Automation Listers :

My Disintermediation essay (Controls Intelligence March 2000) generated a lot of comments and kudos - thank you!

I have had many requests to review the same subject from the customer's point of view. As an end-user, a customer, should you stick with the channels you know? Or, start buying direct from the suppliers website?

This was published in Controls Intelligence April 2000. It's now on the web at :

http://www.jimpinto.com/writings/disintermediation2.html

Cheers :
jim
----------/
Jim Pinto
email: [email protected]
Web: www.jimpinto.com
San Diego, CA. USA
----------/

 

Jim,
(Therefore, the distributors will be left with single unit sales and the obvious choice of becoming a systems integrator themselves.) - From your article

Does this mean that my distributor will eventually become my competition? Actually, I believe it is already happening. I have found distributors selling direct to my customers at pricing equal or better than I (system integrator) can purchase them for. This is similar to automationdirect.com type of sales where the customer and the OEM are on par for pricing and discounts. We can weather this type of business because we sell a product that is comprised of service, experience, licensing, etc.

Now if the distributor actually becomes the system integrator, that is a different story. That could get ugly.


Kirk S. Hegwood
President
Signing for Hegwood Electric Service, Inc.

 

Kirk Hegwood writes, regarding Jim Pinto's article:
> Jim,
> (Therefore, the distributors will be left with single unit sales and the
> obvious choice of becoming a systems integrator themselves.) - From your
> article
>
> Does this mean that my distributor will eventually become my competition?
> Actually, I believe it is already happening. I have found distributors
> selling direct to my customers at pricing equal or better than I (system
> integrator) can purchase them for. This is similar to
> automationdirect.com
> type of sales where the customer and the OEM are on par for pricing and
> discounts. We can weather this type of business because we sell a product
> that is comprised of service, experience, licensing, etc.
>
> Now if the distributor actually becomes the system integrator, that is a
> different story. That could get ugly.

What else is a distributor to do?

Distributors have the following basic choices for strategic planning:

1. Plan for a distribution of assets and close. (This is NOT a joke...there are distributors who are so unprepared for what is happening in the
Industrial Automation field that they might as well close now, since they _will_ be closed soon.)

2. Sell to anyone, anywhere at the best price you can get.

3. Produce a value-added product that is not equipment or software.

This means looking at joining e-commerce buying organizations such as Industrial Vortex or IndustriaSolutions or electrobase, or any one of
several hundred more.

This means shelling out the $300K minimum required to produce your own eStore that works.

This means retraining salespeople and redirecting resources into High Probability prospecting.

This means doing whatever value added work you can get profitably paid to do in conjunction with just selling product. In other words, one of the biggest things a distributor can do to protect itself from the coming Great Flood is to become an engineering consultant and/or systems integrator too, and charge the customer first for designing the solution to the problem, and then providing the hardware and software to solve the problem, and then for installing and starting up the solution to the problem, and then taking a maintenance contract to make sure the problem stays solved.

Any distributor who hasn't reasoned this far by now should consider option 1 above.

Walt Boyes

---------------------------------------------------------------
Walt Boyes -- Director of New Business Development
Branom Instrument Co.-- P. O. Box 80307-- 5500 4th Ave. So.
Seattle, WA 98108-0307
Phone: 1-206-762-6050 ext. 310 -- Fax: 1-206-767-5669
http://www.branom.com -- http://www.branomstore.com
mailto:[email protected]
---------------------------------------------------------------

 

"Kirk S. Hegwood" <[email protected]> asks :


>(Therefore, the distributors will be left with single unit sales and the
>obvious choice of becoming a systems integrator themselves.) - From your
>article

Jim Pinto responds :

Yes, that is correct.
The conventional "distributor" is being "disintermediated" !

<Kirk>
>Does this mean that my distributor will eventually become my competition?

<Jim>
Yes - the smart distributor will become a systems integrator, and the not-so-smart will become extinct.

<Kirk>
>Now if the distributor actually becomes the system integrator, that is a
>different story. That could get ugly.

<jim>
The really smart distributors will find out how to collaborate, rather than compete. Collaboration means - focussing on different industry segments, developing purchasing alliances, offering "infomediary" services.

Good thread - others invited to join in.

Cheers:
jim
----------/
Jim Pinto
Tel : (858)279-8836 (direct)
email: [email protected]
Web: www.jimpinto.com
San Diego, CA. USA
----------/

 

Jim,

Some of my distributors are already smartening-up.
I have available CD's of parts cross-references,
safety product selection, the usual demo's, etc. In short, they are performing more information services.

