My Retort: Disintermediation Will Never Happen Unless You Let It by Bill Attardi - Energy Watch News


My Retort: Disintermediation Will Never Happen Unless You Let It by Bill Attardi

I still have a full head of hair, maybe it’s because I’m a consultant and have never been in the distribution business. Tough business, I agree, with some very savvy professionals, some with hair and some very bald. Tough businesses can do that to you……

Talk about losing your hair……In 1998, Kodak had 170,000 employees and sold 85% of all photo paper worldwide. They really knew the photo paper business. Within just a few years after that, their business model all but disappeared, and they went bankrupt. What happened to Kodak? Did you ever think in 1998 that 3 years later you would never take pictures on paper film again? This will happen in a lot of industries in the next 5-10 years and most, like Kodak, will not see it coming. Software alone will dramatically disrupt most traditional industries as we know them today in that same time period. Two rather striking examples: Uber is no more than just a software / app tool. They don’t own any cars, but are now the biggest taxi company in the world. AirBnB is now the biggest hotel company in the world, although they don’t own any properties — just software. It’s clear, any business model designed for success in the 20th century is doomed for failure in the 21st century.

I always believed that if you don’t know what you are doing, you are not going to be very good at it. The lighting companies know about lighting and have been very good at it for centuries. But lighting is not just about light anymore. I keep going back to the cell phone in your pocket that you are lost without when you forget to put it there. You lived most of your life without it, certainly if you are my age, so why are you so dependent upon it now. I believe because your personal cell phone is not just about long distance communications anymore. If the phone companies had figured that out, then maybe a computer nerd would not have innovated the mobile entertainment center in your pocket that you cannot live without. When every light source will be replaced by SSL, and lighting could become the core connector to every device we own, your business needs to know what you are doing. That to me is a new business model… unless you create a disruptive business model that matches the disruptive innovations coming at an unprecedented rate, the end is near. (I explain more on this in my article in Electrical Wholesaling: http://ewweb.com/commentary/speaking-out-12-tips-reinventing-your-lighting-business

Chris Brown is concerned about disintermediation and rightly so. If you are in the distribution business, ask yourself – what’s in it for me in the future. What’s your vision? Opportunity or disintermediation? In any changing industry, the big question is: can you or do you want to reposition your company to take advantage of this change. The pain comes when you know you must change just to survive and still don’t. Manufacturers are repositioning their traditional businesses, just look around you (Acuity, Apple, Eaton, Cisco, GE, Gooee, Opple, Osram, Philips, on and on) and they expect to work with traditional Electrical Distributors and traditional Lighting Distributors that change and reach new levels of high technical competences and provide new services / solutions to serve their customers. Remember, it’s their customers too. One threat and it’s just one threat is disintermediation and my true belief is that it can only happen if you let it. We have talked about this for years…… manufacturers are going direct……what a nightmare! There are other threats to your business……do you know what they are? Figure it out but that’s the question. The answer is always the same: focus on your strengths, get it right, add to the process. Bring value to the proposition or someone else will. My past experience is that manufacturers go direct because their channel of distribution stop being relevant and stop serving the needs of the mutual customer. It’s not their choice. They are not in the distribution business, they have other fish to fry and they know they will never do it better than you.

But you have to get better, much better. It’s time to prepare to win in the lighting industry. Allow me to repeat myself, the one over-riding, most infectious opportunity we have ever seen in the lighting industry is that every single light source now burning will be replaced by a better mouse trap. If that has happened at any time in our history, please let me know as I have only been at it for 50 years. If you are in the traditional lighting business, you most likely sold what’s out there. Now it’s time for you to prepare to replace them all with intelligent lighting and get closer to your customers than ever before. That spells OPPORTUNITY!

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5 comments on “My Retort: Disintermediation Will Never Happen Unless You Let It by Bill Attardi

  1. robert quintal says:

    Bill,

    You nailed it, your best yet. I’m not a “told you so” kind of guy, I let results do the talking. My now 4 year old unique rep. agency that caters to the ESCO channel was slammed, blocked and tackled in the initial presentation of our plan to manufacturers and distributors for all the very reasons that they need us now. Some get it, many don’t. Oh well, can’t save them all.

    Chicken Little best be staying up all hours to retort this one!

