Buttonwood Technology Group, L.L.C.

After three days in Atlanta last week with some of the best and brightest our industry has to offer a few thoughts occurred to me.  I’d like to share them with you in the hope that two things will happen.  First, I hope we will continue a dialog of learning and sharing from each other and second, I want us to grow as an industry and one of the ways we’ll grow is to become better informed about the challenges ahead.

The three things I learned at EME Atlanta ’09 are:
• Product Safety Matters,
• David Always Beats Goliath and
• Brownies make you fat!

Product Safety and Efficiency Matter

The industry as we know it is at an inflection point. The current business model has 18 to 24 months left.  Distributors will need to add product safety and efficiency to their sales strategy to continue to grow and succeed.

Today we compete on four factors:  Price, Service, Relationship and History.  A distributor says I’ll get you a deal, I’ll deliver on time and we’ll have fun working on this project because we’ve been doing this for together for years!   

The coming product safety revolution will change all that.  Fast!  It costs a supplier at least $250,000 per year to run a product safety program. Most (i.e. 95%) suppliers in our industry do less than five million per year in sales.   The economics get complicated if a business with a top line of three million has to suddenly add 10% of that as an ongoing cost.  The supplier playing field will change quickly and dramatically when the smaller supplier can no longer undercut the larger player by shifting business to a factory or agent with unknown safety certifications.

The efficiency revolution is already changing the competitive landscape.  Suppliers that choose to invest in the systems that can leverage  technology are winning business that costs less to process.  Every day I see distributors shift business from a supplier that is ignoring technology towards a supplier that is focusing on technology.  The shift in order flow is subtle, it happens bit by bit and it’s very hard to reverse once the electronic connection between the supplier and distributor is working successfully.

Tomorrow will add two new elements to the competitive landscape: safety and efficiency.    Safety requires working with suppliers who can demonstrate with legally binding documentation that their products won’t harm people, don’t damage the planet and aren’t made by children. Efficiency requires that our industry process an order without the usual 10 phone calls, three faxes and 5 days of haggling, forgetting and changing our minds. Look at the toy business today and that’s our industry in 5 years.

Below are two websites with which everyone should become familiar. They can help you better understand how the new rules of the game will affect your business.  If you want to talk about efficiency let me know. I’ll show you how Buttonwood is working to drive costs out of the transaction while giving your buyer more choice, control and flexibility.

http://www.qcalliance.org/news.html

http://www.cpsc.gov/ABOUT/Cpsia/cpsia.HTML#whatsnew

David Always Beats Goliath

Smaller distributors continue to win business. 

In the many discussion I had with more than 40 distributors over three days one thing stood out far and above all others.   Malcom Gladwell explains it best in an article that I’ve linked to below.  Winners operate in real time, don’t follow the rules and ignore tradition. 

It was a tremendous privilege to spend three days talking with men and women who have created successful business.  Since Buttonwood is a transformative technology product the conversation quickly turns to strategy whenever I meet a new distributor.  The larger distributors usually respond with genuine interest but they have committees of decision makers that need months of study and analysis to come to a decision.  A smaller distributors can take a risk, make the decision and execute within weeks.  That ability to ignore the rules and move more quickly give the smaller business a tremendous advantage over the larger one.

The ongoing challenge for all business, not just distributors,  is how to keep that fast moving insurgent mentality alive in a successful growing business.  The following article,  from this week’s New Yorker, describes how the rebels can beat the establishment.

Here’s the money quote:

“Insurgents work harder than Goliath. But their other advantage is that they will do what is “socially horrifying”—they will challenge the conventions about how battles are supposed to be fought.”

Here’s the article – it’s a fun read.

http://www.newyorker.com/reporting/2009/05/11/090511fa_fact_gladwell?currentPage=all

Sitting Around For Three Days Eating Brownies Makes You Fat

I came home five pounds heavier.  Our wellness is the most important and precious thing we have.  It’s too easy to choose the high-sugar high-calorie snacks when the pressure is on but the effects of three days of brownies and cookies are now going to take me weeks of running on that annoying treadmill to undo.

There’s a lesson here: making the easy choices today leads to more work later.  This lesson can be applied to the choice to sell products that are certified as safe, the choice to invest in the technology to drive efficiency and the choice to keep the entrepreneurial spirit alive in our growing successful business.   All three of these decisions take a little extra effort up front but the rewards of choosing safety, efficiency and innovation will make us more successful and more competitive in the long run.

Thank you all for sharing your hope and dreams with me over three days.  It remains a privilege to provide technology services to such a smart, talented and innovative group of professionals.  Good luck and have a great summer.