Distribution Model disruption
Garage Gigs for Growth (#8)
Tried some new lights this blog….hmmm – seems to have given rise to a skin tone I would describe as ‘Trumps Fake Orange’. But lets not let that distract us from getting after 2018 in a BIG way.
Frankly its time for most Aussie businesses to get off their arses beach towels and add more innovation and disruption to their business strategy. But as much as I’d just love to do a Gary Vee smackdown on the complacent, kick sand in the face of status quo or even better take a leaf out of Oprah’s far more elegant #itstime to wake-up tone (did you see her Golden Globes Cecil B. DeMille acceptance speech this week? too cool for school I say) – I will maintain some decorum at least for January.
Unlike this first para – here is a serious look at how some companies and industries are disrupting prevailing distribution models and thus changing the game entirely.
Video Transcript
| So we're back in the saddle in 2018, hey, after our Christmas and New Year. If you thought 2017 saw a lot of change, I reckon fasten your seatbelts and see what's gonna happen this year. Amazing things happening in disruption, in all sorts of sectors. Here's a model I think might help us have a little bit of think about what we can try, or what to look for, as our markets shift virtually beneath our feet.
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| In the '80s and the '90s, the distribution model for computers was via computer stores. So IBM, and the likes, sold their computers to distributors in computer stores. You'd go in there and the salesperson would talk to you and you'd choose a computer and you'd take it home with you. So IBM was selling their computers via other people's assets, their computer stores, and using their labour.
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| But this dude called Dell, Michael Dell came along and said, "Hey, I'm just gonna sell them direct to the public." So this cutting out the middle man is not a new strategy, but gee it was a powerful one. In '83 he did $6 million in his first year. Three years later he was up to 34 million in sales. Two years later it was 159 million. Three years later, 800 million. And before he'd done 10 years, he was a $2 billion company. I can't even wrap my head around what he would have had to do to achieve that rate of growth.
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| But clearly this model, which delivered cheaper computers, worked exceptionally well. It also gave him insights into what customers wanted. He could listen to them, talk to them directly, and there's many other things that he did well. But this was a big thing, going direct, using his own labour and his own properties to deliver direct to customers. So cutting out the middle man, is that what we should do every time?
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| Well, how about taxi's? Taxi's use their own cars and their own drivers, own assets, own labour up until recently, when we all know what happened. This little company called Uber came along and they said, "Oh we're gonna use other people's cars, your cars. We're gonna use you to drive them around yourselves." So we went back the other way.
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| Supermarkets are in place to sell food companies products. So a food company, what are they doing? They're using other people's assets. So if I'm Mars or Unilever, I'm gonna use the supermarket to sell. I'm not gonna use my own sales force, and I'm not gonna use my own stores. So food companies are here, and they sell fruit. Coles and Woollies, what do Coles and Woollies do? Well Coles and Woollies are here. What happens when we go to the supermarket? They're using our labour, aren't they? They're not providing labour. We're picking the stuff off the shelf, we're putting it into the trolley, we're driving it home, we're unpacking it. So they're using their own stores, but they're using our labour.
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| But then what's happening now, this is visiting a store. But what about supermarket for online? One reason why supermarkets might not want us to go online and shop, is because all of a sudden they've got to start using their own labour. When you enter it on the computer, they've got to go to the shelf, they've gotta put it in a box, they've gotta drive it to our place. So they're providing their own labour in this model. And their own delivery force, their own vehicles. So there's more expense here for them.
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| What's also happening now is food companies are going, "Well, what if we do a Dell and we just sell straight to the consumer?" So there's also an announcement recently in the UK that the likes of Mars and Unilever are gonna sell directly to consumers. So they're gonna skip these guys. If it's online, well they can do it themselves. Right? And presumably they'll do it for 1/3 cheaper.
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| So this stuff's moving around. Who might be up in the top left hand corner? Up here we've got real estate agents. They have a bit of a footprint but essentially they're normally in your home to sell it. So they're using our asset, the home, and they're providing the labour to sell it. But of course what's happening now with a number of startups in the real estate industry, is there's all this DIY, do-it-yourself selling your own house. So there's a number of startups that are gaining a fair bit of traction by moving down here, where we're using our labour, selling our own home.
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| There's some really cool things actually being done at the moment by Australia Post. One of the things they're doing is they're saying if stuff's moving online, if we're coming down here, then one of the challenges for a retailer is getting this stuff out to people. So one of the things that Australia Post has launched is a startup called Chipster. We go there, we register our email address, and we can buy from 50 retailers. And the retailers themselves can use Australia Post's assets and Australia Post's labour to get it to you, as opposed to having to do this online supermarket thing down here. So that's a pretty cool startup.
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| There's another startup link to Australia Post called Fulfilio. So if I'm a small or medium enterprise and I've been successful and I'm growing, and I'm spending heaps of my time ... Michael Dell would've had this problem ... I'm spending heaps of my times packing my own goods and shipping them out. Going from the post office, getting them out or getting them picked up by a courier. I'm spending a lot of time getting my stuff, if it's a product, packaged up and shipped and distributed. But now, SMA's have this option, again with a startup link to Australia Post, is a company called Fulfilio, where you can essentially outsource that part of it to them. So now an SMA is using other people's assets and other people's labour to distribute their own products, instead of doing all that work themselves.
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| So we've got startups all over the place, here. And the key to this for you is, what does your business do? Whose assets does it use to distribute your product? Whose labour do you use? And if you flip across one of the quadrants, let's just try. You're in one, pick one of the other three. Or maybe you're in a few, but you might need to put one other of them on steroids? There is opportunity everywhere in 2018 to find new revenue and new ways to grow. Good luck this year, guys. |
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