Last week, I listened attentively to the CEO and owner of a Californian automotive radiator distribution business, which he grew to a successful $230 million dollar company by implementing software technology. What caught my interest was the way he implemented software programming to replace a fragmented distribution business and use software technology to increase efficiencies in distribution and marketing. Paper based radiator catalogues were replaced with digital ones. Distribution points had been integrated with logistics to enhance shipment performance to the customers to deliver radiators within customer based parameters and demand. Product demand could be monitored to encourage different pricing models to the franchisees. These technological enhancements made this company the leader in the sale and distribution of car radiators.
Instead mid-sized “brick-and-mortar” companies should also analyze their business to see where technology can lead them to another level of growth and profitability. They should ask themselves whether their market is fragmented. Whether there are faster and accurate means to monitor their clients with technology to determine better pricing models, or more efficient logistics. How technology can manage warehousing and distribution. Technology is no longer the province of large companies. Now technology can be acquired inexpensively at different scales addressing the concerns of medium-sized companies, down to smaller firms.
Further, software technology companies should look at the “path not taken”. Radiators don’t sound sexy, but the CEO discovered that his competitors relied on old-fashioned books to find a radiator and a phone call to a distributor to get one. Consumers demanded quicker delivery of their radiators. Constantly, we are bombarded by “me too” companies creating derivative technologies related to social networking, search engines, coupons, medical management, etc. These startups believe that if they can follow the footsteps of Facebook or Google, they can achieve great riches. Instead many become “zombie” companies that desperately seek an exit strategy.
In one fell swoop, this Californian radiator company created a database that contained each part and description, linked the order to local demand and pricing, and integrated a highly efficient delivery and marketing system. Meanwhile, the competitors dragged their feet while this company ate their plate in the marketplace. The company also expanded its IT staff which constantly adds new applications for the company so that it has an edge over the competitors. How many radiator companies follow this program?
Meanwhile, many high-tech companies believe that technology is an end in itself. It is not. It is simply a tool for integrating information and being able to spit out comprehensive data and analysis. If one were to view it as such, it can be applied to many other industries. Unfortunately, many technologists have been groomed in Ivory towers, without understanding brick and mortar industries. Many of these technology companies would be better off finding individuals from older industries to find smokestack companies that have operations ripe for technological improvement. Failure to do so exposes a technology company from producing a redundant product line or a software product that improves substantially the operations of an older “brick-and-mortar” type company.
The recent movie, Internship, suggests that older managers do add value. Two middle-aged salesmen participate in a Google’s internship program. There were concerns that they were too old, a common conclusion by start-up technology companies. But these two interns added value because they understood established companies.
In the same context, the same CEO made the following comment– that also stood out in my mind about companies maintaining old school management techniques. In a previous article, I discussed the Kodak bankruptcy and incumbent management. Similarly, he found that hiring personnel with substantial experience did not improve the growth of his company. These experienced managers followed the same old procedures and distribution process in the decades old industry. To break away from tradition, he began to hire a younger staff with no direct business experience but fluent in technology. And that is when the company began to jump forward.
Again established mid-sized companies should re-evaluate their business process and marketing, and see how technology can improve their profit margins and pursue additional growth. They should not be concerned about implementing change, especially when change can lead to better margins. And software companies should be anxious to enter this market as the next growth opportunity.