Buttonwood Technology Group, L.L.C.

Here’s an interesting article on productivity which suggests that your Blackberry is not making you more efficient.

The money quote:

“In addition, a lot of the supposed BlackBerry benefit is destroyed by four factors. First, working on a BlackBerry is less efficient than working on a computer (it takes more time to get the same stuff done), so some of your benefit (time waiting in line) is wasted in lower productivity. Second, checking your email constantly causes you to respond to emails and deal with issues that you could have simply ignored had you waited until you got home or to your hotel (since questions or issues posed in email often resolve themselves if you simply wait a few hours). Third, having a BlackBerry causes you to spend more time on email than you need to, because you can. But people lobby their companies to pay for their BlackBerrys because they want them, and companies often agree because they think they’re getting a more efficient workforce. Fourth, the quality of work you do on a BlackBerry is lower than on a computer. For example, with a computer, you can answer a question by finding a specific data source and actually finding the answer; with a BlackBerry, you are more likely to give an unhelpful answer like “try looking at source X,” which you may have misidentified, and which is less helpful to the person asking the question.”

Of course we’re all about efficiency since what we do all day is try and make things more efficient for our customers here at Buttonwood so I’m thinking of ditching my Blackberry!

I hated school….school taught me that the definition of being wrong was not following rules. School taught me that you can’t do anything new – just do what someone else has already done. The better you could imitate the existing idea the more frequently you would be rewarded. Of course I only wanted to do something new…and so I was frequently punished!

I have a suspicion that our industry attracts a lot of people who like to create and who don’t like rules.  This fellow has some interesting insights into education and creativity that I hope you will all enjoy!

So..for the first time in a while we didn’t get a booth in Vegas (see previous post)

I was feeling a little at a loss about what I was going to do all day but somewhat incredibly I was actually busier than past years. I met with more people and worked on bigger more interesting deals that ever before. Here’s what I did…

I sent out an email to a bunch of people I wanted to talk to about 3 weeks before the show. Most of them replied and I set up a bunch of meetings. It was pretty casual for the most part, the coffee shop, a restaurant, a bar, some party that we were both going to…but the reality is that I had uninterrupted conversations with the people I wanted to talk to.

I often feel that standing in a trade show booth is one of the most boring and soul destroying activities on the planet. Most of the time one of three things happens…1) you stare at your booth mates wondering if anyone is going to stop and visit the booth 2) people visit who have no intention of remembering what we told them (the “just scan me” crowd) or 3) people come and try and sell you their stuff. Occasionally you have a good conversation with someone but I’d say from past experience you get around 5 of those per day. 5 good chats in a day is not terrible but the big question is how do you increase that number and get rid of all the other nonsense.

So I decided to do it differently this year and it worked better…but I still think we haven’t found the right solutions and that there has to be a better way to do trade shows.

The traditional trade show format make sense if your going to have a huge booth and a large staff managing the booth. That way you can actually get EVERYONE who comes to the show to stop by the booth and engage with your company. When you are smaller you don’t really have the resources (we’re talking 100K+ to do it right) to connect with thousands of people.

There has to be a better model for the smaller company to engage people at a trade show. Maybe something like setting appointments in some sort of meeting room on the floor. That way each person who comes to the “booth” would be somewhat qualified in advance, committed to listening to the sales pitch and feel like they got something out of the experience. If anyone has more thoughts on this topic I’d love to hear them…we’re definitely looking for better ways to get our message across without acting like the human version of SPAM.

I had a fascinating experience this morning.  I was reading an article in the NY Post on a toy made by Fisher-Price that the New York Public Research Interest Group has suggested is unsafe.  Apparently it contains bromine, a fire retardant that can affect the reproductive system and cause birth defects, as well as mercury, which affects the organs and nervous system. Nice!!

I look over and the toy is sitting beside my six-month old son…I get up and we say good-bye to the Laugh & Learn™ Learning Puppy™ which I’m now calling mutant zombie puppy.

So when I get to work I pick up the phone and call Fisher-Price.  Their consumer relations person (who would not give her name) read me a statement to the effect that Fisher-Price believes that the toy to be in compliance with the current safety standards. However they are no longer selling it on their online store….something’s fishy at Fisher-Price!!

The website Healthstuff.org published the test results on their website and the NYPIRG included the toy in their Trouble in Toyland report. …clearly it’s not a happy day for the folks over at Fisher Price.

