Why Distributors Are Slow to Invest in Technology

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By Dirk Beveridge

As the effects of the pandemic rippled across wholesale distribution, it was obvious technology was going to be a fault line – the divider between those who would come out ahead and those who fall behind.

Unfortunately, despite the urgent need to adopt technology, I still hear all the time from distributors that they don’t want to do so until they need to. And even then, many are reluctant.

The industry perpetuates this false narrative that technology is too hard, too expensive and too difficult to maintain with limited manpower. The sheer concept of implementing new tools, even if they benefit the company, seems too daunting to consider.

These thoughts are holding distributors back. Yet we’ve come to believe them simply because we hear them so often.

Whatever reason you have for waiting to invest in technology, it’s time to obliterate it. Throw it out.

The need for digital transformation in distribution is critical. We need to bring appropriate technology into our businesses to remain sustainable, relevant and profitable – to survive and thrive. The past several years of disruption have shown the importance of being agile, and those businesses using technology to aid their efforts have come out on top.

One leader I spoke with said: “The pace of technology continues to accelerate. Companies can choose to try and keep up, or they will be left behind. Those left behind will have lower profits and attract lower talent, perpetuating a self-fulfilling downward spiral.”

It’s a harsh reality, but it’s the truth. There’s a sense of urgency to adopt new technology, to stay ahead of the curve. It all comes down to mindset.

The 4 Technology Mindsets

The Boston Consulting Group found that digital transformation among businesses had been discretionary and self-paced before the pandemic. But the pandemic transformed digital adoption from an “if we have to, we will” into an urgent need. We tested BCG’s findings by asking distributors for their take, and 86% of the distributors we surveyed with agreed.

Acting on this need is not about finances nor time. It’s about mindset and strategy. Whatever the size of your company, you have the means to bring the technology you need into your business. Costs have fallen, and service providers have developed implementation and maintenance plans that enable even the smallest of companies to implement leading-edge technology.

Over years of working and speaking with distributors, I’ve identified four mindsets about technology investments. Your mindset determines how you will approach digital transformation. It also dictates our individual and collective desire to obliterate this false narrative that technology is too hard, costly or complex for distributors.

Complacent Thinkers: When a company is reluctant to invest, it’s often because they’re complacent and accepting of the status quo. It’s a mindset of “What isn’t broken doesn’t need to be fixed.” We sell product, and we’re profitable. Our customers seem to keep coming back, so let’s keep everything as it is. These short-term thinkers are averse to risk.
Defensive Investors: Many distributors invest in technology reactively. The purpose of investing in technology for these businesses is simply to keep up. They’ll react when necessary to be as good as they need to – today.
Strategic Adopters: These distributors are offensive investors. They’re strategic. They understand the need to evolve their business model. They want to understand how they are going to evolve their culture to account for changing demographics and their future employees, customers and suppliers. These folks are always looking for new opportunities, constantly focused on the ever-changing expectations from all their relationships.
The Foreverness Group: I define foreverness as someone who is focused on continuing their business…forever. These distributors are setting the stage for the next generation – and the next – right now. As a result, they are building and executing a technology strategy that “future proofs” their business.

It’s easy to rationalize about finances and use the cost or fear of the unknown as a reason not to invest. But if you pause and think critically, you gain a new perspective on the true cost, both financially and operationally, of not embracing the technology you need today to drive market leadership, relevance, profitability and sustainability.

Regardless of where your company is on this journey, moving forward takes the courage to act, commitment to your vision and the willingness to take on some risk. To begin, read my open letter to distributors Shift to Tomorrow, which is a manifesto of sorts encouraging you to own your future.

Next, consider these three areas of focus and initial questions:

Vision: What are the first steps we can take to create a vision for how technology will serve our business in the digital age?
Business Model: How will technology change the role we will play in the supply chain?
Customer Experience: What technologies will change the customer buying experience and requirements?

These three questions are a great start to begin assessing your mindset and readiness to make the necessary moves for your technology-enabled future.

Dirk Beveridge is the founder of UNleashWD, Executive Producer at We Supply America, President of the Beveridge Consulting Group and Champion for the noble calling of distribution for over 36 years. His one-of-a-kind perspective on the future of wholesale distribution has guided his mission to advance the growth, relevance and transformation of the industry, helping distributors thrive.

Learn more about Dirk by visiting WeSupplyAmerica.net.