforts to tailor customers. You can bring this into a website, in a product catalog or marketplace if you want to focus on this channel. So, various options exist to use the product data and come closer to your customer.
Tell me a little bit more about that. Accurate product data into a website — what would that have looked like? How would that change the customer experience?
Today when I go on a website as a customer and try to solve a problem, I normally finish with a very limited amount of real practical information on products, applications, and solutions.
Normally you get a lot of general stuff, but you don’t find a really good product catalog or a search engine — something where I can solve my problem without always asking someone. And we all know, my children, all the younger generation, they try to solve the issues by surfing, by finding things without calling.
So, basically this is, I think for me, a very important aspect of customer experience. And on the websites mostly, you don’t find this; it’s still underdeveloped. And a couple of distributors probably have some kind of product data available. They also have a limited search engine. But I doubt that this is really convincing today for a customer who’s on their webpage and trying to solve a problem. It all depends on the right quality of product available and accessible for the customer.
Yeah. I couldn’t help but notice that earlier, you said marketplace.
Everybody now certainly talks about omnichannel and how important that is to them. Assuming that all that product data is nicely organized and everything else obviously helps lower the friction to join third party platform third-party platforms. Do you think that’s gonna happen?
For sure. And I see it already happening. Best-in-class distributors already follow this omnichannel solution. Still a couple of distributors are hesitant to see this as the right channel to market. I have a very simple philosophy. I believe a customer will search and decide where to go to find a certain supplier or distributor. He decides this, and you might like it or you don’t.
The customer will find the right touchpoint, and if you are not first with a customer and give a decent service, you will not win the customer. So, the best thing you can do as a distributor is to create this omnichannel strategy and try to get in touch with the customer on every single potential channel a customer wants to use. And this gives you a much higher likelihood to grow with the customer and win the customer in the end.
Ali Amin-Javaheri: Look. Obviously, you’re talking our language. And thank you for getting to a good amount of detail here. A lot of what you said is very relevant to what we hear in the industry.
Everyone says the right things — that they want to transform digitally. It’s the thing, and I think what some people are starting to find out is that they have to now go out and solve the root of the problem that’s holding them back from transforming, which is like you’ve kept saying over and over again, digitizing the product catalog.
This product data is at the center of every company’s universe. If this data isn’t unified, cleansed, and harmonized, you can’t fully leverage investments. And you mentioned the website, but it can also be used in CRMs, ERPs, customer portals, and all sorts of systems.
And like you said earlier, to enable sales folks to cross-sell and recommend products and solutions and all that sort of thing. I don’t think our industry has fully grasped how important it is to do a lot of things that you just mentioned. However, the challenge is real.
It’s complicated. And it’s even more complicated in distribution because the catalogs span so many markets, they span so many regions, they span so many suppliers. And so to fully leverage size and scale and all of those sorts of things, it has to start there.
From our perspective, most companies — could be producers or distributors — haven’t yet organized their product data into a single system of record. Most don’t have that source of truth. And this is the thing that’s holding them back from creating amazing customer experiences.
Thank you for all of your insights.