The lesson here is that we each to have a better plan for this type of situation that Fisher-Price did today.  What happens when The Ecology Center decided to focus on a promotional product?  What if your product shows up on one of their lists?  Each company in our industry needs to know what to say when some organization calls one of our products unsafe.

I tripped over this issue this morning and I’m still not sure what to think. I know I’m going home to take a hard look at all the Fisher Price stuff that litters my living room and the next time I buy something it’s probable not going to be from Fisher-Price.

It’s too bad since they make nice stuff and I remember some Fisher Price toys fondly from my own childhood.  The good news is that the kid is very interested in his toes right now so he’s not missing the Mutant Zombie Puppy.

So….it’s almost the end of the year.  If you’re like me you’ve watched your 401(k) drop by half; you’ve had a rough year hitting your numbers and you’re thinking hard about where to go next with your business. 

I’ve written a few ideas which I hope you’ll find both helpful and thought provoking as you consider how to evolve your business over coming months.   I’ll be in Vegas all week for the show.  If you’d like to find some time to get together for an hour to discuss strategy and how Buttonwood can help your business please email or call me and we’ll figure something out. We have a hotel suite in the Mandalay Bay which is great for meetings or we can grab a quick bite or drink somewhere if that works better.

Our industry is at a fascinating crossroads.  For so long we’ve depended on building relationships and lowering prices to drive business. Today, in our era of rapid globalization, relationships are less important and price can change every day.  We need to recognize that our customer’s needs are evolving and explore how we adjust our business model to profit from the opportunities these changes present.

Going forward our industry will mature into two clearly defined markets.  These two markets will have distinct requirements and offer different opportunities.

Two Markets Emerging in the Promotional Products Industry

Stapleization

Staples is now the largest distributor in the industry.  If we look at how the office product giant approaches selling office products we get a very good idea of how they are going to sell promotional products.   The Staples rep visits a company and sells them a buying process that uses an online solution with sophisticated integration, reporting and customization capabilities. This buying process replaces the 15 to 20 distributors that are currently servicing a company with one consolidated buying solution. The relationship is maintained using technology and efficiency so the salesperson can spend more time looking for new business. This new model enables rapid and efficient growth.  

4Imprintization

4imprint is the largest of a new breed of distributor that services the small business and consumer markets.  Instead of a person and a catalog maintaining the relationship the buyer is acquired with search engine optimization, online advertising, email and direct mail.  This new model requires considerable startup costs and scale to execute but the economic benefits become attractive since the cost of acquiring and maintaining a customer are dramatically reduced due to the shift from direct sales to internet and direct marketing.   

What Happens To The Traditional Distributor

In order to compete in the emerging promotional products industry the distributor salesperson must figure out how to sell more volume while spending less time and money doing so.  It’s not really very complicated.  The typical distributor salesperson maxes out at $1 million per year in volume while the average salesperson sells less than $500,000 per year.  If you decide that efficiency and process improvements don’t matter that much then the only way for a distributorship to grow is to add more salespeople.  The economics of adding salespeople who manage their own accounts creates more inefficiency as the business grows.  Imagine running a restaurant where each table has their own chef in the kitchen – now imagine that restaurant with 100 chefs and 100 tables… it would be mayhem!  That’s what we do today in our industry which is why distributors have trouble growing their business.  In case you think I’m talking about some crazy new management fad here I’m not, this economic management insight can be found in the Old Testament (Exodus 18:18-23).

Where do you go from here? 

Lower your operating and transaction costs

This is the most important thing you can do to help your business.  The sooner you start the better.   The average cost of completing a transaction is outrageously high and the ONLY way to grow efficiently is the find ways of lowering those costs. It’s not good business to make seven to ten phone calls on a $1800 order, it’s a recipe for low profits , or, these days , bankruptcy!   There are ways to lower your transaction costs. They require an investment in time, focus and money.  Solutions like Buttonwood need managers to drive efficiency and growth. The business model will only change if you put someone in charge of actually changing it and hold them accountable for the results.  To lower your transaction costs hire or promote someone within your organization immediately and put them in charge of efficiency.

