Categories: Podcasts

In our first Friday 15 of the new year, we talk about everyone’s favorite beginning-of-the-year topic: budgeting!

Specifically, how do you work with your CFO to get the budget you need.  The CFO’s job isn’t to tell you “no” – their job is (in part) to manage how cash is spent. As a digital executive, your job starts with understanding how your CFO thinks about the world.  Andy & Brian share ideas about how to build better rapport with your CFO so you can grow your side of the business.

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Brian Beck: Welcome to the Friday 15 – we are rocking here at Master B2B with some new music. My name is Brian Beck here with Andy Hoar. Welcome to Friday 15, our first session of 2025. The world is changing or maybe saying the same. Welcome.

Andy Hoar: Your house is still there, which is most important.

Brian: We had a bit of a firestorm here, unfortunately, in Los Angeles County. I live up in the hills and it was a pretty crazy time here early in the year. A lot of people lost their homes, really frightening stuff. The world’s changing out here, Andy. These fires, unfortunately, are happening more frequently. We’ll see. We were out of our house for three days. Kind of crazy. Now you’ve got to deal with the big news, which is that the Supreme Court said that TikTok can be banned. TikTok prepares to shut down app in the US on Sunday, a couple of days from now, sources saying, Andy, for those of us in the B2B community, you might say, well, gosh, this doesn’t really have much impact on us. But this is really a landmark decision in some ways, right? What are your thoughts on this?

Andy: I think the importance here is that this is really the government stepping in in the social media space. Obviously they’ve brought lawsuits against companies like Facebook and there’s anti-trust lawsuits. But this is the first direct intervention it seems by the government, which is the only thing that can stop these larger tech companies. That seems pretty clear. Some of you said, years ago, someone at Amazon told me this, like, under his breath, I think the only thing that is going to stop us is the government. And it’s true because they become almost natural monopolies. That’s a terrible word to use. But because people like what they’re doing, that’s the thing. If they deliver things at a lower cost, they have loyalty around that. Now, there’s always the potential. This could turn into something much uglier with real monopolies. But yeah, this thing with TikTok, though, is only a function of whether the government’s going to enforce the ban or not. And the Biden administration said they’re not. And the Trump administration is kind of waffling on this. So it could be that the Supreme Court said the law of the land is TikTok can’t operate in the United States. And the government and the administration say, well, we’re not going to do anything about it. So we’ll see what happens.

Brian: Andy, we’re going to talk today about a hot topic for everyone, budgets. What’s happening with B2B budgets in 2025? We’ve done research on and off on this over the past couple of years. We’re going to share some of that. This is some research that was done back in, I think, 2019, 18, 19. What are your biggest challenges in building your B2B e-commerce business? The number one across manufacturers and distributors, number one reason or challenge is lack of money. So clearly in the past, and we’ve heard this anecdotally through the years, lack of money is really – it’s leadership not providing the dollars or understanding how to think about investments in digital. And I think that persists. And we’re going to talk about that today. But if we fast forward, we did this research last year where we asked the question, has your company provided you with sufficient financial resources to achieve your technology investment goals for 2024? We asked this question early 2024. And a massive number, almost 90 percent said, yes, we’re getting the money we need. But at the same time, and we’ve cited this statistic numerous times, the ROI pressure on the executives getting the money has increased, has sped up almost 70 percent said compared to three years ago. The timeframe I need to show in ROI has increased. It’s sped up. So, you’ve got this pressure on the digital team, the e-commerce team, to show me the money, show me what you’re doing for this. And the challenge we have here, Andy, is that ROI on some of these digital investments can take time. These are significant investments sometimes, multi-million dollars, $10, $15 million dollars in some cases for major systems implementations, multi-global multi-brand companies. Gartner says the enterprise e-commerce platforms generally achieve ROI within 18 to 24 months, factoring in setup costs, integration challenges, et cetera. I’ve lived this as a VP of e-commerce and practitioner. It takes time to recognize the investment and the return. And it’s also really hard to measure sometimes. You think about sales or traffic being done on the e-commerce or digital front, but then, the actual revenue coming in through other channels like a sales force or an EDI system or some other way. And, how do you measure some of these things like PIM or, product information management or data cleanup or foundational investments and analytics and things like that. So what are your thoughts on all this? We’ve seen some improvements in budget availability, but, are we setting ourselves up for failure here because we can’t show the ROI?

Andy: So we asked our practitioners during our roundtable series last year, we gave them time, and we said, hey, we’re going to take five, ten minutes here. We have a quick survey. We want to know what your priorities are for 2025. And number one, it’s very consistent. The different colors are the different round tables. But very consistent, and we saw the same two things. Number one and number two are the top priorities. Analytics and reporting & ROI of digital investments. What’s interesting is those things are interrelated because the ROI comes from the measurement. Now, the measurement comes from having access to the data, which is another discussion. But these point to the exact same thing, which is if you’re not measuring what you’re doing, you’re not going to get the investment dollars. So what’s hindering people’s ability to do that? So we know in our anecdotal conversations with people that there is a bit of an old school new school dynamic going on here, where you have the new school, which is the VP of digital, let’s say, who’s got all these metrics that he can show online and online to offline, so cross-channel analytics, et cetera, about how digital is affecting offline. But if the CFO at one of these companies is still traditional? Many of them want to accept those arguments. They’re looking at things like how is this increasing inventory turns – which, by the way, those are great metrics, but they may not be the right metrics in this new day and age. So what we’ve seen is that people are not necessarily gathering the right data. They’re not necessarily analyzing it properly. And they’re thinking about it really as an investment cycle, as opposed to a continuous process. And then they’re going and talking to CFOs, who are saying, well, we wrote a big check during the pandemic, and now we’re waiting to see that payoff. So there’s the pandemic hangover. There’s this notion of, again, that investment cycles are off. So there’s a bit of two groups that are not communicating very well here. And we know a story of one individual who struggled with this. This person was telling the right story, but the person listening wasn’t hearing what this person was saying, and it didn’t work out. I think there are more stories like that out there. So there’s a little bit of a given on both sides. And I do think that ultimately the digital people have to prove to the CFO, for example, that digital is worth investing in. But it also requires the CFO to understand that this isn’t like 1985, 1995. This is 2025. It’s a little different.

Brian: We’re holding our Summit in March at the University of Chicago. We’re looking to have a CFO panel there, and actuall, get the perspective of some of those CFOs, talking openly with our heads of e-commerce and heads of digital and marketing. And what are the things they actually need to see and what are the challenges? I relate this back to my book – I published it almost five years ago now. But I included a study in there from Korn Ferry. And what they did was they looked at the traits of the most successful digital leaders as it relates to different metrics of e-commerce maturity. What they found, this is probably no surprise to those who are listening and who have been successful – you’re as much of a salesperson and a collaborator as you are an executor when you’re leading e-commerce at these companies. And this applies to the CFO as much as it does to all other aspects of the business, the sales team, etc. You have to get your CFO on board with this and really do a good job selling them. How are we measuring this? Otherwise you’re not going to get the budget. Now, there’s a point at which you’ve got to say, like our friend who shall remain unnamed who left that company, who was the VP of digital, he couldn’t get a CFO to see these things. Or the C-suite. And at some point you’ve got to say to yourself, as a digital leader, I’ve just got to leave. I’ve got to find a different environment where the CFO and the board and all the rest are going to understand that this is, I like to say, this is existential to some degree. You have to make some of these changes to your business, to data, to your infrastructure, to things that are not necessarily going to say, hey, I spent a dollar and got $10 back and I can immediately attribute it to that investment dollar. It’s like opening a store or building your backend, help desk systems or even building a finance function at a business. Trying say – “ok, finance function. Tell me what your ROI is.” There are accounting functions – they don’t have an ROI. They’re cost centers. So some of the things that you have to do in marketing, well, you could argue both sides of that one. But you get what I’m saying, right? It’s a double standard.

Andy: I think also it’s worth noting though that sometimes these things become tail wagging the dog scenarios where people spend all their time to get budget for things and it’s so hard to get it that they get the money, and then they end up wasting the money. So I know you’ve seen this. I’ve definitely seen this where they go out and buy a PIM that they don’t use. right? So a CFO says – You guys bought this PIM three years ago and you’re not using it. Why do you want me now to give you money for an e-commerce platform, re-platform, for example? They hired people who aren’t qualified. That’s another thing I see. They moved people under roles and said, well, this guy’s been with our company for 20 years. He’s got the right attitude. He’s never done any sort of analytics. Well, he looked at our data once in our ERP, right? So this person doesn’t really know how to do their job. And then ultimately it all comes down to one thing and I’ve seen this time and again, they don’t have the right digital strategy because they don’t have a digital strategy. Their digital strategy is to have a digital strategy, which is ironic because that’s not going to work. When you posted this on LinkedIn, my first thought was, priorities should drive budget, but all too often, this is where the tail wags, the dog. It becomes reversed with a budget that drives the priorities and they get out of whack. And then the CFO comes back and says, well, wait a minute, we spent all this money, especially during the pandemic. And there’s a bunch of things we’ve seen no ROI on and it all gets polluted by that. So in other words, it becomes like an aggregate ROI. And the digital people have to do a better job of saying, well, wait a minute, maybe the ROI in that PIM system we bought three years ago is low because we haven’t implemented it yet, but the ROI in the e-commerce platform is high. So let’s separate these things. But again, like you said, ultimately it’s incumbent upon the digital people to put it in the terms the CFO understands.

Brian: Absolutely. And then of course, overriding all this Andy is, you’ve got, the economy, right? And it’s been weird ever since the pandemic. Now Goldman Sachs has come out and said, hey, the US economy is poised to beat expectations in 2025. The US economy is in a good place andrecession fears have diminished. Inflation is trending back towards 2%. Labor market is rebalanced. And they expect 2.5% US GDP growth. CFOs think about this stuff – they don’t think about e-commerce and digital in a bubble. They’re in charge of managing the whole business, right? And the economy impacts these companies. There are a lot of our listeners at very large companies and mid-sized to very large companies that are affected by macro trends. Any thoughts on how the economy plays into the budget?

Andy: Who knows. We have talked about this for a couple of years now. And I will point out that Goldman Sachs flipped on this a couple of months ago. They had a forecast. And now it’s completely different again. So, hey, that might be the reality of things. It could just be that forecasts are not good for these things anymore because it’s so unpredictable. Events are driving what’s happening now. Who knows? But yeah, you do the best with what you’ve got. And B2B companies tend to be more conservative. They tend to have to look over longer periods of time because they have to buy inventory. If your B2B company has a warehouse full of stuff, it costs money to carry that. So, I guess their magnifications are bigger for making investments. But it’s funny, we were just talking about investments. I think a lot of CFOs tend to think about it that way. They think of digital the same way they think of their offline investments. And that’s a great example.

Brian: We just did a poll on LinkedIn where we asked executives whether they’re getting more budget or not. We asked the question of B2B manufacturers, brands, and distributors: what is happening to your budget for digital investments in 2025? 50% said they were increasing. 28% said they were staying the same. And 22% said they were decreasing. Now, you can look at these numbers and see this as a relatively bullish outlook. And to some degree it is. But that’s down, Andy, from where we were a year ago. Now, they’re not exactly the same cohort we’re surveying here. The sentiment is seems to have changed. What do you think?

Andy: I think it’s the economic uncertainty. This could change too in a couple of months if the economy starts to pick up or if the economy slows some more. Just look at interest rates. Are they going up or they’re going down? Who knows? Even the Fed doesn’t know, right? So if the Fed doesn’t know what interest rates are going to do, then how in the world are economists going to know what the economy is going to do? The reality is the metrics that we used before are oftentimes lagging indicators of where the economy is going. And so nobody figured out what indicates where the economy is actually going. All they know is where it’s been. And so we’re in this world. We’re trying to kind of figure that out.

 

This week on the Friday 15, we’ve surveyed B2B practitioners about their priorities for next year, and we wanted to share the results with you…

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Brian Beck: Andy, this is our last Friday 15 of 2024. My name is Brian Beck. I’m here with Andy Hoar in my partner in the Master B2B Community Thought Leadership Series, wrapping up this year. Welcome everyone to Friday 15. Got an exciting topic today, I want to talk about. But before we do that, let’s talk about our breaking news. You can see this – 87% of Millennial Gen Z buyers report dissatisfaction in at least one area of their B2B buying experience. This is brand new research from Forrester, or your former employer and place of doing research. This was released last week, mid December. And it’s telling, it really sets the stage, I think, well for what we’re going to talk about today. But yeah, they even used our name of our business in the title of the report here. It could be a play on words here, to master B2B buying mayhem, providers must prioritize our buyers’ needs. But they found that 87% are, and particularly amongst younger buyers, dissatisfied.

Andy Hoar: Well, my quick comment on this is, I’ve seen too many B2C companies do it too, but B2B companies are prime offenders, where they retrofit the process. So they don’t think new, like, hey, you know what, this world’s changed. Why don’t we start over? Let’s think about a whole new process. No, they just take the existing process and they try and extract away from it. And what ends up happening is a lot of those business processes don’t work. They just don’t work. Oh, somebody runs into a problem. Have them call customer service. Well, no wait a minute, we’re already online. They don’t want to call something on the phone. So if they change that process to be more like an intelligent chatbot, but they don’t do that because they’re like, well, we have a call center. So that’s where these things happen. That’s where these pitfalls occur.

Brian: Yeah, no question. Well, it sets the stage well for our topic today, which is what are B2B executives top strategic priorities for 2025? And one of the fortunate things we have access to here at Master B2B is direct feedback from thousands of practitioners that are part of our community here. And so we’re able to survey and ask questions and things of that nature. And that’s exactly what we did. But let’s set the stage a little bit. Number one, we found in our own research, our state of B2B, e-commerce this year that 83 percent of executives reported they were going to spend more money on digital this year. The same research also showed though that ROI expectations are now much higher compared to three years ago. We asked this question in our state of B2B e-commerce survey. Compared to three years ago, the timeframe in which I need to show an ROI on B2B e-commerce these days has, guess what, 65% said “sped up.”

Andy: This is a reality. I think it was due to the overspending during the pandemic where people were just plowing money into digital. And then some CFOs said, “Wait a minute, we spent X amount of money on this. What do we get for it?” Well, at the time, you’re putting a fire out. You’re not going to worry about how much water you’re using. But now they’re looking back on it and saying, “Maybe we overspent, maybe we didn’t underspend, we don’t know, but we’ve got to figure this out.” There’s just one big problem with this. When it comes to spending on technology, these are investments. They take time to produce value. And you can’t just decide as a CFO that when we buy a new platform, we need to get an ROI within six months. That’s not how platforms work. It takes time because it’s an investment. These are five -to-ten year time horizons. And over the course of that timeframe, an effective investment will produce a high return. And if you measure it after the first six months, you’re not going to be there. I think about guys like Noah Lyles, he’s the fastest man in the world. He wins the 100 meter dash. But in the first 20 meters, he’s usually in the last place. By the end, he wins. So if you said, “Well, after 20 meters, he’s a loser.” Well, after 60 meters, he’s winning after 80, he’s beat everybody else. So you get at the right time horizon here.

Brian: I think it also depends on the type of investment that you’re making, but for the most part, I agree with you that it’s a marathon, not a sprint. But it raises the question. And after we did this research, we said, “Gosh, we really have to ask our practitioners, how and where are they spending money, given these pressures, and given the fact that this ROI must be demonstrated, where should they spend the money?” So we asked the question. So we did 10 roundtables this fall, with several hundred people participating in our roundtables across the United States, L.A. and New York and everywhere in between – Milwaukee and Minneapolis and Dallas and Atlanta. And we asked the questions of these practitioners, how do you prioritize? Which, because there are so many possible priorities – everything from improving how you’re using existing technology to purchasing new technologies like PIM, eCommerce, hiring talent to improving the business case and gaining better alignment to implementing change management, resolving tunnel conflict, launching marketplace and Amazon programs. There are so many places that traditional B2B companies can place their bets. How do they prioritize all these different areas? So we surveyed them, but before we reveal what all these several hundred people told us, which is the theme of today’s Friday 15, we asked our LinkedIn audience what they thought. In other words, what do you think the top priorities are? And this is how they voted. So this was just a poll we put up this week. We asked our LinkedIn community, which do you think is the number one strategic priority for B2B eCommerce executives in 2025? Well, guess what? Number one, was “improve the customer experience.” Number two, “improve ROI cases for digital.” A distant third, “improve analytics and reporting” and even more distant fourth “fix product data problems,” the data problem we often talk about. So our audience is a LinkedIn community at large. Now we could take that now and contrast that to what we heard from the roundtable audience in person when we polled them. We asked them to fill out a survey as they were sitting in our roundtables. And again, several hundred people. Now, who was the winner? Drumroll, please. I don’t have a drumroll sound effect. I need that. Let’s get this in. Our budget ran out. We didn’t have funds for that sound effect. Okay. So here we go. Here are the winners. Number one, analytics and reporting. Number two, improving the ROI case for digital investments. Number three, was customer experience improvements. Now we had some others that came in pretty high too. But those were the three clear winners again across several hundred roundtable participants across those markets. So we wanted to dive in a little bit on each of these. But any of the surprise you Andy?

Andy: What surprised me was how consistent it was. And what we would do,at every one of our roundtables and almost without fail, it was those three. And we gave them several options. A lot of options. Those three were always number one in pretty much in that order, which is fascinating. Analytics and reporting pretty consistently ranked number one. It was very close at times. We’ve translated that in our heads. We think what they’re really talking about is getting developing insights about customers. That’s what analysis and reporting stands for. It’s not just looking at a dashboard to see conversion rates, although that matters. Obviously, it’s more about what types of behavior are people demonstrating? Can we sell them more? What’s profit optimizing? What are their cross-sells and upsells? What are we missing here? How can we expand lines of business? That’s all driven by analytics and reporting. And frankly, if you do that really well, then the other two sort of take care of themselves, right?

Brian: You know what did surprise me about this is that channel conflict was so low. It was the lowest one of all the 12 or 15 choices we gave people. And because resolving channel conflict, it’s something that’s often cited in my, you know, when I do work through my Enciba company with Amazon, it’s like the number one reason people don’t sell on Amazon is because they’re worried about channel conflict. But as you talk about eCommerce, it’s interesting that it came in so low because we asked about marketplace, direct eCommerce, but it was the lowest one. So anyway, it’s just surprising.

Andy: Yeah, the channel conflict thing was kind of interesting, especially compared to prior years. When it comes to Amazon, that is 100% the Amazon problem is channel conflict. So that’s why you’re probably pretty steeped in that when it comes to Amazon. But something from Amazon, I think there are two reasons why channel conflict is falling so dramatically. One is people can’t resolve it and they just give up on it and like, well, I can’t, there’s no way I’ll have to get beyond it. Or they have resolved it because it’s been a few years. So to me, it’s kind of bifurcated. So it’s either they’ve resolved it and they don’t care, they can’t resolve it and they don’t care. But either way, they don’t care.

Brian: Let’s dive in on these. So the first one or top one, again, is analytics and insights. And I kind of think about it as an iceberg, eCommerce has been measured independently from an analytical perspective for years. I was an eCom VP for 17 years. And during that time we lived and died by our analytics, but that was all one channel analytics. You’ve got this whole piece under the iceberg – you see only the tip of the iceberg and underneath it is the impact digital has across the business. We can’t just look at the top because eCommerce metrics don’t tell the full story. Here’s some data that shows across different B2B industry categories, that two thirds of purchases across industrial machinery, industrial supplies, packing, shipping materials- two thirds of purchases were significantly influenced by digital. And those are happening mostly off-line. Digital and eCommerce work together. And we have this gap where companies don’t, fully align their channels and align their data analytics. In fact, Accenture did a study recently, Andy, that shows poorly coordinated and misaligned digital strategies can cost companies as much as 10% of their annual revenue. We’re talking about tens of millions for some of these big B2B organizations. So this is a real problem and it’s one that needs to be addressed. And I think B2B now is waking up to saying, “Hey, I’ve got to look at things omnichannel here. What are my most meaningful metrics across the organization?” And companies have, as we found in some of our earlier Friday 15s and polls, as executives don’t necessarily have enough information or they have too much, they don’t know what to do with it.

Andy: I’d love to see how Accenture actually calculated that because when I read that, I think to myself ONLY 10% of the annual revenue? I think this is just about messed up projects. A bad strategy, which I think is a super set of this, is going to cost you a lot more than 10%. And I see a lot of that, I’m sure you do as well.

Brian: Absolutely. So that’s number one. And so we’re going to see next year when we look at it, and we didn’t include the data here today, but we also have data around what people are investing in in 2025. So what specific tools, technologies, and approaches. And I think we’re going to see that analytics is right up there at the top. So our number two, and it’s tied very closely with the first one, is the ROI of digital investments. Adobe did a study about a year and a half ago that found that 38% of B2B companies report challenges in securing adequate budget for eCommerce and for many, providing ROI of these investments remains the main hurdle. So you’re getting the number one reason we’ve seen this repeatedly in multiple studies, Andy, where executives are not fully bought in, and it leads to a lack of budget. Now we’ve found that companies are getting more from our earlier study and it’s that statistic we showed. But this is a persistent issue. And we hear it anecdotally in our roundtables from people, they are still struggling to build the business case and what it comes down to is really an omnichannel story. And that’s where I think it becomes challenging and it has something to do with your datapoint earlier on time horizons – Some of these things take a long time to develop and to implement and then to realize ROI, but the ROI comes from revenue lift. It comes from profit enhancement across the organization, doing things more efficiently, dropping the cost to serve. And not just eCommerce shift. What we’re talking about across the company, digital tools and then efficiency, driving a lot of efficiency and all of us together driving higher enterprise valuation, there’s a formula for this, but it’s difficult for eCommerce leaders to quantify it in some cases. I think about things like PIM systems, long-term investments.

Andy: Two quick points. One is I’m finding that B2B eCommerce people are being held to a higher standard. I’ve talked about this at length. So that’s a challenge here. They’ll go to the eCommerce team and say you have to demonstrate down to the penny, let’s say, jokingly, what the ROI is of those digital investments. Meanwhile, they’ll go spend an order of magnitude more on a trade show. And THAT team doesn’t have to justify the ROI. They say, “Oh, that’s what we’ve always done.” And that produces psychic benefits. I’m like, wait a minute. So one group is going to be perfectly measured. The other one can be very imperfectly measured? Why don’t you apply the same standard to both those groups? That’s one issue. The other thing is that the way in which they measure the ROI is oftentimes interesting because digital is now spreading across the organization. And it’s starting to cannibalize other areas. So you mentioned data. Well, they already had a data group. But when digital comes along and says, hey, we need access to this data to be able to produce better cross-sells and upsells and recommendations, etc. Then all of a sudden they’re like, well, what’s the ROI on that? Wait a minute. What’s the ROI on what you’re doing right now? So digital is now spreading. And it’s starting to compete for dollars for other budgets. And that’s getting pushback.

Brian: Exactly. This is going to be one of our key talking points during our events next year – how to help practitioners better document and create these business cases. And I think it helps a lot as we see continued evolution of the C-suite as we see more digital experience in the C-suite. And we’re seeing that particularly in some of the larger companies, and we’ve documented that in the past. As that senior level becomes more sophisticated as it relates to digital, I think we’ll see that they’re more open to an understanding of how these kinds of investments will pay out over time. I think in 2024 we made the prediction that this is all becoming more existential versus incremental in terms of how you tell the story. In other words, companies will realize that, hey, we’ve got to make these investments in order to stay relevant to our customers. Regardless of a 12 month payback period or something. So anyhow, we’re going to see how this evolves. Our third is customer experience, number three. And so customer experience, as it relates to things like UI/UX, personalization, site search, relevancy, just the experience. And we saw that data at the, in the breaking news from Forrester, or that 87% of younger buyers are disappointed. Well, younger buyers who now make up 75% of B2B buyers say, I will not use the app or website that is hard to navigate. 62% of them said that. And I will not use an app or website that is too slow to load. 60, 60% said that this is a study from Uniquely. If you’re not delivering a digital experience, customer experience, that meets expectations, you’re going to be missing the boat because B2B buyers will consider switching. If you’re not consistent across your channels, 80% will consider switching. If prices aren’t available, 80% will consider switching. If it’s not easy to place an order via mobile, 73%. This is all data from McKinsey.

Andy: The standard keeps rising and the nature of the buyer keeps changing because these younger buyers oftentimes aren’t as knowledgeable as older buyers. So take a person who’s a plumber, for example, and a plumber in their 20s, maybe just out of an apprenticeship and this person needs to buy a replacement part. Well, the old guy, the mentor, would know exactly what the part was because he’d been doing it for years. The younger person may not. So the younger person has to use a mobile app and say, I’m looking for a replacement part for this. Imagine being a search engine that says, oh, sorry, with the part number, we only know how to track for part numbers. In fact, we talked to Peter Curran from Coveo the other day about that. And he says, we tried everybody to do very specific searches. And there’s nothing wrong with specific searches. But if you don’t know what you’re looking for, it’s part of that discovery path. In which case, you need to understand natural language search, etc. And people in the search engines are capable of doing that. But B2B companies have not implemented that. They aren’t able to do it. So they’ve got basically, in this case, a search solution that works for a mature user. Somebody who’s very knowledgeable and has a lot of domain expertise, but they don’t have a search solution for somebody who isn’t that.

Brian: Search is so important, particularly for very large catalogs, big distributors, etc. And so that’s one element, right? But it’s really across the board. And the consistency thing is the same theme I think we’re hearing through all these priorities. Where buyers don’t just look at you in channels. They don’t look at you as an eCom or as an inside sales discussion or an email exchange. They’re looking for a consistent experience from you. And that’s where I think a lot of the gap is still in B2B.

 

This week on the Friday 15, Andy & Brian discuss whether workers are afraid to be honest about their AI usage at work.  We’ve heard senior team members talk openly about how they’re using AI to be more efficient, but are junior employees perceived as lazy if they use these new tools?

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Brian Beck: Welcome to Friday 15 with Master B2B. My name’s Brian Beck. I’m here with Andy Hoar. Let’s get into our breaking news. We just came out of cyber week and the Cyber five and some big numbers on the consumer side. Look at this significant growth year over year, even at this scale. EMarketer came out with some numbers and they nailed it. Right?

Andy Hoar: Yeah, I got to give credit. So Zia Daniell Wigder who runs the research arm for eMarketer is my former boss from Forrester Research. And I was really impressed. They really nailed it. So Black Friday, this is a prediction from June. They predicted in June that Black Friday would be $10.76 billion. Adobe has announced a couple days after Black Friday that the number was $10.8 billion. So you don’t get much better than that. And then also Cyber Monday, they estimated in June to be $13.93 billion. And if you see the next slide, the actual number was $13.3 billion. So as an analyst, I have to recognize when people really nailed forecasts. So it’s kind of an intra industry honor code. And so shout out to Zia for her team really nailing it. That’s impressive. But also on this page, if you’ll notice, you put it in a red box. This is a stunning statistic. And if you told something like this even 10 years ago, I think they would have laughed. 57% of this online sales on Cyber Monday were through a mobile device. 57%. I mean, wow. The way in which people buy has definitely changed. I remember way back in the day when people wouldn’t use a credit card online. Remember that? I do. I lived through that in the late 90s.

Brian: We did a whole Friday 15 session on this a few weeks ago, where we talked about, does this impact B2B? And I think we’re seeing total evidence that it does. We’re still, it’s sort of the jury is still out. The numbers are still out. We’ll see how the rest of the season plays out. But just look at Amazon Business, for example. Amazon Business, again, is the one of the biggest players now in B2B commerce. Look at the emails they’re sending out. Save Big with Cyber Monday deals, discover the latest savings, including 50% up to software, 30% off of office products. And they’re talking about deals in IT, in break room, in MRO, in office, different categories. These are B2B categories. And you know, what’s fascinating is just, and again, early numbers here, but anecdotal. Just looking at the numbers we’re getting in from my Enciba business where we manage B2B companies’ Amazon programs. In some cases, some of these companies are up 100% over a normal period of time. During this Cyber Monday or Black Friday, we’re starting to get those numbers in. And we’ve got quite a few clients, including gigantic electronics electrical products, manufacturers and plumbing supply companies. So there’s some real spillover here, Andy over to the B2B side.

Andy: We’ve heard some brand manufacturers even who said, “Not only are we not going to have a presence over the four day period, in particular Black Friday, but a lot of our businesses aren’t even open.” So how do you contrast that with Amazon Business, all these companies having record sales on Black Friday and Cyber Monday. And on Black Friday, many B2B, traditional B2B distributors aren’t even open.

Brian: Well, I’m curious to see what they do through their e-commerce. So that’s the beauty of B2B eCommerce that it be open when your branches aren’t. We’re going to keep monitoring this because I think it’s an interesting dynamic, particularly because now we have all these millennials and Gen Z that are now in the workforce. Certainly, Amazon Business doesn’t do things based on gut. They do it based on data. And so there are reasons they’re doing these deals on these days. And, and we’re seeing it in our Enciba performance with our clients. These are B2B companies. These aren’t shirts and perfume, right? They’re selling plumbing equipment. Anyhow, it’s a real thing.

Andy: It makes the point that the most important thing in the world is customer attention. And you’ve got customer attention on these days. And people who are B2C consumers are also B2B buyers. And so if they’re looking at Amazon to buy something for Christmas for their family. And they’re also buying for work. And you’ve got their attention, especially if you’re like a Home Depot or a Lowe’s, one of these kind of half B2C, half B2B companies. It is bleeding over. It’s putting pressure. And I predict that within a couple of years, all of these B2B companies with very rare exception will be doing Cyber Monday and Black Friday – kind of. So, it may not be called the same thing. I don’t know. But that period of time, they’ll be selling online.

Brian: Well, let’s get into our topic today, which is all about AI. And here’s the question, Andy. Are you being transparent about your use of AI at work? What prompted all this is a really interesting story about the fact that it was a study by Slack that said that 99% of executives plan to invest in AI. So everyone’s talking about, oh, yeah, everyone’s investing in AI. It’s got huge promise. But then nearly 50% of employees are uncomfortable admitting AI use because they’re afraid of being perceived as less confident or lazy. So this is huge disconnect, Andy, right? Between people investing in it and then the people using it and that if you’re afraid to admit you’re using it, what does that do from an innovation standpoint? Companies like Apple and Google and others for decades, and since they’ve been founded, have all been about democratization of innovation. People innovating at the bottom rung and that making its way up the organization. Well, clearly there’s no process here if people don’t talk about it. How are companies going to take advantage of innovation occurring?

Andy: What’s worse than not talking about it, which could be, you know, just the fact that people design in their consciousness. No, they’re avoiding talking about it, which is even more interesting. So if you show the next slide, the top three reasons why. So on the right hand side, the top three reasons workers are uncomfortable sharing that they’re using AI. Number one was they feel like using AI is cheating. Number two, they fear being seen as less confident. This is interesting. And the last one very related to number two is they fear being seen as lazy. And it does raise an interesting question. If the AI is doing the work, then why do you need the people? Now, making the evolution forward that we have to make here is that the people are directing the AI, they’re coordinating the AI, they’re managing the AI for an outcome. And that part’s getting lost. But traditionally speaking, companies have mostly thought about people as producing results that then get coordinated amongst other people. And now maybe that’s going to shift. Maybe it’s going to matter less where you got the information or how you got the information. And more that, you’re finding a way to turn it into revenue, make it work with a larger organization, et cetera. That hasn’t entered the mindset of a lot of managers. And there’s still people who want you to come into the office because they want to see the work you’re doing. We’ll take this one to the next logical conclusion. Not only am I not in the office, I’m not even doing the work. But if I’m producing results, then who cares, right? There’s an argument to be made for that. On the left hand side of the graphic it has an interesting thing. It says, percentage of workers uncomfortable sharing the use of AI for the following tasks. They asked them in more detail – How are you using this stuff? And what are you uncomfortable sharing? Number one was writing messages to your manager. So 34% of people are communicating with their manager using AI, chatGPT. And they’re like, we don’t like talking about that. Number three, stuck out to me, they’re uncomfortable sharing that they’re evaluating the performance of their direct reports by using chatGPT. So basically, they’re telling me, how should I talk to my employee about their performance? And by the way, here’s some things I noticed and they’re having chatGPT essentially do the evaluation.

Brian: Having been a manager many times in my career, one of the most onerous tasks is actually writing up job reports and writing up performance reviews. It’s very time consuming. So I’m sure what people are saying there is, hey, I’m just going “write me a job review for this person”, maybe putting a few data points in. But look, at the end of the day, if it writes a good job review and it’s accurate… If people are using these things to make their jobs more efficient and save time, if you can enter into chatGPT or whatever your tool is, a series of things that that are accurate that say, I’ve noticed my employees doing this, this, this, and this, they do this well. They have opportunities here. And it creates a summary for you and puts it into an organized format. What’s wrong with that? It’s just saving them time.

Andy: But it also kind of brings into question what are you actually doing? Why can’t you just – if you had a more sophisticated sort of collection framework for people’s work, then just have Asana do it for you, which is a project management software. It’ll use ChatGPT if you need to write the job or the performance review. But the other one kind of stood out to me to your point. One thing, 25% of employees said they are uncomfortable talking about using AI to brainstorm new ideas for projects. That was number five on the list. I have to ask myself, why would that be a problem? Why would that be a problem? Why not use ChatGPT to come up with ideas? Why should you waste your time trying to come up with ideas when this thing can crowdsource the whole concept of doing that? So that to me feels strange that people are embarrassed to say that I’m using that.

Brian: I think companies and people have to close the gap here. There’s a trust gap here to some degree. Where people are feeling like, hey, I’m kind of cheating. That’s the number one reason they’re uncomfortable. And it’s not cheating. Companies need to make it okay for people to do this stuff. Now, this also ties back to intent. We’ll get into that in just a minute. But there are historical parallels for this, right, Andy?

Andy: So we were thinking about this and how is this similar to other evolutions in technology. I think this AI one is an order of magnitude more important than other technologies in the past. Do you know what that thing on the left is? It’s a thing in wood. It’s made of what looks like metal or some sort. And it looks like it could be a musical instrument. Well, that is the first known image of an actual calculator. From the 1730s or something like that. But what’s interesting about this calculator is that I guarantee you when they were having conversations, people were saying, how dare you use this machine? You can’t trust this machine. You’re cheating. You should be doing this math on paper in front of people. Gee, does that sound familiar? That you can’t trust this thing. In fact, what was funny is that the calculator was invented in 1773. But it wasn’t demonstrated for five years because the people who invented it had to get over the fact that people thought it was untrustworthy. They had to prove it worked. And so it’s like, it sounds very familiar, doesn’t it? And then the one on the right is a picture of a stock photo of a dude putting a piece of beef in a microwave oven. And I remember hearing years ago that among the sort of chefs of old, they thought using a microwave oven was cheating. You shouldn’t be using a microwave oven to do whatever. That’s unnatural and it’s just not acceptable. And it’s like, here again, another technology that initially was dismissed as cheating or a shortcut that you shouldn’t be using, it sounds very familiar, doesn’t it?

Brian: It’s really about making jobs more efficient. But here’s what’s interesting, Andy. I think it’s ties in my earlier point about intentions.. Did you know that more than one in three Americans earned money through side hustles and 32% think they’ll always want or need those? So is the intention of using AI? Does it tie back to, hey, I’m going to have two or three full-time jobs or a side hustle enables me to game my employer’s situation and have multiple jobs at once. In some cases, then I think maybe employers have a beef with using it and people should probably be hiding it.

Andy: I think you found some numbers that said, it’s like almost 50% of those age 27 to 42. So younger people, half of them have side hustles. I guess companies have to get better at recognizing that, but if somebody’s generating value, the question is, do you need that person to generate value or do you just need the chatGPT that they’re using to do it on its own? I mean, are you overpaying people to basically use chatGPT and as a result, they’re able to work in multiple jobs. This will work itself out over time, but it’s really an admission that companies don’t know a lot about what their employees are actually doing and how they’re actually doing it. I would argue who cares. But you could be saving money, I guess, but I think there’s a point about trust. There’s just some, there are some companies that feel like we need to know how they did this and where it came from and not for verification purposes, for origination purposes. Are we paying somebody to do this? Or are they getting this from somebody else? I say who cares, right?

Brian: I think ultimately what’s winning is the outcome economy, meaning hey I need an outcome here and this ties into the remote versus hybrid versus in office discussion, because what’s driving a lot of the in-office stuff companies say “it’s cultural” and there’s some weight to that, but ultimately managers are still uncomfortable with the fact that they don’t know what their employees are doing if they’re not in the office. So I think this ties into it too, right? And so, if you think about you sitting in the office using AI to do your tasks and your manager looking over your shoulder, that’s a little different than doing it from home and trying to run five jobs at once. 88% again, another stat here, 88% of Gen Z use AI to do their jobs for them. Gen Z, this is the youngest group. 88%.

Andy: Well, and we found this idea that there’s something called “task paralysis,” which is I don’t know what to do next. So they go to AI and ask AI. This is otherwise known as thinking. Brian, I need you to finish this project. Oops, task paralysis. I don’t know how to do that.

Brian: So we asked our LinkedIn universe here, our community on LinkedIn. If you are using AI in your work, are you hiding it? Are you being transparent? And in our LinkedIn world, 82% said they’re being transparent about it. So either they’re lying to us through the LinkedIn poll, which maybe they are, or there is some hope here that people are willing to be transparent and maybe even help their organization become more efficient by using AI.

Andy: I have a theory on this one too. Our people tend to be even more senior versus more junior. The senior people organization have no reason to hide it, because their jobs are not threatened. Nobody’s going to question the CEO. Are you doing the work? Or is AI doing the work? But junior people are the ones who I think are more concerned about this, because I think they feel like their jobs are competing with AI. Senior executives are not competing with AI yet. So that might explain this one. Maybe if it was a more junior audience, we get slightly different results.

 

Andy and Brian attended the B2B Online event in Orlando, and they’ll catch you up on all the key themes they heard during the event.

They’ll touch on AI, also on AI, and maybe even AI. But also tips on how to convince the CFO to invest in digital.

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Brian Beck: Hey, my brother! Welcome to Friday 15 with Master B2B! Folks, we are broadcasting from the fine land of palm trees today. Straight to Florida. Thank you everyone for joining us. My name is Brian Beck. I’m here with Andy Hoar, Mr. Cool. Over there with the shades on, hanging out. You’re still at the resort there, Andy. Oh, and drinking on the job, too. I see what you got in that fine cocktail there, sir.

Andy Hoar: Oh, I’ve got to tell you, the sun is beautiful. [Laughter] I can still probably get my shades on here.

Brian: So for those you’re listening, Andy, is hanging out by the pool at the J.W. Marriott, Orlando, with the shades on. And I’m hanging out here in, let’s see here, I’m at Disney Springs. I’ve got a balloon floating overhead. Do you see it there, Andy? Thanks for joining us today for the Friday 15. Andy and I have spent this week here at B2B online in Orlando, Florida. The industry’s bi-annual gathering of B2B commerce executives. We had a great time. We talked to a lot of folks, met with a lot of folks over the last few days. And Andy said, we’re going to get some interesting insights from Andy today, the more he drinks with whatever he’s drinking there. So, we got the umbrella drink. That’s right. Oh, that’s awesome. Well, welcome everyone to Friday 15th from Orlando. We’ve got an interesting recap today. We’re doing a report live from the field, or well recorded from the field, those of you listening on our podcast. And one of the annual events, Andy, several hundred industry leaders are here from across different industries. We saw folks from all different kinds of companies. We’re going to cite some of the key things that we heard over the next few minutes here. But we can just start to jump in on that. But before we do, Andy, anything you want to say about the conference in general?

Andy: Yeah, so I think we made a couple slides here that we want to kind of walk people through on a serious note. So there was one panel, actually, that kind of stood out. Several people commented on this. But we’re back to the same issue about making the case for digital. And somebody had a statement, WIIFM, which is kind of hard to remember, but it stands for “what’s in it for me.” Obviously, the statement is, I think a lot of people forget that when you’re talking to the CFO, you want to talk about how you’re showing how cost won’t increase, but revenue will. And different executives have different worldviews. And when you’re selling digital, sell them the way they want to be sold. An age-old issue around lift vs shift. People pointed out that adoption is the biggest reason why digital grows, which is kind of shifting from existing customers, et cetera. But shift alone isn’t considered real growth by the CFOs. Incremental revenue gets executive attention. And so when you’re talking to these people, talking to the terms they understand, but I’m a big believer in lift and shift, not just lift or shift.

Brian: This is a really key thing, because I heard this question three or four times, just at the conference about, hey, people are struggling with the perception that e-commerce, regardless of the channel, whether it’s direct commerce, Amazon or whatever, simply shifts revenue. And all I’m doing is pushing it from one channel to the other in some cases, a more expensive channel, which, overcoming that is really critical. And what’s fascinating is, and we’ll even share some stories here from the conference a little bit later about, companies that have been really successful with their rollouts, seeing overall lifts in the business when they go to e-commerce, even the e-commerce channels of their resellers, because they’re better prepared to enable the channel for growth – better data, better analytics, better pictures and videos, all kinds of things, right, just asset improvement, alone can be beneficial to the channel, even when a company like a manufacturer moves directly into e-commerce. So this was, but it’s fascinating, we’re still having the discussion, that the industry is still at this, and we haven’t moved beyond it, but it’s a real struggle.

Andy: Well, and then we have this double standard – which is online has to demonstrate down to the penny where all the money is, what the return is on it. And because online has historically been able to do that, it’s held at that standard. Fine. But I talked, if I talked to one executive, I talked to several at this event who said, “The offline money is not being held at the same standard.” They go spend money on trade shows, they spend money on giveaways, etc. And they can’t even measure what the value of that is down to the, down to the hundreds of dollars, tens of dollars, or penny, but for some reason e-commerce has to produce down to the penny, but everybody else can just round up to the nearest thousand dollars. So that’s frustrating to digital executives. I still think that equilibrium will be found, though, because at the end of the day, if you can measure something with precision, you’re going to get more money because you know what you’re getting out of it.

Brian: Yeah, I was talking to Corey Case, the CMO, at Sarnova, at dinner, at one of our dinners. He oversees all the marketing, but even his world where he oversees the budget, it’s hard even to shift, and he understands digital. He’s very sophisticated. It’s hard to shift the organization’s thinking around this, because they’ve been doing those traditional methods for so long. This last piece here is really fascinating that we heard, which was the counterfactual, what happens if we don’t do this? In other words, if we don’t invest in digital or e-commerce, that was an interesting point that we heard. And it’s almost like, it’s a doomsdaying, but it’s existential, right? If we don’t do it, we’re going to lose share. One of the best places to find out what the real situation is, is just look at Amazon, right? And search your brand, not your brand, but just your product category on Amazon. You see all these brands? I did this just a couple days ago with one of the attendees. We looked at his brand on Amazon, and we said, gosh, look at these companies doing all this volume. They never heard of, right? All these brands. You never heard of a lot of them coming out of Asia. And so this counterfactual thing is now resonating. We heard it on the main stage in panels.

