“Distributors are cherry—picking the best aspects of e-commerce and the Internet and making it their own,” said Barbara Jorgensen, managing editor, Electronics Purchasing Strategies, in a recent blog. This is all about the use and sharing of data to deliver information that customers need to select and buy components when they need them. These digital services range from accessing online components catalogs and ordering parts online to conducting datasheet and parametric searches and sharing BOMs via e-dashboards.
Not all distributors have fully embraced the digital revolution, but they may not have a choice if they want to continue to grow their revenues and profitability, while continuing to meet changing customer requirements.
In a recent webinar, Robert Parker, group VP for IDC Manufacturing, Retail and Energy Insights, noted that “digital transformation is not just a technology trend but it is at the center of the business strategies across all industries.”
It’s also at its core a customer-centric business strategy, he added. Isn’t this the “prime directive” for the distribution industry to service their customers in any way they want to engage with them.
“For all businesses – B2B and B2C alike – improving performance going forward will require deepening these customer relationships and focusing on customer loyalty,” said Leslie Hand, VP, IDC Retail Insights, during the webinar presentation.
When discussing how companies are creating omni-experiences for customers, partners, and employees, Hand said “it has become clear that digital transformation pivots on changing the experience.”
IDC expects that 60 percent of B2B and 80 percent of B2C enterprises will revamp their “digital front doors – and customer engagement systems – to support 1,000 to 10,000 times more customers and customer touchpoints than they do today.” This will also translate into more personalized customer service.
IDC predicts that the “Innovation Stage” of what it calls the 3rd Platform – built on the technologies of mobile computing, cloud services, big data & analytics, and social networking – will accelerate over the next three to five years as enterprises commit to digital transformation (DX).
“The disruptive impact of digital transformation is about to be felt in every industry as enterprises ‘flip the switch’ and massively scale up their DX initiatives to secure a leadership role in the DX economy,” said Frank Gens , senior vice president and chief analyst at IDC, in a press release. “In the next two years, two-thirds of Global 2000 CEOs will put DX at the center of their growth and profitability strategies. By the end of this decade, IDC predicts that the percentage of enterprises with advanced DX strategies and implementations will more than double.”
Data will play a big role in this transformation. IDC said “success in the DX economy will depend on the ability to build robust ‘data pipelines’ that flow both in and out of the enterprise. By 2018, IDC predicts that the flow of external data into organizations with advanced DX strategies will increase by as much as a factor of five while high-end DX performers will increase their ‘data out’ by 500-fold or more.”
IDC also finds that industry cloud platform and community participation will become increasingly important to scale up digital supply chains and digital distribution channels by as much as 100- to 1000-fold. As a result, the market researcher expects more than 50 percent of large enterprises, and more than 80 percent of those with advanced DX strategies, will create and/or partner with cloud platforms to scale up their digital supply chains and distribution networks by 2018.
Here are 10 predictions from the IDC FutureScape for Worldwide Digital Transformation:
By the End of 2017, Two-Thirds of the CEOs of the G2000 Will Have Digital Transformation at the Center of Their Corporate Strategy
By 2017, 60% Companies with a DX Strategy Will Deem It Too Critical for Any One Functional Area and Create an Independent Corporate Executive Position to Oversee the Implementation
By 2018, 80% of B2C Companies Will Have Created Immersive, Authentic Omni-Experiences for Customers, Partners, and Employees; 60% of B2B-Centric Companies Will Have Done the Same
The Top New Investment Areas Through 2017 Will Be Contextual Understanding and Automated Next Best Action Capabilities
In 2016, 65% of Large Enterprises Will Have Committed to Become Information-Based Companies, Shifting the Organizational Focus to Relationships, People, and Intangible Capital
By 2018, 75% of the G2000 Will Have Deployed Full, Information-Based, and Economic Models or “Digital Twins” of Their Products/Services, Supply Network, Sales Channels, and Operations
By 2020, 60% of the G2000 Will Have Doubled Their Productivity by Digitally Transforming Many Processes from Human-Based to Software-Based Delivery
In 2016, the Level of Connectivity Related to Products, Assets, and Processes Will Increase 50% for All Industry Value Chains
The Sharing Economy Will Give Rise to the Networked Free Agent and Skill-Based Marketplaces, Resulting in More than 10% of Work Being Sourced in this Fashion in Mature Economies by 2019
By 2018, at Least 20% of All Workers Will Use Automated Assistance Technologies to Make Decisions and Get Work Done
Executives have to start to view technology as a fundamental business resource rather than a means to track information, said Parker. “There is going to be a real change where information is more of a fundamental basis for the business rather than a way to report on the business.”
This is going to require a greater buy-in by distributors into the digital world, beyond enabling customers to place orders or RFQs online, share BOMs electronically, or search for datasheets. It will be interesting to see where the next phase of digital transformation takes the distribution industry.
Distributors like Arrow Electronics are well on their way. The global distributor, already making significant investments in software and information technology (IT) partnerships, realizes the importance and impact of software and IT on its entire business model, including its ecommerce business and workflow tools that help customers in both purchasing and design environments. This includes the business models of Verical.com, a unique e-commerce marketplace, and SiliconExpert Technologies, which supplies information on millions of parts via its parts search, BOM management and obsolescence mitigation solutions.
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