    Rob

  2. BillAttardi says:

    Right on Rob………..
    Chicken Little is a Jets fan so he’s used to losing……..
    Really we are all very much in agreement.
    The supply chain has to be relevant and re-position their businesses to take advantage of this opportunity.
    Thanks for your comments,
    Bill

  3. Bill,
    This is well stated. What you propose is necessary, but not sufficient. Maybe EDs have to stop worrying about what they distribute and start thinking about the values they bring to customers. If those values don’t warrant the added profit built into the distribution chain, then they are doomed in the medium run irrespective of whether or not they understand the connection of lighting and IoT communication. In my opinion there will be room for distributive (and the added costs it entails),because complexity creates opportunity for the smart and swift.
    The ED of the future must hone their skills to those that produce the most value. Those skills will include detailed product knowledge, high levels of flexibility and the courage to readily abandon those things that don’t work and find new ideas that will.
    Large OEMs will never properly service smaller customers…it just costs too much money to do it. Large OEMs will never be good at putting together packages that invole other OEMs products. OEMs will never have the closeness of relationship that EDs have.
    So it is uyp to the modern ED to focus on being ahead of the technology curve to always have what the customer will need tomorrow and build a knowledge base and customers will comfortably rely on.
    In the end, it doesn’t much matter what you distribute, as long as the customers keep coming back.

  4. David Gordon says:

    Bill – at the recent AD meeting I had some questions ask similar questions, especially as it relates to IIoT. Essentially “where do I fit” and “how can I add value other than selling the hardware?” And when you do a Google search for IIoT providers (VARs, software, etc) there are lots of companies we’ve never heard of. Essentially we’re asking, what business models could distributors consider? The challenge is that only the larger companies (and this could be $100M plus based upon thought process) can afford the investments.

    Same in lighting. Some distributors are starting to invest in lighting control engineers so they can bring value to their customers and yes, to their manufacturers (they will gain advantages from this audience.)

    The channel will lose revenue as more end-users seek products. The Internet enables them to search (and we just saw a Dodge report that stated 62% of contractors get information from manufacturer sites often / very often; from search engines (Google) 59% of the time either often or very often) and we’ve seen and conducted surveys that engineers / specifiers are 80-90%. If the channel, inclusive of contractors, don’t sell, then products will be hardware and could come from outside the electrical / lighting channel (could come from other distribution).

    The key will be distribution management having a vision for their business and adapting their model. Some will, some won’t, some don’t have a need as their vision is to remain local and be a high performing resource for their customers. There is no wrong answer.

    As an industry we’ll eventually have to become comfortable with answering the question “why you” and accept that some customers, and manufacturers, will choose otherwise for their reasons. Learn those reasons and identify “your” profitable niche.

  5. Jay Goodman says:

    Bill,

    I see it less as a technology shift and more as how to create value and justify a premium as the technology and markets shift. I have to give Bart an “attaboy” on this one. There will be lots of ways for distribution to make money and stay relevant, if they find the areas of service and supply where they can remain relevant.

    As I understand, the vast majority of the traditional lighting industry is still specified new build, and large renovation projects. I really don’t see disintermediation coming there. If anything I think the lighting industry will be beneficiary of the “trojan horse” concept, where so much of the technology that will be built into the “lighting real-estate” will still get specified, bidd and bought via the traditional lighting channel and the lighting OEMs.

    For my esteemed friend Rob, I credit him for staying the course and serving the retrofit market as he has but…. as a recovering retrofit guy myself, it’s a distinctively different market and channel dynamic than the traditional lighting industry. Rob, as I see it, to a bona fide lighting OEM, the retrofit market is the extra gravy on that roast beef and sharp provolone sandwich.

    As for distribution’s role, sure traditional replacement lamps are a waning business, but there are still tens of millions of T12 lamps out there!.. there will be plenty of legacy lamp and ballast replacements, and there will certainly be LED driver and LED fixture replacement demand coming , unless everyone believes LEDs will last forever. If you do, just come to my house, I’ve gotten maybe 2 years out of a wide variety of different manufacturers product. And look the proliferation of LED tubes.. from what I see, they last no longer than fluorescent lamps too.

    Remaining relevant is the key in my opinion. Based on how huge the market is, and how fragmented it is, it can’t be served by an OEM directly in any economically viable manner. Distribution has the customers, just find out what they need.

    Onward,

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