Andy: Now you have to say, well, Amazon’s doing this. Our competitors are doing that. So because the market has shifted, the dynamic has shifted. There is a way to answer this question. And oftentimes the answer is, nothing good. If we don’t do this, it’s not good.

Brian: So Andy, you know in my book, a few years back, I highlighted a whole bunch of case studies around Illumina. Well, we heard from Evan Vasili, who’s the global manager of Omnichannel, a bunch of things around aligning sales and marketing and Illumina, as a company has done a tremendous job at this. They’re a $3.5 billion company getting almost half of their revenue from digital channels, e-commerce, e-procurement. And if anyone can speak to this, he can because they’ve done it so successfully. And he shared some not-so-basic basics, right? Andy, what did he talk about?

Andy: I think there are seven, but I think we’re going to hire just three here. One is get shared dashboards and align KPIs. I mean, this is just blocking and tackling. But so many companies don’t do it. They have sales as their KPIs. And marketing as their KPIs. And sadly, they don’t often overlap. Another big one is to get everybody in the same room. That’s really key, because, they talk about this, but oftentimes they just don’t get in the same room and talk about stuff. They talk past each other, versus with each other. But the biggest one was the one we kind of underline here, which was getting sales to use the content that already exists. I’ve worked with salespeople before. God love them. But they always want more information, and they always want different information. And marketing doesn’t really push the issue here. And says, hey, we have given you really good stuff, case studies, et cetera. It’s just easy to blame marketing when things are not sold well. And so, marketing’s got to push back and say, hey, look, we’ve got the content. Use what we’ve given you.

Brian: That was a really interesting session. And then AI, of course, continues to be all the buzz Emanuela Delgado SVP at PartsTown, which is a very large distributor. The first session at the beginning of the conference got a lot of attention. We heard it throughout the conference. Some of the points that she made. What was she talking about, Andy?

Andy: She talked about customer service and the opportunity for AI with regard to customer service. And she said, when you think about it, think about shifting from a reactive mindset to a proactive mindset when it comes to customer service. So instead of just waiting for people to reach out to you, potentially she’s reaching out to them using AI asking, hey, are you struggling here? How can we provide you with more information, et cetera? She pointed out something too about sentiment analysis to gain insights. Like, using customer service phone calls to get insights. Like, why didn’t people convert? Why aren’t these calls converting? Why are customers calling and not using the website? I know I’ve talked with companies before that have thrown all of their customer service transcripts into AI and then had it kind of summarized. If the beauty of AI is actually, if it’s something that’s known, it can read through it, distill it down, almost like note-taking can. And provide insight that perhaps, at scale you’ve never looked at before. She said that data, and this is, well-known, but always good to hear, that data is the key in your AI. Quality of the data is bad then the AI is going to be bad, right? And the last point that she made was, about having guard rails in place. If you don’t have human validation and intervention, anything you build can be a risk to your business. So it’s not ready to take our hands off the wheel yet and let AI take the wheel. You’ve got to have some guardrails in place and it’s got to be smart to do it. But I actually think we’ve shifted and we’re going to continue shifting away from human first AI second, to AI first human second. But that human dimension is really critical.

Brian: I agree. This was a point at the dinners, and we had a bunch of executive dinners at the conference. At one of the tables, we had a big long table, about 12 executives sitting at it. One of the execs said, “Hey, I want to know, can you guys just be quiet for a second? I want to ask the table, how were you practically using this AI?” And I think you had the same thing in your dinner too, Andy, where people are just asking the question, I was reading through a quick recap of the conference today. And I heard someone say, “Hey, are we beating a dead horse at this point? There’s still too much emphasis on AI as the spearhead of the solution rather than treating it as an ingredient that enhances them, makes me roll my eyes as an IT guy. I think about it as the solve, not the headline.” Which is a really interesting point because, you think about search, you think about other solutions, and it really is a part of the solution, not the solution necessarily itself. it has to solve a pain point, right? Or it has to be part of a solution of a pain point. I thought that was an interesting perspective.

Andy: Yeah, it’s been overhyped. Which is unfortunate because I think there are many use cases right now that are emerging for AI that people are going to dismiss because of the overhype, mostly coming from the vendors who were trying to increase the valuation by adding a word AI to the end of it. And I was talking to somebody today who was looking at search technologies and I said, “There’s one company I’m talking to that AI is the every other word out of their mouth.” And they said, “This is the real differentiator.” And he kind of rolled his eyes and said, “You know what? I’ve actually told them when they come on site and meet with my team, stop talking about Gen AI.” Because it’s not resonating. You’re saying things that don’t exist today and he said, “I’m looking for practical use cases.” And I heard the same thing you did. People were asking me at the event, “Hey, how are people actually using AI?” And I want to hear how other people are doing this. So I would suspect that’s the number one reason people came to the event from a content perspective was just to understand what other people are doing and not doing with AI.

Brian: So we heard from Alice Peregory from Atlas Sign Industries. She talked about getting change management right, which continues to be something that a lot of folks are struggling with. She said one of the biggest traps of change management is trying to change too much, too quickly..This is really the thing that holds a lot of this digital transformation back is change management and failure to align. So taking things one step at a time was her advice. And then Andy, I heard something really interesting. Nick Ostergaard. Nick from Toyota Material Handling. He runs their digital solutions function. He talked about leveraging Japanese business practices for digital. And also he shared with me some things that were really insightful about learning how to manage cross-culturally. And he cited these concepts from Japanese business practices which have to do with, going to the source and gaining alignment building consensus. So even before you walk into a meeting, the decisions are already made and you’re doing these things one by one and then continuously improving. But one of the key things he said that was interesting that he learned and working with Japanese management is that, they’re continually asking questions questions questions questions, questions and it feels like they’re never making a decision. He said what they’re actually doing is not testing the business case as much as how, how resolute you are about making the case. How does Nick feel about this, almost earning into their trust. And is he really convinced this is the solution. And it’s like it’s almost like traditional B to B relationship kind of management where you’re earning the trust. He’s earning the trust of the Japanese management until he realized that it took him a lot longer to get to a solution or get to an agreement on a path, a course of action. Once he realized it, he changed his approach. Now he said he’s getting to decisions more quickly from management. So fascinating sort of insights and cross-cultural management, but also some lessons for for US business.

Andy: It’s something like a commitment due diligence, they want to know that you’re actually committed to them. If you make an argument and they ask a question and then it collapses. Well, you weren’t very committed to it. Plus honor is very important in Asian society. And so if you lie once, okay, that’s one thing. If you lie twice, three times, then, if you’re committed to something you’re not really committed to, then you’re consistently lying over and over again. So it’s kind of interesting insight.

Brian: So we had a debate: “Can you avoid driving into the data ditch” was the theme. This is a highlight of the entire event. And we had a great group. We had a group of practitioners, two teams, Andy, I sided with team inevitable, meaning that it’s inevitable. You’re going to end up in the data ditch. You have to prepare and assume that you’re going to have to clean up data later. We had very seasoned practitioners who’ve been in it for a long time. And we use this analogy of the water treatment process Andy, let’s talk about this for a second.

Andy: It’s very similar like water comes in raw and it comes out the other end pure and distributable to people who are going to drink it. Well, data is not terribly different. It comes in in a raw format. It gets treated through filtered and normalized and standardized and eventually stored. Here, we have a picture of a water tower in an environment that’s more like an ERP or a PIM. And it gets distributed out to internal customers and external customers. And the debate was, can you fix the data when it comes in raw or must it go through this expensive time consuming normalization standardization process? And the fact that the default is it has to go through that standardization process. However, if you do enough upfront thinking, this is the point our team made, you can actually fix a lot of this stuff at the source. And in fact, Nick told a really interesting story about telematics at Toyota Material Handling. He said, look, we get all this data from these forklifts about how they’re being used, when they need to be fixed, etc. Well, that data, if we didn’t actually do a lot of thinking upfront about how to organize and standardize that data instead of calling one thing 73 different things, we wouldn’t be able to use that telematics information. So they did the work upfront and now they have this multi-million dollar telematics business because they did the work on the data upfront. But it is possible to do this as opposed to resigning yourself to taking all the data and it’s always going to be dirty and we’re just going to have to fix it. So this picture of us on stage here.

Brian: Team inevitable said, hey, this, we’re getting data from so many sources that we just have to acknowledge the reality that, the data is not going to be clean ever we’re going to have to deal with this and it is different for a Toyota that owns all the channels and they, they’re a closed loop so they can do that because they own the data they own the equipment or, the platforms and things so it’s much easier for them. So we asked the audience to vote on this and we had my highly, highly accurate decibel meter and we asked the audience to clap and cheer and well, who won? Well, I didn’t win again.

Andy: Yeah, for those who can’t see the picture here. It’s important to show there are six people in front here. We’re all standing next to one another – me and my team on one side Brian and his team on the other side and we have a big box around with an arrow pointed at it saying “winners” and it’s not just a winner’s the debate. We’re winners in all of life.

Brian: So this was close though folks. I mean, we were very close on the voting and I think there’s an acknowledgement from both teams that the problem probably will persist. We talked about AI and we talked about, the fact that AI will has the promise to solve some of this, particularly normalization, but it’s not there yet.

 

This week on the Friday 15, Andy & Brian talk about the advantages and disadvantages of B2B organizations taking a cost-centered approach to investment.

While there are certainly benefits of focusing on cost (risk reduction, for example), when we polled our community 83% said that a cost-focused approach negatively impacted competitiveness.

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Brian Beck: Welcome to the Friday 15 with Master B2B. Your home and community for B2B e-commerce executives throughout the galaxy. Right Andy? Brian Beck here with Andy Hoar for our weekly Friday 15. We try to do these things in 15 minutes and it never happens. Welcome to Friday. We’ve got a ja- packed and fun topic we’re talking about today. But before we get into that, let’s do our breaking news. Awesome. So Andy, do you see this? This is a story in MDM talking about the manufacturing PMI hitting its lowest mark in 15 months. The PMI is a measure of performance of the industrial health of the industrial economy. It’s widely regarded as a good metric for this. And the article really talked about demand. So just a quote from it here, “demand remains subdued as companies continue to show an unwillingness to invest in capital and inventory due to concerns about federal monetary policy, inflation, things of that nature.” And this article hit right before the election. And so it went on to say, basically, it almost doesn’t matter who gets elected here in the United States. This is an indication of where the economy is. And there’s concerns about monetary policy from, at the time, both partiese. So I think it’s just another indication that the core of the economy is soft. And they talk a lot about manufacturing. Any thoughts or reaction here, Andy?

Andy Hoar: I’m giving it up on trying to predict where the economy is going to go. I mean, I feel like we’re living the joke about economists predicting 12 of the last 10 recessions. It’s like nobody knows what the hell is going on. The Fed – one minute, it’s lower interest rates, then next month they’re holding interest rates. We added 300,000 jobs then in the next minute, it’s 20,000 and then revising the numbers later. I don’t believe any of this stuff anymore because for predictions sake, I believe the numbers in the present are largely accurate. But we have this vacillating up and down… And I think what you’re seeing here, if I had to theorize, is that purchasing managers, when they don’t have visibility, they freeze like everybody else does. I think what this is. It’s not that they’re negative about the future. They just don’t know.

Brian: At least now there’s some sort of clarity in the government and the US, and I think that’ll help. And it actually plays really well into our discussion today. Our topic today is – Is an excessive focus on cost limiting digital innovation in B2B? For a long time, Andy, B2B companies have taken a really, really conservative approach to investments, particularly large investments and particularly digital investments. There are benefits of a cost-based model when you think about decision-making. And should a company focus its decision-making around costs and efficiency? So we define this, of course, going to the new authority on everything, ChatGPT. This is what chat GPT says this is. “Cost-focused decision-making is a strategic approach in business that emphasizes minimizing expenses and optimizing resource allocation as primary goals. In this approach, decisions are primarily based on reducing operational costs, enhancing cost efficiency and ensuring that spending aligns strictly with budgetary constraints.” It’s very data-focused, and we’re using data to determine areas where we can get more out of the organization. In some ways, PE (private equity) follows this model where they look to maximize the efficiency of the assets they’ve invested in. And we’ve talked to tons of people who are on the other side of this and they’re like, “Hey, so we just got bought by aPE firm.” And they’re hearing – lock it down, fix this, maybe replace that part of it, but we’re not going to upgrade anything because they’re hoping to whip it into shape with the existing technology and then just sell it to somebody else. So I wanted to know as we were putting this together, we tried to understand how many companies are kind of using this cost-focused approach in B2B. We found this interesting statistic from Forrester Research. It says, “Only 35% of B2B firms prioritize customer experience, meaning that the remainder still operate with a more conventional cost-focused mindset or a mixed approach.” So this implies that two-thirds of companies are using a cost-centered decision-making model for managing their business. It does have advantages. It drives operational efficiency. Resource Optimization, it optimizes there. Maximizes profit. It reduces risks, right? ,It prepares a company for a down economy or a softness. It creates higher productivity and it simplifies budgeting. I simplifies financial planning. There are truly some significant advantages here to this cost approach. Andy, do you see any others or any others?

Andy: I think this is all true, but we like to analogize things on Friday 15. This strikes me a lot as if you were a basketball or football team that focused heavily on defense. This isn’t trying to prevent the other team from scoring. And, boy, you could argue people say defense leads to offense, defense wins championships. That’s all true. But you have to score, too, right? You can’t just score and have really efficient defense and win zero-zero. So that feels like the issue, and to translate it back into the business thing, you can’t save your way into prosperity. You have to generate revenue. There has to be some offense here. And I think that’s probably what the next slide is about, right?

Brian: There are drawbacks. And we found this study by a company called Galileo. And a quote from it says, “Cost-centered companies often prioritize short-term cost savings over investments in innovation, research, and development. This approach can hinder a company’s ability to introduce new products and services, respond to market changes, or adapt or adopt new technologies, which ultimately may reduce its competitiveness.” We decided to ask our audience, Andy, on LinkedIn what they thought of this issue. And check this out. We asked this question on LinkedIn. “Does a conservative cost-focused approach prevent B2B companies from making long-term investments in important digital tools?” 83% of our audience said, “Yes, it does.” So, clearly, there’s a material impact here. And how does this come to life? In the B2B e-commerce world – this is a study from logik.io. It came out just very recently a couple months ago. 60% of B2B websites deliver a quote, “a generally negative experience.” So, this is turning into bad experience. In some ways you could make the connection here where companies aren’t investing what they should be. And we know this anecdotally, Andy, in talking to leaders in our space about where you have historically been constrained in terms of your ability to execute and deliver a great digital experience. But this is going to translate to other channels as well. The sales team, effectiveness of the organization, these digital tools, and perhaps the biggest one is that I think of when it comes to this as PIM and data. You heard this just yesterday from one of the practitioners we were talking to, Andy, that they’ve had a hard time justifying the ROI for investing in a PIM. And not just the PIM, but the data-cleanliness and getting that product data ready for a PIM. This is a long-term foundational investment you have to make. And if you don’t make it, it shows up in your website experience, in your ability to syndicate data, in your ability to sell your products, even for your sales force, your customer service team, your inside, outside sales, it happens. What do you think?

Andy: It’s like the old joke about the man with a hammer only sees nails. And not to get too philosophical here, but this is one of the issues. When you see the business as about minimizing costs, then everything is defined as a cost. And so when you were talking about the data thing, what I kept coming to my mind is how many people we talk to have said, they see data as something to be managed, cost-contained, risk-reduced, etc. When, in fact, I often argue, and I think you would agree, that data is what separates companies. The one thing that’s unique to every company is its own data. That’s it. Everything else can be built, borrowed, bought, or stolen. People, technologies, etc. But the data is really what separates one company from the other. And so why in the world would you see that as something that has to be cost-contained? I’m not saying just spend freely on it, but this is the mindset shift that needs to take place. And there’s no better example of companies that really understand the value of investment than in the tech world. And we’ve seen this double standard. We’re talking beforehand about this. Amazon. Remember back in the day when Amazon was competing against retailers and Wall Street kept cutting them slack saying, well, yeah, they lost money this year, but we believe in the company. Well, what they had to do eventually because there was so much complaining and the retailer said, look, this is not fair. We have to live by one standard. They get to go by another standard. What we’ll do is we’ll do investment cycles. One year we invest, the next year we read through awards and then just alternate years. And what happened to their stock in those years? The years when they invested and their costs were higher and their profit went down, their stock took a hit. And then the following year, no other change to the business. Other than they just didn’t invest as much, their profitability went up and guess what happened to their stock? Their stock went up. And so Amazon, I thought was sitting around playing games going fine. This year we’re stocking going up next year. We’ll go up. Would I do anything different except that we have investment cycles? So I would agree that many of these companies were treated unfairly. That’s true. And the technology companies get a pass on this. But maybe there’s a lesson to be learned here. The technology companies have to invest because if they don’t, they disappear. And so maybe the B2B companies need to think a little bit more like technology companies. I’m not saying become technology companies, but think more like it. And think about investment cycles because you can’t just spend your whole existence trying to save money and reduce risk to the point where you’ve got old technologies that don’t work and things finally fall apart and then the business is over.

Brian: Continuing the Amazon analogy, when Bezos founded the company, he talked about becoming the earth’s most customer centric company. And that’s really what the flip side of this is focusing on – the customer experience. And could this be a better path? And certainly it has been for Amazon. Here’s some data from McKinsey that I’m sharing – companies that focus on customer satisfaction can see revenue boosts of up to 10 to 15 percent compared to the competitors who do not prioritize customer experience and prioritize other things like costs. Just just the foundational elements that you need to succeed on a marketplace companies are having a hard time investing in those. Maybe the tide is turning here a bit… In our own research, Andy, we found in our State of B2B e-Commerce report this year 83% of B2B organizations were planning to spend more money on digital in 2024. So budget maybe is opening up at least based on our survey of our executives.

Andy: During the pandemic, everybody who was doing any business, B2C or B2B, was forced to really invest in these tools because they needed to change the way the business operates. So suddenly they started thinking a little bit differently because of this massive exogenous event called the pandemic. Maybe that mindset should be more permanent.

Brian: Yeah, we don’t want another global pandemic to move things along. But what’s interesting about this too in the same research, Andy, we found that the investment has to be more focused on ROI than ever. Compared to three years ago, the time frame in which I need to show an ROI on B2B e-commerce has what? 60 plus percent, 65 percent said it’s sped up. So does this put executives in a position where they need to invest in things that show a quick ROI and they’re going to direct their attention to those things versus making foundational investments in things like data or new e-commerce platforms or ERP upgrade – things that are more foundational for the business that might take 10 years to pay back.

Andy: This is the old mindset creeping back in though. I know stories about people who had this where they invested during the pandemic, they saw tremendous benefits with customer experience, etc. They even have online metrics and even the cross-channel metrics to show this. But some CFOs are thinking, well, we’ve got to go back to the old way of thinking, the pre-pandemic way of thinking. We have to have a very specific ROI around this. I’m like, do you apply this ROI to other marketing dollars spend? Do you know how much each one of those trade show dollars was worth? Do you know how much every one of those catalog dollars was worth? Do you do this with every TV commercial? Yet suddenly, all of a sudden, there’s ROI on this. I think part of the reason why is because there was such a massive investment in digital. They were catching up and now the CFO sees a big line item and they’re like, not to demonize CFOs, but they’re thinking, oh, we’ve got to slow this down. No, maybe you need to speed it up actually. Maybe you need to think differently about your metrics because I’ve heard this complaint many times from digital executives when they go into meetings, the CEOs, we track this down to the penny. It’s like, well, I can get pretty close, but those guys can’t track it down to the thousand dollars. You’re going to hold me to a different standard and the problem is, I don’t have a problem with double standards except that if you’re hurting the business because you’re holding these guys in digital to a different standard and you’re hurting the business as a result. That’s a big mistake.

Brian: Well, we just, we heard this last week. We had Dan from Zest Dental on. Dan Stepchew. He was talking about this in the marketing realm and how they’re dealing with all these privacy laws now changing. They can’t track the results of some of their marketing spend on places like Facebook and Google. And he can’t justify investments in marketing.

Andy: So what does that mean? So the answer isn’t okay, let’s find another way to measure this stuff or let’s maybe take some qualified leap of faith based on a model. No, it’s shut it down. We can’t measure any of this stuff in other ways. We’re still going to keep doing that. Why don’t we shut that down too?

Brian: Well, it’s been successful for years, Andy. It’s been successful for the last 100 years.

Andy: And businesses never change, right? Blockbuster really was right. Circuit City really was right.

Brian: Anyone want to buy some Sears stock?

Andy: So we feel like we have to call what we see here, which is this double standard hurts businesses and this old way of thinking doesn’t work. Not to say just spend freely without measuring this stuff, but you have to recognize that you’re living in a different world. And in a different world, you have to have different KPIs, different metrics and a different mindset.

 

With all the changes in how marketers track their digital marketing spend, we wanted to know how B2B marketers are dealing with this issue.

In this episode, we speak with Dan Stepchew, the Digital Marketing Director at Zest Dental Solutions, about how he’s shifting his digital spend and how he’s changed how he tracks the efficacy of his campaigns.

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Brian Beck: Welcome to Friday 15 with Master B2B. My name is Brian Beck. I’m here with my partner Andy Hoar. Andy, welcome to Friday 15. We have got a great episode today. Lots to talk about. How’s your Friday Andy?

Andy Hoar: Good. Got football coming up this weekend.

Brian: My team is so far out of it at this point. Oh boy. My poor Rutgers Scarlet Knights. We started strong and died quick. Hopefully we’ll at least get to a bowl game. Anyhow folks, we’ve got a great series that we’re going to be talking about today. In fact, we’ve got so much packed here. We’re going skip our breaking news this week and go straight into the topic, which is how do B2B e-commerce executives manage marketing tracking challenges? Andy, this is a huge deal. We’re talking about companies that have taken away the ability for marketers to effectively track what their marketing is actually doing. They’re advertising. So let’s define the issue first. Andy, you pulled together some good information and background on this. Why don’t we go ahead and dive in and explain what the issue is that marketers are dealing with?

Andy: So this is all about privacy. And it’s really critical to understand the foundation, which is this difference between first party cookies and third party cookies. So first party cookies are cookies that enhance their experience on a single website. And this is going to come into play here a moment. Third party cookies allow you to track activities across multiple websites. The Google ad network, for example, was predicated on this idea of third party tracking because there you can, as an advertiser, you can follow people across various websites. So just keep this in mind that Google is really predicated on this. Their entire business model is based on third party cookie tracking. And not just them, but others. But what got us thinking about this was this article we saw in the Wall Street Journal saying that Facebook was scheduled to lose $10 billion because of a single decision that Apple made – to change the privacy settings and allow people to opt out. This you had to opt in to it. And so in a heartbeat, it changed the entire scenario. So all of a sudden, all these people on iPhones were opting out of sharing their privacy information. And as a result, third party cookie tracking was rendered useless. So Facebook, people are paying Facebook to show these ads to people on their Apple devices. And when they made this decision, the advertiser could no longer see if that person actually viewed the ad right in a nutshell. That’s the cookie thing. And if they wanted to, there are people who had opted in, but they were a lot more expensive. So it caused two problems. One is the price of tracking people went up significantly. And the number of people went down significantly. They told a story about somebody who’s in the article whose cost of acquisition tripled or quadrupled overnight to find the same customer. So that was one story. The other story was the Google story, which is Google has gone back and forth on this one. They were going to disable cookie settings because a lot of GDPR in Europe has had an impact on this California privacy settings. There’s been a trend toward this and Apple made its big decision. So there’s a lot of pressure on Google to get rid of third party cookie tracking as well. And so they said, yes, we’re going to do it. And they announced this long lead time and then just kept changing their mind, especially after Apple made their decision because all those people advertising on Apple suddenly shifted over to Google. So Google says, not only are we on the fence about doing this, but all of a sudden we’ve got all this new demand coming to us. So what did they do? They changed their mind again. So they’ve gone back and forth and back and forth and back and forth. They finally decided to postpone the decision. They took the greatest decision to do absolutely nothing. So that’s where we were. So what is this sort of lead to? Well, one of the conclusions you can draw, and this has been an interesting one, is that there’s been a shift toward first party cookie spending, meaning spending money on closed networks, not these networks where you can view people across everything.

So what has happened, and you and I weren’t even terribly familiar with this, is the emergence of retail media networks, which by the way, this is coming to a B2B e-commerce site near you. But what are these things? Well, you show in the next slide, we’ve seen the emergence of things like Walmart Connect, which enables an advertiser, let’s call it a Procter & Gamble, to spend money on Walmart in a variety of different ways. They were always be able to do so with shopper marketing in store. But now it’s sponsored search on the website. It’s online display advertising, it’s offline media, in-store stuff we mentioned, you know, brand shop and shelf sort of stuff, at the point of purchase. And they recently about a year ago acquired Vizio, the guys who make TVs. They want to be able to advertise on Vizio through connected television smart TV networks. And sor Walmart decided to get stories about this. And you can see they advertise on their website that you can reach 145 million customers through Walmart Connect. And in fact, it’s led to the point where a lot of the brand advertisers are shifting money away from actual advertising to this, because Walmart’s a closed community. They can tell you – they don’t have to track people across multiple websites. There’s one website. Walmart. So that’s B2C. And as we know, everything starts in B2C and migrates to B2B. On the right side of the screen here’s o that neither you nor I had even heard of – Orange Apron Media. And I wish we could do a poll and ask people what that is. It’s Home Depot. So Home Depot now has a retail media network. And if you see at the bottom, it says Home Depot advertising means reaching 198 million individual customers online in our 2340 stores and they attract on the website 3.5 billion visits each year. So companies like Black and Decker, for example, are now looking at spending money with Home Depot. This is a direct result of what happened with Meta/Facebook and Google. And so this is where dollars are going. And we’re going to have a guest on here in a moment. He’s going to talk to something about this. So just to put some context around it, we’re talking about $20 billion inn B2B digital ad spending going to like 23 billion by 2026. These numbers are going to be higher than that. So it’s $20 billion. And there have been some early winners here. So LinkedIn has been a big winner here and Meta. So between the two of them, according to eMarketer, they’re going to dominate almost 50% of digital ad spending is going through LinkedIn and Meta. And so and then of course, these retail media networks are going to see spending there. But a couple of interesting things – LinkedIn, according to eMarketer is going to be almost 50% of B2B digital ads, which is video, etc. on LinkedIn. I always think about this – what did Microsoft buy them for a billion dollars? What a steal that was. I mean, how much of LinkedIn was spun off? How much would it be worth? Not a billion dollars. Probably a half a trillion. And Meta is doing a third of all B2B social ad spending. And then of course, no discussion about any of this is complete without talking about Amazon. And this surprises a little bit. I thought actually the number was even bigger. But Amazon’s B2B ad revenue this year are projected to be about a billion, which was shocking that it wasn’t actually larger than that.

Brian: Yeah, the number feels small to me. I think maybe it’s because it’s B2B specifically, right? If you look at their overall ad spend, it’s tremendous and they’re growing. And it’s the same thing. They are closed network, right? So just like the others, and so marketers are dealing with this. It’s a real challenge. And we have a special guest that we want to introduce to you today, Mr. Dan Stepchew, digital marketing director at Zest Dental Solutions. Dan, you are kind enough to join us today to talk about this impact on your business. Zest is a B2B company. Tell us, tell us a little more about Zest.

Dan Stephchew: Sure. Hey guys. As Andy said, everything that’s B2C eventually migrates to B2B and I did the same. So I’m also part of that. I came from a B2C background. Joined Zest about a year ago. So Zest Dental Solutions is a company. It’s a medical manufacturer, dental manufacturer that’s been based in San Diego County for at least 50 years. Big player in over dentures, specifically the attachments that go onto your implants. So whatever you need to do, they attach an implant to the denture. So you have an over denture. This is what they’re known for. About five years ago, we shifted to direct. So it was a traditional wholesale model, retail. The shift to direct occurred and they brought me in to take some of those B2C methodologies and apply them to the direct model.

Brian: Interesting. So you’re not, you’re not selling these products to consumers. You’re selling these to dentists. I mean, this isn’t a DIY product. I’m not putting that mouth.

Dan: Not yet. If I had it my way, it would be. There’s some regulatory concerns, but you’d be surprised. A lot of customers actually do shop for these things on Amazon.

Brian: So tell us, Dan, I mean, you dealt with this directly, this issue, right? What impact has it had – these changes that have been happening in marketing and tracking?

Dan: Well, this goes back to my B2C days when working with Meta or when it was Facebook, you’d be able to see incredible results that when iOS, I forget the version. When that was released, we saw that, like you said, Andy, the cost of acquisition sort. And that’s come down quite a bit. I think Facebook or Meta has been able to sort of figure out a way around that, especially using some of their new ad tools. But nevertheless, we had to get creative with how we spent our dollars and then of course, the pandemic hit. And it was sort of a one-two punch. And then a third punch hit when new privacy concerns, GDPR got involved. So these are all good things, by the way. I’m not against privacy, of course. I remember being able to see all the companies that were tracking you across the internet. And it was scary. It was alarming. But as a marketer, it’s concerning now that we don’t have all the tools that we used to have. And so we have to figure out how to get creative here.

Brian: You said your traffic in GA4 drop to Google Analytics, went through the freaking floor when this happened.

Dan: So in an effort to again, the best of intentions, we attempted to add GDPR privacy controls, allowed people to opt out of cookie tracking beyond the essentials on our site. And in doing so, most people decided not to allow cookies, including Google’s ad tracker. And yeah, our traffic numbers in Google Analytics, what we used to report up to leadership, went down by half. So we were faced with a conundrum there.

Andy: Didn’t you say, too, that it changed your KPIs? What you were reporting to the C-suite, and he says about website sessions, you don’t even report those anymore?

Dan: Yeah, I don’t even dive into it. What I’m trying to do is focus on revenue at this point. Whatever I can control.

Brian: So what has been the result of this? You just said you don’t track these things anymore. You don’t report on them anymore. What has been the impact in terms of your own ability to get an even investment for dollars to invest in this stuff?

Dan: Yeah, a great question. And that’s been the biggest struggle for me here is understanding how to get creative and the one way that we’re doing it is like Andy mentioned, these closed systems are able to report the data that they’re able to collect. So what we need to do then is we look at what I call in-platform statistics. So Meta, for instance, is still collecting the same data they were collecting before. So we measure what they give us against the previous period, and I report data. And again, that’s fine. It shows progress, but it’s a black box, right? It’s their data. It’s not ours. And that’s a big shift. And so I have to use all these different in-platform data points to paint the picture that we’re showing progress and additional investment is necessary.

Brian: So, B2B companies have historically invested in old school marketing – events and trade publications and things like that. How has this dynamic kind of shifted where your marketing dollars that you have are going as you look across your business? Will you go back to old school now because this tracking is not available?

Dan: Not if I can help it, but certainly there’s a lot of pressure from commercial teams across the board to reinvest those dollars back into, like you said, traditional platforms like sponsoring events at conferences, taking out, you know, media ads on their emails, for instance. And because those things used to work 20 years ago, that was the name of the game and then digital marketing sort of progressed forward. So now they’re able to punch holes in some of the reporting that we’re getting back from the ad campaigns that we’re investing in across all the different networks. So it’s, yeah, it’s been a struggle. I need to figure out a way to show when a customer clicks on an ad in Facebook or Google, they purchase. And I need to just unify that data in one place and that’s been a difficult uphill battle here.

Andy: But I’ve got to ask, your compatriots on the other side who are making arguments for what we used to call measured media, right? I always thought it was funny, but the trade shows, et cetera, they have the same standard of demonstration of ROI. So it feels like there’s still a double standard when you became slightly less able to establish the connections. They’ve never been able to establish the connection.

Dan: Never. Right. Yeah. And that’s my defense. And then we end up in a stalemate, right?

Brian: Well, you developed an interesting framework, Dan, that I’ll just share here real quick on the screen. You don’t have to go into all the details on this for time. But tell us how have you kind of worked around this? How are you making cases? What’s this framework?

Dan: So this all comes down to – how do we measure incrementality? So for every dollar that we put in… there’s a sales team here at Zest. They’re doing great work on the ground. But if we’re not measuring what they’re doing apples to apples, against what we’re doing digitally, then there’s no way to show incrementality with the dollars that we’re spending digitally. So what I tried to do here is to, is to get around that and use sort of directional points. So in platform revenue, what we can track online, are we growing? What’s the contribution margin? Traditional KPIs? And you know, this definitely helps. But, there’s still ways to poke holes in thesedata points.

Brian: Well, that’s the challenge here. And I don’t know if we have a solution, but certainly, looking at these kinds of metrics can be helpful. Have you shifted more of those sort of closed networks? Like we talked about earlier, have you put more into that versus into the Meta’s and other tools?

Dan: It’s interesting. We are looking at those. We just began investing heavily into Meta here. Traditionally, we weren’t even doing that. So, we’re just establishing the foundation into other networks beyond just the traditional sort of Google sponsored content. We’re an e-commerce site as well, right? So we spend a lot of money in Google shopping. So anything, in addition to that is brand new here.

Andy: So Dan, I have to ask a question about this. And I think we have to move to the next slide of this. But you said Meta and you said that this is mostly targeted at dentists, right? You said you have maybe a consumer component of people. Who are you targeting on Meta? Are you targeting my dentist on Meta?

Dan: Absolutely. Yeah, definitely. It’s scary that they’re probably on their phones looking at Instagram in between appointments, but they are.

Brian: So so we asked our audience about this: are privacy policies making ad tracking more difficult (like Apple’)s reducing or preventing your company’s use of digital marketing. Wow. 67% said they’re reducing their use of digital marketing and 17% said they’re preventing use of digital marketing. That’s 83% guys that say, hey, this stuff is preventing me from investing in or reducing my investments in digital marketing. Dan reaction instant reaction. What do you think?

Dan: Yeah, it’s a tragedy. It’s a huge opportunity for a business that can figure this out for us. If it’s not Google, it’s going to be someone else.

 

This week on the Friday 15 podcast, Andy & Brian talk about how much channel conflict fears should impact your distribution strategy (in short, it shouldn’t.)

They dig into 7 ways to sell direct while managing the conflicts:

– MAP and sales channel agreements
– Public vs private pricing (pricing exposed behind logins or inside custom catalogs)
– Assortment variations by channel
– Being mindful of who is selling
– Taking control in marketplace channels
– Provide digital assets and analytics to channel partners
– Channel monitoring and enforcement.

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Brian Beck: Well, good day everyone. Welcome to Friday 15. My name is Brian Beck. I’m here with Andy Hoar. And we are here to talk about some great stuff today. Our Master B2B weekly Friday 15 session. We’re rocking out today. Andy, welcome to Friday.

Andy Hoar: Yeah, it’s good to be here, and it’s good to have a conversation. And this is a good one.

Brian: It is a hot issue. We’re going to talk about channel conflict today. But before we do, let’s talk about some breaking news. Emarketer, I don’t know if you saw this this week. Voice shopping is not a major commerce channel now, but Ge.Y and Gen Z may change that with what EMarketer found – they published it this week. They found recent studies that showed that the use of voice assistance and voice related commerce amongst Gen Z, which is our youngest generation, just coming into the workforce is growing at about three times the rate as it is amongst other cohorts. So this is not something that should be ignored by B2B or really by any any sector of commerce. Voice commerce, while it’s been sort of played a second fiddle to many other types of commerce, it needs to be paid attention to because this will emerge as these Gen Z folks become more part of the B2B buying cohort. What are your thoughts?

Andy: To me, one of the best use cases is in B2B, somebody who’s out in the field, installing or whatever. They don’t have access to a screen and they need a part and if they could just talk to an AI bot and say, I need this part number. Great. It’s on its way or you can pick it up in two hours here. That’s just so convenient. You’ve seen these guys like plumbers and stuff. They can’t really hold the phone while they’re doing their job. So they can just hit speaker phone and reorder something. It’s a huge deal. So this voice recognition has gotten so good now that this is a viable option.

Brian: In some of our past debates and other events we’ve even played some of the voice recognition and it’s pretty amazing. There’s still a lot of things that we find lag time and things like that in the responses, but, there’s been some incredible advances with AI as it relates to voice recognition, voice response. So this is coming, folks, and something to pay attention to. This caught our eye this week. So our topic this week is one of the biggest we’ve heard constantly ever since we started this thought leadership series: Is channel conflict a good reason not to sell directly via eCommerce? Hmm. A very hot topic and let’s start by defining what channel conflict actually is. I’m just going to site Wikipedia here, Andy. Channel conflict, the way they define it – Channel conflict occurs when brands disintermediate their channel partners such as distributors, dealers, retailers, sales reps, by selling products directly to buyers through general marketing methods and or over the internet. This is a classic challenge. The opportunity exists particularly for manufacturers, but frankly, also for distributors, to sell and create their own private label products in the case of distributors or manufacturers, to go direct on eCommerce to the buyer that they’re traditionally relied on their dealer distributor. And this is an issue that has caused consternation because eCommerce provides a dramatic opportunity for many companies, but it affects everything, really everything from direct eCommerce, but also really even Amazon. So I’m sharing some statistics here. So my company Enciba that works with B2B product manufacturers on Amazon, we do a poll and every year – it’s from our pulse survey. In fact, we’re going through it right now for 2025. We asked questions like, Hey, if you’re not selling on Amazon, why aren’t you? Well, a full third, 34% said, we don’t want to cause conflict with our other sales channels. A top reason why they’re not selling on Amazon. They don’t want to cause channel conflict. The same thing holds true of other channels. And in fact, we got a comment on this when we posted this on LinkedIn, Andy. Joe Kovacs, co-founder of Brand Guarde, which does brand work for companies on Amazon. He said, we see most sources of channel conflict coming from uncontrolled eCommerce channels like Amazon and unauthorized sellers undercutting price and such on Amazon. So he sees how this can happen. And I see it too in our work with Enciba, where this uncontrolled channel can cause conflict. A lot of it’s due to price. Companies will get products, they’ll list them on Amazon, drop the price. It’s the only way they can earn the sale. But this carries over to the direct eCommerce channel. One of the companies that we’ve done work with, who sponsored some of our events over the past year, Logik.io. They did a study this year. And they found that conflict fear prevents direct selling on eCommerce as well. Nearly eight in 10 B2B websites that they surveyed – and there were hundreds of them -did not enable buyers to complete transactions online. That’s 80%. That’s one of the highest numbers I’ve seen around this. But I’ve seen numbers anywhere from 50 to 80%. Companies not selling online directly B2B. My goodness, we’ve got a situation here where companies are not taking advantage of the opportunity and due to channel conflict. What are your thoughts?

Andy: Well, this is this classic. This is not a new issue. But to me, the trap here is that people extrapolate from the present to the future instead of thinking from the future back to the present. That sounds like some sort of theoretical construct. But most companies that I’ve worked with in the last 10 years, they start with where they are today and they go, “Okay, this is what we want to be in five years.” But they always leave out of that equation. What are customers doing? And what will the customers want and what’s their behavior look like? And the one problem with all this stuff about selling direct is that there are actually definitely customers who want to buy direct from brand manufacturers. Period. End of story. That’s just not in question. I’ve done a lot of research around this. There are a distinct group of customers that want to buy direct to you. And by the way, not only that, but they actually want to pay for the privilege of doing so. They’ll pay a premium to do so. But all these brand manufacturers say, “Well, we don’t want to disrupt our channel.” I’m like, “Well, you know all of your distributors are doing private label.” So they’re selling their own version of what you’re doing. How is that not disrupting the channel? So there’s this illusion or myth that the channel is perfect and undisrupted. And I’ve been reminding people of this as have you for years now, we’ve got news for you. It’s already disrupted. It’s not that it’s every man for himself because you want to have a channel partnership. But there is that famous term “co-opetition.” There is something to be said for that. You need to find your place. Everybody needs to serve the customers in the best way possible because the customers are going to find it. They’re going to do it on their own. And if you don’t participate, if you don’t sell direct to them, somebody else will.

Brian: Absolutely. And you know it’s so funny because I’ve been in this business a long time and I started in eCommerce in the late 1990s. So I’m dating myself here. But I was on the consumer side. In the first, almost 20 years of my career, I was on the consumer side of eCommerce. I worked with PacSun, which is a clothing retailer. I ran their eCommerce business for a little while. If a brand that we sold did not have their own direct eCommerce, something was wrong with them. We felt like they weren’t doing what they needed to do to establish the brand in the marketplace. They weren’t present controlling their presence on Amazon. They weren’t doing the things they needed to do to build their overall presence – a rising tide floats all boats, right? If you’re out there and you’re controlling your overall presence in the marketplace and selling direct, as long as you have a thoughtful channel strategy as a branded manufacturer, then there’s not this is an accountability issue. It’s something that is expected or should be expected. I think B2B is going to get there. It’s just taking a freaking long time.

Andy: So because there’s still this perception that manufacturers make and distributors sell and service. And in general, that’s correct, but we just gave examples of private label distributors making products and where customers go to a brand manufacturer’s website and want to buy from them. How is that not a brand manufacturer selling and servicing to some extent? So again, it’s not as clean and cut as it’s always been. Your point is valid. This happened early on in B2C. Remember back in the day when the Procter and Gamble’s of the world were threatening the Walmarts to the world by saying, if you ever sell direct, we’re going to yank all of our Tide and Huggies and all this off the shelves. Well, the last time went to Walmart, they still had all that stuff on the shelves. S So we just all lie to each other and pretend the reality isn’t what it is. And as you show on the screen here, this is actually happening B2B. It totally has.

Brian: Today’s value chain is so much more complex than it was where the maker makes and the taker takes and resells to the end user, right? And the distributor. But today, the value chain is much more complex. You’ve got branded manufacturers that are selling themselves. They’re selling to pureplay eCommerce. They’re selling to Amazon and Marketplaces, also the multi-channel distribution. You’ve got the distributor now making private label product. You got distributors buying their suppliers. You see this happening all the time. So they’re vertically integrating. So they’re creating. They realize that there’s better margin, for example, in private label product. In my book I talked about this when we published it a few years ago. I think this is all what I call the age of transparency. You think about this on the consumer side. The consumer or the B2B buyer now has more power than they’ve ever had. And that’s actually a good thing in a lot of ways. I mean, just opens up. If you’re a manufacturer who differentiates on product, you just have to recognize this is all happening and take action on it and not sit on your butt, and have a direct selling channel. And embrace Marketplaces, sell directly on Amazon. Work with your distributors who are progressive in eCommerce. Not to the extent of ignoring the traditional channel. If you look at Andy, if you look at the leaders in their categories and consumer products, companies like Apple or Nike, what are they doing? They’ve embraced all this. They have huge direct selling channels. And you’ve got retailers clamoring over themselves to sell their products. Not every company can sell Nike. I remember this at PacSun back in the years.

Andy: Nike actually went too far in the other direction. Oh, they basically wrote off the channel during the pandemic and said, “Oh, we’re just going to sell off our stuff direct.” That was a mistake. So you can go too far in either direction.

Brian: Yes. I would agree with that.

