Industrial Distribution was able to speak with Texas A&M’s Dr. Barry Lawrence, Program Director and Professor of the Industrial Distribution Program at the university. Dr. Lawrence outlines why he feels higher education is important in the lives of working professionals, and how the landscape of the industry is forcing this issue.
ID: What kinds of continuing education are important for the working professional in industrial distribution?
Dr. Lawrence: When you talk about entry level personnel, much like the rest of the professional world: they need a college degree with some form of specialization relevant to the field. A number of people get college degrees and go into the field and self-educate their self from there, but that’s doing it the hard way. The industry needs more people who actually bring that knowledge into the field. For the sales professional, what we at TAMU believe is that they need to have the college degree, and a little bit of experience, certainly some product background training and service training. It’s all internal from there: more and more applied supply chain knowledge through continuing education programs and things of that nature. Ultimately when you head into management, we believe that a master’s degree taught at an applied level - meaning that it’s not a theoretical masters but it’s actually a masters that uses constructs and best practices - that allows the students to actually interactively engage in the process of comparing their environment with the suggested cases.
ID: Why should these individuals, already comfortable with their careers, feel the need to attain more education?
Dr. Lawrence: I had a discussion with someone who had been to a university and the university didn’t have anything to offer them. Subsequently, I saw them in a conversation with one of the companies that works very closely with us and this person asked that company why they work with our university as extensively as they did. This response from that company’s leader was “at company x, we don’t think we know everything.” Now, it’s amusing but it carries a lot of meat: if I am working in a particular industry vertical I have a deep knowledge of my company, I obviously have a great deal of intelligence to have risen to the point that I’m at. I have a very strong command and knowledge of what my competition is capable of doing – therefore the only thing I can do is incrementally innovate on my competition or on others within my vertical based upon my own level of intellectual capability.
When you engage in further education, especially nontraditional education, you move into a structured environment. What I mean by that is that there is a compendium of information in every class that’s supposed to be covered, we call it the curriculum. Many people think that in academics that it’s all about what’s being taught in the curriculum. In fact, in an applied environment, it’s about all of the aspects and significant areas of this particular discipline. Be it strategic management, sales and marketing, or whatever: there are many aspects to it that the average firm doesn’t get the chance to think about in an average day. The first step for a working professional is to get the complete, holistic understanding of the framework of what it is you do. I know that top executives might believe that they have that, but in reality most do not.
Once you’ve got the entire framework, now you need to know what the best practices are for that framework. Granted, you could look at the framework if you’re the top executive and you could say “I think I know the best practice here, here, here, and here.” If you get outside of your industry vertical, which would happen if you were in an academic environment, then you begin to see how other verticals have actually solved the problem or found best practices. It’s always disconcerting when I’m talking to a company and they say “how many HVAC companies do you have in this session?” The intent behind the question is that if there isn’t enough HVAC content it can’t be valuable to me. That is entirely the wrong position to take. The position should be “how many of the sharpest minds do you have?” This is because you already know what the HVAC people do: you know what they are doing and you know it in detail. You’ve been fighting them for however long you’ve been in your career, so you don’t need to learn from them. You need to learn from others. If somebody else is doing something that is considered to be a best practice there and you look at it as “I don’t think that it can be done in my channel,” you need to deconstruct that and ascertain exactly why that is. If somebody else within your channel figures out that the solution does work, they can take you apart. And we’ve seen it done again and again and again, so you need to get outside of your comfort zone, outside of your vertical. You need to be engaged in classes with students who come from other areas, who will be doing the same thing. In that environment, it causes the mind to grow and it introduces you to best practices that you haven’t considered and it lets you almost step away from your company, rise above it, and look down upon it: you see it in a new way.
I think a lot of people who’ve been through education when they were unprepared for it, typically as an undergraduate at a young age, don’t recognize that that type of knowledge is being transferred to them and may not be mature enough to take it on. But once you become an industry executive and that kind of information is delivered into your hands, you suddenly see things you never saw before.