Help your salespeople make more money

Now that you are lowering your transaction costs you can start to show your salespeople how they can make more money since they won’t be spending so much time on order management.   Don’t just cut their commissions and hope they sell more. That irritates them and makes them look for a new job.  Sit with your accountant and develop a financial model that rewards your sales force for increasing business using this more efficient model.  This means higher commissions for choosing to use efficient technology to win new business or using a preferred supplier or beating sales targets.  You need to show them that while they will earn a lower commission they will MAKE MORE MONEY when they sell $3 to $5 million with an efficient technology based solution then they will selling $500,000 managing every order with the phone and fax.

Distributors consolidate your spend with fewer suppliers

Another part of lowering your transaction costs is dramatically reducing the number of suppliers you do business with. How can you expect a supplier to care about you when you give them $20,000 per year in business and call them 10 times on every order? That’s a hard way for anyone to make money!  No matter how big you are you’re never going to be able to get more efficient if you spread your business over 500 suppliers and make a bunch of phone calls every time you place an order. Choose 10 suppliers (seriously I mean TEN!) that you want to develop key relationships with and figure out how to get much more connected with those 10 suppliers. Once you get the first 10 figured out you can add more as your business grows. 

Now that you have decided to become really important to 10 suppliers you get efficient by doing the following three things. 

1) Demand awesome service by establishing written service level agreements that clearly lay out your expectations and establish policies and procedures that you both agree on. 

2) Create a bulletproof technology pipeline between your two businesses that means that you know where EVERY ORDER IS AT ALL TIMES. 

3) Expect a dramatically different pricing relationship since you’re no longer calling them 10 times on every order. Efficiency should be reflected and rewarded in your pricing and service and should clearly set you apart from your less efficient competition.  Now you can drive more profitable business to that supplier and you, your salesperson and your supplier can make more money.

Suppliers reward distributors who spend money with you

Suppliers need to get picky.  Not every distributor is the same any more.  Distributors that choose to make themselves important to you by creating efficiency and driving business should be much more important than distributors who don’t. As a supplier you can reward your salespeople for growing efficient business and give your salespeople the tools and training to understand the value of efficiency to the business.  Once you have a pipeline, a service level agreement and a preferential pricing relationship you can become a true partner to your distributor and both of you can grow profitable and efficient business together.

The Cost of Doing Nothing

I like to tell people that our biggest competitor at Buttonwood is “do nothing”.  If you’re a distributor doing around $3 to $5 million per year with 10 salespeople you’re probably making money and thinking: why should I change?  If you’re planning on retiring in the next few years you probably don’t need to change anything. You won’t grow much but you’ll keep coasting along and you may even be able to sell your business for a few bucks when you’re ready to exit.

However, if you’re in it for the long haul and looking to grow ignoring this new reality I described above makes it difficult to grow your business profitably.  The only way to grow your business is to focus on profitable and sustainable growth.  Continuing to hire salespeople while ignoring the emerging industry business models is neither profitable not sustainable – It’s recipe for stagnation and obsolescence.

If you’re a business owner in the industry today you will need to do the following In order to move forward.  If you’re a salesperson then you should talk to your boss about how you can make more money by helping her do the following things:

1)      Define which parts of your business look like they can be Stapleized (process sales) and which parts of your business look like 4Imprintized (online sales) and clearly separate them. Better yet, pick one and get really good at it. Don’t try and be all things to all people – it’s not efficient.

2)      Lower your costs.  This means your transaction costs!  Put systems in place to let your salespeople sell more stuff.  Any investment in technology needs to answer the question: “How does this allow me and my sales force to sell more?”

3)      Show your salespeople how they will make more money by selling more stuff.  This means give them a smaller share of a bigger pie but make sure the pie gets bigger.

4)      Distributors drive your spend to fewer suppliers and make sure those suppliers reward you for your business with substantially better pricing and more efficient service.

5)      Suppliers reward distributors for the business and growth they commit to and actually succeed in giving you with substantially better pricing and efficient service.

There is tremendous opportunity in this industry for those who create efficiency and productivity gains.  When you can walk into an account and replace 15 distributor salespeople with one technology solution you can make money. When you can replace a catalog and a phone call with a postcard, a website and a few clicks you can make money.   If you keep doing what you’re doing and hope that relationship and price will win you business you’ll be ok for a while but eventually the businesses that chose to become more efficient will prevail. The history of business shows that efficiency always wins. Not always right away…. but eventually and inevitably efficiency always wins.    Thank goodness or we’d still be living in caves!
 
Have a blessed holiday whether it be religious or secular or festive or transformative or merely restful.  Best wishes for a happy new year and a prosperous and efficient future!