Andy: The most important thing is you’ve got to acknowledge the reality here. What changed all of this was the fact that the internet made it possible for buyers to interact directly with manufacturers. That’s it. Before you had to go through a distributor, before you had to go through a retailer. How did you buy as a consumer or Samsung television direct from Samsung 20 years ago? It was impossible. But now you can go to their website and you’ll type in the word Samsung. You’ll go there. The same thing in B2B. And I think there’s still this perception that that doesn’t exist. That, oh no, the buyers all understand the way it’s supposed to operate. We make this stuff and they sell and it’s like, well then shut down the internet because when somebody types in the brand name for something like a 3M respirator, where do they expect to go? Oh, there’s a 3M.

Brian: Right. 75% of buyers are now millennials or Gen Z, guys. Listen, it’s a different buyer. That’s changed. So I love what Tim Peterson contributed in our LinkedIn discussion. President of the Speir Digital, what he said. He said distributor first or distributor only methods of selling are less preferred by buyers year over year. So in other words, things have changed. There may be some great value added services out there from resellers. But on balance, even folks who aren’t digital natives show in surveys and focus groups that they prefer to have less intermediation and would rather tap into an app or click on a site than deal with layers of people, etc. So what Tim’s saying is the same thing we’re saying here is that you know, get out of the way of the buyer. I worked with some manufacturers over the last few years, Andy, that have been very, very successful in growing their business. And their attitude has been, hey, we want to be wherever the buyer is in the best way we can be, we’re going to not ignore channel dynamics, we’re going to have a MAP policy, we’re going to have other things. But you know, we’re going to be in front of the buyer the best way we can. Because manufacturers get caught up on the fact that hey, you know, it’s only about price, right? It’s just this is just about price competition – or distributors do. It’s not necessarily about that. There are powerful incentives for a manufacturer to sell direct. They have more margin, for example. They could theoretically undercut price – other distributors – because they have more margin to work with. They make the product. There’s aren’t two or three steps in the way. But it’s not just about price. In fact, when you look at the data, it’s about other things. The top reasons customers are shifting buying online is not just about price. The top two reasons are that it’s more convenient to sell online. It’s faster. Over 50% of the survey by Forrester a couple of years ago said it’s not about price, it’s about these other things. People get caught up on the price thing. You can manage the price thing. But why do you think all these marketplaces and Amazon Business are coming in and taking all this share and these categories because they’re doing these first two things well faster, easier, right?

Andy: It is about those things and the reason it’s less about price than it’s in B2C is because you’re spending somebody else’s money. That’s number one. And number two, they’re a lot less price sensitive because you have a mission to accomplish here. It’s not like I’m buying a t-shirt for myself and I want to save a dollar on it. It’s because if I have to pay an extra three cents on a widget, but I can get it today and it enables me to earn more revenue today, a dollar today is with more than a dollar tomorrow. These are considerations for B2B companies because it’s a business. There isn’t as much fixation on price in B2B and again, that’s another mindshift thing. So you’re absolutely right about that.

Brian: So the question is can or how do brands sell direct and avoid conflict? And there’s a number of things that I’ve seen where companies can have a deliberate channel strategy while not ignoring what the customer is needing or looking for. So number one is having a minimum advertised price or sales channel agreements with your sales channel honored by everyone including the brand itself. There’s ways to sell on Amazon.

Andy: That’s a great point. It’s got to be 3P and not 1P, right?

Brian: That’s exactly right. You could still have a 1P program if you’re doing that well because then the rest of the channel and the rest of the market is selling at a reasonable price. But so yes, there are, that does have significant implications. But things like pricing too. When we think about price, taking it out of the equation where in B2B we have logins and that’s after the login, that’s where you see your customer specific pricing inside a custom catalog, things like that. So be mindful of how your pricing is displayed in the market. You can vary your assortment by channel so that you’re perhaps selling things on your own site that maybe you’re making product for a distributor that’s unique to that distributor. Being mindful who’s selling the product. So in other words, how and where are you selling the product and is it getting into the hands of folks who you may not want representing your brand, taking control of marketplace channels.

Andy: Yeah, that’s an interesting point that’s worth reinforcing. There has to be an enforcement mechanism in place. You can’t just put a MAP pricing strategy out there or talk about how people who divert inventory we punish and not punish people. I’ve always said take a demonstration event, take one person and demonstrate, with punishment. Set an example, but if you don’t have an enforcement program, I’m sorry, people are going to violate everywhere.

Brian: 100%. There’s lots of companies that come across, particularly in my Amazon work, that may have a MAP policy. It’s not enforced. No one cares. It’s not worth the paper it’s written on. Don’t even bother. So an enforcement takes the internal alignment. At the end of the day, this stuff also provides a branded manufacturer the ability to better support channel when you have good digital assets to distribute and syndicate analytics about what’s happening on your own website, what people are searching for. You can actually empower your channel. So these things work together. And again, to the point of not cannibalizing, but raising the bar for that. And Ryan Weller, thanks for your comment, he said terms and conditions usually have more teeth than MAP. And I would agree with that actually. Ryan, thanks for that comment.

Andy: Yeah, because it’s a contract, right?

Brian: And who’s selling it. Right, there’s all kinds of tricks to the trade behind that. In fact, Ryan, we pulled the comment from you from LinkedIn. So, thanks for contributing live here. Ryan is the Senior Manager of eCommerce marketplaces at Adidas. And also does his brand management stuff, professionally. So he said brands need to set guardrails on how they are going to prevent channel conflict. It’s likely that products that drive brand awareness need to be managed differently. And that’s kind of that assortment segregation argument Andy, right? We were just making for talking about. We also got a comment from Rick Wingender, director of integrated marketing at Mueller Sports Medicine. He said reducing contact points for customers is a losing strategy. Sometimes the distributor dealer is a better contact than the manufacturer. If you’re a dealer, what the PC industry calls VAR years ago, then you’re path to success by focusing on the value add. And there are plenty of things that manufacturers can’t compete with dealers on. And they don’t want to. But again, don’t be focused only on price. So, thank you, Rick, for that comment. I think it’s insightful.

Andy: Yeah, by the way, he’s absolutely right. This seems like it levels the playing field and actually in a way empowers brand manufacturers over distributors. Not necessarily. Distributors have distinct advantages. And he points out the fact that they can offer multiple products, the fact that they can offer services, the fact that they’re local, the fact that they have deep domain expertise across multiple products – this is the stuff they should be focused on. Those are the value-added services. But he’s right. Too many of them for so long have been just competing on price with other distributors. And they need to think it’s not a competition with other distributors exclusively. It’s actually a competition for the customer’s attention, which has a lot less time to do in B2B with price and more to do with those things you mentioned earlier in the survey, which is speed and convenience.

Brian: Exactly. So we asked our audience – Should concerns with channel conflict prevent B2B companies, particularly manufacturers, from selling directly to end buyers, 100% said no!

Andy: This has never happened. This wasn’t a small number.

Brian: It’s like 100 people who replied to this, right? It was a substantial number of people that voted. I was shocked that it was 100%.

Andy: I don’t know if we’re living in a bubble here or wishful thinking land. But, well, we talked about this beforehand. We’ve been doing these roundtables around the country and we’ve asked people what are the priorities for 2025? And one of the options is channel conflict. And it consistently this year has been in the basement. And I’ve even pointed it out, like nobody seems to be focused on it or care about it. You and I both know that that’s not true. But we think that people in the middle phase, the first phase was panic. We’ve kind of passed through that phase. The second phase is kind of reconciliation with reality. And a lot of them are like, oh, I think there’s probably some here, but I’m not quite worried about it because it seems to be taking care of itself. There’ll be a third and a fourth phase. But the next phase is reality. And that reality is going to be, wait a minute, we are kind of competing with these guys and we have to get smart about it. But nobody’s going back to the world of two-step distribution where we make, they sell. I don’t see that happen anywhere. And that may be the reason that people here aren’t as concerned about it. So, I mean, this gives me some hope. We’re going to move beyond this issue in a managed way.

 

This week on the Friday 15 podcast…

Andy & Brian discuss whether Black Friday, Cyber Monday, and the holiday season more broadly drive sales in B2B. Andy shares how the season is like the Super Bowl where even if your television network isn’t showing the Super Bowl, it’s going to impact you in one way or another.

That said, we hear from one practitioner who says that they’ve tried holiday promotions to no avail.

— 

Brian Beck: Good morning, afternoon, I don’t want to say Vietnam, I want to say the world of B2B e-commerce, Brian Beck here with Andy Hoar. It’s the Master B2B Friday, 15… nice fall weather outside, it’s the end of October 2024. Everyone, we’re excited to talk today about the holiday.

Andy Hoar: So Brian, did you just finish your radio show or are you going to start your radio show? Are you spinning the hits?

Brian: I am. Actually, yeah, let’s spin the hits, I don’t have any good hits to spin here, man. So no, it’s an exciting time, lots happening, we’re getting to the end of the year, elections around the corner, my goodness, lots of change, so impacting companies around the world. So Andy, great to be here with you, we’re here for Friday 15, but let’s hit our news first, Andy, I don’t know if you saw this but MDM just released some research, MDM is the Modern Distribution Management company that does research and their partners, they just released some research around distribution companies spending less on industry events and what they’re referring to is trade shows. Those traditional events with buyers and sellers getting together to swap products and make deals and things like that and the fact that what they found in interviewing 200 distribution companies is that those folks are spending more on things like digital media and other things and spending less on traditional trade shows. To me, it’s fascinating to see this but I see it anecdotally, too. In terms of the companies that I talk to that go to those shows and I go to those shows, you go to those shows sometimes, these are traditional tools or industrial products and just there’s less business transacting there and I think that’s a sign of the new buyer. What do you think?

Andy: Yeah, I think part of the issue is that these used to be places where you would learn about new products. Well, you don’t need to go to a physical location to learn about new products anymore so you can do that online and so there’s still this online and offline one-plus-one equals three sort of situation. But these events have to be about people learning things and learning about new products, and this isn’t really a great way to do it unless the products are large and you’re showing tractors or whatever that’s different. If you’re just talking about stuff that can be done online, then I think you’re going to have more of a struggle to get people to come now. With our events, which are kind of regional events and niche events, we’ve actually seen a growth in those where people are going after local connections, very specific and particular areas of expertise, but broad industry events where we get together and kind of the CNBC thing, I think those are isolated now to very, very large events like CES and Dreamforce and stuff like that, or really large industry events. But it’s the small ones that are great, the really big ones are great, it’s the ones in the middle that kind of struggle.

Brian: Yeah, we’re seeing that for learning purposes and new areas of growth like digital and e-commerce, we’ve seen consistent growth in those events over the years. It’s really the traditional ways of doing business for changing and this is a reflection of that. So anyhow, let’s get to our topic today which is does the Q4 holiday peak matter in B2B e-commerce?

You know Andy, this is something we’re going to revisit every year. We talked about it last year around this time, and asked questions of our B2B audience because it’s such a peak, I mean I’ve lived this myself and being on the B2C side of things for many years, it’s a frenzy, everyone is really heads down. All your e-commerce and retail folks are working really hard this time of year all the way through the middle of December, almost end of December, because a lot of businesses make, they call it Black Friday for a reason, that’s where companies move into the Black, this is where they make their money in the retail sector. So does this impact B2B is the question… We found some data – this is some data last year that I’m sharing here for those of you watching, for those of you listening, you know the cyber five last year, cyber five being the five days between Thanksgiving and Cyber Monday set records, total sales of $38 billion, 7.8% year over year increase, it was the biggest, Cyber Monday was the biggest online shopping day ever in the United States, I’m talking about 2023 now, and shoppers spent $15.7 million every minute. It was a frenzy. Analysts expect a similar kind of growth this year. The economy seems to be changing every day here, but anyhow this is some data that eMarketer shared a couple of months ago, I think in August, indicating they expect a 9.5% growth over 2023, and this is November and December numbers $266 billion, 9.5% growth. In fact as of now Andy, this is an interesting stat, 24% of consumers have already started shopping as of early October, and you know it’s this deal thing. I learned this in consumer retail, 81% of consumers are looking for deals and discounts during the holiday, and you’ve got the retailers out there and Ecom and Brick and Mortar investing heavily in things like social media to drive all this, 69% of U.S. e-commerce decision makers plan to increase investments in social media advertising this holiday, meaning 2024. So the top two things they’re investing in, over other things like supply chain, AI, diversified digital payments, etc, they’re really focusing on social. Again, this all begs the question what does this mean, is this even relevant for B2B, right, any thoughts on any reactions to the B2C data, Andy?

Andy: Well, not surprising, I think we’ve seen a transition away from offline to online, the pandemic accelerated a lot of that. It’s not new. The question is how does this impact B2B? A couple of interesting notes: One is there’s always been a “B2 Big B” and a “B2 Small B” when we say B2B. There’s also B2B2C, so those are brands. These two things are kind of inextricably bound. There are some pure B2B companies for sure, heavy industrial, etc, it’s not like you or I are going to decide to buy a hundred thousand dollar earth mover for the holidays, or maybe you did. I haven’t. But the reality is these companies not only make B2B products, they make other products as well, so there are companies like Toro for example. They make business versions, industrial versions of things, like mowers for golf courses. But they also make consumer products, and so consumers are primed for these things, the companies are primed for these things. It’s inevitable that there’s going to be overlap, so there’s the B2B kind of B2C, B2B2C, B2 Small B kind of a block. But there are companies that straddle those both. I mentioned Toro, Home Depot, Lowes for example, you worked at Harbor Freight Tools, you guys are mostly B2C, but you have B2B as well, so that’s on the sell side. But on the buy side, you’ve got people who put on this hat as consumer, and they would expect them always to take it off and put a new hat on for B2B, and it’s just not the case. So we live in an attention economy where you get emails all day long, you’re seeing deals, etc, and so if you see this as a consumer, there’s just too much opportunity for B2B companies to capitalize on that being primed for that. So whether it makes sense to do it or not is a different issue, but I think it’s inevitable and it’s inarguable that it’s actually happening because there are companies where we’ve seen it. Amazon’s an example of this. Global Industrial is an example of this – they serve a certain audience. Amazon Business, they’ve got consumers, people are paying attention to these things, so they can’t help themselves. But again, whether they should do it is an interesting discussion, but are they actually doing it? I think it’s an unequivocal, yes.

Brian: A lot of this ties in to your point, that the majority of buyers are either Gen Z or millennials now. The oldest millennials are now in their 40s, they are the majority of your B2B buyers, our younger folks who are all digital natives, to your point about the behavior, the consumer behavior, the consumer, the B2B buyer is a consumer who is a digital native and there is some level of expectation that hey, during this period of time, I want e-commerce deals. We just saw that data a second ago – 81% of consumers are looking for deals and discounts during the holiday. So yes, is this relevant, you know, of course it’s relevant in that regard. The question is what would B2B companies do about it. So we asked that.

Andy: One thing to mention about this is that obviously we need to point out there are two different types of buying scenarios in B2B. There’s planned spending, which is like spec-ing kind of spending, and then unplanned or spot spending, this doesn’t affect the first one. That’s not real, I haven’t seen evidence.

Brian: I’m not so sure, I’m not sure about that, but go ahead.

Andy: Somebody’s going to build a building and they’re like, we’re going to have a sale and stuff, so it accelerates somebody’s building of building plans.I don’t know, maybe? But on the spot market, for sure, this is what we’re really talking about, it’s the unplanned spending, but there may be an argument for planned spending.

Brian: I’m not so sure. Let’s think about it. I know that on its surface that’s what it feels like, Andy, but remember that things change as you’re doing projects, and if you have a budget allocated, I think a lot of this is driven by timing and in budget cycles more so. I’ll prove it to you as we get further into our data here, but it has to do with, I think, the unused portion of budgets. And the fact of the matter is, those folks need to use that, and in the planned spend portion, that does apply. So those are budgeted dollars that are allocated to certain categories. So guess what, when the budget’s coming to an end if you don’t use it and it goes away. So that’s where I think we’re going to, we see a lot of this behavior manifesting, less to do with holiday, but we’ll get into that in a second. We asked last year – our community in 2023 – Do cyber Monday and Black Friday, the cyber five, have a material impact on B2B e-commerce sales, or just B2C? Well, 63% of the audience a year ago said, yeah, it does affect us while 37% said no. So the audience, the community of ours believes that this, there’s a real impact here. Here’s what Justin Rinaldi, director of marketing e-commerce at SafetySpeed Manufacturing said in our Forum.

Andy: Yeah, just saw him days ago, Minneapolis actually.

Brian: Oh, that’s right, he was in Minneapolis at our roundtable.

So Justin’s been very active in our community, thank you Justin for your contributions to the conversations. He said, “we see a slight increase in sales during the holiday period, primarily because a lot of smaller businesses have use it or lose it funds, and these are the main catalysts for cyber week spending.” Interesting, so more to do with budget. When I saw his quote, Andy, I asked myself the question, well, okay, but you know, use it or lose it, so how many companies actually have cycles that are annual? I asked, of course, ChatGPT, which is the authority of everything now, used to be Wikipedia, now it’s ChatGPT. I asked how many companies have fiscal years or calendar years, it said approximately 70% of US companies use a calendar year as their fiscal year, and this is especially common to Justin’s point among smaller companies and without significant seasonal variations, in their business. Andy, is this peak behavior really just an illusion? That it’s not about the holiday, it’s about budget cycles, what do you think?

Andy: I agree with you on that, but some of them kind of draw the line between the budget cycles and planned spending. So I’m building a building, and I’m going to decide, based on Christmas sales, whether I’m going to put certain wiring in the building, I mean that’s what I’m kind of curious about.

Brian: Andy, do you think those projects work perfectly and all the spend happens right when it’s expected to? No, that planned spend is allocated to budget years. And if your budget’s going away, you’ve got to use it. You’re going to buy it in advance, you’re going to buy it before the year’s out.

Andy: I do see that point about the budget cycles, and the user will lose it. I also think it’s the case that some organizations buy like consumers do, and they’re getting deals from retailers, let’s say, on products, and so what are they going to do? They’re going to think to themselves, “I got all these power drills at Home Depot on sale, and then yet I go over to Grainger and Fastenal and I buy the same power drills and they’re not on sale?” It puts pressure on Grainger and Fastenal to put those things on sale, to compete with the retailers.

Brian: I agree with that, I think some of this is also self-fulfilling, and it’s pulling demand forward. We used to say in the retail market, we want to stop discounting so much, we want to sell more at a regular price. Tthat was like the mantra of every freaking retailer I ever worked with, because everyone’s trying to get their margins up. Well, B2B seems to be giving away a margin that they may not have to, Andy. To your point, look at this, last year, Global Industrial offered, this is a Cyber Monday sale that I’m showing on the screen here, and for those listening, it says,
“shop, click, save 20% off, extended to Friday.” That sounds very consumer. The question is though, is this self-fulfilling? Meaning that they’re doing it because they think they have to, and because, obviously the majority of people think this is important, it influences them to put their own sales up, just to your last point, right?

Andy: Before, and they’re seeing your favorite thing, which is, they’re seeing people steal, ready for this, wallet share. They’re studying it and found that they’re losing to retail competitors on those particular days, and to blunt that, they’re doing this.

Brian: No, that’s a good point, and in fact, we looked at, we asked of course, right before our broadcast today, we asked ChatGPT, sorry, and everything, hey, does Amazon Business run deals during the holiday? And ChatGPT of course answered this, yes, Amazon Business often runs deals and promotions for B2B, including during the holiday season, because around major events like Black Friday, Cyber Monday. And while the promotions aren’t always as heavily marketed as consumer deals, they aim to support businesses looking to restock, upgrade, or prepare for their own holiday demands. Amazon Business is doing it, obviously Global Industrial here with this example. Rick Wingander said, who is the director of Integrated Marketing at Mueller Sports, and again, Rick, thank you, you are contributing frequently, we appreciate that, “B2B sellers provide promotional incentives to customers to make their own numbers before the end of the year.” Thank you for that, Rick. And we also got a comment from Dan Stepchew, who runs digital marketing, the senior guy at Zest Dental Solutions, which sells dental products. He said, “there’s a good enough number of customers who call on asking for Black Friday deals, so it seems there’s some spillover from the retail culture to justify some additional promotions and ad spend to capture that subtle spike.” He went on to say, this is how we do it – we integrate winter sale across all of our channels, the site, emails, SMS, social, social, this is a business, business company, and we send it to all our sales reps. So it’s not just digital, they send it to their sales reps to close deals, and pull forward repeat orders.The question is, is this self-fulfilling, and in some ways our community is saying, hey, we’re buying into this, and they’re putting out promotions in B2B, what do you think?

Andy: Well, this is interesting with the dental stuff, there’s a third reason for you to lose it, because people have deductibles that are going to expire at the end of the year, and so the dentist, that’s one of their busiest times of the year is at the end of the year, when everybody’s going to have their deductible flip, so it’s an accentuation of what you talked about with the user to lose it. I’m going to go back to Amazon for just a moment. Amazon’s kind of an interesting case study. And the chain of effects, because Amazon Business, when it was Amazon Supply, would never have kind of done this sort of thing. Because Amazon Business is now part of Amazon, and Amazon is doing this stuff, there’s subtle pressure on Amazon Business, either opportunistically or otherwise. And then of course Amazon Business because it’s such a large part of B2B now, is putting pressure on at least the dot-coms of the traditional distributors, like the Graingers, the Fastenals, and this is where you get this follow-on effect, right?

Brian: Yeah, that’s true, and this by the way, so these folks need to kind of feel like they need to participate, but not everybody does, I mean you think about, like we got this comment from Ben Geyer, the digital product manager at Caterpillar, what does Caterpillar make, Andy?

Andy: They make giant equipment, right?

Brian: He’s also a Forum member by the way, he said while some of our North American dealers take advantage of Q4 timing to put offers out there, any results have been insignificant. So I think there’s a lot of category variants in this behavior as well, even if they put out deals, if it’s something like a, I don’t know, like an earth mover to your point, you know, earlier, maybe it’s not going to move even if we do offer deals. So you know, we wanted to ask again, our audience, Andy, this year, what do you think is going to happen? So we asked the question, “Does Q4 holiday peak and consumer shopping impact B2B e-commerce?” And guess what, 78% said yes, this is a LinkedIn poll we just put up this week, 22% said no, no impact at all. I think you’ve got to look at your category and make a decision as to whether it’s something that’s meaningful for you. You need to look at your competitors and see if they’re doing something to your point so you don’t lose wallet share. But to me, the bigger driver in all this is more about budget. Any final reactions on this point, what do you think a business should do about this?

Andy: You know what, it’s just inevitable spillover because it’s such a large event, it reminds me of the Super Bowl. The Super Bowl is on television, every other network is just programming either really nitchy stuff or running repeats or what have you.Is everybody in the United States of America watching the Super Bowl? No, there are plenty of people who aren’t into football, but you can’t really be unaffected by it, right? And so whether you like it or not, you have to think about it. And I think that’s where B2B is with regard to the holiday season. It’s just such a large event, in addition to all those intersections we talked about, the gravitational pull is so large that you’d be almost forced not to try and take advantage of it, if you can, like Ben’s point at Caterpillar, $300,000 back hoes or whatever it would cost is not going to be affected by it. But there are adjacencies here and maybe some parts of the business are affected by it.

 

This week on the Friday 15, Andy & Brian talk about the marketing challenge B2B companies have with attracting younger workers, and some of the strategies that have worked.

“The issue is a messaging problem, it’s not a reality problem. B2B offers many of the things that Gen Z is looking for – B2C talks about it, but B2B actually offers what this generation wants.”

They discuss how companies have tried advertising with NASCAR, building relationships with local colleges, winning “best place to work” awards and more…

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Brian Beck: Welcome to Friday 15 with Brian Beck and Andy Hoar, your co-host in our weekly Friday sometimes 15 minute podcast. Anyhow, welcome everyone to Master B2B. We’re here to talk about those crazy kids, Gen Z, right, Andy? We’ve got some fun topics on tap for today, but before we do that, Andy, we really need to just share something on our breaking news. Amazon introduces vendor managed inventory – vending machines sitting in facilities around the country and the world. This is a traditional way that B2B has gone to market, thinking about companies like Fastenal, Grainger and others, where inventory is sitting on the edge, sitting right next to the use of the products and their resupply, just like vending machines are. And Amazon is now in this business, Andy. This was just announced at the Amazon reshape conference in Dallas. What do you think?

Andy Hoar: What I would say is that for Fastenal, in particular, they have thousands and thousands of these vending machines on work sites. And so, you just order a glove on the phone, you go to the machine, you pick it up, but there’s a whole supply chain around this, like who’s going to stock these machines? Who’s maintaining the machines, etc. I don’t know that part of it. I don’t know if we know the details. Even if Amazon is building the machine, I doubt they would contract with somebody. But let’s see how this works. But I think if I’m a Fastenal I’m a little concerned here because they can be in a lot of different places. Plus all those workers already have Amazon apps. So they’re starting with an advantage here. But we’ll see how this plays out. What are they going to carry in there? Is it the standard kind of fast moving products?

Brian: I can tell you. Andy, if you look at the assortment that Amazon carries, Amazon Business, It dwarfs the assortment of most distributors and the category leaders in those categories. Electrical products.

Andy: Yeah, but they can sell them all in the same way?

Brian: No, of course not. No, but it goes to what we’ve talked about in prior episodes here, Amazon is a supply chain company. They have supply, global supply chain services, global supply chain solutions. They’re selling shipping services. They’re bigger than FedEx and UPS. Now in the US market, they are doing all the way back for global sourcing. They have solutions all the way through. This is the AWS playbook. This is the Amazon Web Services playbook for infrastructure and supply chain management. They’re in this business, make no mistake. So yes, your traditional distributors need to be aware and paying attention to all this. I’ve been saying this for years. They have to be paying attention. It’s fascinating to see this. I kind of thought it might be coming, but now here it is. All right, so let’s get to our topic today. We’re going to talk about what’s the best way for companies to convince younger workers that B2B is a good career bet. We’ve been running this theme for a couple of weeks now, Andy. And we found some really interesting statistics when we surveyed our audience. You know, we did a survey last week and we asked the question “Is B2B destined to always be Gen Z second choice for employment?” and 65% said yes… Oh my goodness. So how do we make this industry attractive to this new generation of workers who are now in their 20s, right? So many of them are entering their, or well into their,– 20s and they are now the generation that’s being hired into entry level jobs. As we discussed on our podcast last week, B2B does have elements that Gen Z looks for, things like work life balance, diversity and inclusion, mental health awareness, career progression. It checks a lot of those fundamental boxes. I think Andy, you found some additional research here.

Andy: The issue here is a messaging problem. It’s not a reality problem. We’ll talk about here in a moment because B2B offers many of the things that Gen Z is looking for. In fact, in greater quantity and higher quality than some B2C companies, which only talk about it, but B2B actually does it. You know, that statistic about the 65% say it’s a second choice. We’re not surprised by that, but we’re shocked that it isn’t shocking more B2B companies. And this is some additional research that we found from a company called Ripple Match, which actually has studied Gen Z pretty extensively. And they award companies for achieving certain dimensions of the business that appeal to Gen Z. And so, what’s funny is that their stuff is very similar to what we talked about, which you just showed on the screen. Gen Z, again, is a theme here. They want to learn. They’re very interested in training. Many of them graduate from college, not having had a lot of exposure to these businesses or business in general. And so, they’re eager and anxious to work, but they’re not quite sure what it is. So, training and development matters a lot. If you just throw people into the deep end and say, “Hey, you can make a lot of money here, but you’ve got to figure it all out on your own.” Again, we’re making broad generalizations here, but that’s what this research is about. Company culture matters. They don’t want to work in highly competitive environments where they’re cutthroat, just ask the banking, investment banking industry, how that’s working for them or high tech, as we’ve talked about last week. It only attracts a certain type of person. And I think en masse, they struggle to get Gen Z’s to actually want to work and stay in those companies. B2B companies are more familial. They take things seriously. They expect you to be there for more than two years and hop off to another circumstance. So, there’s more endurance about it. But, you know, RippleMatch said that the well-being and the company culture really matter. Another big one is financial security benefits. This is the generation that came of age, let’s say, they’re in their 20s now. They were kids and they saw their parents struggle with the financial meltdown of 2007. And so, they don’t want to repeat that. We see this every so often in various generations, like the children of the depression era, kids were more conservative with their cash, et cetera. This is what we’re seeing. So, this generation really wants companies to think about 401(k) programs, retirement programs, making sure that there’s a safety net for them. And so, that’s another dimension. And the last one, of course, is very popular. This generation is concerned about diversity, equity, inclusion, and being an inclusive company. Not seeing differences, differences, et cetera. And it turns out, the reason we knew about this one was because Grainger actually was named one of the Next Gen 100 by Ripple Match in 2021. So, it is possible for B2B companies to appeal to Gen Z, and this is a case in point.

Brian: And why were they named, Andy? What kinds of things do Grainger do?

Andy: Well, they actively promoted these things. They sought these awards. They have an office where they have people who are focused on these things. That’s what you have to do. You can’t accidentally get these awards. You have to make an effort. And so, they tic the boxes around learning development, 401K and retirements, the DEI stuff, the diversity equity inclusion. And it’s a family environment. B2B gives you opportunities that you’re not going to get B2C.

Brian: But it’s marketing, right? I mean, essentially, you’re saying here that Grainger is effectively marketing to this next generation the things that matter to them. And that’s why they won this award.

Andy: By the way, interestingly enough, in this case with the next company, we’re talking about two. These are their customers. Last but not least, what about Grainger? Grainger has been at this a while. Again, they didn’t accidentally get themselves into this. They intentionally sought these awards. Because in 2018, they actually won an award for Gen Y, which is the generation prior to this, as a good place for millennials to work. So this is a continuation of a theme. They’ve invested in this stuff. They’ve appealed to it. And they’ve won awards and they’ve delivered. Fastenal is taking a different approach. We don’t have insight into everything Fastenal is doing, but just from the outside looking in, this is what we saw. Fastenal is heavily invested in NASCAR and NHL, which by the way, appeals to that younger generation on two levels, one to work there and two, as customers. I’m not sure if this is more about appealing to them as customers or as employees, probably a little bit of both. But certainly, this is a step in a certain direction. This appeals to Gen Z men, right? But this is not the only thing they’re doing this year. And I’m not sure this is the first year, but this year, they released an environmental, social and government, environmental social and government report, ESG report talking about how Fastenal cares about the environment, what they’re doing about it. This is the kind of stuff that appeals to Gen Z. So they’re waking up to this as well.

Brian: Yeah, it’s interesting, Andy, to see – this doesn’t come naturally,I don’t think, to a lot of traditional B2B companies, particularly the leadership that grew up in a different generation. So I think it requires companies like Grainger and Fastenal to be very intentional about it to appeal and really market the things that already exist in the company, those elements that do appeal to Gen Z. And so we asked our community about this and I wanted to share one response – Betsy Ruderman, who is a senior manager, of digital at Zurn Elkay and she’s also an adjunct professor at Marquette. She teaches Gen Z, … this is an interesting quote, in one of our round tables in Milwaukee…she said, I was talking with Matt Hutchins, who leads e-commerce at Direct Supply which is a home healthcare – Equipment manufacturer and distributor for senior living. So Matt Hutchins runs e-commerce with Direct Supply and told him what a great job they’ve been doing at becoming a sought after employer among her students, which is not an easy thing to do in some of the less sexy areas of B2B like, well, there you go, senior living. What I think they do well, referring to Direct Supply, is consistently being on, being present on campus, and they have a dedicated university relations employee who is phenomenal. So they’re making that really deliberate effort to be in front of this market, being present on campus and marketing themselves, right, Andy?

Andy: This is a theme that we saw throughout a lot of the comments that we got when we posted this and said, hey, what are you doing to attract Gen Z? This is particularly interesting because Betsy is also, like you said, an adjunct professor at Marquette. So she lives in this world. She teaches the students there while also being on the team at Zurn Elkay, which is the water management company. And so she took the opportunity to recognize Matt and Direct Supply for the job they’re doing because she’s seen the other end of the spectrum. That’s what it took. You have to have dedicated professionals. As you said, they’re on campus. They’re appealing. And they’re taking something unsexy like senior living, but it probably ticks a lot of those boxes we talked about earlier.

Brian: Yeah. It’s a good place to work. You can learn a lot. They’re good people there, et cetera. Yep. So Dave Allen. Dave Allen, Director of E-Business at Sager Electronics. He had an interesting point of view here. And he was actually commenting on Betsy’s comment in the forum. He said at Sager Electronics, we can attribute much of our success in recruiting recent grads to our internship program, which is very similar to how Betsy Ruderman described the program at Zurn Elkay. Another thing that helps is that– this is still his quote– that helps is that being an electronic components distributor, many of the parts we sell end up in something cool like robots and race cars or in something useful like advanced medical devices. Again, this stuff, goes back to the points you made earlier that we saw in that research, which point to the fact that these elements, which B2B again already has, in many cases, they’re just– they’re marketing them, right? The internship program, the value of training to Gen Z, apparently is very high. So companies like Sager are developing those things. They’re leaning into it to attract the right employees. Any thoughts on this one?

Andy: I think good customers are also good employees. And I think that’s what he’s saying is, we saw stuff that people like and they like to use and maybe they’re consumers of these things. Maybe they have these robots either professionally or personally, and then they want to work at a company that’s distributing those things. So this is exactly the point. And we saw this too with our last comment from Justin Renaldi, who’s also in the manufacturing space. He said, working for an industrial manufacturer, I’ve engaged the younger generation by building relationships with local colleges. I’ve also had good success spending three to four days a year speaking with classes at local high schools. As local high schools are also giving our brand priority and projects that used to go to our competitors. Now that’s a very sharp idea, which is, hey, I’ll come speak at the school. In exchange, why don’t you guys buy our products? So that’s a good way to promote not only working there, but also becoming a client.

Brian: So Andy, we asked our LinkedIn community, what’s the best way for companies to convince younger workers that B2B is a good career bet? We wanted to ask the question to a broad audience. And number one, we offered four options. Number one option, and answer that question was, emphasize work life balance, 55%. So there’s a real value in that to this cohort. 25% said emphasize the importance of the role I’m getting into. 20% said get cool, voted for get cool, tech, funky offices. 0% said focus on the work family, meaning your colleagues and hey, we’re going to be a family here at work. So I guess that doesn’t have much value.

Andy: The work-life balance one is interesting because when I was coming out of college, I don’t know if you had the same impression. But if somebody said we have a proper work-life balance here, I would’ve thought, “so what? I don’t care about that.” But it is clearly something that has worked its way into our society. I think it’s the Europeanization of American businesses, too, where you get all the time, like, oh, they have a four-week, six-week vacation in Europe. I want one of those, too. And so younger generations usually have to earn that over time, but younger generations think they get that right away. So that’s the way it is. Well, but you know what’s interesting about that, too, is that when you think about other places, other types of employment, you mentioned financial services are working on Wall Street or even consulting or things like that. Choices that people have, B2B can do that better than most of those other categories or a lot of them. The work-life balance is a real thing with B2B companies and a lot of them, of course people say not in mind, but that is really something that B2B can offer. And I do hear that. And it’s just why you do see longevity and have employees at these places. There’s truly that balance there.

On the Friday 15 Podcast, Andy & Brian talk about the challenges B2B companies have hiring junior staff out of college.

Are B2B companies able to offer the opportunities that Gen Z’ers want?  And if so, why don’t members of Gen Z know that?

— 

Brian Beck: Welcome to Friday 15 everyone. My name is Brian Beck. I’m here with Andy Hoar, my partner in the Master B2B e-commerce community and thought leadership series. We welcome you to Master B2B. Happy Friday Andy, good to be here. We’ve got some really interesting stuff. In fact, Andy, our breaking news today has something to do with robots taking over the world. And here they come. What is this about?

Andy Hoar: So, we’re looking at robots from Elon Musk. Robot Army is going to show up and serve us drinks. What’s going on with this? Well, you know, this isn’t a real news broadcast, but it kind of felt a little bit like it this morning because we had a whole thing planned for the beginning and then we saw this and we’re like, we got to rip it up, new breaking news. So, yesterday, which I think might go down in history as a very momentous day in the grand scheme of things, October 10th. Elon Musk announces that the Optimus robot is finally here. They’ve been talking about it for a long time, but nobody’s really ever seen it, heard it, you know, in fact, he even joked that they used to dress people up in robots to make them look like this so they can fake it. But that’s not real and he launched them yesterday in a big Hollywood-like production thing. And all I got to say is, oh my God, if you haven’t seen this yet, you need to go watch the video. There’s videos of these guys, but essentially he opened a world where we’re going to have robots living amongst us, serving our food, cleaning our houses. Babysitting your kids, walking the dog, all sorts of stuff. It’s stuff that humanity used to do. Bu this just broke yesterday and that’s why we had to say something about it. And actually, the funny thing is we were looking at this as, hey, this is the kind of thing where B2B may be an early adopter of this stuff because these robots are already working in factories. They may just come forward. And so it might make it a cool place to work. But on the next slide, if you haven’t seen it yet, you’ve got to go online and watch at least one video. And it’s a video of this guy who’s not exactly the best spokesperson for things. But he’s talking to one of these Optimus robots. And you just don’t, you can’t believe it’s not a human. And that’s all I’m going to say. You got to check this out because it’s incredible. And a year or two ago, I think people would have thought the whole thing was fake. Like it was an AI video. But after ChatGPT and all the interactions we’ve had with these technologies, where it’s natural language, et cetera, you can now look at us and go, oh, yeah, I believe this. And that’s what’s stunning.

Brian: Yeah, this is amazing. Growing up, Andy watching movies like Blade Runner, where people are interacting with robots essentially. This is becoming a reality. It’s really, really fascinating. A little scary, too. Elon Musk is really interesting because he does make his own sort of thing happen. He doesn’t ask for permission to do anything. We’re chatting about that prior to our Friday 15 today. He just kind of goes out and does it. As a personality he’s also going to go down in history as someone who is a true innovator, just like Jeff Bezos and others in the conversations.

Andy: He does. Howard Hughes. And they’re all crazy when they get older. You know what I’m saying? Let’s see what happens.

Brian: The Spruce Goose comes flying in…Well, you know, this is fascinating. You know, it has implications for our topic today, which is – Is B2B destined to always be second choice for employment for Gen Z. The Gen Z folks, Andy, they’re moving into the workforce. You know, they’re in their 20s now and they’re taking entry-level positions. And this is a really interesting topic and it kind of comes out of some of the topics we’ve discussed in our recent Friday 15 episodes. And we asked the question, what are actually Gen Z’s career aspirations? What are they actually looking for? So again, Gen Z is the younger cohorts. Those folks, I think it’s between 12 and I think 25, 27, somewhere in that age range, if I’m not mistaken. So the younger portion of the workforce, obviously the 12-year-olds aren’t going into full-time employment yet, at least not in the United States. However, you know, what are these folks looking for? Well, you know, it’s interesting looking at statistics from a variety of sources here. This is some data from Morning Consult with the trade and industry development group. Says, you know, number one, work-life balance trumps job security. So they’re looking for, you know, that age-old, you know, hey, we want to be able to live a life at the same time we’re working. And we don’t honestly care. And I don’t know how different that is necessarily from how Gen Z or Gen X, my generation felt when we entered the workforce, but what’s interesting here is what kinds of jobs were they looking for? The top jobs, media and entertainment and healthcare are the top target industries, not our traditional B2B industries. 57% of Gen Z’ers said they would like to become a social media influencer, which is interesting.

Andy: I’m surprised it wasn’t higher than that, to be honest.

Brian: Everybody’s looking for, you know, there are 15 minutes of fame. And again, maybe if we had social media when I was coming of age as in the 20s, I would have said the same thing. Of course, Andy, I wanted to be a rock star, but as a piano player.

Andy: They’re still time, Brian. You’re going to Cleveland next week. They’re still time.

Brian: That’s right. Rock and roll, hall of fame, here I come. And then nearly 40% of Gen Z’s have both a job and a side hustle. That to me, that’s a new thing, right? That shows some, entrepreneurialism and shows some sparks, some initiative. And then we looked at what are the top preferred employers in those categories. One of the things that jumped out is of course tech positions, and company’s like Google, Amazon, Apple, Disney. What’s not in here is a lot of, guess what? That traditional B2B industries like, oh, I don’t know, HVAC, electrical plumbing, building materials and all the traditional chemicals and metals that our audience are leaders in these categories.

Andy: Yeah, banking and stuff like that. The auto industry, those are at the bottom of the list. I mean, when we were younger, those were kind of the rock solid industries. You wanted to go into banking or the auto industry or, you know, even retail. Those things have declined. Even some of these famous brands like Sony and Nike, Starbucks, they’re well down this list. So we’ve known this for a couple of years now. Everybody wants to work in high tech. Maybe that has maybe peaked and started to slide a little bit. But what people don’t realize is to work at Google and Amazon and Apple is not a cakewalk to get in the front door is quite an undertaking. I used to go into Silicon Valley and I know people who had 20 interviews for some of these companies and still that told them. For Apple, definitely one to two percent of candidates are actually hired. Now, they probably get a lot of people who want to work there. But it doesn’t change the fact that you don’t just walk in the front door. You have to be very well educated. You have to work your tail off. You basically have to be at the place, now with return to work mandates. You got to be there six, seven days a week. And so it’s a lot, it’s a hard job. It’s sexy and it’s fun. And everybody’s got an iPhone, but it’s a lot of work. And then Google, just as another contrast, the interview process can take up to seven rounds. I knew people who had 20 rounds of interviews. And you know, and even then once you get there, there’s no guarantee. You’re not guaranteed the job for any period of time. You have to keep producing and improving yourself and it’s hyper competitive. We know about Amazon. Amazon, we’ve thrown Amazon in this too. How difficult is it to get to work at Amazon and then how difficult is it to stay at Amazon?

Brian: These are very metrics driven and to your point, very competitive. So yeah aspirationally, folks can say, hey, I want to work with my, with my passion or in these sexy industries. But then, this is a great quote here from Scott Galloway, if anyone knows Scott Galloway he’s a professor at NYU and has written books. He started a couple of businesses and successfully exited them over the years. But he said something really interesting. He’s a well known personality. He said, passions don’t often pay the bills. Acting has a 99% unemployment rate and 83% of them, the employees don’t have health insurance because they don’t make more than $23,000 a year. So his point is simply that following your passion, this sort of notion, this romantic notion of following your passion is sort of silly if you’re practical about it.

Andy: Yeah, is this social media influence the new acting basically? Remember back in the 80s, I was like, I want to be in the movies, I want to move to Hollywood, I’ll be a waitress for a couple of years and I’ll get my big break. How is social media influence any different, right? Oh, I’ll just film a video and I’ll put it up and I’ll go viral and like I paid hundreds of thousands of dollars on my own TV show and a reality show. It sounds very similar. And I think these numbers probably apply the same to social media influence.

Brian: And you can see how successful I’ve been in my rock star career, Andy. Clearly, I’m playing in arenas.

Andy: I thought B2B was your passion project.

