Unleashing the Power of Digital Transformation in Manufacturing and Distribution
60% YOY growth in e-commerce sales. $1 billion in new revenue. 8x productivity gains.
These are the types of results that B2B manufacturing and distribution businesses can realize if the right digital strategies are developed, and when leaders take on the necessary transformation work to bring these strategies to life. Unfortunately, many companies in the manufacturing sector are still trying to get by with outdated systems and patchwork solutions – leading to operational inefficiencies and limiting their strategic options for growth. There is hope: Those who embrace digital transformation can create new possibilities.
In our work with a range of B2B manufacturing and distribution leaders, we’ve seen successful digital transformation enable companies to expand into new markets, unlock new avenues for growth, engage new customers and gain a tangible competitive advantage. In this article, we explore why digital growth strategies matter and how to develop the right e-commerce approach for your business.
“We believe our industry will begin seeing more disruption from large online players and big digital marketplace players, and want to support our customers from seeing attrition as a result. We saw it as absolutely critical to digitally transform to meet rising consumer expectations and to ultimately help our customers grow their businesses.”Rob Saper, General Manager, Dexter Distribution Group
The Significance of a Digital Growth Strategy
Digital growth strategies can support a range of business objectives, from increased sales and stronger customer loyalty to higher efficiency and lower costs. But the simplest reason that B2B companies need digital and e-commerce strategies is that customers expect them to have one. All customers are looking for convenience, flexibility and personalized experiences. Every company must have a digital platform that supports effortless ordering, rapid delivery and responsive service.
When Dawn Food Products Inc. made it easier for customers to discover new products on its online self-service platform, the company saw a surge in online orders for products that customers had not previously purchased offline. The well-designed digital solution prompted customers to buy more and expand their relationships with Dawn.
Digital platforms add value beyond purchasing by providing an outlet for content and services that cater to diverse customer needs associated with the core product set. Anheuser-Busch InBev’s BEES B2B sales platform, for example, empowers retailers and partners with customer insights, personalized product recommendations and sales trends. AB InBev now generates 63% of its revenue through B2B digital platforms, with BEES experiencing a remarkable 60% growth from 2021 to 2022.
Digital strategies also empower companies to scale efficiently, accommodating a growing customer base without the limitations of traditional brick-and-mortar operations. Casey’s Distributing achieved an eightfold increase in productivity by transitioning from manual order processes to a SaaS-based e-commerce platform integrated with inventory management software.
Platforms that automate manual processes and connect diverse systems reduce both error rates and costs. They make it possible to harness the power of data and analytics to generate invaluable insights that can be used to optimize pricing, marketing programs, inventory, and supply management. These platforms help companies understand where they should invest in growth and how to scale the business.
E-commerce strategies are critical for B2B companies to extend into new market segments and compete with established players, new market entrants and potential disrupters. To engage smaller businesses with simpler needs than its larger customers, Grainger operates Zoro.com alongside its flagship website. The expanded product assortment has been a hit, generating $1 billion in annual revenue.
Over time, as digital strategies evolve and capabilities mature, companies may consider refining their business models or launching entirely new value streams. The right platform allows companies to test and learn about new products and services. For instance, Schneider Electric’s Exchange created a new marketplace of data services that foster collaboration and networking within the energy sector.
A common theme for successful e-commerce strategies is data monetization. Marketplace and platform models featuring different vendors offering their products produce data and insights that customers value. They also create a market for selling advertising space. B2B businesses, especially distribution companies and others that serve as middlemen, can follow the lead of Walmart, Target, Kroger and others that have built large businesses by selling ads and customer data directly to advertisers.
Asking the Right Questions
The journey to breakthrough results starts with asking the right questions to inform digital and e-commerce strategies:
- What information or tools would enrich and accelerate the customer journey?
- Which interactions and touchpoints can we personalize to encourage upselling?
- What data would be valuable for customers? What’s the best way to make it accessible and actionable?
- Which existing processes would benefit from automation and integration?
- How can e-commerce enable us to fully capture and leverage customer data?
- How can we expand the value exchange with the customer base? What’s the best place to start?
- Where can we find new revenue streams in a revamped digital ecosystem?
Seven Steps for Developing a Successful Digital Growth Strategy
To build successful e-commerce and digital strategies, companies should consider the following key steps:
1. Define the Vision and Goals
Envision your business aspirations and how they relate to what customers want. Determine where your e-commerce and digital strategy can deliver maximum value in meeting customer needs. Clearly identify, document and gain organizational consensus on the top areas of opportunity across the customer journey.
2. Assess Customer Readiness for Change
Proactively engage customers to determine their preferences for digital engagement versus traditional business approaches. Communicate clearly what’s changing and how they will benefit from a more digital experience. Take advantage of the inherent stickiness of manufacturing and distribution to gradually evolve customer mindsets toward digital ecosystems and, ultimately, strengthen existing relationships.
3. Prepare the Organization
Assess organizational structures, processes and resources to determine whether they need to be enhanced or adjusted to execute against the new digital ambitions. Engage business units and organizational capabilities that will be affected by the new strategy to ensure they understand the goals and their role in it.
4. Prioritize Change Management Needs
Craft a change management approach that addresses fears of job security and change fatigue, especially among essential customer-facing staff. Consider refining incentives and shifting cultural attitudes to foster innovative thinking and behaviors. Invest in training and upskilling and equip the workforce with the right tools so they can thrive as their everyday work and your business operations get more digital.
5. Create a Roadmap and Business Case
Develop a detailed plan outlining how your digital strategy will unlock value over time, with key milestones and quantifiable targets. Engage stakeholders to gain buy-in based on formal business cases and roadmaps, which is especially important for low-margin businesses unaccustomed to transformational change.
6. Choose the Right Platforms and Technologies
Evaluate and select e-commerce and digital platforms that best align with your business objectives. Integrate the back-office systems and data repositories necessary to build the foundation for high-impact customer-facing solutions.
7. Continuously Monitor and Adjust
With the roadmap and business case as the baseline, devise and track meaningful customer, financial and operational metrics to monitor the success of your digital strategy. Adapt your strategy accordingly while keeping the long-term vision in mind. Plan to iterate continuously as digital transformation is more an ongoing journey than a single destination.
The prospect of digital transformation can seem daunting, to even the most forward-looking leaders. But robust e-commerce and digital strategies have become essential in B2B manufacturing and distribution businesses. And the lessons learned from those firms that have successfully transformed confirm the compelling returns – in the form of broader reach, increased efficiency, high-value customer insights, stronger relationships, and stronger competitive capabilities.
Prophet has been recognized by Forrester as a notable Digital Transformation in The Digital Transformation Services Landscape, Q3 2023. Check out the report here and learn how Prophet can help drive performance gains through effective digital strategies.