Staying ahead of the power curve

By : Jim Pinto,
San Diego, CA.

In the new economy, Internet communication has brought major changes to the way business is being done. Make sure that your business is staying ahead of the power-curve.

The original version of this article was published by
EECO Electrical Equipment Co. Sept. 2001

In the past, information flowed through intermediaries with closed access to sources of products, services and information. In the post-Internet world, intermediaries like real-estate agents, stockbrokers and travel agents are disappearing rapidly through “disintermediation”. The products, information and services they provided are now freely available at minimal cost - usually with customers connecting directly to the supplier.

In the industrial automation and controls business, the perspective is somewhat different. Standard products are used in relatively low quantities and with programming and modifications that demand expertise. Most industrial users have special requirements for a wide variety of different products and systems, needing significant amounts of application knowledge and experience.

The dawn of infomediaries

Manufacturers (or product suppliers) provide marketing (selection of customers and products), engineering (design knowledge and resources), manufacturing (component assembly into finished products) and inventory (availability).

Their sales channels are links with their customers - providing the coordination, selection, communication and exchange functions. It must be noted that this reference to “sales channels” includes not only independent Sales Reps and Distributors, but also people in larger organizations that do the sales and support functions. In many successful industrial businesses, external, independent sales channels replace direct employees when they prove to be more effective at lower cost.

In the new economy, the distributor sales channel provides applications engineering, facilitates availability of optimized solutions and develops customer relationships that make a significant difference in a complex business environment. The best industrial automation distributors are not merely intermediaries - they are “infomediaries.”

Sales in the Internet age

The emergence of the Internet has brought easy information dissemination (through the Web), effective email communications (directly between customer and supplier) and E-commerce (easy product selection and purchase).

This puts pressure on those who do nothing more than act as intermediaries - their functions simply disappear.

The prime targets of disintermediation are those distributors who still believe that their own core competency and number-one selling technique is: "I've got it in stock!" Today, it doesn't really matter on whose shelf the product resides; what really matters is making sure that the customer has access to the specific solutions they need within the expected timeframe, and making the transaction seamless

Winning sales channels in industrial automation are those distributors who deliver products at the right price and the right time. Price and delivery includes providing application-specific knowledge for trouble-free installation, painless logistics, systems design, service, calibration, maintenance and upgrade. Smart distributors provide consultative selling with a focus on applications engineering and systems design expertise. They offer the best solution for the customers’ application.

Leading-edge industrial distributors have already moved strongly towards knowledge and relationship management. They have developed creative programs that help them become an extension of the customer’s technical staff. They have found ways to add value to their customers' businesses through background knowledge, experience, engineering and design abilities. They use to their advantage the new technology that conventional distributors see as a threat. They share database files and knowledge with their suppliers and their customers, providing a close relationship to all partners in the relationship. That’s their competitive edge.

Pick a winner

During the past couple of years, large industrial-automation manufacturers who had invested in new Internet sales-channels have found that the knowledge and customer-relationships developed by their distributors were hard to replace - and so they have retreated. There are a few instances of success, but always when the products needed very little intermediation and pricing had already degraded to commodity status.

The well-organized high-tech distributor is most often the best sales channel in the industrial automation and controls markets, providing the highest value choice for customers and suppliers alike.

In the fast-changing environment of the new economy, business is tough! As an industrial automation OEM or end-user in the industrial automation market, make sure that your business picks the right supplier and distributor partnerships.

There is plenty of room at the top for good relationships - and for winners!

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Copyright 2000 : Jim Pinto, San Diego, CA, USA