Brian: Well, it is. It is. It has evolved to become my passion. Andy, don’t worry. So we asked, we wanted to know, so let’s match up. Does B2B actually have what Gen Z wants from their employer? So we went and we found this checklist from Deloitte Insights and it says, what do these folks want? And what do we find, Andy?

Andy: It’s work life balance, diversity, inclusion, mental health awareness, clear career progression, which is a big one, and now I’m introducing some non-traditional benefits. 15 years ago, most companies didn’t have any of this stuff. B2C, B2B, period, right? Then B2C adopted it first, but B2B is doing this stuff too now. And so we talk about this, that people think of B2B as kind of some island out there that nobody goes and visits. You have to take a special ferry there. It’s not any different from B2C in any regards. And in fact, for B2B brands, they’re very similar to B2C brands. They have different audiences and make different products. But the companies are very functionally similar. So when we went down the list, we said, wait a minute. B2B offers all these things that B2C offers and all that Gen Z seems to be looking for. And so, maybe Gen Z should take a reality check here and look at this and say, wait a minute. And by the way, B2B is hiring. They want people and they’re the ones that make things that keep the world afloat and working. It just isn’t quote unquote sexy, right?

Brian: Right. Well, what’s interesting about this too is it strikes me that yes, Gen Z probably should take another look Andy. But also that the companies themselves need to do a better job of telling Gen Z in the hiring process that they offer these things, right? So we asked our community. We posted this on LinkedIn and got a lot of very interesting comments, particularly from folks in consulting and executive search. So Harry Joiner, those of you who may know Harry, he’s been in e-commerce, he’s known as the e-commerce recruiter. That’s the name of his company. He’s been doing this for a long time. I’ve known Harry for probably 15 years or more. And he commented and he places folks in these e-commerce roles. He says in general, they meaning Gen Z don’t seem to like the idea that B2B relationships must be nurtured. And kicking the tree does not hasten ripening. I love that. They like the instant gratification of direct to consumer. They also like the fact that in DTC you never actually talk with the customer. They don’t like a phone. That’s hilarious Harry. Thank you for that.

Andy: I like how he’s on the phone in the picture too.

Brian: I know, right? He’s on the phone. Well, he’s not Gen Z. He’s one of us.

Andy: This doesn’t surprise me at all. And I used to call this generation the text not talk generation because they don’t want to talk to people. And unfortunately, that’s kind of a requirement in the job in B2B especially when it comes to customer service.

Brian: Rick Wingender who commented actually last week on our post, he’s the director of Integrated Marketing at Mueller Sports Medicine. He said something interesting, B2B businesses will be seen as stifling to them, meaning Gen Z. They don’t take direction well. And so they’re better suited to small startup consumer businesses. Interesting. And Rick did studies on this in his graduate work. He cited that in his last or earlier post. So he’s saying that maybe they’re better suited for other kinds of businesses and all the process and things might be stifling. But Gen Z, a notice to you – those companies like Apple and Google and Amazon all have processes you need to abide by and work within that are, I’d argue probably even more stifling in some ways than the B2B companies.

Andy: And at places like Apple and Google, you’re on the clock constantly, meaning, if you don’t produce every year and at a certain level, they’re going to kick you out. Not to say that B2B is not going to hold you as accountable, but B2B is a little slower moving. It’s a little bit longer term time horizon. They tend to value the contributions make people make over time. I think you can get better work life balance in a B2B company than a B2C company. Certainly better than in Silicon Valley because again, I used to work there. And the work life balance was, do I get Sunday off? I mean, that’s the work life balance. People lived in their offices and it’s like, yeah, you want to work there and have work life balance? Good luck.

Brian: You took a day off last year. Come on. We’ve got one more quote I want to highlight here, Andy. This is from Dmitry Con, the founder of Access Solutions. Dimitry, thanks for your comment. He says, as the sexy quote unquote, verticals become saturated compensation in B2B will rise, making roles in these classic sectors increasingly appealing. In the end, what might be a missed opportunity for one person, you mean one of the job seekers, could very well become a gain for another. So what he’s saying is, hey, be smart. Don’t write these companies off. B2B companies, when you’re job searching, pay attention. They’re going to pay better and they’re going to appreciate you more, right? So there’s a real opportunity here.

Andy: More opportunity, too. You get opportunities in B2B. And let’s be honest, in places like Apple and Google, there are going to be people who are better, smarter, faster than you are. You’re not going to get an opportunity to move laterally into a different area and say, hey, I try this, because the guy over there, the woman over there who’s already doing it has been doing it for five years in this world class. And a B2B company, I hear this all the time from B2B companies. We bring people in, if they perform, we’ll give them opportunities in other areas. And get that at Google and Amazon and Apple.

Brian: Yeah, so it’s just harder. I think B2B deserves a strong look from Gen Z. For some of the key reasons that Gen Z’s looking for, in terms of career advancement to your point, Andy, it’s one of the key five things they say they’re looking for. B2B is going to be a great place for you. These companies are now investing in employee programs, development programs. We’ve seen this from a variety of companies in our community for new entrants and new folks. And we see there’s a loyalty in B2B that doesn’t exist in a lot of other industries and loyalty to employees. You hear stories of family owned businesses or even large companies that are staying loyal to employees, even in times when the economy is not cooperating. So there’s a real benefit, I think, to B2B for Gen Z. So we asked our audience, though our LinkedIn community doesn’t necessarily agree. We asked the question, is B2B destined to always be Gen Z’s second choice for employment? 65% said yes. It’s okay, fine. So maybe it’s not sexy enough. But those 35%, the people that say no, that they should look at it, that they think it’s something worth evaluating. There’s real opportunity for you there. And frankly, I think it’s smart of the younger folks who have a level of maturity to look at this stuff in a different way and not try to be social media influencers. Because there ain’t that many.

Andy: Well, and the thing is, let’s be honest here, I think most of the issue lies with B2B. They’ve done a very bad job collectively of promoting and marketing themselves. They think it’s just good enough to be who they are. And I remember years ago B2C companies thought that too. And then they had to learn how to market themselves to a younger generation. B2B needs to do that, and it hasn’t done it yet en masse. Some companies have a little bit, but there’s a massive opportunity here for companies to onnect with younger generations. Because like we said, they’ve got the pieces here, but they’re not telling the story.

This week on the Friday 15…

Andy & Brian talk about the skills necessary for new hires in B2B eCommerce and whether people just coming out of college possess those skills.

Plus, does a software company offer an answer to how you find recent grads who have the skills you need?

— 

Brian Beck: Welcome to Friday 15 with Master B2B. Rocking out this morning as usual, my name is Brian Beck. I’m here with my partner in this Thought Leadership Series and Community Andy Hoar. Happy Friday Andy. Well, let’s get into our fun and exciting breaking news. What do we got? We have new music. That means I hit the wrong button. That’s what that means. So breaking news, Andy, we were in Atlanta this week. We had a roundtable with some fantastic folks in the middle of downtown, at Buckhead club. And we had just a wonderful discussion all about game changing B2B e-commerce activities, with companies like Napa Auto Parts, Kimberly Clark, Kloeckner Metals. We had just a great representation. It was a wonderful group, wonderful discussion, and shared some really practical insights into things people are doing. One of the most exciting or interesting discussions was around who should own the digital experience. And you know, it’s always– people always say, oh, it’s the customer. I think that’s a cop out, by the way. Yes, the customer is important. However, we need to also have someone in charge in the organization to take the customer’s input and make a decision about what to do. So it was an interesting discussion, Andy.

Andy Hoar: Well, I’ve heard in some of the roundtables I’ve facilitated, people have said the CEO. The CEO is the Customer Experience Officer? That’s just as bad as saying “the customer.” Are you going to have a meeting with the CEO?

Brian: Yeah, no. It was a great discussion. And I think the conclusion was, it can be different for different organizations. But yes, it does need to sit at a functional level at some point. But anyway, we’ve got a bunch more of these coming up. We’ll announce those as we get into it. But we’ve got a rich topic today. This topic is a follow-on from our discussion last week, which was all about return to office mandates. This week, we’re going to talk about how prepared are recent college graduates to work in B2B e-commerce. This is a hot topic, Andy. And one that we got a lot of interaction on LinkedIn when we posted this, a lot of folks voting about this. But it’s a serious issue. And let’s start by defining what we’re talking about. Who are these recent college graduates? Well, they’re millennials, right? They were born between 1981 and 2000. But more so now, these are Gen Z. And Gen Z is born 2021 to 2020. They’re the folks who are just starting to graduate college now. And this is a getting younger generation. And we’ve had this discussion before, Andy, about what’s the dynamic happening? The fact of the matter is that 63% are hiring from our research of B2B e-commerce leaders. What are they hiring? And for which roles? Well, we asked our community this in our recent research. And there’s things like product management, project management, merchandising, merchandising management, digital marketing, content specialists, even developers. AI development is another area. Analytics. So it’s across a lot of different roles. And you presume as a hiring manager, heck, this person is coming out. And they have a college education. And they’re presumably prepared for the workforce.

Andy: Well, let’s pause here for a second, because the first three positions you mentioned– all of the word management in them. And increasingly, that’s not necessarily managing people, per se, although there’s a dimension of that for sure. It’s mostly about managing processes, which also includes people, if we’re being fair. And what is key and absolutely fundamental to doing that? You have to be able to communicate with people. And you have to be able to hold people accountable. And you’ve got to be able to set expectations. These are required interpersonal skills, which is, I think, what we’re about to talk about has been the real struggle with Gen Z, in particular.

Brian: Yeah, for those of you watching, we’re sharing some information here from Grow Leads, which is a research organization. It says, B2B roles often focus on managing relationships between companies and complex buying processes. If we think about B2B, this is not as simple as selling a shirt in a store, for example. These are more complex buying processes, multiple levels, multiple roles. And so that takes some skills, things like relationship building, as you were alluding to, knowledge of the industry you’re getting into and working in. Strategic thinking, negotiating skills, technical expertise. These are the entry-level positions today, I think, are in some ways more demanding than they’ve ever been. Any thoughts on this, Andy?

Andy: Let’s throw a B2B filter on top of all of this stuff. This isn’t about selling somebody a t-shirt. It doesn’t fit. And then you have a chat robot answer for them, hey, sorry, man, we’ll send you a new one. This is about stuff like you order the wrong part. Or you have the wrong gloves. I was talking to somebody yesterday who was a distributor of gloves. And if you don’t use the right gloves in the right clean room environment, you can contaminate it and cost millions of damage. So there’s a little margin for error, very little margin for error here. And I would say even back up on this industry knowledge thing for a moment, you have to have interest in it, period. B2B companies that we talk to, we say, hey, we’re not sexy. We make hydraulic equipment or whatever. They can’t get anybody in Gen Z – ot only to have industry knowledge – but to have interest in getting industry knowledge. And so there’s a dimension of that that makes B2B even more complicated, more difficult with younger generations. Because who grew up thinking, hey, let’s go look at some hydraulic lifts this afternoon. And especially for people who don’t grow up in those areas, where they even see some of this equipment, they graduate from college. Maybe they grew up in a suburban environment. Somebody says, hey, we’re a $5 billion company that manufactures, again, electrical capacitors. What’s an electrical capacitor? We do run into a lot of that as well. But yeah, it’s all about getting people motivated, making sure they do what they’re doing, having a maturity about you. But most importantly, having an interest in the industry and be able to talk.

Brian: So what started this discussion and our thoughts on talking about this this week was this report that was done by Intelligent.com that came out in September just last month. And it talked about some of the challenges that companies are having with hiring recent college graduates. So just to share some statistics on that, it’s really amazing that, for example, the report asked a question, this is about 1,000, almost 1,000 people they surveyed – managers. How many of the recent college graduates who hired this year have been successful at the company? So they asked that question. And less than 25% said “all of them.” Quite a few said “some”, 60% or 62% said some. And then over 10% said only a few. And there was a cohort that said none at all. So what this leads to, essentially, 75% of companies are reporting that some or all the recent college graduates they hired are unsatisfactory. They’re not meeting the goals. And so when asked further, the report also noted that hiring managers say that recent college grads are unprepared for the workforce, can’t handle the workload, and are unprofessional. I’d love to see a report on our generation Gen X, Andy, with what they would have said– But here the report went on further to understand and ask why haven’t the college graduates been successful. And I asked that question as well. And one thing stood out to us is poor communication skills is one of the top answers. What do you take from that, Andy?

Andy: Well, yeah, number four, behind lack of motivation, lack of professionalism, as you just pointed out. Poor organizational skills. But this communication thing is a particular problem. And I hate to say this, in particular, it’s a problem for young men versus young women. There’s been a bunch of research that’s been done about this. And a lot of it’s because they spend some of some on screens and interacting with non-humans. In fact, there was a study done where they took the iPads and they took the tablets and the smartphones away from a group of boys and girls. And the girls within some period of time started to interact with each other and talking to one another. But the boys just sat there. Again, these are young kids. But they’ve been so conditioned to working with these devices that they didn’t know how to interact with people. And I think that doesn’t really end. If you don’t address that problem at some point in your life, it’s going to continue. So this poor communication skill thing– and you and I were talking about this before, when on air – that there are some theories about the kind of people you should hire. And you mentioned something that you’re a friend who is a PhD in organizational behavior or something. And so it’s something about what kind of people actually tend to have better communication skills. Do you want to share that?

Brian: Yeah. So I do what we’re talking about this today. So I just so happen to have a friend, Dr. Corey Castillo, who has a PhD in organizational leadership and effectiveness. And I asked him the question. So we’ve got this cohort of folks who apparently don’t have motivation, poor communication skills, et cetera. He said something really interesting. I said, What’s a manager to do about this? Where do you go to find those people? He had this concept. He sent me a paper he wrote about this. He said his concept– a story of service. He has this concept that’s all about interpersonal acuity, is how he defines it. And it’s when interaction and communication is a major determinant of individual performance in an organization, an individual’s performance. So he asked, Where might I search for talent with high interpersonal acuity? His answer, what he found in his research is the candidates with direct service experience. So people working at Starbucks, or like the coffee shop, or McDonald’s, or whatever, a service oriented organization. And it’s because it teaches that interpersonal acuity, that ability to relate and collaborate based on interpersonal experience, bringing that to e-commerce. And we’re talking commerce, of course, here. E-commerce role, an entry-level role, not only will they be grateful for the role, but also will have the background and the grit to actually — not only appreciate, but get the work done and communicate effectively. Think about someone who’s at a coffee shop interacting with 500 customers each day with people yelling at him about all kinds of things, then having to get these. So it’s not just a person who walks out having a 4.0 GPA from an Ivy League school who may not have that experience. And that was his point, right, in saying that. So where do we go? service industries. At the end of the day, is this really new Andy? We heard this about millennials. We heard this about Gen Z. Millennial Overkill, the media branding, the handcuffed, and unknowing generation. I mean, these are all these stories you see. And we pulled up– for those of you watching, we pulled up some headlines from past years. And what do millennials really want to do at work? And do they really want to work? So is this really just an age thing? I wonder. It just happened to catch– we’re indicting Gen Z right now because of their age more than anything else. I wonder.

Andy: Yeah, this is an age old discussion in a way. People always complain about the next generation. They’re soft. They don’t know how to do anything. I do think there’s a fundamental difference here. And it’s probably driven a lot by social media. And there’s been a lot of research about this that Gen Z came of age with social media in tow. Older generations, even the millennials, it was later in life. And in those formative early teenage years when you’re spending all your time on Instagram and Snapchat and TikTok, you’re not developing as a person. Whereas if you get something that hits you when you’re in your 20s, at least you’re an adult at that point, like it was with Millennials. So I think we just did a big experiment, sadly, on a whole generation. And we’re going to find out what happened. But the early reports are not great.

Brian: Well, here’s the data from this report, intelligent.com, put out. The fact is, six out of 10 firms had to fire a recent college grad this year in 2024. 60% fail rate in terms of just having to release some portion of the folks that were hired in this cohort. So clearly, that’s not a good track record. We went to our community too, Andy. And we asked them on LinkedIn, and we got quite a few comments about this. This is one that came in from Rick Wingender. Rick is director of Integrated Marketing, Mueller Sports. And he actually studied this as part of his graduate work. He studied this phenomenon. What he says is, “This is not a failure of management. It’s a cultural and educational failure, a lowering of standards of performance. It’s an issue I’ve been studying since 2005, when I was a grad school teaching assistant, I was continually shocked by lack of academic preparedness, also for work ethic. And as a hiring manager, I think these contributions to the workplace continue to decline at an accelerating and alarming rate.” So Rick’s got– we’re gloom and doom here. Contrary to that, we also got a comment… So I think companies, Andy, are starting to recognize that they have a role in this, though. And so Robert Poratti, director of Product Marketing at VTEX, which is a software company. He said,”This is exactly why VTEX launched the DCS, Digital Commerce Specialist Program, for recent college graduates. We hire and train participants across disciplines for 18 months and then place them in positions that align with their interest and skills”. So to me, Andy, there’s a little bit of, hey, management, we have to hire, right? You have to fill these roles. So how do we deal with it? Well, does the company have to change a bit in how they’re approaching, like VTEX is doing? What are your thoughts?

Andy: But you can’t lower the standards. That’s what we’re hearing repeatedly here, is that maybe in academia, they’ve lowered the standards. That’s arguable. And it’s probably true. There’s been a lot of grade inflation, for example. But let’s say they have lowered the standards. When they graduate from high school college, what have you, businesses can’t lower their standards accordingly. In fact, the standards are going up, not down, because customer expectations are going up, not down. But I’m struck by what Robert said here, that he said, you know, in line with our interest and skills. I think the solution here is everything is an apprenticeship now. It just is. When you graduate from high school or college, it’s all a trial. And we’re going to just throw a bunch of people out and see what happens. There’s a company that I know pretty well. In fact, he’s a member of our community. And they’re hiring people to drive forklifts. And he told me a number that’s stunning. He said, if we hire 400 people, we lose 360 to 370 of them. Part of it is that they’re getting drawn away to other companies, because it’s a competitive marketplace. But most of it is, they just don’t care. They can’t keep people in place, because there’s just no motivation to want to do the work. Earlier generations, people were happy to have the work. And today, there’s just been this kind of a situation that’s set in where you can just live with your parents, I guess. And this is having ramifications and ripple effects through our economy. And that’s why our companies are automating things. That’s why our companies are using AI. It’s not just because it’s a cool neat technology. Part of it in B2B in particular, is because they can’t find people to fill the jobs.

Brian: Well, we asked our community when we poll on LinkedIn, as we do always, Andy. And we asked the question, how prepared our recent college graduates to work in B2B e-commerce? This is sad. 64% said not very. And almost 20% said not at all. That’s almost 85% said they’re not prepared to work in this area, which is an indictment. Only 8% said college graduates are very prepared. Only 8%. That’s crazy. Most of the people that respond to our poll are hiring managers. They’re more senior.

Andy: And Brian, these are recent college graduates. Keep that in mind. So arguably, these are people who have spent a quarter of a million dollars, $300,000, $400,000. At some more elite schools, as much as a half a million dollars. And the conclusion is that 85% of these people are not prepared to work in B2B e-commerce.

Brian: That’s crazy. I read this book about 20 years ago, and it was called Getting Them To Give A Damn. It was all about finding employees who care, and particularly amongst younger generations, at the time it was Gen X. But now it’s obviously different. But it’s been an enduring problem. And I think some of the things we’ve seen here is that it could potentially be getting worse. But that book gave me some optimism then, and it does now. And there’s really some methodologies like Dr. Castillo was saying, Corey, it’s looking in specific places like service industries to find the right talent.

Andy: By the way, what I’ve found personally is when you do find somebody who is skilled and talented and interested, they just stand out far more than they used to. There are people like this. For sure, there are people who are motivated. There are people who are interested. There are people who are excited and reliable and can communicate. I don’t know that it’s the mean anymore. It might be the exception. But when you do find them, they’re like gold.

Brian: Yep. And we’ve been lucky in our business, Andy, and then in other businesses, I’ve been involved with to find those folks. And to really treat them well as an employer and make sure that they’re happy. And we’re giving them increased responsibility, things of that nature.

This week on the Friday 15 – an All-Breaking-News edition.  Andy & Brian take a look at Amazon’s decision to have everyone return to the office 5 days a week and what impact this has on employees and on the business more broadly.

While executives report improved productivity when they’ve had employees return full-time to the office, Andy & Brian share some statistics showing that these mandates also cause higher turnover while also disproportionately negatively affecting women in the workplace.

Does the perceived improved productivity outweigh the negatives?

— 

Brian Beck: Welcome to the Friday 15 with Master B2B. My name is Brian Beck. I’m here with Andy Hoar, my partner in crime here at Master B2B. We’ve got some exciting stuff to talk about this week. And we’ll start with just a little bit of breaking news and this breaking news is close to home.

Andy Hoar: Brian, you live in LA and actually go to stay in LA for a Master B2B event. Tell us about it.

Brian: Yeah, it was awesome. So we had a roundtable this week Tuesday. It was a group of over 20 e-commerce leaders from the Los Angeles area from across all different kinds of companies. We had what’s interesting about LA Andy is you get companies that have B2C that have just as much B2B business as an industrial products company does. They’re selling to a distributor. They’re selling to retailers or selling to boutique stores and wholesale and private label. And they’re just as B2B as anybody else. So what’s fascinating, because we had some of those traditional industrial type companies. And then we had folks all kinds of others in the room. And it was really just a fantastic discussion all around how to use B2B or in modern tools to leverage to create differentiated B2B experiences, online experiences. And we talked about all sorts of things. AI of course came up, but a lot of talk about the organization. My favorite question is – who should own the digital experience, ultimately make decisions about it. We had a big debate about that. And should it be on the IT side? Should it be a chief digital officer? Should it be the CEO? A lot of folks said it should be the customer. Well, the customer makes decisions, but they’re not sitting in your organization. So it was a great talk and I appreciated everyone that was there. So thank you again for joining us. And we’re doing these all over the country. In fact, next week, I’m in Atlanta to do one of these great groups coming together for that one. So we still have one seat left. If anyone wants to join us, you can go to our website and see go to events and sign up there. Anyhow, any great time. And of course, in LA, Andy, we had amazing views. We’re looking over the Hollywood sign and you can see all downtown LA. It was fabulous. So our topic today, and it’s a meaty one – We’re going to talk about our return to office mandates. But for productivity, this is a huge question. I was sitting in Seattle last week, for Amazon’s Accelerate Conference. And it was in mid-September. And when this announcement came out, that Amazon CEO called for everyone back to the office full time, five days a week starting in January 2025. So if you thought your two days a week at home were safe, well, hey, think again, the free for all it’s coming to an end. And man, did we hear it? Sitting there, Andy, from folks that are at Amazon. This is causing a lot of chatter. Amazon has a million and a half employees. This is a very significant change for Amazon. And why are companies doing this? Well, you found this data – Andy, you want to speak to this?

Andy: According to business leaders, it’s about what? It’s about productivity. But you know, this is not just Amazon. It’s the chatter, the chattering class extends to basically all of tech. And because tech is sort of driving out of the markets and the way other companies think about themselves, either they’re tech companies. This one it’s the butterfly effect. This one flap of the wings that Amazon has spread through all of tech and all of non-tech. And so it’s rekindled this perennial debate about working from home versus working in the office. You and I have debated this for a couple of years through the pandemic. Here we are again. But it’s a classic case of the employers believe that employees are more productive in the office and employees, by and large, believe the exact opposite. And so the story once again is who’s going to win the argument. And it seems to be the same deal every time. Whoever has the upper hand, which we’ll get to in a moment. But this is the kind of data that the employers cite, which is this is a study done by resume builder, business executives, business leaders by a factor of almost three to one, they believe that being in the office improves cost or employee productivity. Now this is, I don’t know how scientific this was. But this is generally what they think. And of course, this is the quantitative side on the qualitative side, Andy Jassy, the CEO of Amazon actually makes the argument himself too. And you found this quote.

Brian: Yeah. Andy said in his letter to employees, and I was sitting there with employees when they were reading it. It was crazy. It is easier. He said, Andy said, “it is easier for our teammates to learn, model practice, and strengthen our culture; collaborating, brainstorming and inventing are simpler and more effective Teaching and learning from one another are more seamless, and teams tend to be better connected to one another when employees are together in person 5 days per week.”

Andy: Have you looked at the market cap of tech companies before and after the pandemic? I think they’re doing just fine. And it’s also not just a tech thing. Apple is worth more than the top 10 largest public companies in all of Europe. Combined. That’s crazy. One company is worth 10. And one of those companies, by the way, is SAP is one of the largest public trading companies in Europe. So Apple is doing just fine. Amazon is doing just fine. Which does cause us to wonder what’s the real intention here? But let’s go through the Kabuki theater. And let’s throw out some more of these stats that the executives seem to cite all the time. I have another one.

Brian: Well, actually, Carrie found this for us. Carrie Hogan, thank you, Carrie on our team. CEOs expect full return to office in the next three years. Look at this. 79% in office. Right? So the CEOs envision working environments for corporate employees to shift away from hybrid and certainly away from fully remote. Only 4% expect fully remote. Now, there have to be business reasons for this, Andy. I love this. People are going to return to office because people are returning to office. That’s the reason they’re going to be traveling to the office. All right. Fine. But I mean, what is — What do the actual statistics show? Well we found this funny cartoon. For those of you who can see this, I’ll read it for those who aren’t. This is a manager talking to a bunch of people on Zoom saying, “Everyone should come back to the office now.” And all these people saying, “From Zoom,” they say, “Why? Productivity hasn’t dipped. We’re saving commute time. Why do you want us to come back to the office?” The manager says, “Well, so that I can better monitor you.” [ Laughter ] I think we have to look at the actual productivity stats to start getting some insights into this. And what’s fascinating here is that when we look and ask or when organizations like in this case research come, was WFH research found that employees want to work from home about a half a day a week more than firms are offering. So you’ve got this base of employees. It feels like they don’t even have enough work from home today, right?

Andy: Well, and you can’t see this on the screen. This goes up until April of 2023. And it’s a firm plan average offering like 2.25 days a week working from home, employees want closer to 2.75 days a week. But the dotted line here was still going up or about the same. What we’ve seen recently is just if you’d extend this out to the present, it would fall. So the gap is widening. What is not happening is employees are saying, “Sure, I would love to come back into the office and work some more.” Employers, on their hand, for a lot of reasons, some of which I guess I would say about training and just team culture. I agree with that. But five days a week, so basically Amazon says, “We want to forget about the pandemic, forget about digital technologies, forget about communication technologies like Zoom teams, etc.” We just want to ignore all of that. And have you come back and work the same way you did before the pandemic. Now, there’s no evidence that that’s required or necessary or actually five days a week is more productive than two or three. So that’s just made up out of thin air. And it’s also the case that this stuff is hurting. This return to office mandate stuff is hurting very specific types of employees, which is the stats on the next screen. We found the evidence. Now, we went through the pandemic. There have been studies that have been done. There’s very clear evidence that the remote and hybrid work thing has reshaped the labor market. You know, it’s enabled workers to live in lower cost areas, which by the way, broadens the talent pool. I remember another day in Silicon Valley. It was really hard to get anybody to move to Silicon Valley, not because it’s not a beautiful place and lots of our children, but nobody can afford to live there. So when the pandemic came along, suddenly Google could hire people in Boise, Idaho. Who could do the same work as somebody in Sunnyvale, California, except in Boise, you could afford to own a house. What are you going to do about those folks who are now living in these places? A lot of them are like, well, screw it. I love Boise now, so I’m going to leave. This is a bit when it brought more women into the workforce. We saw a record of 79 million jobs. It’s 78% of women working age are employed. It’s up from 75% from five years ago. Why? Because women, especially moms – working moms, can work from home and also take care of a lot of the traditional duties that have been assigned to them for better or worse. That’s another discussion of another day about taking care of children. So you can have those two lives. You can’t have those two lives when you go to an office, especially if there’s not a great reason for that. Another one is increased opportunities for workers with disabilities. If you’re disabled, it’s a lot harder to get into the office. Especially if you’re taking public transportation. It’s really hard to get on a train, get off a train. Versus rolling into your office, turning on Zoom and doing your work remotely, just as easily as you could in the office. And by the way, it’s raised satisfaction and performance ratings without the relationship costs of having to travel, etc. So there’s a lot of evidence that this has reshaped the labor market. And like I said at the beginning, these companies seem to be doing just fine with profitability and market cap, etc.

Brian: So what we’re talking about here, what you just shared, Andy, are all statistics that benefit the employee. In other words, opening up more opportunities, you could argue that opening up a broader labor pool helps companies for sure. It raised satisfaction, better performance ratings, bringing more people in the door of course. But what does it do to productivity when companies say, “Hey, you’ve got to go back to the office.” And this is some interesting and fascinating stuff. Number one, employee attrition, right? So we have a number of sources we found here that talk about how these mandates can actually impact retention or attrition: 42% of companies with return to office mandates have experienced higher turnover than they expected. That was a study by Unispace. 63% of C-suite leaders surveyed said that their return to office policies have led to a disproportionate number of women leaving their jobs. That 57% of those leaders said that the loss of women and workers has negatively impacted company productivity. So I think you’re on to something there. All of this return to office stuff is relatively new. When I’m sitting there at Amazon with the guy that moved to Spokane, which is 3 and a half hours from Amazon’s headquarters in Seattle says, “I gotta leave” because I can’t be commuting every day. My life is now there. I can handle three days a week. I can’t do five.” So remember too that some of these are immediate reactions to near-term reactions. So I think part of this needs to play out, right?

Andy: Yeah, but there’s one real bitter irony about this. I touched on it earlier is the reason they want people to come back in the office is arguably productivity, right? But the return office mandates very clearly have one particular demographic, which I said earlier, is working mothers, who believe or not in the research are disproportionately, they are the most productive of all these different groups, working mothers. And so what’s happening is because these return office mandates are driving working mothers away because they want to keep their work from home relationship. Companies that want to increase productivity by ordering people to come back in the office are driving working mothers away, which is causing them to leave, which is reducing the productivity of the organization. So the original one’s in here was to make the company more productive, but return office mandates have driven away the most productive segment of their employees, which has actually had the reverse effect of reducing productivity.

Brian: What I think we need to do is balance, There’s going to be an adjustment period here as more companies push this. And I think we’re going to need to see some normalization in this data. It’s also about executive employees, it’s also about executive attrition. Gartner found that one in three executives who were presented with a return to office obligation reported they would leave their current employer for that reason. These are executives, right? So executives want the flexibility as well, not just employees. And when we look at moving beyond retention into recruitment, we do see that it’s harder. I see this in my own businesses, and we see it at Master B2B, companies that require people to be in the office, it’s harder to find people because you’re limiting the number of people in your universe for recruiting. And you know, there’s also studies that have been done, Farmers Group did a study that said return office mandates and policy reversals are often presented without clear evidence of lack of productivity. Now we looked, because we really did look to try to find evidence of increased productivity. And you know, when you talk about a company like Amazon they’re a data based company, they have legions, I’m sure, of management experts, helping them make these decisions. So what’s fascinating is though, I haven’t found any actual data saying it is more productive when people are in the office. Have you?

Andy: Well, not only did you not, Andy Jassy didn’t because you remember from the statement, I listened carefully to what you read there. It was all qualitative and anecdotal. There was no stat. How does the company so steeped and deep in data not say according to our research five day week employees are 16 20 87% more productive than those who aren’t in the office. Now, I don’t mean to say there aren’t studies that have been done. I’m sure there have been that have shown that spending more time in the office is more productive…So really it’s like zero versus five days. You probably can’t say that zero office days is more productive than five days. Going from two to five- I’ve never seen anything that says going from two or three to five makes organization more productive and I can say apparently Andy Jassy doesn’t have any either because if he had he would have shared it, I think.

Brian: I think what’s really happening here is the balance of power has shifted and the economy is in a different place. It’s easier to manage people when they’re in the office, number one. So it’s easier for me. It just is. Let’s be honest. Management of people and oversight like that cartoon showed is easier so this is a management decision, and that is where the power rests these days. Andy, you found this interesting statistic…
Tech employment has cooled off right so you look at these big companies and the balance of power we said this in 2023 in our predictions a year and a half ago Andy. But the balance of power was shifting back to the employer from the employee and I think we’re seeing this play out just look at these layoff numbers.

Andy: Whoever has the upper hand is going to win and right now because of a lot of reasons the tech economy is cool. These numbers are pretty stark. Just in 2024 alone according to layoffs.FYI, which by the way is a site where they keep track of all the companies who lay people off- it’s fascinating… according to them 124,000 tech employees have been laid off in 2024 adding to 428,000 who lost their jobs in 2022 and 2023. There’s been kind of a quiet revolution that’s taking place here of a lot of tech employees and a lot of software developer. The number of jobs that have been on sites like Indeed have dropped precipitously for software developers compared to two or three years ago. These guys were getting paid ridiculous sums of money because there was such demand and now post pandemic and with ChatGPT, you’ve seen this fall off a cliff. And history is going to write this was a time when this changed dramatically but again to your point when people are getting laid off, it’s a buyer’s market for labor and so you got to get in line and so if Amazon says you got to be there five days a week for whatever reason they quote unquote make up or not. If you want a job at Amazon you’ve got to be there. One quick point about Amazon that’s worth mentioning. They’re the second largest private employer in the United States of America now. That’s amazing because I have all these warehouse workers. Number one is Walmart. They have a lot of people who can’t work from home and so we know from the conversations we’ve had with B2B executives this is a cultural problem because you can’t tell all the people in the warehouse you’ve got to go to work and I’m going to go to the home or I’m going to go to the beach and I’m going to work from Tahiti. That doesn’t create the right kind of environment and so Amazon has millions of employees who are working in warehouses and maybe they’re thinking too hey it’s not a great look if all of our executives in Seattle are working from home in the beach while people are working really hard in the warehouses. So that could be a dimension of this discussion.

Brian: We asked our LinkedIn audience about this so with tech companies these days focused on profitability more than anything else – and they have also a lot of unused office space – so you’ve got that that element… we asked our LinkedIn audience whether Amazon’s five day return to office mandate was primarily about improving productivity or a clever way to do a reduction. And 67% said mostly a reduction in force, and 16% said it’s for productivity.

Andy: I think we had some comments to this effect like yeah it’s a RIF, and it actually is a clever RIF because if Amazon says hey you got to come to the office five days a week and these groups of segments say no I’ve already moved or I want to work from home or I’m a working mom – Amazon saves billions of dollars.

Brian: I found this article from the study that was done last week by this company called blind and what they found is that only 9% said that they were happy with the back to your desk order and 73% are now considering moving jobs because of it.

Andy: Let’s be honest here if there were increases in productivity and people were interested in being more productive so they could be better at their jobs, we would see a higher percentage of these respondents who would say yeah I don’t love going back in the office but I am better when I’m there and so yeah I can see the argument. But we’re not even seeing that because there are people who literally believe that going to the office makes them less productive because they have more time in the commute they get there and they spend more time in meetings. How many times have we heard this story? I’ve heard it dozens of times where people say yeah I went back to the office and you know what I did? I said hello to a few people, then I went into my office and I spent the entire day on Zoom talking to my team located all around the world because return to office mandate doesn’t affect anybody in distributed teams and don’t we live in a global economy where most people’s teams are all over the place so what am I actually going to the office for? To sit there and go and on Zoom all day long? Why can’t I just do that from home and save the commute time?

Andy & Brian discuss the challenges of deciding which data to track, and how to use it to make better business decisions.

They offer 6 ways to make analytics more actionable:

1) Collect data in one place and with a holistic view
2) Compare data over time.
3) Know your KPIs – look across channels, not just eCommerce.
4) Set and measure against benchmarks
5) Set and measure against goals, then monitor.
6) Use testing to impact specific KPIs (bounce rate, conversion rate, AOV, etc).

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Brian Beck: Welcome to Friday 15 with Master B2B Brian Beck here with Andy my co-host in this thought leadership series and our weekly LinkedIn Live program and our podcast broadcast around the Galaxy.

Andy Hoar: The part of the Galaxy I’m in today is a little place called New York City, you may have heard of it heard of it. I came here for a round table which we’re gonna talk about here in a moment ,but yeah it’s the first time I think I’ve ever done the Friday 15 from the east coast and so you’re in LA, so we’re bi-coastal.

Brian: We had an we had an exciting week this week Andy. We were we were all over the country and at different events and getting people together. In fact, our breaking news today is going to be all about where we were. So first off Andy you were in New York for our Round Table Master B2B executive Round Table in Midtown Manhattan. It was a really looked like an awesome event tell us how it went ,

Andy: We had actually a new cadre of companies – We had pharma companies like Merck. We had Panasonic, Duracell, some fashion companies, companies that make Home Furnishings, we had lighting companies, who do a lot more B2B than than you might think. And in fact, a few came and said hey wasn’t quite sure if this was right for me but when they came they were like wow yes we didn’t realize we do 20-30% of our business in B2B. We didn’t realize how different it really is until we’re there. Then we had a fantastic conversation about testing your website – the theme of our Round Table Series this year has been about customer experience, and we spent 30 minutes talking about how to test, because one of the gentlemen that was there actually is a former data scientist at Amazon and he was talking about how they do testing and what works and what doesn’t work. So I just stepped back and let him talk and for a good 30 minutes they were peppering questions at one another. It was exactly why we do these roundtables.

Brian: We’ve got a bunch of these coming up, and we’ll share the schedule later in the episode. Andy, while you were in New York in the heart of Manhattan I was up in Seattle at Amazon Accelerate. I was incredible the number of people that were at this thing. There were 5,000 people there, and there were probably another 10,000 online watching virtually. This is an Amazon Seller conference where they get all the folks who are doing what’s called Seller Central together and talk about new features. I spent a lot of time with Amazon business and with the head of Amazon business. One of the one of the big announcements for the Amazon business world was that Amazon is now allowing advertising specifically to reach business customers which they had they had never allowed before. So they’re advancing their paid advertising components to allow for things like that. They continue to chop away at all the things that businesses need to meet those business buyers. It just continues to raise the bar for the rest of the industry. The other big thing they introduced is one hour delivery using drones. They had their head of delivery up there talking about continuing to advance their delivery product – they did two-day and then one-day and now it’s one hour. By the end of the year they’re going to have that capability in key markets. Think about what distribution is traditionally differentiated on – instant delivery or quick delivery.

Andy: The time frame between science fiction and reality is shrinking. Because I remember when they brought this up I don’t know six or seven years ago if I’m recalling correctly, I think there was even like a 60 Minutes discussion about it. They had Jeff Bezos on there and they said you’re goinog to use drones? Are we gonna be eating meat pellets and living on the moon too? It sounded so futuristic and here it is.

Brian: They continue to push the bar. Their whole culture is all about testing, and it’s fascinating because they also do things that are counter to their own core business. They’re doing a lot to enable other people to sell on their websites. There was a lot of talk about logistics and operations and extending Amazon shipping capabilities. They are legitimately competing with with FedEx and UPS – they’re buying market share now. They’re out there offering discounts on shipping rates.They’re enabling other off-Amazon transactions to occur, which is counterintuitive in some ways if you think about it. The CEO of retail got up there and said we believe in this. They do things that are outside the box which most traditional businesses don’t do.

Andy: Remember the Amazon Marketplace was exactly that. Amazon used to sell stuff themselves and they didn’t have this third-party Marketplace. And then they said well, if we can’t beat them join them because people were going to third parties and buying these things and they were using Amazon to we room their stuff (as supposed to showroom) and so Amazon decided they’re never going to win that game so let’s just get 15% of whatever. Let’s just bring them into the fold. And of course the Amazon people responsible for selling Amazon stuff said wait a minute, why are you inviting the competition in? And they said because it’s actually better for customers. This is where your mindset really matters. In fact, the other day in our discussion one of the things that the former Amazon gentleman said is that when they’re doing testing some of what was optimized for his group actually was not optimized for another group. They would have these knockdown, drag out fights internally where they say if we change the page to help us here it would actually hurt us there. So somebody had to make a decision. So not only do they compete with other people outside of Amazon, they compete with people inside of Amazon because ultimately what matters is what customers want and the data always wins.

Brian: So let’s get into our topic today – making analytics actionable in B2B e-commerce. So this is a question, Andy. I was a VP of eCommerce for 15, 16 years. This is really key. This is a key part of being successful in your function as a leader. So again, here, Andy, we went to the authority on all things now, Chat GPT. We asked ChatGPT for a definition of eCommerce analytics. And I won’t read the whole thing here. But essentially, it said it refers to the process of collecting, analyzing, interpreting data. And also understanding various metrics and KPIs that reflect customer behavior, sales performance, effectiveness of marketing, and overall business health for eCommerce. And so in my history, Andy, and the history of many of the folks that listen into our podcasts and our sessions here, how we’ve traditionally looked at eCommerce is really in a silo. I’m showing an example of a Google Analytics page that shows things like visits and new versus repeat visitors, number of page views, conversion rate, revenue, average order value, what we call bounce rate, which is the number of people that hit the site and leave it immediately. This is how we traditionally looked at it. In some ways this is good. It gives us a lot of good actionable data because, hey, we could say people are bouncing on the website. Where are they bouncing? Why are they leaving immediately and go fix that page? But the problem is it doesn’t tell a full story. So I wanted to share some data here I found from BCG research that shows that on average two thirds of purchases were influenced by digital, but they happened offline. These are offline transactions being influenced by online transactions. And Andy, we found this in our own research too. And this is B2B specific. The data I’m showing here has to do with industrial machinery, industrial supplies, packaging. And these are B2B categories that are demonstrating that digital is really a significant influence. So your data, the KPIs that we look at as an eCommerce operator, don’t reflect this. They’re just reflecting what’s happening on the website, which is important, but it’s not the full story. So this can get even more complex when we think about different scenarios. Andy, you found some data here from Harvard Business Review. You want to talk about this?