I’ve just finished teaching a class on strategic management and even at the stage I’m at - as long as I’ve been doing this - I still find myself reflecting on the great thoughts from management strategists from around the world, thinking about how I can run my organization within the university better. There are so many things that come from engaging in a conversation with other industry verticals, with other students and with faculty members who are all reaching toward the same goal. If you think you can be a top successful executive without that type of introspection, without that type of understanding, and just do it by the seat of your pants – well maybe you can. There are still the occasional Steve Jobses out there with a bachelor’s degree who do those sorts of things, but most individuals need more training, more specialization.
ID: So the importance of this in the distribution sector is competitive advantage and a new perspective?
Dr. Lawrence: Yes. What we’re witnessing now is the very, very rapid commoditization of products and services. What happens is that products become commodities very quickly - it’s the American way. That’s the way we do things and that cycle is shortening and shortening all the time. Now for a distributor what does this mean? Well it means that you can’t just latch onto a product and say “there’s my competitive advantage.” You are going to have to wrap those products in services, and when you wrap them in services, you find that services are even more threatening. When the value to the customer is a commodity, the price for a service is zero. What you have to do is you have to bring together an extremely well though out value proposition that wraps the services around the product offering, blends the brand between the distributor and the manufacturer, and then add a sales force that is educated enough and capable enough to deliver that value proposition and control the marketplace for you. If you can’t do that, then you’re going to be playing a price war. And if you don’t think that cuts your profit, look around and ask how many of your competitors are playing price wars. Every distributor I talk to - and I talk to hundreds of distributors a year - when I ask what the competitive advantage of their competitors is, they say price. Then when I ask them what their competitive advantage is, they say our people. Then when I ask them if I were to ask the same questions of their competitors, what would they say? They usually look at each other, start laughing, and say price. Nobody wants to play that game, and if you’re not going to play that game, then you have to play the value based game. The only way you play the value based game is with extremely well designed value propositions based upon customer needs, based upon intense supply chain capabilities, based upon your services, based upon the suppliers product, branding, and a whole complex set of data. When you go into a conversation like this with a lot of distributors you can see the fears. You can see them sitting there thinking “my sales force can’t do that.” And the deeper fear behind that is “I don’t even know if I can do that.” So then what you’re seeing is that it’s going be a price war. Well there’s only one winner in a price war.
ID: And would you say that this is incredibly important in the onset of things like Amazon supply.com, which are just essentially going to try to bottom line every single product and ignore services?
Dr. Lawrence: Yes: they are the next big box. Sometimes they’re retailers, sometimes they’re dot coms, sometimes they’re just distributors that say “hey, we’re just going to strip away the services, going to ship you the product overnight. And we’re going to carry a hundred thousand different products, we’re going to go for the lowest levels of sales force expertise and customer problem solving.” Amazon is just setting itself up as the next big box and they’re a big box that can threaten other big boxes. They can threaten Home Depot, they can threaten Grainger, and they can threaten Motion: they can do that. The odds that they are going to be successful doing so are probably not that good, but they’ll take a piece of the market. As far as Amazon is concerned, they are going to play across all the markets. They don’t need to be the leading power transmission distributor, they don’t need to be the leading electrical distributor, they don’t need to be leading general supplier: all they need is a small percentage of each and that’s what they’ll do. But then, once they figure out which of those markets the distributors are weakest in, the ones where the value propositions are not strong, the places where the customers no longer value salespeople, they only value quick delivery and broad selection – then they’ll take it to the next level.
Point blank, the biggest threat facing the distribution community now is the lack of training for the sales force in areas other than products. When the distributor cannot differentiate themselves with their sales force, when the customer no longer looks at the distributor’s sales force as a value-add in solving their problems: the modern distributor is dead. This is the most serious threat to the distribution community and we have got to start training our sales force.