What I don't understand is where they can
become a systems integrator. Often, in the past,
I've seen where a sales group will sell an end user on a particular brand, then they help that user by pulling in a recognized systems integrator.

Most of the sales folks I talk with, although they
have a wealth of knowledge on the lines that they sell and a little bit on their competition, I have not seen them actually in the past integrate systems. A distributor, to become the systems integrator and compete in the marketplace, must be able to jump that bridge.

What is that bridge? Acquisition of resources?
Partnering? Bear in mind that the only ones they
can draw from are those they need to compete with.

Anthony Kerstens P.Eng.

 

[email protected]
Anthony Kerstens <[email protected]> mentions :

>Some of my distributors are already smartening-up.
>I have available CD's of parts cross-references,
>safety product selection, the usual demo's, etc. In
>short, they are performing more information services.

Jim Pinto responds :

Yes, the good distributors are becoming "infomediaries" - which makes them valuable to Systems Integrators.

<Anthony >
>What I don't understand is where they can
>become a systems integrator. Often, in the past,
>I've seen where a sales group will sell an
>end user on a particular brand, then they help
>that user by pulling in a recognized systems integrator.

<jim>
Distributors have traditionally been Sales and Stocking. To "expand" and "protect" their business, they sometimes hire a system engineer or two, and start putting "panels" together -
and this escalates into systems integration. But, of course, this puts them into competition with their own SI customers.

As their "stocking distributor" business becomes disintermediated, they need to branch out into becoming "info-mediaries". My first Disintermediation article suggests things-to-do for a Distributor. Take a look at :

http://www.jimpinto.com/writings/disintermediation.html

Anthony continues :

>Most of the sales folks I talk with, although they
>have a wealth of knowledge on the lines that they sell
>and a little bit on their competition, I have not seen them
>actually in the past integrate systems.
>A distributor, to become the systems integrator and
>compete in the marketplace, must be able to
>jump that bridge.

<jim>

Yes indeed ! And few are able to do that sucessfully. It's probably easier for a sales company to jump into becoming a true "infomediary".

<Anthony>
>What is that bridge? Acquisition of resources?
>Partnering? Bear in mind that the only ones they
>can draw from are those they need to compete with.

<jim>
My belief is that the best "bridge" is partnering.
The smart distributors form "alliances" with several SIs, each specializing in different "vertical" products or markets - eg: HVAC, drive-systems, PLCs, SCADA, etc.

Good thread!
Sales Reps and Distributors invited to join in this
interesting and valuable discussion.

Cheers:
jim
----------/
Jim Pinto
Tel : (858)279-8836 (direct)
email: [email protected]
Web: www.jimpinto.com
San Diego, CA. USA
----------/

 

It's great to see this debate progressing from where Mr. Pinto left off, and I'm hoping to see some move toward a concept in the early part of a recent thread that ended up being about operating systems. Which is good. It's great. But, it's only half of my original intention.

The other half was the issue of product terminology standardization. I got an email from a fellow who's ongoing project is categorizing information in the field of motion control. This is an encouraging trend as the Net evolves into a world where significantly more types of content providers (eeeeuch, ugly word!) with ever-finer fields of vision, populate the landscape. Once upon a time, I even asked some of the eggheads at ARC about their ideas, and was soon afterward, able to read an Insight about RosettaNet. But, since then, it's been cold, as yesterday's lambchops.

Content, it seems, is king. With products available from everywhere at everyday low prices, the engineering component becomes salient. Reading articles and news items in Industrial Distribution magazine, you can smell the fear.

But, stocking distributors and manufacturers' representatives have different jobs, don't they?

 

Content is king? Yes, but perhaps that can be generalized further.

There is a programming axiom that the more user-friendly a piece of software is, the more it has going on behind the scenes. Certainly, all the favorite buzzword technologies are no exception. For example, Joe down the street decides he wants to take his car and soup it up. He investigates the options, evaluates what he wants versus what he can afford, and makes decisions. He can pick-up a gear or exotic lubricant, and evaluate the
engineering information presented in the literature, in the context that he needs it. However, he does not need to understand powder metallurgy or organic chemistry.

The consumer is the content provider. Engineering provides the tools. It only stands to reason that motivated individuals in the marketplace will
raise the bar and provide more bang for the buck that Joe down the street will evaluate and make decisions on. If you have a good product and are
confident in it to the point that you can successfully sell it, then I'd say that's the smell of Darwinism in the marketplace.

Anthony Kerstens P.Eng.