Andy: There are basically what they describe as three states in which analytics operates. One is kind of a descriptive model. And other ones a predictive model. And the last one is a prescriptive model. The difference is, I think, like the weather. So let’s say you want to describe what happened yesterday. Oh, it rained yesterday. The model said it rained yesterday. Well, you need that in order to inform the future model. So you have to understand the past. That’s kind of a description of what happened. But there’s nothing predictive, prescriptive about it. Then there’s kind of the predictive one, which is, oh, in the next three days, we’re expecting rain, which is a model that will tell you that there’s rain coming. But it’s not the ultimate sort of nirvana around analytics, which is – help me understand when it’s going to rain and where it’s going to rain and how much it’s going to rain. And that’s what everybody’s aiming for, which is the prescriptive decision-making that analytics can deliver. And I think they did a nice job here of talking about all three of them. Because when we talk about analytics, we don’t always talk about the differences here. They also stress that you need to have a data culture. This sounds so much like what we said many thousands of times about having a digital mindset or a digital culture. You need a data culture that appreciates data and sees it as an opportunity for differentiation and not something to be managed or costed out. And then I think the other thing is it’s important to know that the analytics have to be aligned with your business goals, which is what we really talk about on the next slide, which is that this is fascinating, actually. This is very complex, but I’m going to try and simplify or oversimplify so we can get it done here. Think of a two by two matrix where you have aligned companies and misaligned companies and then low digital maturity companies and high digital maturity companies. What they wanted to know was what does analytics fit into each of those four categories? I’ll take the two extremes. The aligned companies, meaning internally aligned, the C-suite and the rank and file agree on what we’re doing here as a business and the analytics is measuring the same thing that are digitally mature. Those people when they get the analytics right, their research showed that the analytics has a multiplier effect on the business. In contrast, the companies of this sort are misaligned – the way they did this is they interviewed the CEO and somebody in charge of analytics and they asked them both the same set of questions, then they saw if there was a difference in the answer. If there was, they called that misaligned. Misaligned companies that are digitally immature, not surprisingly, the analytics didn’t have much of an effect because they’re misaligned and the digital maturity is low. They’re just at 2%, and they don’t quite know what they’re doing. They’re still feeling around in the dark. What they said, the analytics really underperform is for misaligned companies that are digitally mature. That sounds almost like an oxymoron, but if you think about a company where the C-suite is thinking one thing and the analytics team is thinking something else, but they’re selling 50-60% of their stuff online. They said, “Where do you get the analytics wrong in that scenario?” It actually has a negative effect. Misaligned digitally immature companies where the growth KPIs underperform, the financial KPIs underperform, and the customer KPIs all underperform. Think about it.

Brian: I guess maybe it’s a little bit of, “Hey, we’re digitally mature. We’ve arrived. Maybe they don’t need to think about this, or put effort into alignment because they feel like they’re there or at least I don’t know.” What’s interesting, Andy – It can almost tell whatever story you wanted to tell, or you can use data as an operator and a silo to tell your story and ignore other data. This does, I think, come down a lot to culture. Getting back to our earlier discussion, Amazon – Harrington, again, who’s the CEO, Doug Harrington of the retail business, was talking about data and how they’re using AI, to do some of the predictive things you were talking about. What’s interesting about Amazon’s culture is they’re very much about the data and analytics and allowing it to tell a story and they demand that the data be viewed objectively. I think that’s a key piece of this. We got some comments when we talked about this on LinkedIn, Marc Vasquez, who’s the Global Director of eCommerce at Ideal Triton products, weighed in on this. I think he highlighted a really interesting side of this. He said, “I think the problem can come from a proliferation of data and changing KPIs.” He’s saying, “Too much data. We don’t always track the right things, but we may not know it until we’ve been tracking it for too long, and it stays on the dashboard and it becomes a mile long.” This is part of the problem. There can be too much data, right? As an operator, you don’t know what to focus on.

Andy: There was an interesting study that Gartner did. In 2018 where they asked digital leaders and CDOs, rank the top three activities that you’re measuring for data and analytics success. They were all internal in 2018. Four years later, they asked the same people, the same set of questions, and all of the analytics were focused on external things. Which is, by the way, better, I think, generally, but look at that shift in four years from highly focused internally to highly focused externally. To Marc’s point, I think you can find that analytics, because they’re reflecting the business strategy, can be a moving target. For companies that are not honest, intellectually honest, about what their business is doing from a digital perspective (to your point earlier – it’s not just about selling online, it’s about cross-channel influence as well.) If they’re not intellectually honest and not measuring that stuff, then surprise, surprise, the analytics are going to be off because the business doesn’t reflect the analytics. The analytics don’t reflect the business.

Brian: The question we started with this all with is, how do we make analytics actionable? How do we distill it down to the point where it can be… What are the most important metrics to be measuring? Again, on the alignment side, too, not just in a silo. This is some data that I found, Andy. I looked at a number of different sources… I saw collecting data in one place, having a holistic view, omnichannel view. It’s one of the challenges that we talk a lot about data at our roundtables of the fact that if we’ve got it in a lot of different places, it’s hard to analyze it. It’s hard to pull it together into a cohesive picture. Comparing data over time is the best practice. Again, it sounds motherhood, and apple pie, but how are we doing if we standardize the data and how we’re collecting it? How are we performing? Know your KPIs and looking across channels. My favorite metric is share of wallet. How are we doing from a transactional standpoint across all channels in meeting customers’ needs?

Andy: The collecting data in one place is… Having it all in one place is an enormous challenge for B2B companies. Comparing data over time. Once you’ve got it there that’s oftentimes simply a report. But that first one, these are not all made the same. That first one I found is by far the most difficult one. Number two, I find is actually the Harvard Business Review story talked about aligning the business performance and the key goals with the KPIs because oftentimes they’re not aligned and people are narrowly measuring one thing or the business challenges change every year. It’s always about profit, right? But one year, it can be about growth and next year, it can be about cost reduction. And all of a sudden you’re getting lurching back and forth all over the place around what you’re measuring. So, analytics is kind of the tail that gets wagged by the dog.

Brian: A couple of other things of note here. One is measuring benchmarks and also goals. Setting up and understanding where you’re going with your metrics and then highlighting those. And then the last thing I wanted to mention here was around testing. We talked about this at the roundtable this week, figuring out which metrics. And there was a really interesting figure that was highlighted during your roundtable – only 12% of tests actually result in something actionable. The other 88% tell you nothing. Is that true?

Andy: That’s right. That’s exactly right. And I think people’s mouths were agape when they heard this. And we asked the people in the roundtable, confidentially, we had them fill out a form. What are your top priorities for 2025? The number one answer was analytics. A head of customer experience. So when we decided to do this topic, I’m like, Brian, you’re going to be shocked to hear that. That’s exactly what we heard in New York. Now, not everybody feels that way necessarily, but I think it was like 78%, which was overwhelmingly in New York the number one answer.

Brian: That’s amazing. So we did ask the LinkedIn community also. Do they feel like they have enough information on their analytics dashboard, not enough, or just the right amount to make actionable decisions? That’s the key. That’s the key word here, actionable decisions. 56% said, not enough information. So unlike Marc, who highlighted the issue with regards to too much information, not knowing what to do with it, only 22% said that. 56% said they didn’t have enough info to act on, and only 22% said they had to write the right amount of information. So we have work to do here, folks, in making this information actionable. And it puts all the way back to the foundation of getting the right data into one place so you can build it.

This week on the Friday 15 podcast, Andy & Brian discuss the reasons why it’s challenging for B2B eCommerce businesses to build a great user experience.  A few reasons they dig into:

– Because buyers need to make these purchases for work, the interface may matter less than in B2C.

– B2B businesses aren’t willing to make the investments necessary to create a great experience.

– The size of many B2B catalogs are orders of magnitude larger than the catalogs of B2C, which makes it much more difficult to build a great user experience.

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Brian Beck: Welcome to Friday 15 with Master B2B. My name is Brian Beck and I’m here with Andy Hoar, my partner in this crazy wild community of B2B e-commerce. They’re all crazy and wild, right Andy?

Andy Hoar: I don’t really think it’s crazy and wild when I think of B2B but we’ll go with it for now.

Brian: All right everyone, we got lots of cover today. But let’s start with some of our breaking news. Andy, you are in Chicago, well you’re always in Chicago but you were in Chicago downtown on Wednesday this week for a Master B2B executive roundtable with an incredible group. Who was there?

Andy: Yeah, near the top of the Willis Tower there. So we put our drone out and our drone took that amazing stock photo there. You know, it was an absolutely fantastic event. I mean we’re really getting a lot of traction with these and we had the elite of Chicago there. We had the Zoros, the Grangers, CDW was there. Univar, several multi-billion dollar companies and then
several kind of mid-size companies too. And I love putting those two groups together because they can learn from each other. And in terms of learning from each other we tried something a little bit different this time where we allowed sort of the folks to talk more interactively about their priorities for 2025. It’s not if we required it but we encouraged it, and my God was that amazing. I mean for 20, 30 minutes they were all sharing ideas, comparing notes, talking about their respective strategies for digital and I walked away as many people there did saying, wow, this is priceless. Getting these people in the same room – it was a great event and I’m looking forward to New York next week where hopefully the same magic will take place.

Brian: Yeah, we got a great group signed up for that round table as well. We’re doing a lot of these through the fall and it really helps us get our finger on the pulse of what the industry is talking about. These are VPs of e-commerce, chief digital officers, CMOs, directors of eCom, sitting down in a room talking about what’s important to them. So, yeah, we’re excited about New York and then we’ve got Atlanta and Dallas after that. It’s going to be a good series here. And you don’t know if you saw this breaking news – MDM’s forecast for the rest of 2024. Now they’re forecasting their business is going to be up later in the year followed by a much better 2025. I think it’s maybe some of the economy, some of the clarity there. Maybe that’s helping. And it’ll help once we get past the election, things like that. But we’ve seen stories in MDM about particularly large distributors. MDM covers a lot of the distribution market in industrial channels and others. And they’ve had some stories recently about companies that haven’t been kind of doing as well, even in e-commerce, with sales down and such. But this is encouraging – Andy, any reactions?

Andy: My take on this is – who knows? I’d love to be able to say, you know, we’re not economists, but we read a lot about what the economists are saying – and in one week, we’re in a recession. We just don’t know the next week. The recession’s coming. It’s going to be steep. The next week it’s, oh, we’re going to have a soft landing. I don’t think anybody really knows. But what’s interesting about this is people still have to make plans. And so MDM is talking to the distributors saying, where are you putting your money? So I tend to go with what these guys are saying a bit more than what even the economists are saying because these guys have to make bets. There’s the old joke with economists – you know, the one hand on the other hand, the economist can be on all sides of the same issue. And we’re entering budget season now where a lot of companies are planning their 2025 budgets. They do that typically in the fall. And so it’s going to be interesting.

Brian: So our topic we need to get to today is – Is great UI/UX (that’s user interface, user experience), design necessary in B2B e-commerce? Is it necessary or is good, good enough when you’re just rolling out a B2B e-commerce or other digital experience? And Andy, this is a great topic and one that’s close to my heart. You know, for many years I was as a VP of eCommerce. The UI on the consumer side, which is where I was living, was critical. And data proves out how important this is – the experience you give to your customer in the digital commerce, journey. We went to the authority on all things now, ChatGPT. We asked ChatGPT for a definition of great UI/UX design. And here is what ChatGPT said. Great UI/UX design in eCommerce is about creating a seamless, intuitive and engaging experience that effectively guides users through the shopping process, enhancing satisfaction while driving conversion. It balances aesthetics with functionality, ensuring design not only looks appealing, but it’s also easy to navigate and use. That’s the definition. Now, in my book, Andy, I talked a lot about eliminating friction in B2B, being a key measure of success for e-commerce by manufacturers distributors. So I think ChatGPT’s definition in some ways reflects that. But we’ve got this situation where companies that do this well on the consumer side and reap the benefits. Forrester said websites with well-designed user interfaces can increase conversion rates by as much as 200%. And I’ve experienced this. I’ve lived this on the consumer side. We improve our UX. We get higher conversion rates. But B2B, oh my gosh, 60% of B2B websites were found by a study this year to deliver a generally negative experience. Okay. So we’re not delivering a positive experience. It certainly means our UI/UX is not functioning very well. In fact, Amazon Web Services also found that e-commerce companies that are compromising on user experience and not meeting standards (meaning best practices) are missing out on 35% of their potential web sales. Okay. So we got companies B2B not meeting the standards. Clearly there’s a conversion rate benefit. The question is, is good, good enough? So Andy, I asked ChatGPT, to give me the best example. What’s the best example of user experience design in consumer? Well, that’s what showed up: The Apple store. They’re well known, apparently, as being one of the best. And I know this first-hand because we used to look at competitors, including companies like Apple for inspiration on user experience design. Apple is known as the best, right? So it’s a clean design. There’s a whole series of things they do well, get to your product quickly. They have product navigation configurations and really guiding the customer to what they need. You’re not an Apple customer, though, Andy, are you?

Andy: I’m an Android guy, but what’s interesting about this is I, you did a search with ChatGPT for the best site. And ChatGPT is actually owned by Microsoft, which is a rival of Apple in a way. And so I was wondering if ChatGPT is going to get fired by Microsoft. That was one comment. The other comment is, you seem to be talking to ChatGPT quite a bit. Are you asking chat GPT for a relationship? Fashion advice, health advice, I mean, I’m starting to get a little concerned that, you know, every time there’s a question, you go to ChatGPT. That said, you may just be ahead of the rest of us because it’s probably where it’s all going. So, back to this. Apple, inarguably, is a great website, but here’s the problem. Higher conversion rates for great UI/UX, so on and so forth. But do B2B companies have the resources, the time, and the budget to invest in it? And frankly, do they have the appetite for it? Because great UX design is like great athletics or great music. If you want to be great. To go from 99 to 99.99 is a order of magnitude leap. And so this is really the question, are you willing and able to invest that? And I don’t find many B2B companies are willing to do that. Because it’s a lot of time and data intensive. It’s resource intensive. So, yes, great is better than good, but it is a question about whether great is substantially better than good to make good just not good enough.

Brian: Well, it’s really about the effectiveness of the channel, period. Is it worth it? Do you want you need to invest the level of an Apple, or even companies not as big as Apple with the deep pockets, but do you need to emulate that kind of a user experience in B2B commerce? And, is it paying dividends?

Andy: And it’s worth noting too that B2B buyers are different from B2C buyers. We’re looking at the Apple site here. And I’m thinking, wow, it’s visual eye candy. It’s elegant. It’s beautiful. Most B2B buyers don’t care about that really. Now, that’s not an excuse for bad experience, but a lot of B2B buyers are very efficient. They’re hunter-like. They go enter the part number. They get out. Again, not an excuse for having a green screen with a blinking cursor that says, “Enter order here.” But seeing all this stuff, these great images, 360 reviews, videos, actually can be an impediment to an efficient buying experience. So, you’ve got those two things. B2B companies really have the time, money, and energy to invest in it. And two, B2C buyers on the other side, appreciate it. Those are the open questions.

Brian: So we asked our LinkedIn audience about this. And we got some interesting feedback. So Eric Nebbia, who’s the Senior Director of Digital at Fortune Brands, and also been in e-commerce for a long time, he said, “B2B buyers at work are similar to B2C shoppers at home and expect a similar experience.” However, there could be switching costs for B2B buyers to choose another website. So let’s think about that. He also said, “Also B2B buyers likely have direction on what to buy in a budget. So, better UX may not increase sales.” It’s his opinion that it’s kind of a pointless investment, getting to the level of great. Any reactions to that?

Andy: Well, I think you make a great point- well that Eric makes a great point about the switching costs. It’s not as easy as one click. It’s not like you go to Amazon and say, “Oh, that doesn’t work for me. I’ll go buy from Walmart.com or Target.com.” B2B has contract pricing. You have certain vendors where only these vendors can provide what you need. So there’s vendor lock-in in many cases. Now, again, these are non-excuses for companies producing subpar sites. But the dynamics are different. I think Eric pointed that out here.

Brian: I think, though, it’s interesting, even in that scenario, I’ve seen this big distributor, I’ll leave them nameless because I don’t want to embarrass anybody. But one of the largest distributors in the world had a very difficult user experience on their e-commerce site. It had to do with search and timing a result search. It would take minutes. There are millions of products and it would take minutes to get back product results. Minutes, that’s not good. That’s not great. It’s not good. It’s not even acceptable to get product results back that slowly. But customers would continue to order from that website because they had to. It was one of their number one complaints business-wide. I remember I worked with this company four or five years ago. This UX stuff, you have to get to at least a level of good. But that’s Eric’s point about switching costs. In some cases, people put up with miserable instances in B2B, right? This is the state of the art today – B2B ordering portals for a lot of companies, particularly manufacturers where they’re just like, “Hey, log in. Here’s your enter your order number, your part ID, and then we’ll order it for you.” There’s absolutely no baseline user experience from B2C here. Those of you who can see this visually, I’ve just got an example of a customer portal here. Again, the state of the art, but it doesn’t have to be this way. I think, Andy, your point about switching costs and things of that in nature,it’s really about acquisition, I think. I think you can use good or maybe even great UX to capture a customer as they’re looking for a new supplier. If you make it easy for them, then you lock them in with your pricing and your negotiated prices and making it easy for them to re-order – those kinds of things. I think UX can probably play a role in acquisition, retention, maybe once you got them, you got them. What’s interesting about this is that we’re talking about that B2B at its core is just more complex. We think about things like complex products and huge catalogs and finding products amongst all these technical specifications. You relate that to a consumer site, like a clothing site, what are your product variants? Their size and color. Think about high complexity in electrical products. You’ve got compatibility issues, you’ve got sizing, you’ve got, “Does this work with that? What are the technical specifications? What are the power specs?” All kinds of different things that you need to think about in terms of product findability. And then you make, if you’re making those products specs difficult to find on your site, these are some of the things that make it more difficult in a B2B environment to deliver great UX.

Andy: Just massive complexity variants here. Like you said, a shirt, small, medium, large, extra large, but a fastener could have thousands of viable combinations here. So, CPQ really matters. CPQ is inherently complicated. Imagine for B2C people, think about buying a laptop and all the different variations. And there aren’t that many really in the end, but you can get like a different color screen or a different color shell. You can get a size of a screen. You can have this coating and that coating. Imagine that for every item and having tens of thousands of those items. In that case, the elegance of the site doesn’t really matter. It’s really about the efficiency. So, I think the thing that’s underdone about B2B is that speed to answer is really critical. It’s maybe a metric. I just made up. I don’t know if anybody actually measures that, but it should be, and that’s why I shuddered to think what you said about a site that took minutes because when you were saying that I was calculating in my head. The general rule of the problem is that for every one second delay in search result, the conversion rate goes down by 7%. So, it doesn’t even contemplate minutes. I mean, five seconds is a 35% decline in conversion rate. I don’t even know what two minutes would be.

Brian: My opinion on this, Andy, and we’ll see what our audience has to say in our poll, is frankly that UI, it’s different. It is actually harder, and it’s more important. If we think about not so much the design elements, but the elegance by which you get people to the product quickly, it’s your speed to answer. Get them to the right product quickly. It doesn’t have to be beautiful in B2B. It has to be fast and efficient. And therein lies the challenge in UX and UI in B2B. I think it’s actually more important than B2C. You know, I think it has to be great, but I think it has to be great in a different way. That’s my personal opinion.

Andy: I like your point, and I would add to it. It doesn’t have to be beautiful, but it can’t be ugly. And so that leads to a lot of gray area. And it depends on who your customers are, but I just don’t want people to walk away from this saying, oh, Andy and Brian said, we don’t have to do a great job with our UI/UX. No. You have to do a different job that’s more focused on getting answers quickly and efficiently, which by the way, ain’t easy either.

Brian: No, that’s exactly right. UX also crosses a lot of touchpoints in B2B. So it’s not only the eCommerce experience. It’s every other aspect of it. You think about post-purchase experience, where’s my order status, getting support in your product, it’s mobile, it’s field support. It really crosses a lot. And you know who does this well, Andy? Granger was one of the companies that came up when we asked ChatGPT. And they have long invested in this channel – decades, several decades at least – in delivering a speed-to-answer solution. And you can see it on their website. You don’t need a login to see what they’re doing. They’re mimicking a lot of B2C best practices, but they’ve also layered in quite a bit in terms of the B2B requirements for a buyer to find what they need quickly. So if you laid it up against, I don’t know, one of the big consumer brands, is it as beautiful? Does it need to be? Absolutely not? Is it elegant in different ways? Yes, it gets the customer to their product quickly. That’s the thing that matters. That’s why Amazon Business is winning business and new entrants are winning too. Anyhow, any thoughts on Grainger?

Andy: I agree with that 100%. It’s not the prettiest thing I’ll ever see, but it’s pretty damn effective. And I think it shows in the numbers. There’s work that can be done for sure, but I think they’ve got a handle on who their customers are. And that’s the key to this. The UI/UX has to be based on your customers, and you can’t just create a UI/UX in the abstract It’s going to depend on how customers use your site and what they’re looking for. That’s the definition of great. What is great for your customers?

Brian: That’s right. That’s absolutely right. And there’s best practices that we can adapt or adopt, excuse me, from B2C in B2B. Things like card sorting exercises, customer focus groups and studies, A/B testing. There are a lot of best practices here that can be adapted. We can go through some of those in one of our other Friday 15s.

Andy: Well, it’s just something quickly that you might find interesting is I’m taking a deep dive into search here and there’s a new area…well, not a new area, but there’s an emerging area within B2B in search called guided selling. Which is where people enter something in the search box and it’s pretty clear they don’t exactly what they’re looking for. In the past, it would just leave the binkling cursor and you have to figure it out yourself. Now, they’re parsing that and saying, hey, did you mean this? Now, are you thinking about that? So the search becomes almost like an intelligent guided browse in a way. But in B2B, that really matters. Not so much in B2C … but in B2B, it might be like, oh, are you looking for this fastener in this particular use case for this kind of temperature rating? You know, things you haven’t thought of that address to some of that complexity.

Brian: Well, we asked our LinkedIn audience- Is great UI UX design necessary in B2B commerce or is good, good enough to be successful? Our LinkedIn audience responded and 73% said great is necessary. Only 27% said good is good enough. I thought this would go the other way. No?

Andy: I’m not surprised by it because it’s aspirational. If we put a price tag and a timeline around it and said hey, it may cost you five times as much and take you three times as long. Do you still think it’s necessary? I think the numbers might be different.

This week on the Friday 15, Andy & Brian discuss whether your eCommerce site can replace some of the work being done by the inside sales team…

The biggest takeaway this week is that the inside sales team brings an enormous amount of efficiency and revenue opportunity when paired with outside sales and when paired well with eCommerce.

In this episode they’ll break down what inside sales does for a living, and whether the growth of eCommerce will impact the success of that role.

— 

Brian Beck: Welcome to Master B2B’s Friday 15. Here we are both for Friday 15 in early September just past the Labor Day. My name is Brian Beck. I’m here with Andy Hoar. My partner in the Master B2B Thought Leadership Series. Welcome everyone. Excited that you’re here today. We have a great set of topics we’re going to be talking about. Today this is a hot one, Andy, talking about inside sales versus e-commerce. We hear a lot about AI and all these things happening in the world. But before we jump in on that, we have some… [Music] Breaking News. Andy, I don’t know if you saw this yesterday. E-Marketer came out with some data that was actually published by Google. It talked about CTOs being now responsible for driving the Gen AI strategy at businesses. They surveyed hundreds of companies and found that it wasn’t the business side which was driving the AI strategy at companies. It’s actually the technical function. CTO, 59% said the CTO, CIO followed that followed by the CEO. So this is really still at the C level and it’s technical. What’s your reaction?

Andy Hoar: Yeah, and that’s surprising. It’s considered a game-changing technology but most importantly, a technology. So companies, this is early in the curve. We saw this thing with e-commerce. I’ll bet if you go way back on the Wayback Machine, you’ll hear the same thing about CRM when it first came out. Despite the fact that CRM is currently owned by the business or marketing side of the house now. But it’s a “technology” (air quotes) and because of that it goes to the CTO. But I assure you within the next five to ten years this is going to be distributed across the organization. CTOs might have sort of an oversight responsibility but this is way too important to be put in the hands of just the technical team.

Brian: Yeah, although what’s interesting Andy is we find a lot of folks – I think about people like, Andy Goodfellow at Zoro, excuse me, owned by Grainger. They are technical leaders but they’re business minded. So in that sense, there’s more of that creeping into the CTO, CIO role – there’s a responsibility for business and awareness of the business needs. But I agree with you. I think ultimately there has to be a real business use case for this stuff and that has to come from the business side. Sotoday I think there’s more concern about the security of AI and how you manage this thing that everyone is sort of afraid of a little bit. And so that’s what’s dominating where it’s being managed. Anyhow we’ll see how this evolves. I just thought it was really really interesting because the CMO is at the bottom of the list – only 18% said that that was the role responsible for driving a Gen.A.I. strategy. So anyhow interesting stuff let’s get into our topic today which is – Is e-commerce replacing inside sales in B2B commerce? Now, we think we’re just talking about AI and we think about AI’s implications for e-commerce for digital for making processes more efficient not only for the commerce side but also for answering questions addressing some of those common use cases that traditionally inside sales has addressed. And when thinking about what are some of those traditional roles of inside sales starting here, Andy. Or thinking about what they are typically doing around things like lead generation or prospecting for new leads for a company, or handling inbound leads – in that case a company calls in and they’re handling leads to either direct that to an outside sales person or perhaps close the sale or handling transactional or one time purchases. Or things like re-orders versus maybe a more complex sale that requires someone who is looking at the configuration or the application of the product in the field. So they’re handling those transactional orders serving smaller or long tail customers. Someone who just wants to buy one thing from the business and they just want to get it done and get out. Inside sales typically handles that. Or even handling simpler questions or problems. We do have technical support with a lot of companies with inside sales sometimes tend to be technical but more routine questions that don’t require you being in the field looking at the application with the customer, for example. These are the traditional roles of inside sales. But you found this article that McKinsey recently did a study that talked about inside sales versus some of the other selling functions. Do you want to speak to this a bit?

Andy: Yes so the headline here is that McKinsey found that inside sales typically cover 50% of the prospects at I’m sorry 4x the number of prospects at 50% of the cost of a traditional field rep. Backing up a second… Inside sales as a function – if we went back and looked at the history of it, it’s something that grew out of a fault in the model around the outside sales rep who is busy and expensive and traditionally well trained. One person couldn’t take every phone call and qualify every prospect and handle especially the long tail customers who are infrequent purchasers with small tickets. So they needed a function that would bridge the gap between that and nothing. So inside sales comes along which are typically I think hstorically people who were going to be outside sales reps and were early in their career. But like everything digital upended this model as well. And what we have seen is that the inside sales rep has become a new sort of monster in the organization. It’s a really powerful function if used properly, and it’s because technology has enabled it. This is what McKinsey found out: 4x the number of prospects at 50% of the cost because the outside sales person maybe has to travel someplace or have longer deeper conversations and sometimes those conversations are wasted when you have somebody who’s very expensive with a six-figure income and who’s well trained who’s taking phone calls about onesies and twosies and answering simple questions. eCommerce solved a lot of that by answering those simple questions and then the inside sales people have access to the same information that the outside sales reps have so basically the bottom line here is that a well armed inside sales rep can now effectively answer the same level of questions that the outside sales rep can. Now, people can disagree with us on that and yes, experience matters etc but technology and information has changed this game and that’s what McKinsey found. These numbers are pretty staggering. They increase revenue. They improved productivity for the field reps because they’re giving the outside sales reps better qualified prospects, but probably fewer of them. So this to me requires a rethink of the model.

Brian: Some of the other data here for those listening on your podcast – inside sales can touch 80% of accounts. What’s fascinating, Andy, is that the buyer has changed. 74% of millennials avoid sales calls and outreach efforts. That’s some data from Activate Marketing Services from two years ago. These millennials, by the way, everyone thinks they’re young kids they’re not. They’re now in their 40s. These are the majority of buyers and even GenZ are entering the workforce. So the buyer is changing out from under us.

Andy: I think it’s important to note is the difference between inbound and outbound. Outbound is reaching out to people and calling them contacting them. I think that’s where this statistic is particularly relevant. People are not taking phone calls. I don’t even take phone calls now. My phone rings and if it’s a number even number i don’t recognize I just read the message later. So we’re not taking phone calls. So let’s say somebody has a question. They contact the company through the portal. Maybe they send an email through the e-commerce site. Who does that go to? Does that go to customer service? Does that go to inside sales? Presumably it’ll go to inside sales or customer service. In many cases a well-informed customer service agent, just like a well-informed inside sales agent, can actually answer the question. And if they have any training they might be able to close the deal. I speculated about this with “Death of the B2B Salesman” 10 years ago. I thought that with information and technology customer service reps and inside sales reps can be a lot more effective. And I think that’s what we’re seeing now to the point where maybe that inside sales rep will get back to you and answer your question. And you say “great let’s close the deal.” Do you then have to pass them to an outside sales rep who that person has no relationship with? Or can the inside person or the customer service person close the deal? That’s an interesting question.

Brian: It is, but it kind of misses the point of the whole broadcast which is – is e-commerce going to take the place of these sales?

Andy: Because we didn’t get to the kicker here. We talked about inside sales. We talked about customer service. We talked about outside sales. But there’s a new kid in town, and it’s called the AI chatbot. And that’s typically run by the e-commerce team. So let’s take the AI chatbot and insert them in the process. If somebody asks a question on the website, the chatbot actually replies and answers the question. And it says, “would you like to book this transaction?” and if the person says “yes” and never touched inside sales and never touched customer service and never got to outside sales – that’s another dimension here where you can argue that as that becomes more prevalent and better – and we’ve seen it ourselves – the sales model is going to be challenged by AI. Now, that said, I don’t think AI can be able to answer everything. And for larger purchases people we want to talk to somebody. But do they need to talk to the expensive outside sales rep? Or can they talk to customer service? Or in this case, inside sales? I would argue, yes.

Brian: You wrote a bit about this following in the great footsteps of this gentleman here. For those of you listening on the podcast, we have a couple of pictures here. Two very handsome men. Mr. Andy Hoar and standing next to someone called Mr. Arthur Miller. And they both wrote all about this thing called the death of a salesman. So Andy, you wrote this when you were at Forrester and you had some theories that it seems to me some of the things you talked about are becoming closer to reality. But let’s talk about – does e-com take over, or does it supercharge inside sales? If we look back and think about those functions that we talked about at the beginning of the session today, can e-com handle these things? The first one on the list was lead generation or outbound prospecting. And if you think about things like digital marketing or the fact that a lot of today’s buyers are going online first to research products. Isn’t that replacing outbound marketing?

Andy: Plus we know that you can actually do personalized messaging using AI to people even on places like LinkedIn where you think they’re actually talking you personally. And so that’s all generated by the e-com in the marketing team, which doesn’t require somebody typing the message. And this does undermine the argument of inside sales.

Brian: How about handling inbound leads?

Andy: You can be rerouted through the chatbot and problem solved.

Brian: Or handling a purchase like a transactional one time purchase such as a reorder. Doesn’t e-com do that? The buyer knows what they want better than anyone else.

Andy: That’s the most important use case right now – the reorders where you just put them on a subscription plan and they just reorder easily.

Brian: They pull up the reorders once they log into their e-commerce account they see what they ordered in the past – I need this widget and boom, order again five seconds later. It’s very Amazon-esque. How about serving smaller or long tail customers – can’t e-commerce take that on from from inside sales?

Andy: It depends on what it is, but this is a perennial problem for every company. How do you handle the low frequency, small ticket long-tail customers who don’t generate enough revenue to justify paying an outside sales person who’s on commission?

Brian: Handling simple questions – can’t e-commerce or a website, now super powered with AI, handle some of these simple problems or questions? What is the role of the inside sales rep if e-com can handle a lot of these things?

Andy: It really depends on what the question is. If it’s a risky purchase where it’s a very customized purchase then you’re going to want to talk to somebody. If it’s an expensive product you probably want to talk to somebody. But this reminds me of e-commerce back in the day people said that nobody is going to buy anything over a hundred dollars online. People are making million dollar purchases online now so I’m not sure that’s an effective argument. I do think though that especially in B2B where there’s such such specificity about what you’re buying -like that part has to work in that machine – people may not trust the AI which might hallucinate. But it’s going to get better and I think the trend is definitely in the direction of e-commerce and AI taking over a lot of these functions.

Brian: I think this is going to be a balance with inside and outside sales empowered with digital – it’s already happening. Here’s a quote I’m going to read from the McKinsey study that we were citing earlier. “B2B sellers have achieved up to 20% revenue gains by redefining go to market through inside and hybrid sales. The successful inside sales model relies on qualified account managers and leverages digital solutions to optimize sales strategy and outreach through a range of channels.” What they’re saying is that as we look at those functions in inside sales they’ve traditionally handled those things, and as they become better and easier we can free up time from the inside sales team and change the focus to higher value tasks where there actually is some consultative selling required, or some technical knowledge, or some application knowledge which can be delivered via phone or web collaboration or Zoom or what have you. And we’ve seen this in our community too. We asked this question and we got some reactions on our LinkedIn poll questions. James Wallen had a really interesting point. James is the vice president of sales at Credit Key, and he said order placement is being pushed to e-commerce, changing the ratio of accounts that can be covered by both inside and outside sales a lot of accounts that would now have a now today have an assigned sales rep field rep are not being covered by inside sales and many accounts that are being directed to inside sales are not being pushed to e-commerce. So it’s kind of a rebalancing, and it’s making it more efficient and putting the buyer at the core – this how the buyer wants to be served – and providing different options.

Andy: What’s interesting about that evolution is that you can also map and it correlates with the least amount of friction. With an outside sales rep you’ve got to wait for them to call you back. An inside sales rep, they’re 24/7 or they’re on the phone you can talk to them in real time.

Brian: Jack Moberger, director of sales engagement at algolia, said this which I think was interesting: “Data proliferation and great analytics widen the funnel for the best offerings and the inside and outside sales teams grow like weeds because they’re able to chase down customers they would never would have thought to target.” It’s not just about the process and efficiency and eliminating friction, it’s also about widening the top of the funnel and getting more leads in so that the business can close more. We also asked our community on a LinkedIn poll about this and this was fastening. We asked them: Are you increasing or decreasing your use of inside sales in the age of digital, and 72% said they were increasing their use of inside sales, which is counter to what you might suspect.

Andy: We didn’t ask the question: are you increasing the use of outside sales in the age of digital? That’s the more pertinent question for death of a b2b salesman. That number is a lot closer to 50%. I think there’s the emergence of this well armed younger digitally savvy sales representative who’s using information and technology to answer questions and close deals. The question is – who’s closing the deal? That used to be something that only outside sales people could do, but I think we’re finding more and more in fact there’s even research we didn’t present today that says that people trust inside sales people more than outside sales.

Brian: Jared Abelson from Simpson Strong Tie, who’s their head of e-commerce, said their industry customers date they’re outside sales rep but marry their inside sales rep.

Andy: The research does show that when they ask them, “Who do you trust” they always say inside sales.

This week on the podcast, Andy & Brian talk through the pitfalls and best practices when hiring a system integrator.

They share some of the red flags that SIs say they look out for when working with a client (Biggest?  Inadequate buy-in from senior management).

As well as red flags from practitioners (Biggest? Inadequate experience working with B2B companies.

— 

Brian Beck: Welcome to the Friday 15 with Master B2B. My name is Brian Beck. I’m here with Mr. Andy Hoar, my partner in the Master B2B community. And we’re rocking out this Friday. Getting to the end of summer here, Andy. Labor Day is coming up. Exciting times. Lots still going on in the world of B2B e-commerce. Welcome to Friday.

Andy Hoar: Yeah, apparently there was a sale on blue shirts because we’re both wearing them today.

Brian: Well, we tend to do this all the time. Even in our image here in our Friday 15 logo banner, we’re wearing the same shirt, it looks like. So, yes, we think alike. No, we don’t. Not all the time. We look alike. No, we don’t. That’s okay. Well, Andy, I know you follow the news, as do I, and the FTC has been pretty busy. In our breaking news, what the heck is this? FTC bans fake online reviews. Inflated social media influence. The rule takes effect in October. So, Andy, we are going to get rid of all fake reviews. The FTC is going to enforce this globally. Apparently, they’re opening offices in Bangladesh, China, and all these other places. I don’t know, man. What do you think about this? What’s this all about?

Andy: You know, as soon as you pass a law or establish a rule, it automatically works. So we’ll look forward to this working as well. But on a serious note, I think it’s interesting that there really are four conditions they said in these articles about what the FTC is doing here. And one is that they’re going after the demand side of the equation, not the supply side. So people are going to be generating these reviews, but they’re going after companies that actually post these reviews and knowingly post them and don’t take them down. So we’ll see how that develops, but here’s some of the conditions. One is you can’t knowingly buy fake reviews or use AI-generated reviews claiming to be real. That’s going to be a big problem. This is a big one too. Company insiders must identify themselves. We know there’s an epidemic of company people who promote their own products and use their personal accounts or whatever – now that’s going to fall into the net if you get caught doing that that could be a big big problem. Companies cannot claim their own websites as independent references. There are companies that do that – divisions or sister companies – you know so they won’t be able to do that anymore. But this is my favorite: They can no longer threaten negative reviewers. So apparently if someone posts a negative review, you can factually disagree with them. But if you say, if you don’t take this down, then we’re going to fill in the blank. Apparently you can’t do that anymore. So we’ll see what happens.

Brian: Or Jersey style, break your kneecaps. I don’t know, man. That’s my home state. New Jersey. Gotta love it. This is fascinating. So they’re going to use AI to track this. So what do we got? ChatFTC coming soon? Is this a little AI action from the federal government?

Andy: Well, you and I both know that this all comes down to enforcement and you can’t enforce this. So good luck. But it will, you know, a few demonstration cases here and there, a few big lawsuits, a few big fines, and it’ll scare some companies into doing something. But by and large, this is impossible to police.

Brian: Well, I mean, just look at Amazon. It’s a huge problem on Amazon with all these people gaming the review systems. A lot of companies coming from abroad or sellers coming from abroad just gaming the system. Amazon itself, which is one of the most sophisticated companies in the world in terms of using things like AI to manage this, and they have a lot of people focused on this as well, trying to eliminate this problem. Even then, it’s hard for them to enforce it. So anyway, this is great. Maybe this will give some more kind of fodder and ammunition to companies like Amazon to clean it up. But man, this is a big problem. And I appreciate the FCC doing this, but it’s going to be quite a bit on the enforcement side. I agree. All right, well, let’s get to our topic, because it’s a really rich one. Today, we’re talking about: What is the best way to search for an implementation partner when rolling out a B2B e-commerce platform? Andy, I have lived this myself. This is a big deal and a challenge for practitioners to find the right partner, because frankly, the partner is so important in this process. But frame it up a little bit for us. Who’s involved in this process here?

Andy: Well, it takes two to tango, right? So there are two parties involved here. There’s the practitioner, which is usually a manufacturer or distributor who needs to select a systems integrator to implement a platform. And there’s also the systems integrator who actually has to do the work. And we tend to focus on one or the other. And so for purposes of this discussion today, we wanted to talk to both sides and kind of like in the spirit of the husband and wife and each side’s got an opinion on the other we thought let’s see what they have to say about this. I was thinking through this myself as I was putting the slide deck together – I thought, “Who do I know who would be able to kind of speak to both issues and represent sort of how this world works?” And then it hit me. I do know somebody like this.

Brian: Who is it, Andy?

Andy: His name is Brian Beck. The good Brian and the bad Brian. Come on.

Brian: Which one’s good? Which one’s bad?

Andy: Brian, the practitioner who worked at HarborFreight Tools and PacSun, where you’ve had some of these experiences selecting an SI. And of course you’ve also gone over to the other side where you’ve been the SI and for fun and for people on the podcast, who can’t see this, we flipped Brian and put devil horns on his head there to illustrate the SI in him. No, we mean that as a joke, obviously, but I wanted to have you be the emperor from Star Wars and have you go to the dark. That would have been funny. Your face. So anyway, I struggled with that. And my graphic skills are somewhat limited. But I think people get the point here. So, Brian, we’re going to go to you a bit here. No pun intended. We go through.

Brian: Well, you could have used ChatFTC to do my image there, Andy, with the evil emperor.

Andy: You like how you switched it so you’re facing it a different way like that?

Brian: That’s pretty good. And I don’t know why you made the SI the evil side, man. Come on, Andy. So to your point, Andy, I have done both sides of this. I spent a long time, 17 years as a practitioner, and I spent about three years working at Guidance, running their strategy practice. And Guidance is a systems integrator. So I have selected, gosh, I’ve done probably five replatformings as the e-commerce executive. And during the course of that, I probably worked with hired, fired, everything else. I don’t know, 15 different SIs over the course of that, maybe 20. And so I can tell you firsthand both sides of this and how challenging it is. But let’s talk about what the systems integrator does and then why it’s so challenging. So the systems integrator gets in and they help you. It’s one thing to select the platform, right? That’s a critical piece. You need to select the right e-commerce or whatever platform it is. But frankly, the day-to-day work, and I lived this as a practitioner, the day-to-day work is really up to the systems integrator to get in and configure it, to customize it, to integrate it. So they’re doing documentation of the system. They’re doing maintenance and support after it goes live, testing, et cetera. But everything on the upfront is really a lot of the work. And this is where you really get into the meat of the relationship, honestly – it’s systems design, it’s selection of components, it’s integration with your ERP systems, with other point solutions you might have. If you have systems of record or order management, if you have systems of record for things like product information or content. There’s a lot to do here. And what I’ve learned along the way is that the systems integrator who becomes your partner in the effort. And you have to select someone here who is really going to see you through some of these unforeseen things that occur – always occur during a rollout of a system. There’s always things you don’t you don’t know so the systems integrator really is your partner even more so than the platform is in my experience. I’ve run businesses on Salesforce and HCL and Adobe Commerce and Shopify and all these different platforms and so it’s a common issue regardless of platform.

Andy: I think this is the nuts and bolts and the part that’s not here, actually, which is maybe the most important part, is the upfront part about the requirements gathering and understanding what a company is in need of. Because sometimes they say they need to do one thing. You get in and realize it’s actually not that at all. We need to replace our PIM. Well, it turns out they have a data problem and it turns out they don’t have a digital strategy or they don’t agree on the digital strategy. So all of a sudden it goes from being turning knobs to figuring out strategies. So it gets complicated. There’s a lot on the heels of which is why it’s that much more important that you get this right on both sides of the equation. Because, again, the practitioners are the ones paying here. And they got to get it right because they have maybe the most to lose. But the SIs also don’t want to get involved, as you know, in a project that goes the wrong way, goes off the rails. These things end up in lawsuits sometimes. You know, there’s a lot of bad. So it really is important that there be a match. So how do you do that?

Brian: You’re right, Andy. At Harbor Freight Tools, when we rolled out e-commerce, we used three different SIs in sequence. We ended up with Guidance. That’s actually eventually how I ended up working there. But if you make the wrong decision, it can set you back time and money. So we asked our LinkedIn audience, what’s the best way to search for an implementation partner or a systems integrator when rolling out a B2B e-commerce platform? And what’s fascinating here is the number one answer was word of mouth at 52% followed by asking the platform provider for their recommendation – meaning the software company.Less important in terms of searching was shopping at a conference at 13% or searching online at only four percent. I think this speaks to the importance of the reputation the SI has in the market. The fact that when you’re at a VP or director of e-commerce level, when you’re looking for a partner, you’re going to go to your peers because that’s who you trust for unvarnished opinions. And that’s actually one of the values of our community. And we bring these people together so they can ask these questions on our Forum and other places. But I think it’s actually really more about multiples of these when we ask some practitioners. I think we got some feedback. You have that in front of you.

Andy: Theresa Kuske said – hey, this is great. Yes. Word of mouth. But you have to do all of these things. You’ve got to ask people, you’ve got to put together a process for review, et cetera. And Matt Ekman from Great Northern Equipment said, a referral is really critical, but you also have to have an RFP, RFI process in place. So, I think the answer is there’s maybe a superordinate answer, which is word of mouth. But embedded in all this stuff is you can’t just take somebody’s word for it. You’ve got to go vet it yourself and so there’s a lot that goes into it – but our question was “how do you search and where do you begin” and I do think word of mouth is where people begin. But it’s a bit circular too because you may start there but how did you get there? And so you’re right – communities matter.

