The best innovators in distribution “lean into the forces of change and turn them into sources of opportunity,” a leader in a new survey of 100+ industrial distributors says.
Three-quarters of the executives interviewed rated innovation efforts as a Top 3 priority, and two-thirds said it’s rising in importance, Kevin Reid-Morris (pictured above), CEO of ReadMore Ventures, said in Denver Sept. 12 during SHIFT, a conference staged by Modern Distribution Management. MDM also sponsored the survey. That publication recently was acquired by the National Association of Wholesaler-Distributors.
Reid-Morris said companies good at innovation spend about 70% of their innovation budget on initiatives to improve the core business, another 20% to explore adjacent spaces, and 10% on ventures that would transform the company.
The returns on investment, however, were reversed: 10% from core business improvements, 20% from adjacent spaces, and 70% from transformational projects.
Why do all this? Eighty-nine percent of survey respondents said they did innovation work to capture market share, 79% to distinguish themselves from competitors, 63% to capitalize on a consumer need, 51% to embrace new technology, 48% to grow their company’s valuation, and 42% to avoid being disrupted.
What was accomplished? Looking at innovations launched within the past five years, 46% of respondents said the changes boosted revenue by 10%, while 31% saw revenue gains of 10% to 20%. Another 8% reported that revenue went up 20% to 40%, and 7% of respondents said they gained over 40%. In all, 83% of respondents said the revenue increases met or exceeded their expectations.
“Practice makes profit,” Reid-Morris stressed. Distributors surveyed that made at least five attempts to innovate their business model were three times more likely to be in the better half of all distributors doing innovations. Their results tended to generate revenues above 10%. “Just the very act of rolling up your sleeves and starting on this work tends to get you more success when you’re in your third or fifth attempts,” Reid-Morris said.
Setting aside money for innovation work also matters. Companies that allocated specific funding to innovation were twice as likely to see revenue gains.