 

Brian: We see it on our Forum where people ask questions all the time: Hey what do you think about this SI or how should I find someone or who’s done work on this platform? But we also wanted to get feedback from the systems integrators, Andy. So you talked to a couple of folks here and got some interesting stories about implementations, about how companies are selecting. What did they say?

Andy: Well, so we put the word out to everybody and we heard back from these four. I’m sure there were many others who would love to have gotten back to us, but maybe next time. So Techmates Group, American Eagle, Avatria, and Luminos Labs all had something to say about this. What we did was we distilled all of their thoughts into a series of what we consider to be red flags from the systems integrators’ perspective, red flags from the practitioners’ perspective, and then some best practices. Let’s go through these quickly. The red flags that we heard from the SIs were, and I’ve heard this many times myself – run, don’t walk if you’re approached by a practitioner that has inadequate buy-in from senior management. We’ve seen this. Is anybody else on board with this? Sure. And then you get there and you find out the CEO doesn’t even know this is happening, right? That’s one. Two, unclear project goals and definitions. So you get scope, budget, and timeline creep. Yeah, this is another one. The really savvy SIs have figured this one out. It’s the first thing they do. They figure out why are we here? And then they figure out realistically what we can do. And because they got to scope it and budget it, right? Because there’s nothing worse than coming back and being way off on those things. Three, too many competing priorities. I’ve seen this myself with companies that they’ve got eight projects going on and they’re like, oh, let’s add another one. Let’s go ahead and implement an e-commerce. I know companies right now that are doing PIM implementations, ERP implementations and e-commerce implementations. And the same team is doing all three of them. So that would be something an SI is like, hey, you know, maybe we should wait on the e-commerce thing. Fourth one, inadequate progress tracking. That goes on too, where it starts off with a bang, but then nobody’s really in charge, not really monitoring things, and it goes off the rails. And then the big one, There’s no planning for the after-the-fact, the training part, the organizational change part. So maybe let’s say you implement the e-commerce platform, but then the sales reps jobs are impacted, or the customer service is implemented. And it’s like, oh, forgot to put that in the plan. So SIs know that you’ve got to watch out for those things and ask those questions up front.

Brian: Just a quick comment from an SI’s perspective. One of the red flags I would always, when I was at Guidance, a lot of it was around timeline, right? People would have unrealistic timelines and not understanding what they needed to do from their side. To me, that was the biggest red flag from an SI’s perspective in working with companies looking to roll out e-com. But practitioners also, there are some significant red flags here that we heard.

Andy: Ultimately, they’re the ones who are paying for this. They’re the ones who need to be satisfied with the experience. And we saw five. These are not exhaustives, but five that kind of bumped up here in the world we live in. One is that a lot of SIs have limited experience in the B2B space. They had B2C implementations and said, yeah, it’s all the same. You just change the B to a C and C to a B.

Brian: These are red flags that practitioners see with SIs, right?

Andy: Another one is that if an SI, from a practitioner’s perspective, has kind of an inflexible working style where they’re very rigid. That’s not a good sign. Another one is failure to communicate clearly and regularly – this happens a lot where the SI starts off with a bang but then when they get into the meat of the project and they’ve got six or seven other projects that those teams are working on too, and then unless they have a really strong project management component you know they stop communicating and when you stop communicating regularly and clearly things really fall apart. A big one that the practitioners pointed out was you’ve just got to like these people. They have to gel with your team because they’re an extension of your team. And so you wouldn’t hire somebody you didn’t like to work for you. Why would you hire an SI you didn’t like to work for you? And this is a funny, interesting one that I heard from a couple of people is that it’s a red flag when an SI is particularly defensive. You challenge what they’re telling you, right? You ask questions like, well, why are we going in this path or why are we going on that path? And if they break out the, “hey, I’ve done this many times before.” This is the first time you’ve ever done it. They may actually believe that. They may actually be true. But you can’t approach a practitioner with that kind of language. You have to say, hey, I understand your concern. Let me explain to you why.

Brian: No question. And this style, the culture fit is the most important thing. When I was a practitioner, I would always look for that because ultimately you’re going to run into problems and challenges as you roll these out. This is highly, highly complex stuff. So what are some of the best practices? We came up with a bunch here in terms of selecting an SI. So this came from our conversations with everybody and our experience as well.

Andy: We’ll go through these quickly, but I think one is to talk to references, ask hard questions about technical expertise. You and I were joking ahead of time that we’ve heard the same version of this one story many times about how one company came in, claimed to have expertise in a certain area. They were kind of faking it until they made it. The practitioner didn’t know about it. They did a bunch of workarounds, delayed it. And then when they had a third party review of the code, turns out, whoops, presto, they didn’t know what they were doing. They didn’t write in this code, this particular language, and they mucked it all up and then somebody had to come in and fix it. Another one is the culture side. I know a client right now where they had misgivings about the SI they were hiring, but they went with it. And they didn’t trust their gut and they don’t like each other. And so they’re too involved in the project at this point that they can’t get out of it. But essentially where they are right now is stalemate. They don’t like them. They don’t hate them. They’re just somewhere in the middle. You can do better than that. So ask the tough questions. This is when you and I’ve talked about before, – get to know your team at the SI. Well, who cares about the SI? I don’t care that it’s Accenture, Deloitte, you name it. I care about the team I’m working with. So those guys could be great or bad or vice versa. What matters is the team you get. And so make sure you get that team before you sign any contracts.

Brian: Nick Ostergaard from Toyota left this comment – “A practitioner needs to own it all. The SI will cycle out people and eventually leave. The practitioner needs to build strong relationships and treat the SI as part of the team, but can’t outsource ownership to the SI.” Nick, thanks for that comment. It goes right to that point, Andy, about getting to know your SI team well. They become a part of your team. So that culture thing is the most important. But go ahead.

Andy: Great segue to the next one, which is the most important person at the SI, almost without fail, is the project manager at the SI. Because to Nick’s point, they’ll cycle out people, but the project manager is probably the one person who sticks around and that’s the person who controls the timeline, the budget, et cetera. That person has to be especially strong and your team has to get along with them. I’ve seen projects go off the rails when they really like the consultants, they like the strategy. but the project manager doesn’t gel and it goes nowhere. You have to jointly create these project plans to Nick’s point. The SI can’t own this thing. Ultimately, the practitioner has to own it, but you both have to do it. These milestones, by the way, that you set up can’t just be things that you blow through. You have to have honest post-mortems and you have to treat each milestone as an opportunity to see are we going on the right track because pretty soon if you’re not you’re going to get way off track. You mentioned something about expecting and embracing trade-offs.

Brian: You’re going to get into a situation in these rollouts where we’re going to run into something that’s unexpected and when we run into that what do we do about it. This is why the relationship and culture match is so important. Because as a practitioner, you may have to trade some functionality out to meet timelines or to meet budgets. And so you have to have a very open and transparent relationship where you can really honestly discuss these trade-offs. Because trust me, I’ve done this so many times. You have to allow some room for this, even in your timeline and your project plan, because it’s going to be more complicated than you think it is.

Andy: Like Mike Tyson used to say, everybody’s got to plan until they get punched in the face. And that’s exactly what happens with these projects. It’s a great strategy. Everybody agrees on it. And day two, something goes wrong. And then it’s about embracing the trade-offs, budgeting for the inevitable surprises. And this is the last point I think is really important. You should really want your SI to be proactive. This gets lost a lot of the time. Oftentimes the selection process gets to be grueling and finally they’re like, OK, we’re just going to go with these guys. We lock it all down and everybody’s just reacting to everybody else. That has got to be guiding you. So you want somebody who’s going to say, Hey, we’ve got some ideas. Let’s talk about how we can move this thing forward because the project’s going to change, right? Especially when you get into the trade-off stuff.

Brian: Absolutely. And you have to budget – I learned this the hard way – budget for inevitable surprises because you as a VP of Ecom, and your CEO and board and everyone’s approved, some level of budget to get this done. There’s going to be surprises, folks. Joe, thanks for your comment here, Joe Albrecht. I think he said it well here: Don’t choose an SI. And Joe is an SI. Select a true partner who will own the project as their own. And that’s where success will come from. You’ll need much more than systems integration to make it a success. How will you know? He’s saying, ask references about their experiences. Absolutely, Joe, totally agree with that. I think that you’ve got to go to your peers and that’s again, what our whole community is about.

This week, Andy & Brian talk about whether large, complex, global enterprises should centralize their digital operations, and how to think about that decision.

They dig into 4 areas:

1) To what extent the market is dominated by local preferences and behaviors

2) What are the service components of the business?

3) What are the fulfillment requirements?

4) Where is talent located?

— 

Brian Beck: Welcome to Friday 15 with Master B2B. My name is Brian Beck here with my partner in crime, Andy Hoar. I’m broadcasting here from Amazon in Washington – that’s Seattle. Overcast weather as usual, Andy, but overcast in the summer is kind of unusual for Washington because typically in Seattle it’s nice and sunny. That lasts about four weeks.

Andy Hoar: That’s why people move there, because there’s never any rain.

Brian: That’s right. Never any rain. Well, folks, welcome to Friday 15. We’ve got some pretty interesting and exciting breaking news today. Let’s get to that. Andy, did you see this? Last week, Google’s search monopoly ruling, they were ruled against by the FTC, I believe, right? That said, hey, you’re a monopoly. Whoa. What’s the deal here, Andy? Talk to us about this and what the implications are.

Andy: It’s just eerie how similar this is to what happened to Microsoft back in the 1990s. And so anybody who’s under the age of 30 back in the 1990s, Microsoft was embedding the Internet Explorer search browser, which doesn’t even exist anymore, on the desktops of all these PC manufacturers like Compaq Computer, which also doesn’t exist anymore. And they were paying money to do that. So Compaq would get paid billions of dollars to put the IE browser on default on the desktop. Well, fast forward 30 years and the same thing is happening all over again where now it’s Google putting its search engine, well paying to have its search engine embedded in browsers that didn’t exist 10 15 years ago like Firefox and Safari but they’re paying Apple for example to be embedded in Apple’s browser. So these tie-ins are kind of the centerpiece of this and the FTC found that paying money to be the default search engine now on these browsers is creating a monopoly. Now, the interesting part about this is it’s hard to prove that there’s been any harm here because the court had a finding of fact that Google search engine was the premier search engine in the space. On the other hand, they said, we don’t have the ability to easily click off, even though you can just go to Bing.com In the browser. But apparently, even everybody agrees there’s something called choice friction. And Google’s in-house lawyers said this, too, in emails, which was really stupid. But they said that’s asking people too much. It’s asking too much for people to just go up to the browser and type in Bing.

Brian: That’s ridiculous. This is an indictment on the laziness of U.S. consumers, I think.

Andy: That’s exactly what it is. And so the question is, how are they going to relieve this? I think you said in the next slide, the Wall Street Journal had an interesting story about this, saying that Google is kind of a strange monopolist. And they pointed out that the judge found that Google would achieve market dominance because, and I quote, “it had the highest quality search engine, which has earned Google the trust of hundreds of millions of daily users.” So they got the best mousetrap out there by the finding of fact. The most interesting part here is that some of the key testimony was given by Microsoft, which owns Bing. And Satya Nadalla said, oh, this nightmare scenario where, you know, Google could use their search history to train an AI bot. And it’s like, oh, really? Like the one Microsoft is an investor in called ChatGPT, which just launched its own search engine called SearchGPT? So this is two three trillion dollar companies kind of fighting it out over who and but the reality is and you and I talked about this beforehand that they can complain all they want but by the time any of this actually comes to pass this will be in the ash heap of history. Five years from now Google’s search dominance may be nowhere because we might be using ChatGPT for a lot of this stuff. And Google, for example, may continue to fumble their AI rollouts. And Microsoft may be the dominant search property on the planet.

Brian: Could be. I still get back to the harm thing. What is the FTC doing pursuing that? If there’s no real… consumer harm here the consumers – maybe that that friction thing is real, I don’t know. It’s sort of like “hey are we just sort of stupid consumers out here and we don’t know how to switch?” There’s actual choice and frankly if someone brought out a better search engine wouldn’t it work to the advantage of the browser companies to build that in?

Andy: There’s a reason why Apple, which could create a search engine, could buy a search engine, uses Google search engine. I’m not an apologist for Google. I’ve got issues with how they do things too. But the harm here is really a bank shot to say that because Google search engine is so good and companies are paid to embed it, that people who want to advertise and buy keywords have fewer opportunities because Google is kind of the only game in town. If somebody has a better search engine that would eliminate the problem. And that’s probably what’s going to happen here until these GPTs are going to come along. I don’t know about you, but I don’t use Google search as much as I use chatGPT. So maybe we’re already along this path.

Brian: Maybe. I do think letting the market play out here and someone comes up with a better search engine, people are going to gravitate towards it, including the browsers. Google now has a legal ruling that they’re the best search engine so that’s kind of interesting too that jumped out at me. Let’s get into our topic. This is a fascinating one – we could do a whole Friday 15 just on that. But our topic today is should the e-commerce function for large, global B2B companies with diverse lines of business be centralized or decentralized? And Andy we’re talking here about companies that might have operations in 20 countries and have 30 brands they’re operating with, lots of diverse business units. So this is really we’re speaking to large global manufacturers, distributors, people like that here. And it’s a question that you and I hear about sort of all the time. Why don’t you take us through kind of what you know, what does it mean to kind of what’s the issue here?

Andy: There really are two schools of thought when it comes to this org design stuff. And this matters, by the way, because the way you design your team will actually produce certain outcomes. It’s just a fact. If you have a very centralized team, you’re going to get a certain set of outcomes that flows like water does down a river, right? And so it does matter how you design this. And so again, the two schools of thought, centralized versus decentralized. This is a poor graphic to show it, but one is where you put everything in place and it all gets distributed out in elegantly or inelegantly. And then the decentralized is where you forward deploy a lot of these capabilities. Now, we have been talking about this one for a while. You and I have had lots of conversations. And in fact, a year ago at our Mindshare Summit, we asked people to tell us. We handed out paper and we said, design your org chart. And then we hung them on the wall. And I think we had something like 96 different versions of them. We put them on the wall and it was fascinating to see people walk around and point at them and say, Oh yeah, this is a good idea. Or we hadn’t considered that or what have you. So we’ve been talking about this one for a long time. And so it’s not a new concept, but what is interesting is we like to think about this. You and I have talked about this quite a bit. What are the factors that you need to consider when you’re making a decision about whether to centralize or decentralize? And this is not an exhaustive list, but we think these are kind of some of the biggies. So one big one is to what extent is your business is really dominated by local customer preferences and behaviors – currency, language, that kind of thing. If you’re operating a multi-brand business and the brands really are unique to a certain country- like I remember when I went to Japan many years ago it’s sort of funny, there was a soft drink there called it’s spelled c-a-l-p-i-s and when you say it it’s pronounced “cow piss” and you’re like “that’s great.” But say Calpis, that’s the name of the drink. But in Japan, people don’t think about it that way. So obviously if you put that in front of a group of Americans to market that, they’d change the name.

Brian: It’s like, Andy, it’s like the Nova in, I guess it was Chevy or whoever released it in South America. Well, Nova is a car, Nova. And Nova means don’t go. It doesn’t go. Exactly. So it’s the same thing, right? But I think this applies not only to geographies at this point, but it also applies to business units, even in the same geography. So if you think about a company that may have different types of products or different brands or different product types, or even serving different customer bases, To me, that’s another flavor of decentralized. You need to give, I think, some capabilities to those people to react to their customer, which might be different than the other lines of business the business is in. So I think this cuts across geographic and also business unit lines.

Andy: The second thing is a service component. And what I mean by that is, does he have to install this stuff? If you’re buying windows and you have to install the windows, obviously the installation is a part of the process versus if it’s a widget you ship and there’s no real local dimension of the fact that it’s delivered and it shows up. That proportionality matters as well. The fulfillment – how difficult is it to fulfill? Can it be shipped in? But perhaps the most important factor here is really the location of the talent. If everybody wants to live in a certain country and that’s where the talent is, then you’re gonna have to probably forward deploy that particular function and not force them to move to another city where they don’t wanna live.

Brian: It’s also where the talent is available. And then when you think about a centralized function, one of the key arguments is really about developing a center of excellence and expertise concentrated at a corporate level that can then be shared. Think about digital marketing or e-commerce platform development and experience development elements, things like that. That is really critical or could be a big advantage to a company. Whereas if it’s spread all over the place and you’re hiring in markets where there may not be as much sophistication or talent, that becomes more challenging. And that’s a big deal. I agree with you. I think that’s the number one factor in my book.

Andy: I think you pointed this out, too, when you were talking about your post on LinkedIn and you talked about if you centralize, say, the tech infrastructure, then there’s some economies of scale associated with that. If you’ve got 25 different versions of platforms all around the world, you can’t really benefit from a bundled discount. Why don’t we go through each one of these and give our thoughts on it. Which of these needs to be centralized versus probably more effectively decentralized for a global B2B manufacturer or distributor?

Brian: For those of you listening on the podcast, here is a list of key functions affected. We have six of them laid out here. So let’s talk through them. So data, consolidation and normalization of data, should that be handled at a corporate level or down, distributed down? And I think I’ve seen this firsthand with companies I’ve worked with in the past. And for example, I remember years ago working with Epson, which is a big printer manufacturer, and they were in 18 countries across the Americas. And this was a big deal for them. They had to allow for the variance of product data at individual country levels because there were different components, features, different requirements in that country for power, for example. Powering up a printer, right? The power configurations are sometimes different in different countries because the electrical grid is different. So I think this can be centralized, for example, but it has to allow for some, at the edge, it has to allow for some customization, product data customization. So that’s when I think you need some sort of, a bit of a federated model.

Andy: The counterargument is that data, if it is in a central location, can be harnessed more effectively. You can have data scientists in 14 different countries all leveraging best practices versus a centralized model where you can have 14 data scientists working together in one location. I think because we’re earlier on, I would tend to lean towards centralizing the data until it’s more advanced, where perhaps you could decentralize it at some point. But you need to centralize the talent, I think, and the understanding.

Brian: I would agree with that. Tech infrastructure, I think, is one that certainly has benefits if it’s shared. Again, using these distributed models where companies may acquire other brands and they have legacy systems or different markets. Some markets might have e-commerce, others don’t. You’ve got individual instances. It’s kind of a mess. And if you don’t centralize tech, I think, in my opinion, you end up with just a hodgepodge, a lot of technical debt, a lot of difficulty in maintaining systems, and then ultimately, you don’t have the same leverage with vendors to negotiate a great contract because you’re negotiating one-offs in all these different markets and countries and business units. This one I think has to be centralized.

Andy: A decentralized version of tech infrastructure often becomes a customized version of tech infrastructure, which is impossible to upgrade at some point, and becomes costly to maintain. So this one pretty clearly lies in the other direction in terms of centralization.

Brian: I would say marketing though, Andy, the next one on our list here, this one I think has to have some localization, whether that’s business unit or geographic. And it’s because you’re speaking to a customer group here that may have different needs that vary by country, even the language. And so marketing, I think, while you can have some centralized expertise around marketing analytics, around SEO, paid search, things like that, when you get down to the language and the distinctions between the different markets, I think you have to have some distribution here, in my opinion.

Andy: Isn’t it interesting? You can take the data and the tech infrastructure out of marketing and centralize that, a la our point of a minute ago, right? The other part was sales. I think the sales data and the sales tech infrastructure can be centralized, but the actual people have to obviously be on the ground. Customer support. Boy, that’s an age old question. Do they need to be in market or not? I mean, we’ve experimented with multiple models here in our lifetimes. I remember offshore, onshore, near-shore. Who knows? But i don’t have a good answer on this one I think that every company is different.

Brian: I think there is some benefit to centralizing this at least to a large degree. And then operations and fulfillment at the end of the day you’re going to need localized fulfillment here. I used to work with a company called Teleflora back in my consumer days. And they would have localized fulfillment, but they’d also ship from all these florist entities all over the United States. But they’d also ship some of the common goods, meaning the stuff that was shared across all of these florists from a single DC around the United States. So I think we’re going to end up here with a hybrid. So let’s talk through what some of them said. I mean, here’s a quote from Ian Heller. I’ll read this one quickly, then Andy will get your comments. Ian’s the founder of Distribution Strategy Group. He was formerly at HD Supply. And he said, “There’s a careful balance here, and it’s not easy to hit. The optimal solution is the messy one, which is often the case, a hybrid that is unique to the company based on its talent profile, market, and business model.” Yeah, amen. I agree with that, Ian. What are your thoughts?

Andy: I think you nailed it. That’s exactly what we’ve been talking about. Decentralized versus decentralized really depends on different functions and overall what the goals of the company are. But you can’t just take one model and shove it on top of it and say, everybody should decentralize or everybody should decentralize. It really is based on your business model and basically your go-to-market strategy and what your customers prefer. Because to the point of customer support, it could be that having people in the Philippines speak to people in the United States is just fine. But it could be that having people in the Philippines speak to people in the United States of America doesn’t work. And so it’s specific to the company itself.

Brian: We got a lot of comments on LinkedIn when we posted this, Andy. Here’s another one from Tim Peterson, President CEO of Spear Digital. And he said, “Central at the very top with country area brand leaders, whichever is needed around the organization.” That’s his recommendation or his thought. Then you get both local expertise, control and learning with cost savings globally. Again, kind of a hybrid thing. What are your thoughts?

Andy: One area we didn’t talk about was finance. And, you know, that’s a question that’s often asked, too, is did you centralize the financial component or decentralize it? I think for the most part, companies centralize that because they’ll be able to track it. But I’ve often heard people say, how is money any different from data? Data and money are kind of like the same concept and they both flow. There’s a good reason to centralize both of them. So you wouldn’t decentralize the finance of the organization. Why would you decentralize the data component, right? I think there is an analogy between the two. And like you pointed out, cost savings, you can’t really do that at the local level if you don’t really have a good sense for how to normalize it. I think the money should be centralized. And I think when you do, you do tend to save some money, at least in terms of licenses and implementation, et cetera.

Brian: We just got a comment in on Llinkedin – thank you for that comment. “I believe the key factor here is how customers behave and what they expect from the company’s location while centralizing data governance and fin ops can be great if customers are used to a different workflow it might lead to more complications than benefits.” Any reaction to that Andy?

Andy: If companies have workflow, it’s where the rubber meets the road. In fact, when you think about implementations, how long does it really take to move data around? You know, not very long. All of the complication with an implementation of a platform, for example, is having it interface with people and their existing processes. And that’s what the person just pointed out is that they have established workflows. This could complicate those workflows. Well, what if the workflows are inefficient to begin with?

Brian: Right, that’s a good point. And thank you for your comment there from, from LinkedIn. So wow. And it’s like, I was getting all kinds of comments. I can’t share all of them, but Robert, thank you for your comment as well. So well, let’s, let’s just share it real quick because it’s interesting. Robert Calvert, thank you. “Isn’t there a broader centralization topic if the e-business group has a single centralized function versus embedding business functions with a matrix overhead?” I think there’s a lot of back and forth on this. And I think where we’re landing and the community said it when we went out to Linkedin we asked this question: Should e-commerce functions for large global b2b companies with diverse lines of business be centralized or decentralized? When asked 64% of them said centralized – that’s two-thirds. I tend to lean to that, but there’s got to be, in my opinion, some level of extension out to the business unit, to the local market.

Andy: I also wonder if this is a self-fulfilling prophecy. We’re asked about large companies. multinational global B2B companies, which already have this centralized framework, right? They start with that. When you ask them, well, is this the right version? They’re like, well, that’s the one we’re using. Therefore, it’s probably the right one. So it becomes a confirmation bias. That said, I do think largely speaking, it’s better to centralize versus decentralize, if for no other reason, just for control. You don’t know what’s going on. Yes, you can have little experiments taking place and there’s a value in doing that. But you could also have 25 different versions of things, and it becomes a mess.

Brian: Well, I think talent’s the overriding driver here in my experience, and working with a lot of different companies that deal with this issue.

This week on the podcast, Andy & Brian discuss the pros and cons of B2B companies making their pricing available in online channels.

They’re mostly aligned with the common wisdom that pricing should be transparent, but they offer 4 reasons why it may make sense to hide some prices:

1) Withholding prices gives the seller pricing power.

2) Making the customer call for price raises their commitment to complete the buying journey.

3) The “price available upon request” notice carries an aura of exclusivity and status.

4) Withholding prices selectively pushed the customer to certain items and away from others.

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Brian Beck: Welcome to Friday 15 with Master B2B. My name is Brian Beck and I’m here with Andy Hoar, my co-founder in this thought leadership and B2B e-commerce community. Andy, happy Friday.

Andy Hoar: Pricing is a topic we have a lot of conversations about and not only does it never get old, it also seems to never go away.

Brian: Yes, that’s true. And yes, constant, constant debate. And we’re going to get into that. A lot of comments this week on our LinkedIn post. But before we do that, let’s talk about some news. Andy, did you see this? Of course you saw this. Shopify stock soars 20% on very strong Q2 report and provides upbeat guidance. Andy, Shopify is bucking the trend. I saw some data just today that came in from McKinsey talking about overall investment in technology being down by 40%, likely due to challenging macroeconomic environments. And elevated interest rates they’re talking about overall but then we looked even this past week at what’s happened with the stock market and some of the big tech firms you know their stocks getting hammered Shopify is bucking the trend. And one of the things we’re seeing here is it’s about B2B it’s creeping in here. Our friends at Cleveland Research shared some data with us- some research reports – on their interpretation of what’s happening And they cited B2B, the quote from their recent release, “B2B growth accelerated sequentially to 140% year-over-year in quarter two, with online orders, B2B online orders, growing six times on a year-over-year basis.” And they cited continuous innovation, including manual payment methods, deposits at checkout. They’re rolling out and clearly focused on B2B. Andy, what’s your thought?

Andy: So to the McKinsey thing, yeah, overall spending on tech year over year has declined. It continues to increase unabated if you compare it to what it was 10 years ago. It continues to increase because it’s labor for capital substitution from Economics 101. It’s a lot less expensive to have software do something than it is to have people do it. But bucking the trend is Shopify and also e-commerce spending, which is what we’re seeing. And the reason why is because people are spending more money online. It’s pretty simple. They have to invest in infrastructure to support that ongoing increase in online spending. Shopify is definitely… making a push into B2B. It’s all over what they’re talking about publicly, et cetera. I think they realize that it’s a market that’s under-potentialized, especially on the SMB mid-market end of things.

Brian: It’s exciting to see this. And clearly, you know, at the end of the day, benefiting the B2B buyer. But let’s move into our topic today, Andy, which is all about pricing. This is a hot topic, still. We know we dealt with this in consumer years ago should B2B be fully transparent with online pricing. Apparently it’s still a burning question and you know there’s been a lot of data that we found that that implies that it should be let’s talk about some of that. So we did our State of B2B e-Commerce report. It’s just released and available on our website. But we found that in our survey of hundreds of buyers and sellers that B2B buyers are looking for price. Eighty seven percent of B2B buyers are being asked to research prices well before making a purchase. Similarly, they’re looking where? Online. 64% of B2B buyers are researching online before making a purchase. So, they’re looking for price and they’re looking online, right? So, you know, so you think about, is this a new story? The answer is “no” – price has consistently been what matters most this is some research from DC360 from about I think about four years ago and they asked the question what matters most to B2B buyers. Number one almost 70 percent said very important price. Okay, so clearly there’s a message here. And when we asked our community, we got lots of feedback on our LinkedIn poll. I love this comment here from Beth Doling, who’s that global director of marketing technology at Kimberly Clark. She says, “if you don’t show pricing, you may as well tell your customer or potential customer to go do business with your competitors”. So, clearly there’s an argument hereto show pricing and people like, you know, sort of knee jerk reaction. Pricing has got to be available. But there’s other cases, too. What are your thoughts on this, Andy?

Andy: Well, actually, what Beth said, she went on to say, in addition to this great quote, she said, “if you’re still questioning making pricing transparent to customers, either have a legal slash compliance reasoning or you have a hidden agenda.” And then she said “job protection or relationship building is not a reason in 2024 to keep pricing hidden.” I don’t know about you, but when I talk to B2B companies, that’s often what the essence of the objection is. We don’t want our competitors to see the pricing in particular, which is nonsense because you can get it anywhere, right? You can call them and get it. So I guess you make it a little easier for people to find out what they could find out anyway. And you play like a shell game. I mean, it’s called mystery pricing or secret pricing. We’re going to talk about this in a moment – There’s a counter argument here. It’s a weak one, I would argue. But somebody else actually, in one of the comments on LinkedIn, made a great point about this: People who focus on price often imply that that might be the only differentiation they actually have. So if they’re holding back on the price, that could literally be the only lever they have that separates them from anybody else. So in this sea of sameness where you’ve got all these distributors who are offering the same product, instead of offering services, value-added services, building some kind of deeper understanding of the business, et cetera, lending domain expertise. It could be that pricing in a widget-only game is the only thing they got. And I thought that’s a really good point because if that is the only thing, then you have to hold it back. But my God, if you’re doing that, there’s a bigger problem here.

Brian: Well, here’s the thing, Andy. I think this is a very subtle and complex issue. On its surface, it feels like – it’s the same thing with cars, right? When you go buy a car at a car dealership, it’s no longer about the price. You can get this full price transparency there. You can go online. You know what you should pay for the car before you go in. So how do car dealers differentiate? They differentiate on service. They differentiate on the contract. They differentiate on the maintenance. It’s not really about the price because savvy car dealers know that it’s not – the customer is going to know, if you’re dealing with sophisticated customers, what you should pay for that vehicle. So the same dynamic is here, but I think it is actually – more complex and subtle than just saying “should you know should you show all your prices or not.” I think it varies by product, and I think it varies by industry, and I think it varies by complexity of the sale. I think there’s a lot of things and so there are real I think arguments to hide quote unquote pricing.

Andy: But that’s our spectrum of high availability and low availability of pricing. It’s a shame that more B2B companies put themselves on the low availability end of things. There is a spectrum for sure. And you can find companies that fit into each one of those ends of the spectrum. The problem is too many B2B companies put themselves in the low availability end of the spectrum saying, well, we can’t possibly share this information. And before we hit this slide, one interesting side note here about pricing. It is worth noting that when you don’t show a price, you disable a whole process that a lot of B2B buyers actually have, which is they have to go get approval for the purchase of something. It’s not a problem in B2C. I don’t have to get approval to buy a shirt. But if I’m going to buy a thousand units of something, typically what B2B companies do, a lot of people bastardize the shopping cart for this. They put it in the shopping cart. Somebody has a login and they go look at it. They see it. They approve it by actually adding it and making the purchase itself. What are you supposed to do in that process if you can’t even see the price? What am I asking my boss to actually approve?

Brian: That’s a good point, Andy. But hey, by the way, as an aside, you should probably get approval for judging by the shirt you’re wearing. You probably want to have Cindy make approvals of your shirt purchases.

Andy: Well, I will say it’s always a good idea for Cindy to know what I’m wearing. I will say that 100 times out of 100.

Brian: It is a great point. One of the things I talk about in my book is about eliminating friction and making this buyer’s job easier in B2B and by hiding pricing – guess what, you’re making it harder. But I do think there’s a scale here and there are arguments to hide pricing. There was this great article that you found from this company called the Pricing Conundrum so apparently there’s a whole group that focuses on this. And they talk about why hide pricing? And there’s several arguments they make. Why would you do it? Well, think about this. Withholding prices can give the seller pricing power. If you have something that’s very compelling. And you’re not you’re not presenting the pricing online. Well, you know, they have to the second point here, call for price or inquire for the price. And when you’re doing that, it gives them more of a commitment. There’s more of a commitment to completing the buying journey. They want to know if you’ve got something really compelling and perhaps more complex and require solutioning. I think there’s an argument for that.

Andy: It assumes motivation. That’s the problem here. They make it seem like everybody’s trying to get – remember those shoes several years are called Yeezys that Adidas put out and they had a limited window of time when you could buy them. My nephew was big into this. And then we have like two hours on a certain day when they could buy it. Everybody’s trying to create this exclusivity around pricing. The problem with that is my nephew was highly motivated to get those shoes. In this scenario, I don’t think a lot of B2B buyers are highly motivated to go on a scavenger hunt to figure out what the price is for a product. For every customer willing to call you for pricing, three others find pricing online somewhere else and never call. And so I think that’s the issue. There are some people who do want to be kind of enticed and alerted into finding out like it’s a prize on the other end of the phone. But there are several others who don’t even bother with that.

Brian: That’s true. Thanks for your comment here. Jason Hein said, “The flip side is also applicable. Price available upon request can also imply you don’t have a good relationship with that supplier and you aren’t keeping that connection live.” Interesting point, Jason. Thanks for that. You know, we also got a comment from Tim Peterson on our LinkedIn. He said value adds behind secret pricing better be amazing. But in most cases, they are not. Fair enough. But hey, this last point here, guys, I think is really interesting, which is withholding pricing selectively pushes the customer to certain items and away from others. I actually think there’s a case for that because, you know, think about it, Andy. If you’re shopping for something – These are psychological games you can play. Call for price on certain items. And there must be something really special about that item, right? Why do I need to call for a price on this one? So I think there’s some interesting sort of psychological games that can happen here and motivations. We got a comment from Andy Carlson. Andy’s the chief marketing officer at Distributor Data Solutions. And Andy’s been in this industry as a practitioner for a long time. He was at Brady. He was at Antilia as a CMO. So he’s been around this. And his quote, what he said is, “earlier in my career, we were asked to test the impact of showing a price online versus call for price with the hypothesis that more people would call us, right? Because, hey, we’ve got this special product. People found, though, the experience frustrating and ended up going to competitors. I have yet to find a B2B e-commerce customer that prefers the ‘no price’ experience, regardless of the site or the company’s historical norms.” Andy, thanks for that comment. Really interesting. And I think it’s right on point. This is practically people seeing this. I think this is the age of transparency. I’ve said that before. What are your thoughts, Andy?

Andy: Well, as usual, the Andys have it on this podcast. He’s absolutely right.It assumes motivation. Yeah, there’s some truth to creating exclusivity and an allure about a particular price that assumes people want to play the damn game. And I just don’t think most people do. Now, if you’ve got a brand new product or you literally have an exclusive on a product, sure, do it. But we know that in B2B, a lot of this is just commoditized, genericized stuff that, especially for distributors, the way you win this is by differentiating based on service and accommodations other than price. And when you get into this price game, almost always it goes right to the bottom, whether you’re playing the game or not. So you might as well find a better way to differentiate yourself other than just on price.

Brian: What about this thing called price shrouding? This is really interesting. So Stubhub – which all of you know probably- is the place you can buy tickets for events and things. They ran an experiment in which they compared a transparent pricing system to a system in which they showed the full base price on the main search page and the full price only at checkout so they added something. So they had historically only they’d shown complete transparency. That was their original mission. They wanted to show everything. But this price shrouding notion says, hey, I’m going to give you a price, and then I’m going to add some things to the end. But this is what they found. StubHub users who weren’t shown fees until checkout spent about 21% more on tickets and were 14% more likely to complete a purchase compared to those who saw the total cost of the ticket up front, and they dropped their transparent pricing. These guys are sophisticated e-commerce players. But what happened next? Can this work? So but then, oh, right. “StubHub tricks people with bait and switch pricing, DC attorney alleges.” So, yeah, OK, so fine. But I don’t know if they won that case. But anyhow, it’s interesting to see. So there is some sort of price fixing or what have you or transparency stuff that the government’s paying attention to. But that’s an interesting case, Andy, right?

Andy: Well, they leaned into this idea. Their argument is that when we are competing against everybody else, show the lowest possible price. And then bait people into completing the purchase. But once they’re invested, once you get them to click on screens, enter information, yes, it becomes a sunk cost. And the psychology says that once people invest time and effort in something, the more likely to complete it. This is an example of that, but I’m not sure price is the way to do it. You run a big risk. And in particular in B2B, you run really big risks of alienating customers. I think with StubHub, these are things that people drive a lot of passion out of attending events, seeing bands, sports events, et cetera. They’re willing to invest the time and it’s their personal money. I don’t know about this environment where people are buying stuff for work and it is other people’s money. I don’t think they care as much about this. They just don’t want anybody jerking their chain on the pricing. And this is, kind of like a mystery reveal. It doesn’t really work with B2B buyers in my experience.

Brian: Where I think it does work, though, is if you’re a distributor and you have certain advantages that you want to provide to a company who’s buying in bulk from you or works and signs up for an account with you, things like that, where perhaps you can achieve better pricing. And you say that through your e-commerce experience. You show your pricing, but at the end of the day, can someone get better pricing from you? Yeah, sure. If they’re doing a greater level of business with you and are a strategic partner or client.

Andy: But then you can be transparent about that. You buy more, you get a better price. David Gordon actually made this point on LinkedIn about it. He’s like, well, there’s a question about what price you should list. Is it the list price? Is the MSRP, which many of you don’t have? Is it the distributor cost? Do you add a distributor margin? It begs the question, what margin? Yeah, he’s right about this. These are all questions that need to be answered, but they’re all, I think, sadly coming from the perspective of the seller. And yet at the end of the day, we know it’s a buyer’s market and it’s a buyer’s experience and it’s a buyer who’s going to determine whether you actually sell the product or not. So David’s right about making sure that you have these kinds of conversations internally, but in terms of what you do and how you go to market and what you show people online, it better be driven by what buyers want.

Brian: Agreed.

Andy: And then to the point earlier, buyers always want to see a price. I’ve never met a buyer who’s like, yeah, don’t show me a price. Let me try and earn it through some time investment.

Brian: But we asked our audience about this on LinkedIn – should B2B companies be fully transparent in listing their prices online? Oh, guess what won? We got a lot of votes on this one. 54% said fully transparent. 32% said partially transparent. Only 14% said non-transparent. So I think the industry sort of violently agrees just in that kind of partially transparent bucket, 32%. What does that mean? So I think there’s a balance here, Andy. I think there may be some cases, but they’re becoming really edge cases. And to your point earlier, leaning into more transparency than less is important, we think, to B2B companies.

Andy: It’s the B2B buyer who’s driving this and to a person, they want more transparency. I mean, I just never, ever talked to a B2B buyer who said, yeah, please don’t show all the pricing information to me. I’d rather lord it over time. So if you just judge it based on that alone, it’s a settled argument.

Brian: You’ve got a lot of new players out there folks like oh I don’t know – Amazon that are showing pricing fully transparently, This ship has sailed in my view.

This week on the podcast, Andy & Brian discuss:

– How will Amazon react to being deemed a “distributor” by the US government, and will that make them liable for the products third-party sellers put on the platform?

– Does digital investment necessarily lead to improved profitability?

– 3 steps to improving your digital profitability.

— 

Brian Beck: Welcome to Friday 15 with Master B2B, our weekly podcast and LinkedIn live broadcast where we talk about all kinds of great stuff about e-commerce or B2B companies. My name is Brian Beck. I’m here with Andy Hoar, my partner in this thought leadership effort. Welcome to Friday 15, Andy.

Andy Hoar: Yeah, good to be here. Always good to be Friday.

Brian: Always good to be Friday. This is true. So, Andy, as usual, we’ve got to jump right into our breaking news. So, Andy, did you see this this week? Amazon.

Andy: This is really breaking news, actually. It is, big time.

Brian: So we referred to this issue with Amazon about, I think it was maybe two or three months ago, Andy, on one of our Friday 15s, where in the U.S. government, the Consumer Product Safety Commission was looking at ruling Amazon as a distributor and being liable for the products that are being offered on their site, sold by third party sellers. Well, they just found two days ago or three days ago, that they ruled that way, that Amazon is in fact a distributor and is now liable for the safety of products that are sold. It could be sold by somebody selling from somewhere in Asia, some product and someone gets it and it’s dangerous or defective and Amazon is now being held liable by the federal government for that product. This is a potential game changer, Andy, what’s your take?

Andy: This has been an age-old argument about, you know, AT&T did it years ago. Google, all those guys have argued…they’ve all argued that we’re just common carriers and we’re marketplaces at worst. But we’re definitely not distributors. We’re not liable for what’s sold, bought and sold on our network. Except I think the kicker here, for Amazon, is fulfillment by Amazon. I haven’t read too much about this particular point, but my instincts telling me that you can’t actually warehouse the product, merchandise, market, and price the product potentially and not be the distributor of the product. That’s one thing. The other thing is this really applies to danger. That’s what they were focusing on. If you’ve got defective products like hair dryers that blow up in your face or whatever, then you should know whether that’s the case or not. And if you don’t, you’re liable. What’s interesting is what about, and I have to credit Jason Hein for pointing this out – What about if you have incorrect descriptions of products? So he gave the example of if you had a harness that was, you listed as handling 230 pounds, but you transposed it and it’s actually 320 pounds. Or actually, you say it can handle 320, but it actually can’t handle 230. What happens if somebody uses that thing and hurts themselves? It was a mistake. It was a simple product description mistake. But is Amazon liable for that? That’s where it gets really, really ugly.

Brian: They talk about it in this article, which is on MDM. Thank you, MDM, for this. But they talk about it being focused, to your point, around FBA products, products that are held and shipped through Amazon’s Fulfilled by Amazon service, in which Amazon doesn’t actually own the product. As a service, they’re holding the product and shipping it to the end buyer. So remember this as a marketplace – Amazon doesn’t own these products. And that’s what’s really the crux of the issue here. Amazon never owns them, but they warehouse and store them in many cases. And so what I think is going to happen here if this holds and of course, Amazon will probably spend a lot of time in court fighting this.. But assuming that it holds, I’d imagine there’s going to be some additional restrictions placed on third-party products coming in from, from overseas, particularly, particularly Asian other markets where Amazon can’t fully verify the safety of the product. I just think they’re going to have to put more scrutiny on that if they have to live by these rules.

Andy: I’m not sure that’s a bad thing, personally. Should you really be selling things that you don’t know the origin of? This is a big issue around stolen goods. People steal stuff and sell it online. And they say, hey, we’re just selling it here. We have nothing to do with it. Really? Just like Facebook, if they wanted to restrict the kind of content that kids could see, if you started fining them for it, I’m not a big government guy, but I bet they’d figure that one out pretty quickly. And I think Amazon would figure out what’s real and not real in terms of the products. Again, we’d have to have a basic level of safety about what’s being sold. And you can’t just make a ton of money and market all this stuff and house it and say, well, I don’t know what it is.

Brian: I think ultimately for traditional B2B manufacturers and distributors to some degree, this actually could be a good thing. Because they adhere to a lot of these standards. And for the companies, a lot of the companies we work with at, my Amazon agency Enciba, they are fully compliant with all OSHA and consumer product safety commission and all these different standards. And they pride themselves on that. So that could end up being an advantage for them.

Andy: There’s a reason there’s an efficiency about this. Otherwise why play by the rules, you know? T

Brian: So this is an interesting one and we’ll see how that develops. We’ll keep our finger on the pulse on that one. But today’s topic is this. Is profit now more important than sales growth in B2B e-commerce? This is a very interesting question. We got into it in our State of B2B e-commerce report. We’ll get into that in just a moment. But Andy, we see all these stories and we covered some last week. We saw this story just this morning the Dow closes nearly 500 points lower yesterday as investors here the U.S. economy is faltering – the conference board weighed in on some things saying that it is expected to continue to lose momentum in the near term due to high prices, inflation. You hear other stories about, hey, the economy is great and growing. So it’s a mixed bag, but there’s certainly uncertainty in the market. And in the face of that, what’s happening, and we surveyed a lot of B2B practitioners for our State of B2B commerce, and we found in that survey that digital budgets have expanded. So in the face of this economic uncertainty, 83% of executives are spending more in digital this year. So there’s money being delivered into this channel, people are investing, even though they’re feeling and seeing these uncertainty signals. And the other interesting factor, and we’ve highlighted this in earlier Friday 15s, ROI expectations are higher. So compared to three years ago, the timeframe that B2B executives need to produce an ROI has sped up over 60%. So we’re faced with this situation of uncertainty. And we believe, or I believe, that a lot of this is being pushed back and focused into this profitability metric. Now, one thing we know, Andy, this is a statistic I found from Gartner that I’ll read for our podcast listeners. 65% of a company’s business comes from existing customers. And it costs five times as much to attract a new customer than to keep an existing one satisfied. So this profitability pressure, these additional dollars, ROI, where do you go to find the ROI? Well, existing customers, right? What are your thoughts there, Andy?

Andy: The reality is nothing here is new. It’s just that the dirty little secret is that digital is a lot more efficient at selling to people under the right circumstances – not all circumstances, but on the vast majority of scenarios, digital is a far more efficient way of doing it because you can automate a lot of the processes. One of the things we talk about a lot is the cost to serve somebody online is a lot less than it is to serve them offline. People will be upset about that by saying yeah but they’re getting guidance from people that offline thing you’re talking about is talking to sales people (you know that’s my favorite topic) but for reorders and replenishments etc and a lot of items that are naturally sort of identifiable on their own. Why do you need necessarily to talk to somebody? I’ve seen stats that show 50, 60, 70% of what people buy from a distributor is reorder replenishment stuff that you don’t need to talk to somebody about. And so there’s an efficiency dimension here. And efficiency is the same thing as profitability.

Brian: So you think that’s what’s driving a lot of the investment in digital is that the recognition perhaps that it is more efficient in many ways, right?

Andy: Well, it’s a couple of things. At the end of the month, at the end of the year, at the end of the investment cycle, how did we do? To your point about the ROI, ultimately, digital delivers, especially if it’s done well. Now, can you overinvest in this? Can you spend too much money on things you don’t need? Yes. And we saw some of that during the pandemic where it was spend, spend, spend, spend. Funny enough, it’s usually the people that cost the most, not the technology. So it’s really never the technology. But funny enough, the technology is the one that gets the blame. Go figure. But… Yeah. If you overspend on digital, I think oftentimes it’s by hiring too many people. That’s what Amazon found as well as other people. Nobody ever says, oh God, we bought too much software. I mean, it isn’t the case. Sometimes it’s true, but most of the time it’s not that we bought the wrong or too much software. Sometimes it is, most of the times it’s not. It’s usually that we surrounded all of that with too many people and that’s what they end up cutting back on, not the software.

Brian: So this question of profitability versus sales growth, we went out to our LinkedIn community and asked them, in today’s economic environment, is profitability now more important than revenue growth in B2B e-commerce? 79% said yes, it’s all about the bottom line. Only 21% said no. Sales growth is more important. And that to me is fascinating, Andy. You know, it’s always been in digital in my experiences in e-commerce and over the years – it was always about growth, growth, growth, growth, growth, acquire more customers. It wasn’t as much about efficiency, but it seems to be that this has been changing. And I think it’s a sign maybe of some maturity in the market.

Andy: One quick note on that is I do think we’re living in a world now where as the economy slows I think we had some numbers this morning even about about the employment figures that fell below forecasts and estimates so the economy is slowing the interest rate increases over the last year or so have finally started to take hold whether we’re in a recession might be a technical thing but we’re certainly slowing down and what happens when you slow down is it focuses people on what really matters, which is the profitability. I’m fond of analogies and one of my favorite analogies is about revenue is like the gas you put in the car and profit is like how many miles you can drive. Ultimately, you don’t care how much gas you put in the car. You just care how far the car will go. However, there tends to be a correlation between how much gas you put in the car and how far you can go. Now, this could go on forever. I could go into all sorts of dimensions, because what really matters is probably miles per gallon. And I think this is where AI, for example, and software make a big difference, because I think AI could be a leap forward in terms of miles per gallon, where you could get thousands of miles per gallon versus just tens of miles per gallon. But we’ll put that aside for another day. This is what people care about. And so when you start to see the amount of gas you put in your tank go down for whatever reason, all of a sudden people are like, wait a minute, how far can we actually drive this car? And so it does focus you on what is this going to cost us in terms of our ability to execute?

Brian: Well, your AI point is a really interesting one, Andy, because we’ve seen in some of the data that the number one reason or number one thing that B2B companies are thinking about using AI for is efficiency gains. So part of this digital budget stuff, the growth in digital budget might be that. It might be, hey, we want to invest more in AI to drive more efficiency. This theme emerged, Andy, when we were interviewing folks on our webcast this week for the state of B2B e-commerce. And the theme was really about achieving ROI, but doing it by eliminating buyer friction. So profitability, there’s an intense focus, and several folks mentioned this during our webcast. We interviewed, I think, four people. And the theme of friction and really operational efficiency and making the buyer’s job easier on the front and back end really emerged. And we found really three, in our research, we found this show up in three areas. The first was really around easier and faster reordering. You made that point earlier. 62% of buyers are being asked to shift to lower consideration orders to the web. So when we asked our B2B buyer community that question. So that’s fascinating. So there’s certainly an efficiency gain there. And the second thing that emerged was don’t recreate the wheel. Which is really more about accommodating buyers and what they’re expecting from a digital experience. 39% of buyers prefer to buy on the site that is easiest to use or where they already make personal purchases. It’s the Amazon effect. People are used to shopping and buying from Amazon, which is driving Amazon business growth largely. But it’s also, you know, as you think about your own web experience and what you’re delivering, not creating things that are putting friction in the way that are common usability characteristics. Companies like to recreate things that are unique or different. We’re going to our buyers differently and all that stuff. Now, you know, there’s a lot of commonality and B2B companies often overlook this. I have a whole chapter about this in my book. And then finally, making products, all of them, easier to find online. And this is a pervasive theme, just keeps getting more and more sort of reinforced. 64% of buyers research the majority of their purchases online before buying offline. So you’ve got to make it easy for them to find their products. And increasingly, that includes things like showing them pricing and giving them the information they need, the transparency they need. So eliminating friction, Andy. These are three examples, and there’s many more.

Andy: If you serve your customers well, and in B2B, it’s a lot about speed and efficiency because they’re not there to have fun. They’re there to buy stuff. Now, don’t make it unfun, but make it easy. And if you do that, they’ll buy more from you. And if they buy more from you, then you’ll make more money off of them.

Brian: It sounds pretty simple to me. We had another example on our webcast someone was talking about something on the back end, a process. One of the folks we interviewed talked about how their customers, I think it was SAP, talking about how their customers, they are enabling them to pay invoices online, and to look up invoices. This sounds so mundane, but easing the process of just paying invoices, checking balances, it sounds so motherhood and apple pie, but this is the kind of stuff that we’re seeing our practitioners focus on in terms of getting ROI from those digital investments, making the cost, reducing the cost to serve their customers. And the good news is we found in our research that profitability is actually being realized. 65% of the people we surveyed are seeing an improvement in per order profitability. 63% are also seeing an increase in orders from existing customers. This is loudly saying, hey, we really are doubling down on that aspect of our digital efforts.

Andy: What’s driving this profitability per order is clearly technology. It’s definitely digital. It’s making recommendations to people. There are technologies out there that enable sales reps to make a better offer to somebody, a more profit-maximizing offer that they just maybe didn’t know, but the software, which is infinite knowledge, does. So it’s clearly digital that is doing this, which is a nice matchup with the time we’re in today, which is why I think you’re going to see that digital is kind of recession-proof because in the up times, it can help generate more revenue growth – shift and lift. And in the down times, it can help maximize profit. So it’s good on both fronts.

Brian: I’m going to play devil’s advocate to all this, Andy, in that there’s an argument that says in a time when people are pulling back, it then becomes more efficient and it’s more of a time to be aggressive on new customer acquisition and win market share when others are stepping back from that effort. So, just throwing it out as another way of thinking.

Andy: I’m a fan. I think companies should be investing more in technology right now, especially if you have a strong position, even if there’s a down market. This is a good time to use those people who are maybe idle resources to help you create new technologies so that when the market picks back up again, you’re well positioned. Wouldn’t you like to have been some of the people that got early on board with AI, the real AI, the ChatGPT stuff? Wouldn’t you like to have been the ones who adopted ChatGPT sooner versus later to drive things? I sure would have. And that came from people who started early, usually in the time when nobody else is looking at it.

Brian: It also applies into marketing too, or opening new channels. Think about launching new marketing programs, entering new markets, expanding your product offerings, launching an Amazon program, whatever, those sorts of things. And from a marketing perspective, the dollars are presumably a little bit lower when other people aren’t spending. Remember how Amazon, Google, all these pay-per-click and other things work. Those are auctions. Those costs go up when there’s a lot of demand. Well, guess what? Costs go down when there’s less demand.

This week, Andy & Brian talk about why frontline employees and executives have such different views on the state of their businesses:

– What’s the “purpose gap” and is there a way to reduce it?

– How can companies ensure they’re allowing their staff to make forward progress on their projects?

– Is having differing views on the customer the biggest disconnect between executives and rank-and-file staff?

— 

Brian Beck: Welcome to the Friday 15 with Master B2B, my name is Brian Beck here with Andy Hoar my partner in this thought leadership series. Andy, welcome to a steaming hot July Friday 15. What a week it’s been everyone’s getting baked all over the country. My air conditioning went out…for those of you who can’t see me I’m in a different location today.

Andy Hoar: Is that an RV that you’re in there?

Brian: Yeah, I’m in an RV. That’s right. It’s a delivery van. Yes, I’m in the Amazon delivery van. An RV or a delivery van. Oh, my goodness. Well, welcome, everyone, to Friday 15. We’ve got some interesting, interesting stuff that continues to hit the wire, Andy. Going to our breaking news this week. These stories, Andy, coming out from big distributors in the industrial sector. “Motion’s Q2 declines reflect ongoing industrial softness.” That’s a story out of MDM. Another story from MDM. Modern Distribution Management. “In Q2 Fastenal had its weakest daily sales growth in three years”. What’s going on, Andy? We got softness happening here. We’ve talked about this before. It’s continuing, it seems.

Andy: Well, I think you’re going to do your best to drive the B2B space there in LA by ordering your air conditioner replacement. So that’ll definitely get the orders churning at Fastenal and other places like Granger. I think what we’re seeing is the economy, the jig is up. I think we’ve had this extended, prolonged bull market, essentially, and the economy is so efficient now with technology that it’s able to sort of rationalize the problems and make up for deficiencies and private equity firms can come in and cut the fat. But I think the efficiency argument, I think we’ve cut everything we can from the bone at this point. And because interest rates were high for a while, it slowed the economy down. I think long story short, we’re seeing the effects on the consumer market. And now we’re seeing the real effects in the B2B market. And this is where you know it’s real because when these guys start cutting back on orders and such, they’ve seen a trend.

Brian: We’ve got a longer cycle here, and it’s sort of core to the economy, it seems. Now, we’re not economists, we’re just observers, right? But we see this firsthand because of all the manufacturers and distributors we talk with across lots of different industries. So it’s going to be interesting and we’ll continue to watch this and observe. These companies are fine financially but they are indicating some things that are leading where we’re going here. So today we’re going to talk about – What is the biggest disconnect between the rank-and-file employees and executives. This is a fascinating topic. And we’ve been covering some this summer. We’ve been covering some more of these sort of organizational topics that are fascinating and top of mind for a lot of the executives we work with and talk to every day. And really, this comes down to a couple of different things. We did a LinkedIn poll here. We’ll show it later in our Friday 15. But, Forrester did this research last year and they looked at Gen Z and looked at other generations. The quote, here’s a quote from their research. “Gen Z employees are not just looking for a job. They are looking to become part of a community and build something.” So when we think about this disconnect, this has something to do with it, right? There’s a couple of different elements here. Andy, we can talk about incentives and other things and pay. The problem is, and McKinsey did this study. This was a really fascinating paper you found. Thank you. There is a purpose gap. What is a purpose gap? Well, essentially, living your purpose in your day-to-day work. What percentage of executives versus rank-and-file feel like they’re living their purpose? Well, big, giant gap here. 85% of executives in upper management agree they can live their purpose in their day-to-day work The exact opposite with rank-and-file, 85% of frontline managers and employees are unsure or disagree they can live their purpose in their day-to-day work. Well, there’s a gap for you. Gosh, what do you think of this, Andy?

Andy: Well, it helps when you’re making the decisions, when you’re allocating the assets, when you’re in charge, right? And I think when you’re in charge… You feel more powerful, more control over your circumstances. At a lot of these companies, as we know, the senior executives make the decisions in the rank-and-file have to live with it. Well, there’s a natural problem there, which is I don’t feel like I’m a part of the decision making dynamic. I have a hard time accepting that I have any control over my circumstances. So it isn’t surprising. That’s a pretty big gap, but if you’d asked me, I wouldn’t have thought it was 85, 15 and the exact opposite. But it does make an important point that I think if you can see on the screen here, that 50% of rank-and-file employees disagree or strongly disagree that they’re fulfilling their purpose. So there’s a motivational problem here that needs to be overcome, which we’re going to talk about in a moment.

Brian: What’s interesting to me, too, Andy, is that you think about your point about control, sort of control of your destiny. And when you get to those upper levels, you can make decisions which result in something.. So you think about this double edged sword here where it’s almost self-fulfilling. You get to the point where you can make decisions and you find purpose in those decisions and see the results of those decisions. At the same time, you’ve got the younger rank-and-file Gen Z saying, hey, purpose is really important to me. I’ll bet that same number amongst boomers or Gen X is not nearly what it is amongst Gen Z. This is coming from both angles from a cultural perspective particularly here in the U.S. right so but well we live in a different world today too.

Andy: Let’s be honest where you know we’re not struggling to survive like we did back in the day…like if you watch movies that are period pieces from the 30s or whatever people show up to work at a construction site and if they get picked they’re thrilled. Today, people wouldn’t even show up. I remember when I read about when they were building the Golden Gate Bridge, there were people falling all the time. And sadly, people died. All that meant was that there were hundreds of people who showed up ready to take their job. They would almost cheer for somebody to fall and die because that meant a job opening for them. We don’t live in that world anymore. And so because we don’t, and we have more like luxury interests in this world, then people are thinking, well, if I’m going to work, it should be worth my time. Whereas generations ago, it was, if I’m going to work, I need to eat. Big difference.

Brian: We’re well past the Great Depression, right? That’s what formed a lot of those baby boomers and their mindset towards this stuff. But here’s the other thing, Andy. So you’ve got this Gen Z generation, which really wants purpose. And then you’ve got this other statistic here, which is fascinating because it shows executives, they need to motivate these folks and give them purpose. But then they overestimate their effectiveness as motivators, as leaders. This is what we’re showing here for those who can see it. is something called the Organizational Health Index, which is basically a gap analysis done by McKinsey, which talks about how inspiring leaders are in the organization. From a leadership perspective, leaders overestimate their ability to inspire dramatically. And from a motivation standpoint, same result. So we see another gap here, Andy, related to how effective these folks are. So even if there is a purpose to be had, leaders aren’t communicating it effectively, apparently. What are your thoughts?

Andy: I think this was what gave rise years ago to this idea of 360-degree feedback. Remember that? It used to be like we’d sit down for a review and the boss would tell you what he thought or what she thought. You’re doing this well you’re doing that well. Now, get out of here and do better. And that was missing this feedback loop, which, by the way, you wouldn’t do that with customers. Hey, here’s what we’re selling. Get out of here. You know, you want to find out what the customers think about it. And this pervaded the workspace too, where people said, wait a minute, maybe we should hear from people how effective our policies are. In this study, what they did is they asked the leadership the same question as the rank-and-file. They asked the leadership, how effective do you think leaders in this company are? And of course, they’re talking about themselves. We’re pretty effective. Oh, great. We’re great. From the people I talked to, it seems to be just fine. But then they’d ask the same question of the rank-and-file and they get a different answer because sometimes it’s not what you encode, it’s what people decode, and they were decoding things very differently.

Brian: Only 61% of the rank-and-file said the leaders inspire action by others. So how do you address this? How do you close the gap and motivate people and get them to share the vision? How do you get Gen Z on board here? This is an interesting question.

Andy: A ton has been written about this. And by the way, this goes well back 100 years about what motivation is. And it’s fun to take an exploration of that because you see stuff that talks about us as hunter-gatherers and things of that sort. But this was the one that I think set things apart. I remember reading about this a couple of years ago, and it always stuck with me. And it’s a book called The Progress Principle by Theresa Amabile and Stephen Kramer, who are one of the professors at Harvard Business School, organizational psychology PhD’s. And what they did was they took a very different approach to this. They said, we’re going to analyze diary entries. So they gave 238 employees in seven completely different companies diaries. And they said, we want you to record what happened for you on a daily basis. They ended up analyzing 12,000 diary entries, which amounted to 64,000 discrete events. And what they concluded from that was that ultimately what motivated people the most and what made them the happiest was making “daily forward progress on meaningful work.” And it didn’t have to be big stuff. It could be small stuff. I think they had a couple of examples in the book. I’m just going to read a few here. One is – the guy is a programmer said, “I smashed that bug. That’s been frustrating me for almost a week now. That may not be an event to you, but I live a very drab life. So I’m all very hyped.” Somebody else wrote, “I figured out why something was not working correctly. I felt relieved and happy because that was a minor milestone for me.” And then the last one was somebody said, “we spent a lot of time updating the cost reduction project list. And after tallying all the numbers, we were still coming up short of our goal. It’s so discouraging not to be able to hit that number after all this time and hard work.” And so, you know, we forget sometimes that people are living in the trenches. They’re tasked with projects. And that’s the reality they live in. And if they can actually chip away at those projects and at the end of the day feel like they’ve made progress, that makes a huge difference. There’s this sense that everybody, every manager is like a football coach where they have to give an inspirational speech in the locker room about “go get ‘em” and stuff like that. And I think what we’ve discovered is that maybe that is like a sugar high. It gets you pumped up for a couple of minutes, and then five minutes later, you go back to reality, which is you’ve got to solve problems. So it feels like this is, in fact, what motivates people. And the interesting dimension here, just quickly, is that the negative side of this is doubly powerful and in a negative way, in that when people feel like they can’t make forward progress, you can give them all the titles in the world. You can pay them well. They can even enjoy working with other people. But if they show up every day for work and they’re frustrated around every corner, then eventually you’re going to lose them because that’s what they have to do. And so being in a frustrating circumstance where they can’t make forward progress despite all the other extrinsic factors, it makes no difference. But you said, we were talking earlier, you said you had an example of this just today.

Brian: It was fascinating because the manager, their job is to enable people to be able to do these things and achieve meaningful work. But it’s not even just within the structure of their particular function within a corporation. I was talking earlier today, actually, Andy, to an upper level manager at a large plumbing company, a big plumbing manufacturer. And what she told me was there were certain things she’s trying to do in e-commerce. that she wasn’t able to do because she’s fighting against other parts of her organization. So the sales team in particular, in this case, they’ve got someone out there managing small retail sales. These folks are coming online and selling products and really causing channel conflict with what she’s trying to do in e-commerce and she can’t get it done. So it’s not even just within the function. We’re talking about getting things done cross-functionally. So the manager’s job isn’t just that, the executive’s job. You’ve got to be mindful of how your organization is functioning, even within things like channel strategy. Meaningful work can mean a lot of things, but that’s a very subjective term.

Andy: The upshot of this as a manager or a leader’s job is to clear the frustration paths out of the way. Enable your employees to not be frustrated on every turn by bureaucracy or bad decision making or indecisiveness. These are all the things that your job is to clear the path as a manager. And that’s hopefully what good managers are doing. The meaningful work thing, just as a final point here, there’s a famous story about a janitor at NASA who was asked many years ago, what do you do at NASA? And he said, “I put astronauts on the moon.” Now, the reality is he was cleaning toilets. But he felt he was a part of a larger organization. He was doing something he considered to be meaningful work. You can’t snow people here, but you can say, look, if you’re changing tires on a car, you’re actually enabling this family to drive safely from point A to point B. And you’re saving lives by doing this. So you’re not just out there putting bolts into something. So this is another role for the manager – to define what meaningful work is.

Brian: So we asked the question, Andy, of our LinkedIn audience – “What is the biggest disconnect between employees and executives?” And it was fascinating. We provided several different options. It was really interesting what came out. We asked a variety of different things, and the number one was actually “a different view of the customer,” that was 50%, followed by “alignment on vision” at 36%, which is really what we’ve been talking about a lot here. “Communication style” and “incentive structures” were very low, only 7% on each of those two areas. So really, this surprised me, Andy, different view on the customer. What do you think is driving that?

Andy: I think the thing about the different view of the customer is – I think executives are telling themselves and maybe they’re recognizing maybe they don’t – that they can tend to get an oversimplified or sanitized view of the customer. And I think they know that. I’ve talked to many executives who when they go out and talk to customers, they always say things like, “well, all the customers I talked to seem very happy.” And, “these guys love our brand.” But the people in the trenches who are dealing with customers on a day-to-day basis have a more complex and nuanced view where, yeah, maybe they appreciate the brand, but they’re also not happy about the fact that the shipment consistently arrives a day late. And so that disconnect is because they’re not on the operational side. And sometimes that information doesn’t make its way up the chain. I think some executives recognize that maybe I’m not seeing the full picture of the customer, which is I think the reason for this. That said, I think we both know that might be an excuse and that the real disconnect is the one we spent the first 15 minutes talking about, which is the lack of alignment on vision and this inflated view of their ability to motivate people and that people understand what’s in their head. “I think this is our vision. Therefore, everybody in the organization does.” Not always.

Brian: The rank-and-file are saying, “well, our executives have this crazy view of who the customer is… yet I’ve got all these challenges and I’m actually talking to the customers. I see what’s going on here and the executives don’t understand how to better serve the customer.” I think they’re really related. And even as it relates to my example earlier about overall seeing the challenges that lack of alignment can provide and how that translates to ultimately how the product and experience shows up for the customer in the market. So, I think these are interrelated. I was a little surprised that alignment didn’t win though

Andy: This reminded me of the famous stories we’ve often heard where you ask a CEO what the vision for the company is and they can explain it in two sentences or less. This is our value proposition and they’ve got it all figured out about how we’re different, et cetera. Then you go talk to somebody in the rank-and-file and they say, “what is the vision of the company” or “what’s our value proposition?” And they’re like,” I don’t know. I just changed the tires or whatever.” They don’t know. And the problem there is it’s not the rank-and-file’s fault. That’s the fault of the senior management because they have to be out there evangelizing and reinforcing what it is they’re doing in this company because it goes to the meaningful thing. If people don’t know what they’re doing or why they’re doing it, they’re not going to be very good at it.

This week on the podcast Andy & Brian discuss:

– How B2C promotions (like Prime Day) impact B2B sales

– Why internal challenges are the reason why digital strategies fail

– 5 strategies for fixing internal challenges

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Brian Beck: Welcome, everyone, to the Friday 15 with Master B2B. My name is Brian Beck. I’m here with Andy Hoar, my partner in our thought leadership series, Master B2B. Andy, happy Friday as usual. 

Andy Hoar: Yeah, I’m happy we didn’t have an outage today. Apparently there was a massive outage across Windows computers, but hopefully we’ll stay current and live through this webcast here. 

Brian: Yeah, right, exactly. I was talking to someone earlier before our webcast this morning, our podcast, and he was saying that his website, this is a manufacturer, their website went down for about five hours yesterday, and they lost something like a hundred thousand dollars in revenue in a couple of hours…we’re talking real money. Well, on the Friday 15 we talk every week about issues that are pressing for B2B manufacturers and distributors in e-commerce and digital transformation. This week was a big week for the world of Amazon. And so our breaking news is all about Amazon. So Amazon Prime Day, Andy, U.S. online sales drove them to a record $14.2 billion. Huge volumes here. Record-breaking Prime Day sales. It was, I think, 11% bigger than last year, 2023’s Prime Day. This is a two-day event that Amazon runs. It drives a spending frenzy across the United States. And people obviously responded. And it’s been known historically as a consumer purchasing day. Andy, what did you buy during Prime Day? 

Andy: Nothing, actually. 

Brian: Nothing? What the heck, man? 

Andy: Not a thing, did you? Did you hop on and buy your Christmas gift? 

Brian: Of course, I bought lots of stuff. What did I buy? I don’t know. Oh, I know what I bought. My son and I like to go sailing. So I grew up sailing sailboats. And so I bought some new life jackets. They’re very nice. on a Prime Day deal. I haven’t gotten them ye…but I contributed to the 14.2 billion, Andy, and you did not. 

Andy: Well, Brian, you forgot the other part. Just admit you bought some underwear online too, right? 

Brian: I did not buy any underwear. Although I do say, I will tell you, I do buy my underwear and socks on Amazon. That all said the question I always get at my firm Enciba where we run Amazon programs for B2B companies is – What impact do consumer oriented promotional days, have on B2B? Well, I’m going to share some data here. This is a B2B manufacturer. For those of you who are listening on our podcast, I’m showing a graph here that shows ordered product sales daily. This is a B2B company, a manufacturer, not a consumer products company. And it shows their peak on the first day of Prime Day, three times the volume of a normal day. Now, this isn’t all running through Amazon Business. This is sales on Amazon and Amazon Business together. But frankly, this spike didn’t just come from Amazon Business. It came just in general on their entire Amazon program. 3x the volume, almost 4,000 units in a single day, $43,000 in sales in one day. And this is a mature Amazon program. This is a, gosh, a $6 or $7 million Amazon program. Seeing this kind of jump on Prime Day, fascinating. B2B company. What’s your reaction? 

Andy: Yeah, we often hear that Amazon Business has tens of billions of dollars in revenue, which we always know is undercounting the reality of it on Amazon business. But it’s also undercounting the reality across all of Amazon, because as you just pointed out, there are a lot of B2B purchases that take place outside of Amazon business. and I think it’s the case that there are more purchases of B2B products and services taking place off of Amazon Business than on Amazon Business which means you can double at least the number they’re putting through. I hope to someday we can get down to the the bottom of this and see what the actual number is – maybe even Amazon has to estimate what that number is yeah but I’ll I’m going to bet that it’s at least double the number they’re reporting through Amazon Business.

Brian: And what’s fascinating about it too is we saw it across all these categories. We have one of the world’s largest HVAC manufacturers. We run their Amazon program for them. Same thing. They’re just getting their program started. We saw almost a 20X lift on their daily sales in the last two days or this week on Prime Days. Incredible the impact this can have. And so, you know, there really is a convergence of B2B and B2C. It’s clear. And this kind of data shows it. Anyhow, so just some interesting breaking news. Our topic today is – What is the largest impediment to setting priorities for your digital strategy? And Andy, since we’re talking Amazon, or we’ve just been talking Amazon, I always love to quote this guy. And those of you who aren’t, again, watching, this is a picture of Mr. Jeff Bezos, who was the founder of Amazon, of course, is the founder of Amazon. And he said, “we’re not competitor obsessed. We are customer obsessed. We start with the customer’s needs and work backwards. The single most important thing is to focus obsessively on the customer. Our goal is to be the earth’s most customer centric company.” And of course, they’ve had tremendous success. Priorities need to start with the customer. So Andy, any thoughts here? When we talk about priorities, what what do we mean exactly? 

Andy: Well, I find interesting about his quote is he mentions the word “customer” in each one of the four sentences. And I’m thinking to myself, how many B2B companies do I know if they say something even remotely similar, they would mention the word customer in every sentence. Not many. But yes, when it comes to setting priorities, it’s as simple as it sounds. You have to decide what’s first, second, third, and very importantly, what you’re not going to do. The most sophisticated companies on the planet also make a list of the non-executables. Even if we want to, we’re not going to do it because it actually eliminates the mystery around it. It says we’re not doing this, we are going to do this, and we’re going to do things in this order. Things like, hey, do we clean up the website first? Do we focus on our data hygiene? What about customer service? How do you set up a RACI chart to figure out who’s responsible for what? The answer to all this stuff should be based on customer urgency.How do you determine what the most urgent thing is? I remember when I used to be a product manager, we would look at bug fixing and we would say, okay, is this urgent or important? And they’re different things. Something can be urgent because it’s not working right now, but it could also not be important. Something can be important, but not urgent. And so it’s a complex calculation to figure that out. But all of this needs to be based on one thing overarching that I know Amazon does exceedingly well and B2B companies can learn a lot from and from other B2B companies, which is metrics and KPIs. There has to be an objective standard here to determine what the most important thing is to fix. Again, importance, urgency, all these things move together, have to be based on what customers want, which is why I use the word in every sentence. 

Brian: I was for a long time a VP of e-commerce. And this is one of the hardest things to do. You can so we can talk about putting the customer at the center of it, but even knowing the customer’s needs, or having a sense for what are the right features they need on the website – We’re talking about cross channel alignment, things like that and omni channel efforts, all that stuff. This is hard. Digital transformation is very difficult. And even as it breaks down to specifically the e-commerce channel, because you have constraints, you’re trying to prioritize. Thinking about the impediments to prioritization. Okay, so I know what the customer wants or what they need based on some, to your point, data. And we would go out, in my roles in the past at Harbor Freight Tools and other places, we’d go out and we’d collect customer feedback. That would be analytics data, it would be through focus groups, it would be through customer interviews, surveys, et cetera. So we’d have a clear idea as to what the needs were and how to grow. But you’re dealing with limited budgets, organizational alignment that’s required, technology stacks that can be limiting, right? You’ve got all these legacy systems. You need to have leadership on board in terms of what we’re investing in and what kind of return it’s going to drive. And then you need a team to execute. So we asked this question to our LinkedIn audience. We said, what is the largest impediment to setting priorities for your digital strategy? And what’s fascinating, Andy, is that it mirrored some of the research we’ve done recently, where when we look at the results of that question, that poll on LinkedIn, budget constraints was only 12%. The team and hiring was only 12%. We got a little more on shifting corporate priorities – changes in direction and leadership and things at 30 percent as being an impediment. But the number one was lack of alignment in the organization at 45 percent. And this is fascinating because it reflects our research that we did. Let me just share these couple of data points and I want your reaction, Andy. Leadership is on board. 94% of respondents in a recent study we did reported support for digital initiatives from their CEOs. B2B businesses have the executive buy-in needed to make tech investments and the budgets available. We asked the question, has your company provided you with sufficient financial resources to achieve your objectives this year, technology investment goals? Overwhelmingly, almost 90% said yes. Those aren’t the issues, right? What’s your reaction to all this, Andy? 

Andy: I you can go back to the LinkedIn poll, because there’s one fascinating insight I think that just jumps off the page, which is these are all internal impediments. In theory, the most difficult part about setting a digital strategy and setting your priorities should be not knowing exactly what customers want done in what order. To my point earlier, urgency, importance, just knowing from a competitive standpoint what’s going to give us the biggest ROI, what’s going to give us the biggest point of differentiation. None of this stuff has anything to do with any of that, which is why your Jeff Bezos quote is so relevant here. The answer is – what is it that customers want and figuring that out should be the biggest barrier to that. Now, getting that requires thinking through the key performance indicators, understanding what metrics you’re going to capture, having the data to understand the answers to those things. It shouldn’t be, and I know why it is, but it shouldn’t be any of these things – the lack of alignment. Yes, these are realities. They work in corporations. I get it. But it shouldn’t be what’s driving any of the digital strategy. And yet it is. 

Brian: So what’s fascinating, and again, it’s all about the impediments, right? So what are the things that are holding us back? And this study in Harvard Business Review is pretty interesting that I found, Andy. This is a survey of 500 employees, managers, and executives. So this is across all layers of the organization. This isn’t just executives. And what they found is that the organizational alignment on organizational alignment, that the perception is far higher than the actual reality. So when they surveyed these people, 82 percent said they feel the organization is strategically aligned. But then they double clicked down into the actual detail. They had them write out alignment criteria – things that they need to align on. Only 23% of them when they got into the details were actually aligned. So fascinating stat, even though people sort of feel that they’re aligned, In reality, they’re not. This is interesting. Any reactions? 

Andy: There’s a backstory to this, too. I’ve seen this research and research like it – What is sort of a kissing cousin to the data here also indicates that senior executives think that the company is aligned much higher than it is amongst the rank and file. So CEOs and senior executives say, are you guys aligned? And people respond, “Of course we are.” And reading into that, you can say, well, we have a bunch of meetings. People report to me. Everything seems fine down below. Not to oversimplify, but down below, they’re saying, no, I don’t know what I’m doing. I don’t know what I’m supposed to do. I get competing priorities. I have different standards for things. And it’s a bit like a ship where the captain of the ship says, yeah, things are working just fine. But then you go below deck and there’s water leaking all over the place. No, down here, it’s not working. So that’s another dimension to this notion that they need to close that gap between what they feel to be the case – or perceived to be the case – and what is actually the case. And we could do research and podcasts for years on why those things are disconnected. 

Brian: We pulled a couple of other interesting stats here I want to share, Andy. This group called the Entrepreneurs Project, which is focused on CIOs and digital transformation, found that the number one barrier to digital transformation is resistance to change. People don’t want to change how they do business. They don’t change their day-to-day process. They’re comfortable doing things a certain way they’ve done them that way for years and they want to keep doing them that way. Why should I change? I see this every single day. We talk to people every single day who are fighting the fight for digital transformation in companies. And I hear this over and over again. This actually isn’t a surprise, is it to you?

Andy: It’s not. And I think something that isn’t talked about much is one of the reasons why resistance to change is so high is because the senior executives have done an ineffective job of persuading the organization about the benefits of the new reality. So it’s kind of the future state versus the present state. I’ve seen this many, many times. They just assume people know that the future state is digital and everything in digital is nirvana. The people who are making the transition to digital do not understand that. They do not accept that. And they have some good reason for it and some probably conspiratorial reasons to not believe that as well. So this is the thing I advise executives on. You’ve got to get much better at defining this new reality. And if you do – and accept that there are going to be some challenges here and your job may change – but on the other side, it’s a much better world, and here’s why. They would get a lot more uptake on these things. And I think I point to one issue. This isn’t a problem with people personally around technology. It’s not like when the iPhone came out, there was resistance to using the iPhone, right? You know, when new HDTVs come out, there’s not resistance to watching a new TV. So why is it that those things are embraced and other things are not? It’s because they can see the value and they’re not afraid of seeing the value. 

Brian: I think it comes down to one. I asked this question as we were doing this research, Andy, looking at these stats. Why? Why is there a resistance to change? And I think it comes down to trust. I’m sharing some kind of a profile paradigm here from the source called “Five Strategies for Burning Down Silos and Building Bridges” from a company called ProductPlan that does research in this area. The foundational element to overcoming align alignment challenges is trust. It sits below everything else and that’s a belief that the team is capable and, importantly, well-intentioned. Do we have suspicion that he e-commerce VP is just doing this to fill his or her own pockets with credits and kudos.  Is the CDO –  chief digital officer, – doing this for the right reasons and then going up the chain. If you have trust established, then there’s a level of shared understanding. What is the plan? The why? Why are we doing this? What’s the vision? And that needs to come from the top. Partnership is the next level up where there’s true collaboration. And here’s where you get into, Andy, your point about KPIs. Shared KPIs across the organization, clear understanding, and then at the top you get to cohesion where there’s a realization of the organization’s full potential. The interesting quote from this paper, “without intentional action to maintain cohesion and alignment, silos emerge, isolating teams and departments from each other in the company.” And they have some interesting data here around how companies don’t succeed. They have a much harder time from an economic value perspective and are doing better than their peers. So fascinating structure here. But to me, it’s about trust. What are your thoughts? 

Andy: If people don’t know why they’re doing these things, they automatically… revert to type, which is – I’ve got to protect myself. This is my livelihood. If I don’t know how everybody’s going to win here, meaning me, then I’m going to focus on me. And it is a breakdown of trust. Interestingly enough, though, I don’t think trust is enough. I think trust is necessary, but not sufficient, which is why in the pyramid on the screen here, it’s only at the bottom. The next level up is shared understanding. So you could have trust all day long, but if it’s not clear how everybody’s going to win here, I trust the boss that he’s not going to screw me over, but I don’t have any idea how I’m not going to lose. And so it does come down to the cohesion at the top of the triangle, it really does come down to defining trust. explicitly through metrics and KPIs, in my opinion, how this is going to work. And if you start with that and work your way backwards, all these other things take care of themselves. If people know that I’m gonna get bonused based on how the company does, as is everybody else in the company, then I’m going to focus on making the company successful. On the other hand, if I’m going to get bonused based on how well I do, then guess what I’m going to do? I’m going to focus on what I’m doing. And then you never get the cohesion. So it starts and ends with defining the shared reality and sticking to it. 

Brian: It’s fascinating too, and it ties back to our conversation last week regarding culture at our last Friday 15, and the importance of having clearly defined and actionable cultural messages for the organization and vision. You shared some data from how Amazon approaches this, for example, that was quite useful. So for folks who are interested in this, go back and listen to our podcast from last week, That would be July 12th. 

Andy: By the way – because we talk about Amazon a lot – Amazon is not exactly a paragon of virtue here. They have problems too, where you can take things too far. And we’d mentioned last week about taking transparency too far. And then Netflix over-reported people’s salaries thinking everybody wants to see this and we’re doing the right thing. And people pushed back and said, no. Amazon arguably takes this internal competitive dynamic too far. and says, hey, I want survival of the fittest. Well, then it turns into the Lord of the Flies sometimes. And so things can be taken too far as well. And so Amazon needs to fix that. But frankly, they’ve got the other part right around customer obsession.

This week on the podcast, Andy and Brian talk through the 6 characteristics of a great culture and how to implement them in your company…

1) Build your culture based on real-world dilemmas

2) Move your culture from abstraction to action

3) Pain your culture in full color

4) Hire the right people, and they will build the right culture

5) Make sure the culture drives the strategy

6) Don’t be a purist

— 

Brian Beck: Welcome to the Friday 15 with Master B2B. My name is Brian Beck. I’m here with Andy Hoar, my partner in this thought leadership effort around B2B eCommerce. Andy, happy Friday.

Andy Hoar: Glad to be here with you.

Brian: Yeah, this is a warm day in the summer, which is a lot better than a cold day in the winter. Well, it depends if you like to ski or not. There’s my advice. I kind of like cold better than warm, man. 95 and humid is not fun. So welcome, everyone. We’ve got a great session today. We’re going to talk about a topic around culture, which is kind of a soft topic. It doesn’t get as much attention in the community here where we talk a lot about technology and marketing and other things. But we’re going to take on the culture question today and talk about some of the impediments to building a great culture. But before we do that, Andy, as usual, we want to talk a little bit about some breaking news. So let’s get to that. And you found this article on Global Industrial. Tell us about it. What’s going on?

Andy: It just happened yesterday. It’s going to be interesting to watch. But Barry Litwin, who is the CEO of Global Industrial, stepped down to pursue other ventures, which sounds like private equity to me, but we’ll see. But he was there for about seven years. And I think the reason why this is interesting is because Global Industrial is sort of a standard setter when it comes to customer experience for B2B pure-plays. It’s about a billion, 1.2, 1.3 billion dollar company. It’s been kind of up and down for the last several years – more up than down – but it really is a strong pure play B2B. It’s kind of like Amazon Business but for industrial stuff, specifically, so it’ll be interesting to see who becomes the new CEO. And, you know, we use them as an example. They participated in quite a few of our events over the past couple of years. It’ll be interesting to see how that evolves. But it also speaks to our culture question today.

Brian: So, Andy, I saw this this week. An article just came out with some data from eMarketer that says Google will remain a top destination for ad spend in the GenAI era. This is fascinating – there’s some data showing that Google remained the top place where marketers are spending money – 70 plus percent are going to be spending money on Google. You recall, Andy, we had a year, or a year and a half ago when ChatGPT came out and everyone called it the death of Google and saying Google was falling behind. Now we see in Google the AI overview is built right into the search engine. One of the things that that is clear to me from this is that this is kind of a bubble in the sense that this data only talks about the search engines. YOU saw some data in here that spoke to how Gen Z were using AI.

Andy: Google’s dominating this market, but this is no longer the only market when it comes to funding things. So 61% of Gen Zers in the same article by eMarketer said that 61% of Gen Zers are using AI tools instead of search. And think about it. This doesn’t include Alexa, Siri, my wearable watch. All these voice-activated interactions with companies and the AI, like ChatGPT, et cetera, these are alternative search engines. And so I think we need to redefine this market. But within search, yes, Google is dominating, but search may not be the only market for searching anymore.

Brian: This also leaves out Amazon. Amazon is the number one product search engine. If you’re selling products and you’re not on Amazon, you’re missing out on a huge chunk of search activity. So, again, this is kind of a limited view of the marketplace. But it was interesting to see here – Do marketers need to wake up to what’s happening? Do they realize what’s going on with these AI tools and Amazon and everything else? Maybe not. So at least based on this data. So we’ll see. All right, let’s get into our topic today, which is what’s the greatest impediment to building a great culture in B2B e-commerce? And, you know, Andy, this is not just the culture. It’s also about a digital culture, one that understands the importance of digital as a part of this. But really, we asked the question because this is such a foundational element of being successful with e-commerce and with digital. You need to have a culture that embraces the willingness to change. So we wanted to dive into this this week. And we, in fact, did some research around this in terms of digital maturity. Andy, do you want to speak to that a little bit?

Andy: So we’ve been around this digital culture and team culture issue for a while. We released a report two years ago that was kind of foundational around this question of how you assess your own digital maturity. And then just about a month or so ago we released part two (Accelerating Your Digital Vision) in a three-part series about how do you take your digital maturity to the next level. In both of those reports we have some really interesting insights about what develops culture. When we talk about team culture, we’ve actually put some thinking around it. So we did a webcast recently, and this is kind of fun because you and I were debating what do we think is the most important dimension of digital maturity? And I swore up and down it’s customer experience. I still believe that. So the four options, digital tools, team culture, customer experience, and data and insights. And while customer experience got 27%, team culture, your choice, resonates more with the audience. So 41%. The most important dimension of digital maturity. So we’ve been talking about this one for a while. In fact, two years ago when we released our digital maturity report, we gave you a way to benchmark yourself. You can actually score where you stand on various dimensions of team culture. And so there were really seven or eight different areas. We’re not going to go into each one, but just to give you an overview: How sophisticated is your senior digital leader? Is this a person who is a “one man band” who was the head of IT and had to build a website? That’s a stage one digital leader. Or is it a more mature, highest level stage four digital leader who’s been doing this for 15 years, and brings a team of experience, has implemented, failed, re-implemented, over many, many years. So again, it’s the senior most digital leader. It’s the team too. Are we talking about people who are new to this kind of thing? Are they B2B people who don’t know e-commerce or e-commerce people who don’t know B2B? There’s all sorts of different ways of looking at that. But generally, if you have a smaller team, that’s indicative of being an early stage company versus some of these stage four companies with digital teams of 40, 50, a hundred, 200, a thousand people in house. Another area we’ve looked at is senior team, digital mindset. So this is really the C-suite. And we define the early stage digitally immature company as “digitally indifferent,” meaning we’re for digital, I guess, if it’s there on a Tuesday and it’s easy versus the more mature companies who had to fight through this. They’re ones who are fully embracing digital. It’s a part of the way they think. When they make a decision about any part of the business, digital is right near the top in terms of what impact it’s going to have.

Brian: Think about companies like a Granger or others that have a lot of digital experience at the top of the organization.

Andy: And of course, a very important dimension of any B2B digital culture is the sales team, because they’re often the ones who feel threatened by digital, don’t fully understand how it’s going to help them versus why it wouldn’t be an existential threat. So early stage companies, they don’t engage. Sales teams don’t engage. In fact, they’re antagonistic to the idea of digital versus very mature teams that are fully aligned and integrated. And they realize they can make a lot more money by leveraging digital than fighting it. And then the last one that we talk about here is organizational design. And what we’ve seen here is early stage companies, digitally immature companies tend to have generalists. There are people who do multiple things. The later stage, more digitally mature companies, not only are they larger, but they’re more specialized. You have somebody who focuses on SEO. You have somebody who’s a platform expert versus the early stage ones. And we’ve both known these kinds of scenarios where the man or woman who is running the website is also making the platform decisions, is also doing all the hiring, et cetera, et cetera, et cetera. That’s great early on, but you have to get more specialized later.

Brian: So this is about maturity, which is a portion of culture, of course. We did a poll. We asked our LinkedIn community, what’s the biggest impediment to building a great culture in B2B that recognizes the importance of digital? Number one answer out of four choices was overcoming old thinking, 50%. Followed closely by breaking down silos, 41%. Less important – people thought – were a dispersed, remote workforce or inexperienced talent. They didn’t see those two as really impediments only six and three percent respectively. So Andy it really is about building this mindset on one of the elements here and across the organization so you know what we found was this really interesting article.

Andy: In the poll that you just showed, I think we saw two things popped out. One was psychological, which is old thinking. And the other one is structural, which is how do you put that into action? Well, And Erin Meyer, who’s a professor at INSEAD and the author of a book called The Culture Map, Breaking Through the Invisible Boundaries of Global Business, as well as many other books, has really thought a lot about this. And she’s identified, like you said, six key areas. We’ll just run through all six quickly, but we want to double click on two of them that really stood out to us as relevant in particular to B2B. Okay. number one, not in a particular order, but the first one was “build a culture based on real world dilemmas.” You can’t use abstract terms. I always joke about this, that airlines say safety is our number one priority. I’m like, really? I mean, you know, safety is important, but isn’t making money your number one priority or having happy customers be your number one priority? But things like that don’t wash because how do you implement that if you’re an employee. If you’re making decisions about where to put flights, you’re thinking, well, let’s start with safety. What’s the safest way to get this flight from point A to point B?

Brian: And her point about dilemmas, Andy, was an interesting one because it really is the practical application of what you’re saying your culture is about. It’s actually putting it into a decision, a dilemma where an employee has a decision to make, and reflecting back on or understanding what that culture is as a guiding principle to making the decision. So general abstract statements don’t give you that ability, essentially, is what she’s saying. Doesn’t give the ability for that employee to make a decision based on some ethos or some principle. So I thought that was really interesting because it makes it practical.

Andy: Which leads to the second one, which is “move your culture from abstraction to action.” And they said, avoid terms like – there was one example they gave in there. I think it was a healthcare company and said, “it’s simple. We care.” What do you do with that? I mean, what does an employee do with “we care?” The better way to do this is the way Amazon approached it, which is their value statement is have a backbone, “disagree and commit.” Now, that’s something that you can put into action, because if you’re in a meeting and you don’t agree with what somebody is doing, you can channel that and say, you know, I’m going to raise my hand here and say, look, I think this is a mistake. We need to go in a different direction. Here’s why. I’ve worked in high tech. That’s a really critical area. And that’s something you can actually sink your teeth into.

Brian: And it sets the parameter for how a company it’s okay to disagree. We see this in B2B all the time, Andy, where people are afraid to disagree. They don’t want to disagree with the boss. They don’t want to say, Hey, you know, I don’t agree with that, but if it’s stated by the company, this is the way we do things. That creates a culture where it’s okay to do that. In the case of Amazon, it’s a foundational component of what’s led to their success. Test and learn. It’s okay to fail. Those sorts of things. So I thought that was a really important one.

Andy: The third one they mentioned is one we’ll spend very little time, which is paint your culture in full color. And what they meant by that is sometimes a logo and image can speak to how you think about things. They give example like a pineapple, which I guess in Eastern culture signifies hope. But that is one abstract thing on top of another abstract thing I can see where it might appeal to people because it gets people behind an idea but I think you and I both agree that’s probably not as important as the next one which is “hire the right people and they will build the right culture.” I think you and I both thought this one really made a lot of sense.

Brian: They even gave an example like of Patagonia for example in the article where they’ll take a chance and hire someone who’s an outdoor enthusiast who may not have all the skill sets and train them versus hiring someone who has all the skill sets but is clueless in terms of the use of their product. I’ve seen this in our in our own company here, Andy, and in other companies in my Enciba business: You hire the right people that fit with what you want to build as a culture, and it will materialize. This is the most important one by far, in my opinion.

Andy: Well, I love that they cited one company in here, and there’s another one I know about that has a similar approach. They cited Shopify. And Shopify said, “we’re not a family.” You always hear those companies talk about we’re a family. It’s like, we’re not a family. You’re born into a family. And they said, you can’t unfamily. They can’t unfamily you. The danger of family thinking is it becomes incredibly hard to let poor performers go. Shopify is a team. And this is the same approach that Netflix famously takes. Reed Hastings has talked about this, and I think he says it really well. He says, think about Netflix as an elite pro team. And he said the same thing. You can’t fire your sister. If you think about his family, what are you going to do? Put mom on a performance improvement plan? But… He said, if you think about it like a pro team where everybody has to earn their job every year, and if you hire the right people and they play really well together, he said you can do things like make no-look passes. Like having basketball or soccer, for example. You can’t do that unless you have really talented people. And so let’s just dispense with this idea of being a family. Let’s think about it being like a professional team. And you’ve got to earn your spot. If you do, you’ll be well compensated. And the reason you want to do this is because you want to play with the best. And so I think that’s the right approach.

Brian: The next one is “make sure your culture drives strategy.” You know, I think it was, it was a Drucker that said culture eats strategy for breakfast or something like that. Emphasizing that your culture is really the thing that allows you to realize a strategy.

Andy: They have to modify one another, but you can’t let your strategy drive your culture. Because if your strategy is to win every deal, then your culture is going to be win at all costs, right? Versus if you think, hey, we’re going to perform at the highest level and we want to win every deal, and that’s your culture, that can drive your strategy to win every deal. It seems subtle, but there’s a difference there. I think your approach has to drive your strategy and not necessarily the opposite. But I think the last one, It was surprising, but I think informative. And it’s this idea of “don’t be a purist.” And the example they cited here was Netflix. In fact, this woman, Erin Meyer, actually wrote a book about Netflix, which is why there’s a lot of Netflix citations in here. But she said they took transparency too far. One example they gave was they wanted everybody to know everything. So they started revealing everybody above the director level in the company, all of their total compensation. And I think the idea was because it’s a publicly traded company, everybody knows that about the C-suite. Reed Hastings’ salary and compensation was published in public documents. So they said, well, let’s just take it down a level. And they said the problem was after one year of doing that, I think it was 80% of the people in the company said, get rid of it, because they started reducing people to their salary. They’d be walking in the hallway thinking, oh, that’s Bobby makes three hundred and forty seven thousand dollars or that’s Sally – She makes one hundred and fifty five thousand dollars. So there is a point where you can go too far. So transparency is really important, but there’s a limit to that. And I think that’s the point here.

Brian: So six criteria here for building a successful culture, it really resonated with us. And I think it plays into what we found from our community, Andy. The right people is really the most important part of this, if you got the wrong people in there, you know, a brilliant jerk, right? Who’s just gonna spread negativity through the organization, they may be really smart and great at their job from an individual contributor standpoint, but don’t create that doesn’t create the culture of that person that you want to create your business.

This week on the Friday 15, Andy & Brian provide a template for getting and sustaining buy-in for digital initiatives, including:

1) How you build the business case.
2) How you measure value.
3) How you sustain alignment.

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Brian Beck: Welcome everyone to Friday 15. My name is Brian Beck here with Andy Hoar for our weekly Master B2B session where we talk about all kinds of key issues, fun stuff, commerce, breaking news, all kinds of good stuff. Andy, welcome to our weekly Friday 15. We’ve got a great topic we’re going to talk about today related to one of the hottest issues which our practitioners face, which is gaining and sustaining executive alignment. We’ll get into that in just a moment, but first, we have… Breaking news. Let’s bring up our slides here, Andy. Well, Andy, what the heck is this? NBC convinced Michaels to embrace his AI voice for Olympic coverage. How is this related to B2B? 

Andy Hoar: All right. So we always talk about AI, and I thought this would be kind of fun with the Olympics coming up. So this is what’s going to be known as AI Al. And what he did was he licensed his name, image, likeness, and most importantly, his voice. to NBC, who’s now going to use Al Michaels’ voice to do daily summaries of what happened at the Olympics. Now, what’s fascinating about this is he’s not going to have to do any work. They’re going to have this stuff written by other people or probably software or AI, and he’s just going to voice it sitting in his house doing absolutely nothing. I’m sure he got paid a big check for this. This could be an interesting… harbinger of what’s to come with a lot of famous people where they can license their stuff out for commercials and other things. Anyway, just thought it’d be fun to mention, we could see this come to B2B e-commerce at some point, CEOs, you know, AI, their voices. We know there are many languages that you can speak now. So anyway, this will be front and center, kind of the first experience like it. But yeah, I wanted to introduce a little levity to this, but on a more serious note. 

Brian Beck: Well, it does sound like a bit of a train wreck, but let’s see what happens. Yeah. It’s going to be interesting. Maybe I can replace you with AI at some point. 

Andy: We’ll see. Maybe this is AI. How do you know this is me? 

Brian: Yeah, exactly right. Okay, well, serious note, yes, this was some breaking news this week. Amazon Business introduces new technologies to save time and reduce costs for business customers. You know, Andy, this is my world, right? Amazon. with my Enciba business. And this research Amazon produced recently found that close to 49% of procurement teams felt that business buying is cumbersome, convoluted, and time-consuming instead of convenient and intuitive. So ultimately, they’re looking at one of the key reasons they gave for that was really it was about the tools they were using was causing them a lot of challenges. So Amazon Business is head on after this and what’s fascinating about these tools they’ve introduced it really is about saving the buyer time and there’s three then they they released I want to mention that I think are really interesting. One is they’ve really improved their budget management process, so in other words setting spending thresholds anticipating when a company is going to run out of budget. On Amazon if you’re buying through Amazon Business you can set up spending thresholds that will talk about or predict when the budget’s about to expire. They do pre-purchase approvals. They have options to create pre-purchase orders within this. That’s one big step forward they’ve taken. One of the really interesting things though, Andy, is guided buying. What they’re doing is they’re allowing someone who owns the administrator of a business account, It allows them to actually set the product assortment for their buyers in their organization. So they can say within the Amazon assortment, it’s almost like they’re creating their own mini Amazon experience where they can highlight products that they want their operational people to see, a sort of preferred suppliers. This is within Amazon. This is incredible. And they’ve also integrated quite a bit on the quoting side to allow customers for larger purchases within the portal. So upwards of those above $10,000, they’ve integrated some additional functionality. Anyhow, it’s really interesting to see what Amazon is doing here. They’re all about making the buyer’s job easier in B2B and they’re continuing to raise the bar. 

Andy: Well, the only thing that shocks me about that is only 49% of the people said it was confusing and convoluted. That’s shocking to me. 

Brian: Yeah right, though that 49% still provides a lot about a market opportunity for folks like Amazon. So let’s get to our topic and our topic this week is what is the most difficult part of gaining and sustaining digital buy-in for investments from B2B executives, or for B2B executives leading this effort.  And Andy, this is a topic that came up at our Summit back in early June. This was one that in our pre-conference or pre-summit interviews came right to the surface. And we even did some research around it. But this was a topic we had and we actually had a roundtable specifically about it. You want to tell the audience about that? 

Andy: Here’s some pictures from it, but it was led by Steve Martinez, who was formerly of Univar. He was also at Grainger for many years. And they literally talked for an hour about, hey, what does it take to do this? And Steve was kind enough to memorialize all that they discussed, and he put together a document, which… Very long and very detailed and very impressive. If you want a copy of it, let us know. We can get you a copy of it. But what we thought we’d do today is summarize or highlight some of the more important things that stood out from it. But before we do that, we thought it’d be interesting to tie this into what we’ve seen recently in the research. So what we saw… in our recent research, we did a report… second phase of a maturity model report called Taking Your Strategy to the Next Level earlier this month. And what we found is that it is now the case in B2B e-commerce that leadership is on board. So 94% of respondents said that basically the CEOs get it. They get digital is important. That’s a new thing. It’s very important. It’s also eliminated the need for people to persuade others in the organization about why digital is important. It’s also the case that budget is now finally available. This is maybe the biggest insight that we’ve found, and overwhelmingly so. Companies are now saying, look, our executive team is giving us budget. So they’re on board with it. They’re giving budget. But before we’re all ready to dance in the streets and say, hey, this has finally been solved – budget authority is now bringing pressure on ROI. So companies are saying, yeah, do the digital. Here’s the money, but it better produce a return. Why is this relevant? Because Steve’s conversation was all about how you get people on board with this and how do you sustain it? Yeah. There were really three phases that he talked about. Literally, like I said, building the case, which is identifying approaches to influence key leaders for investment and support. That was perennially the difficult part. Two… Measuring the value. This is a biggie. Defining and measuring success for digital initiatives. Well, you can get everybody on board, but if you can’t measure what’s happening, then you’re inevitably going to get to this ROI discussion where you can’t prove there was an ROI and you’re back to square one. The last one, and not to be diminished here, sustaining the alignment. So let’s say you convinced everybody, you’re able to measure the value, people are on board with that idea, but then the CFO changes. Right. Or… The price of the digital goes up dramatically or the price of hiring people goes up dramatically. Or there’s a new thing like analytics that you need to bring on board or AI. How do you keep people on board? And this is really about ensuring continued support and awareness. So it’s a multi-part effort. These are all the insights they came up with – it was 11 of them under “building the case”.  What we want to do is actually just talk about three that support the same idea.  

Brian: Andy, this came out of Steve’s roundtable… so for those of you listening on the podcast we have a sheet here that shows 11 different things that came out of the roundtable in terms of this particular element.

Andy: But again, there must have been a hell of a lot of things discussed in like 15 minutes because this was just one third of it that had 11 insights. So for those of you watching, you’ll be able to go back and watch this again and kind of digest all 11. But the three that we want to talk about here, all have the word champion in them. Identifying somebody early on who’s a big champion, finding a customer as a champion, and then also identifying internal constituencies or champions. Why is this so important? Well, you and I have been through this a lot. We work with a lot of clients over the years. You have the greatest business case on the planet, but if you don’t have somebody there to make it, it’s not going to happen. So that’s really the takeaway from this is when you’re building the business case, find the people internally and externally who are going to be your champions, who are going to make the case for you. If you don’t have these advocates, you’re not going to get very far. That’s really, I think, the important insight here. 

Brian: If you go back one slide there, Andy, I have this case study in my book, and I remember this vividly because I worked with this company called Illumina, they were a leader in biotechnology, about $3.5 billion manufacturer, one of the things that drove them, the champion argument was really key. They’re getting more than half of their revenue from digital channels this is a genetics equipment manufacturer – this isn’t like a fashion apparel company. It’s not what you would suspect to have the kind of penetration digital they have. But one of the key things in building the case before they got started with all of this back seven or eight years ago was that champion – and that champion in their case was the customers saying we want this capability to order via e-commerce and other digital channels. We need it or we’re going to shift our spending. It was almost existential in some ways.

Andy: Well, I’m glad you mentioned the shift thing because that’s actually a great segue to this slide, which is about the metrics. Now, we all know this is critically important and maybe the first thing you should do is identify exactly and precisely what you’re going to measure and how are you going to justify it. Because there are metrics around revenue and cost reduction, customer satisfaction. That’s the first one around alignment on metrics. And you got to get people on board with it because if they’re not on board with those metrics, you’re going to end up failing.  But the one I want to spend just a second on here is measuring channel shift. You and I have talked about this extensively – you literally just mentioned that Illumina had customers defecting to other channels. If you don’t identify this group and understand in detail – I always joke about the people coming in the front door are incremental and people going to the back door are the channel shift. So it’s a lift and shift thing. You’ve got to be lifting. So you’ve got to have new revenue coming in. But you also can’t allow people to walk out the back door. So put a process in place to make sure you’re measuring channel shift and that you don’t just ignore the fact that while you’re bringing people in the front door, a bunch of people are going out the back door. 

Brian: Yeah, I remember talking to Steve Baruch, who we’ve had on some of our podcasts, webcasts, et cetera. Andy, he’s the former CMO at MSC Industrial. He talked, I remember in our conversations, part of it was about this shift piece, and it was really existential, right? I mean, think about it. The business case is always about, hey, what’s the growth opportunity? That’s where the CEO goes, the board goes, things like that. But a lot of this is, and I don’t want to call it defensive, but it’s mandatory. I mean, it’s sort of like this existential thing where if you’re not thinking about it, your customer base is going to move to other suppliers, other channels, et cetera, because the buyer has changed, right? And so you’ve got a different buyer now in the role. They have different behaviors. So it’s an existential thing. And sometimes that can be a little tricky to measure. The way MSC would do it they would look at their customer and understanding what they’re buying from them. Whether they are expanding their wallet share (which is my favorite metric) share of wallet overall in the business not just e-commerce – this is overall share. So when you think about it that way even if they’re shifting channel behavior within your business, you’re still seeing the the overall impact that digital is having because it might lift your sales through your EDI or through your sales force or through your call center through some other channel but it’s an important consideration absolutely.

Andy: Most of the research I’ve seen on this is when people shift to an online channel it becomes a hybrid channel. It’s not going from offline to online, it’s really online influenced offline and online only and they end up spending a lot more. So you shouldn’t be afraid of it, but you sure as hell should measure it. The last part here is how do you sustain all this. So let’s say you got this going but you know people change like I said earlier – customer expectations rise and you’re coming back to the well asking for more money. And they’re like wait a minute – I haven’t really seen this thing succeed. I know we have it but where are we relative to others? Where are we relative to our own KPIs, etc? Here, I think the important point is really around communicating success and failure and not just one or the other, but both. And being honest about it and saying, look, this is where we’re doing well and this is where we’re not doing well. The beautiful part about digital is you can iterate. And so really sophisticated, smart, digital people recognize that this is an opportunity not just to be honest, but also to show people that, hey, if there’s something that’s wrong, this is not decisive. We can fix it. And so the last thing is really about motivating your team internally. and recognizing people who are doing a bang-up job. In digital, a lot of times that’s not well-known. There are people who are writing code. There are people who are producing content who don’t get recognized. But in digital, that stuff is absolutely critical. 

Brian: On the successes and failures piece, do you think, I’m curious, Andy, your opinion: Do you need to have a C-suite, a CEO in particular, that understands that this is an iterative process? Do you have to have some digital native thinking in the C-suite, in order to understand that? Because as you were talking, I’m thinking about the Amazon approach, test and fail and learn, right? And you know, that’s a whole culture that’s grown up with that company for the last 30 years. That’s not typical of a B2B company where it’s business case everything to death. Make sure you get guaranteed you’re going to get the return and all that stuff. Anyway, do you need that digital thinking at the top, do you think, to be successful with that? 

Andy: Ideally, yes, but work with what you’ve got. I think it’ll speak for itself. The beauty about digital is if you’re showing that you’re able to iterate and succeed, even people who don’t have experience with that will generally appreciate it. So I know we’re running short on time here, but final slide. Well, we pulled this as we always do. And we asked the question, which of these phases do you think is most important? And decisively here was measuring the value. 

Brian: Well, the question is, what is the most difficult thing in getting and sustaining executive buy-in for these investments? And it’s measuring the value.  That’s what came out. And fascinating to me, building the case was only 13%, whereas measuring the value, 48% said that was the most difficult thing. And I think that’s true and reflects the complexity of B2B, Andy. Think about it -You’ve got folks that maybe people are researching online, but they’re buying through the EDI platform. How do you draw the attribution? How do you close the loop? These are things that companies are out there looking to solve. So to me, this is a move along the curve. It’s exciting. 

Andy: You want to send somebody into convulsions in digital? Try this phrase: cross channel attribution. This is the stuff that’s hard to do. Five years ago, I think building the case would have been the majority or plurality answer. Today, it’s measuring value. Maybe in five years, it’ll be sustaining alignment. And that’ll show that we’ve made some progress here.

This week Andy & Brian discuss the future of first-party B2B marketplaces and whether the model can rebound from a difficult period following years of overinvestment and low margins.

— 

Brian Beck: Andy Hoar, welcome to Friday 15. Great to be here with you. Welcome everyone to our weekly Friday 15 podcast, LinkedIn Live, Intergalactic Broadcast. Good to see everybody. That’s right. There are aliens in another solar system that are picking the signal up as we speak. I think so. We’ve gone intergalactic. I love it. Well, awesome. Well, thanks, everyone, for joining today. We’re excited to share some cool stuff. We’ve got a great question we’re going to be talking about today, all about marketplaces. But before we get into all that fun stuff, Andy, let’s do some breaking news. Here it comes. Breaking news. So, well, folks, I don’t know if you saw this, Andy, but AD, Affiliated Distributors, which is an industry buying group and industry association, they recently announced they’re merging with a company called iMark, which is another industry type association in the electrical category. And this is fascinating to me, Andy, because I think it signals kind of how B2B companies are really looking at building scale. And you think about distributors and think about AD as a group of distributors, affiliated distributors, and they leverage their ability to go out and negotiate with distributors. suppliers as a group. There’s hundreds of companies involved in this, many mid-market distributors, and they also have quite a bit of e-commerce capability. Caroline Ernst over there, their VP of e-commerce, has done a great job bringing capabilities to this organization. So what are your thoughts? Any reactions here? 

Andy Hoar: Yeah, we have a lot of people in our community who are in the Master B2B Forum who are members of AD. But this just reinforces the age-old… problem here for small distributors, independent distributors, which is there’s a lot to be said for specialization and for geography, but scale matters more. And especially in today’s world where you can order from anywhere and have things shipped from anywhere, it’s go big or go home. 

Brian: I also think this is a continued move to compete with new entrants in B2B like Amazon, right, where there’s a high degree of scale and selection and buying power and all those things. So just interesting to see. And I think we’re going to see more and more of this, you know, particularly amongst mid market as they try to effectively position themselves against some of the big the big behemoths out there. So our topic today is all about first party marketplaces this has been a theme for the last several years through the pandemic and we’ll share some data in a moment where the marketplace model in B2B has so much excitement, potential, but as we’ve learned, also a lot of challenges in terms of deploying. We’re going to share some data. We interviewed some folks ahead of this. The question is, is the first-party marketplace model working in B2B? So we’re going to dive into that a little bit. And just to set the stage a little bit, I wanted to share a couple of things. So there’s confusion about this. What is an online marketplace? Let’s start there. The authority of all things, Wikipedia. Those watching can see. I always go to Wikipedia, right? I mean, it is the authority, right, Andy? 

Andy: That’s right. Wikipedia or TMZ. That’s the other one you go to, right? TMZ. We’ll use them next week. 

Brian: So Wikipedia says it’s a type of e-commerce website where product or service information is provided by multiple third parties. And in an online marketplace, transactions are processed by the marketplace operator (think Amazon) and then delivered or fulfilled by the participating sellers with the marketplace operator typically earning revenue by taking a piece of the transaction. So if you’re selling on amazon you know you’re paying Amazon – usually it’s 15 percent of the transaction – you keep the rest of it basically from a retail perspective and they facilitate it. They’re the merchant of record. Now, you talked about different flavors of marketplace. Those of you who can see this, I have a chart here showing different flavors of marketplace. We’re not going to dive into all this, but the reason I wanted to share a little bit about this is because there are different types of marketplaces. And what we’re talking about today are first party marketplaces. These are marketplaces operated by a traditional B2B company like a distributor or manufacturer. Also vertical marketplaces, industry vertical marketplaces where someone may launch in metals or chemicals or fasteners or medical products, launch a marketplace that goes and tries to address the needs of that B2B buyer in that format we described. So you’ve got companies like Partstown and Zoro and Volusion and Infra.Market and others that use this model. And they tend to be somewhat, some of them often are more controlled or vetted where the sellers come in and they’re vetted before they can list on the marketplace. And what we saw through the pandemic was that marketplaces were on fire. In fact, here’s some data that shows that, and those of you looking, but I’ll describe it, shows that B2B marketplaces during COVID emerged as the fastest growing channel in digital commerce. In 2022, growing to $130 billion, up from $56 billion in 2021 – huge, huge growth numbers. And this garnered a lot of interest, Andy, from the venture capital and PE community. And so we were getting huge investments. You had companies worth billions of dollars. But since 2022, investment interest has really cooled. In fact, only four product marketplaces have received private equity investment this year. This is some data from Bowery Capital. Thank you guys for sharing this with us. They’re talking about where the investment is going in goods. This is against 11, more than 11 in 2023, and even more than that earlier during the pandemic. The investment appetite for this model has cooled dramatically. And we’ll go into why. But Andy, any thoughts on this or any comments on the data? 

Andy: I hate to use this analogy, but the marketplace frothiness reminds me a little bit of what happened during the early 2000s with the early dot-com boom. And one important regard is everybody thought they could scale and everybody thought they could win. And so during the pandemic, it was really about the endless assortment, adding more capability in terms of products, dropshipping things versus warehousing yourself. In theory, just like e-commerce back in the day, back in the 2000s, made sense for everybody to do. But what everybody was unfortunately not focused on was profit. And back in the 2000s, it was about grabbing mindshare and grabbing scale. It didn’t matter. Pets.com famously said, we don’t care about making money ever. We just want to own as much territory as we can. Well, I feel a little bit of that went on during the pandemic because the opportunity opened up. So the market is reallocating its resources like most markets do. And people are now pushing back and saying, okay, I don’t care about your GMV. I don’t care about how many SKUs you have. All I really care about in the end is what’s your profit look like? And so these guys are multiples of profit now. And I think you were going to share that there are a couple of these companies that were valued based on their GMV and not their profit. And now there’s a mismatch in the market big time. 

Brian: That’s what Bowery told us, Andy. It’s fascinating. So, you know, back during the pandemic, you know, top line, the total GMV, the merchandise value running through the marketplace was how these companies were being valued. They were conveying that Faire, which is a product marketplace for home goods and accessories, is a B2B marketplace. It was valued at something like $12 billion. But then these market dynamics shifted, and now those companies are being valued basically on their net revenue, not on the gross merchandise value, but actually what they’re earning in revenue. And it’s a tiny percentage of the total GMV, and therefore – Think again about that definition, commission, Amazon making 15% – It’s analogous to these marketplaces. Faire, I think, charges maybe 20%, something like that. But that doesn’t support a $12 billion valuation. 

Andy: So what you end up with is a situation where more like 500, 600 million based on a three X multiple of profit. So 600 million versus 12 billion. 

Brian: So it’s a tough challenge. But why are these investments down? Why is the model challenging? Well, it’s hard to scale it. And we heard this from the practitioners we talked to, and we’ll share some there, too. There’s a lot of manual process that’s pretty extensive. The notion of a marketplace like e-commerce is you can automate, digitize a lot of these steps. But what the marketplace operators have found is there’s a lot of hand-holding in onboarding suppliers and acquiring buyers. There’s just a lot of manual process. And I think this also bears out with some of the software platforms, too, with the companies that launch these platforms for manufacturers, distributors, verticals, is that even in building the marketplaces, there’s a lot of bespoke stuff that has to happen. So even the tech side is highly manual and customized, right? 

Andy: Well, all the product catalogs are different. And so you have to harmonize those. One of the amazing things about Amazon is those ASIN numbers where they’ve got a standardized universal number for everything. That’s really hard to do. Now, we’re going to talk about how maybe AI can help with that, but it’s this onboarding process is very labor intensive. And so it’s becoming more like these marketplaces are becoming like standard companies where they have a lot of account executives who are making sure the numbers or the catalogs are correct and making sure there’s a lot of care and feeding going on. And that just ain’t what tech companies are valued on. 

Brian: Well, that was the other point that Bowery made is that marketplaces are staffed like tech companies, but they don’t have the margins to support it. If you’re a SaaS company, you’re a software company, you’ve got great margins, you know, gross margins. These guys don’t have great gross margins, but they’re staffed like they do. 

Andy: So either the gross margin improves dramatically or the staffing will change dramatically. I think we know which one’s going to happen. 

Brian: We don’t have it here, but the Bowery guys also shared some data on the number of employees. And you’re absolutely right. The number of employees at these vertical marketplaces are dropping. And all this is driven by changes in valuations of these companies. And ultimately, why has investment cooled in them? Because there ain’t no exit, right? At least not right now. There’s not a strategic sort of follow on investment. So somebody gets in at a seed level. If someone invested at a seed level, it’s hard for them to get out. And then the notion of a strategic like a distributor buying a vertical marketplace in a category, I think still has a lot of promise, but it hasn’t come to bear yet. These distributors, as we’ll show you in a second, they’re launching their own marketplace. They’re just doing it themselves rather than buy somebody. At least that’s been the trend. So it’s interesting. We’re seeing the challenge in the vertical side. I think the promise is still there. And when we talk to folks like Theresa Kuske, who is the maverick, Kuske, one of our longtime competitors, combatants on our debates. She’s at Chamfr now. She joined this company from Ergodyne, which is a safety products manufacturer. She built their e-Commerce. She’s very sophisticated. She joined Chamfr a couple of months ago. Chamfr is a vertical marketplace focused on medical products. When we asked her what the top challenges were, she said, top three, lifecycle in converting new suppliers is long and takes many touches. Exactly to the point we made earlier, it’s a lot of work to get suppliers on board. Number two, building supply and demand at the same time. This is more complex than regular e-commerce because you’re dealing with multiple different sides of the equation here. 

Andy: You can’t just have a bunch of supply and no demand. You can’t just have a bunch of demand and no supply. You have to fight on both fronts. 

Brian: It took Amazon 30 years to get where it is today. This is a seriously complex business model. Managing and enhancing data from suppliers was the number three thing she listed in terms of challenges. I’ll tell you, Andy, one thing I did hear when I talked to Theresa and we talked together to Bowery and some others, there’s a bullishness though about the model. That hasn’t changed. So when we asked Theresa, what are the advantages? Well, it’s getting the buyer, it’s filling a gap early in their buying journey, getting them engaged really early when they’re getting products specified. Greater search visibility. So more exposure to Google and other search engines. They have a broad array of products. they can cover more of the market there’s a deeper knowledge also an expertise of the industry as a vertical marketplace. There’s specificity there that they can capitalize on industry and product expertise so that was Theresa’s feedback.

Andy: These are inherently fractured markets too, that’s worth mentioning. There are tons of suppliers and tons of buyers and it’s hard to establish equilibrium between the two of them. And this is why Faire, for example, has done pretty well, because there’s a lot of buyers, a lot of suppliers, a lot of groups, and that nobody brings these groups together very effectively. So, yes, in theory, this marketplace model makes sense. It’s just the reality is a little challenging. 

Brian: Well, I think it’s about scale. And you can argue that Faire has been a good success story, but they got scale. They raised a lot of money while it was still available. and they’ve really scaled the business. And you could argue that regardless of valuations and everything else, they have filled the need. They’re doing 150 or 200 or something million in GMV now, something like that. It’s significant. The other fellow, Andy, we talked with was Michael Eichinger, longtime industry pioneer, very innovative thinker. Michael’s a chief operating officer at Bay Fastening, Bay Supply, which is a traditional mid-market distributor. Michael is pushing the envelope. He was early to e-commerce. He launched a marketplace three years ago. So this is an example of a traditional B2B company. So when we asked him – what were the top challenges? He said similar things. Complicated bespoke functionality is required. No software platform fully supports industry specific needs. Now, there’s obviously marketplace platforms that get you pretty far down the road. But to your point, catalogs are different. Buying cycles are different. He cited all kinds of examples of getting requests for quotes. The quote process in his industry is really interesting and challenging and unique. Catalog management, he cited as being another challenge, including setting pricing rules. So think about the B2B buyer and getting pricing right. And you’ve got all these different suppliers, sellers selling product on your marketplace. Third thing he indicated was a buyer’s needs are different in B2B, and it’s hard to meet that in the marketplace model. But all that said, Andy, he was really still very bullish on this model. I asked him the question. I said, hey, Michael, would you do it differently? Would you do it again five years ago when you’re thinking about this? He said, no way. It’s not about the short term. This is a long-term play to accommodate the needs of the buyer. He said, I expect this to take eight years to come to fruition. And he sees this model as a differentiator. I love the way this guy thinks. If you can sustain the investment and have that kind of a vision and get your C-suite on board, right? 

Andy: I think there’s a first mover advantage here if you get enough scale. And it could be, not to use another cliche, but it could be a winner takes most scenario. And it’s possible that, for example, Bay got there earlier. But t’s funny to consider that in many places, I’ve heard people argue that marketplaces ARE what distributors do. When you describe what it is, where you’re aggregating suppliers on one end and buyers on the other, isn’t that what a distributor already does? And I think the challenge is that with a lot of these distributors in those environments, they’re low, low margin businesses. And I think many companies were hoping that a marketplace would, because they could reduce the cost, they could increase the scale, but mostly reduce the cost so they could change the profit picture and increase their margins. And that I think is the part that has not borne out yet. 

Brian: I agree with you, the inventory light model. Look at the big some of the big guys like Grainger with Zoro. They attribute an enormous amount of their growth to this notion of extended assortment. Grainger came out with the stats that 19 percent growth. year over year came specifically from extending the assortment through e-commerce. And that part of that in the world of Zoro, at least, is coming from a marketplace model. So I agree with you. I think there’s a real value to distribution in this model. But again, it isn’t it isn’t a panacea when it comes to margin. That’s for sure. 

Andy: Well, why does it work? We’re speculating here, but I think you would find that part of the reason why a Zoro works is because they curate a lot of what they do, which is a unique value proposition. They don’t just throw everything out there. That’s one thing, but it also helps. And you’ve got big brother there with Grainger because they can cheat. And I use this term in a flattering way, they can cheat on both ends of that equation in terms of the suppliers. They gave them a lot of suppliers. In terms of the buyers, and they were hoping to go after a new market, but they brought a lot of buyers to the table too. So they were able to make this marketplace model work a little bit better because they had the help of, they could stand on the shoulders of Grainger to some extent. 

Brian: Well, so the key question here is, and we now know, having gone through it, that the challenges have a lot to do with onboarding data and suppliers and things like that. The key question is, can AI change the trajectory of both the first party and vertical marketplaces by addressing some of these fundamental challenges? Andy, any thoughts? 

Andy: Onboarding, maybe. I don’t know about the other part of it, but if there’s any hope, it’s really the onboarding part. And I’m in wait-and-see mode because I still think there’s a lot of complexity, as Michael pointed out. There’s a lot of bespokeness about this, and we’ll see if AI can deliver on that or not. I’m hopeful, I think eventually, but if people are expecting that AI is going to change the margin picture here, I doubt in the short term that’s going to happen. 

Brian: Yeah, I’m with you. I’m with you on that. All right. So we’re at Friday 20 here. So let’s let’s wrap up with our poll and a couple other quick announcements. So we asked the LinkedIn community, what’s the status of the first party company owned marketplace model in B2B? And there’s still, a lot of 38 percent said, hey, we thought we still think it’s growing. But, over 50 percent said plateauing or growing or slowing. Excuse me. Plateauing or slowing. And 13 percent thought it was going away completely. I don’t agree with the 13 percent, but I definitely think we’re in a slower period for sure. 

Andy: 62 percent are saying not growing. That’s the headline here. And I think we’re going to see. But I think it was maybe overinvestment. A lot of froth around this and so it will equilibrate over time, but when we do this again in a year or two I think we’ll get a better picture on this.

Brian:  I think so I’m really still very bullish and hopeful and supportive and optimistic for folks like Michael and Theresa and Julie and all the folks at Chamfr as well because I think it’s just that the tenacity is what’s required. So there can be winners here, but it’s going to take doubling down on some stuff and some fortitude.

This week Andy & Brian share some of what they learned while hosting the Master B2B Summit in Chicago, including:

– Who owns the customer experience at different companies?

– Where should your next budget dollar be spent?

– Who should be the next hire on your team?

Plus answers to those questions and more…

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Brian Beck: Welcome to Friday 15. This is Brian Beck here with Andy Hoar with Master B2B. We have an exciting session we’re going to talk about today in 15 minutes. We’re excited to share today a recap of our Summit, our Mindshare Summit, Andy I’m excited for this topic today. We have these great gatherings and then what we forget is that there’s a ton that was learned and exchanged and taken away from it. So we’re going to share a little bit of that today. So let’s get into it. So, no breaking news today because we’ve got a lot to cover and share. I mean, gosh, Andy, what a fantastic event. When we started this whole thing, Master B2B, we talked about it really as a thought leadership series, a series of Un-Webinars where we had debates and what it has truly evolved into is a community of B2B e-commerce executives. And I love this quote. I’ll read it for those of you listening on our podcast, a community, this is from Rabbi Jonathan Sacks, he’s a former member of the UK House of Lords. He said, “a community is a place where people know your name and miss you when you aren’t there.” And this is what happened. And it was really a representation. We had 100 plus executives, subject matter experts from all kinds of different industry leaders. Sloan was there, Zora was there, Dawn Foods was there, Owens Corning, Direct Supply, Fastenal. It was just an incredible list of executives that were sharing and learning. And some of the feedback has been amazing. We’ll share that a little bit later, but it’s so different than a traditional conference it’s just a different type of event that we have here. So Andy, any takeaways on the attendees, anything from a community perspective?

Andy Hoar: Well, when we threw that quote up we thought maybe it was a bit aspirational, but as you pointed out, it turned out to be exactly correct before saying, where’s so and so? And I’m glad I came because I wanted to see so and so, and then there are people in the hallway interacting with one another, pointing to their side, talking about things, saying, hey, remember the last time we were here? So there’s definitely a continuity about what we’re getting out of this. And to your point, this is unlike anything else out there which you’ll see from the photos here in a moment, so when we put people in rooms, these are real discussions. These are not fake discussions like I’ve been sadly a part of in the past at other events where it’s all kind of scripted and contrived – not here. I remember one of the ones that I was a part of, I actually hosted it. I had a couple ideas about where I was going to go with it. And I posed one question and 50 minutes later, we went in a different direction, people loved it. And it was, and this is the term I really started to use somebody pointed it out, we were crowd sourcing it. I think that’s exactly the way to think about it. And people come to this event to crowdsource problems, and more importantly, solutions.

Brian: And we’re leaning heavily into this as an organization and as a community because I remember back in my days, Andy, when I was a VP of E-commerce in the consumer side the most valuable input I would get was typically from other VP’s of E-commerce. It was from other folks, other practitioners who would try different things and succeeded in some and failed in others. And I would learn, and I would bounce ideas off of them. And we created that sort of at scale. We held this event at the University of Chicago’s Booth School at the Gleacher Center, it’s a graduate school of business in downtown Chicago. What a fabulous place to do this because it was really, it’s, I think it changed the mindset of folks when they come into a space like this and they see Nobel laureates on the wall. And a classroom setting and really just a different type of setting than what we typically attend is a conference. I think people really enjoyed that. And we got consistent feedback that the venue was fabulous.

Andy: We had the whole floor. Attendees got a private moment. It was like you said, hundreds of nobel laureates. You see any section of it. It goes for hundreds of feet in both directions. Yeah, it’s incredible. And so you walk from one in the other and you’ll be passed on the left or the right by names of extremely famous people. Those of you who are Oppenheimer fans, funny enough, I’ll just tease you with one of the Nobel laureates was the father sadly, the father of the German atomic program, Hindenburg, whose name was actually hanging right behind us. And if you saw Oppenheimer, he was in the movie and it’s like, I didn’t know he was at the University of Chicago for one year. So pretty wild.

Brian: It’s fascinating. And the views were great and the food I thought was excellent and we got good feedback on that as well. So really great location. Beyond the location, it was really about the connections. And we had this session, it was started called table topic connections. And this is one of the highlights. A lot of people wanted even more time at this. What we did was we had all these, all the folks sit at round tables and we alternated and we talked about different different aspects and different questions. Your table, you talked about where is your next dollar being invested in digital? What, what was the answer there? You had some interesting conversations.

Andy: We had a lot of answers, which was also kind of interesting. There weren’t one or two that everybody consistently said. There were some that stood out. User experience was probably number one. Number two was data. And the number three interestingly enough, and this is one of those sign of the time things where we forget we always think that everybody is talking about AI and implementing brand new technologies and upending their companies when in fact there was a bit of a snake still swallowing the food? And it takes a while for it to pass through the system. The number three answer was headless. We’re spending our next dollar on headless. And I thought, wow, isn’t that kind of like two or three years ago? But the reality is many companies on their digital maturity, which we’ll talk about in a moment are still a bit laggard. Yeah. So that was number three. And then there were a bunch of others. I just looking – customer acquisitions, CRM, personalization, search was another one that came up and PIM, our favorite.

Brian: Yeah, that’s a huge topic. And it ties into the first one you said, data. My table topic, Andy, that I was facilitating was, Is Amazon a friend or a foe, which is always, always a hot topic. Everybody wanted more time. A lot of answers around frenemy, meaning that it’s necessary particularly most manufacturers. They knew they needed to be on Amazon. But surprisingly, I got quite a few answers about – Amazon isn’t relevant to me. It isn’t relevant to my customers, my products, my products are too complex. And I was still shocked by that because when I look at in my company Enciba, we work with some very complex products, electrical products, huge HVAC systems, they’re selling on Amazon. So I think there’s still with all the penetration, the hundreds of millions of Prime members and all the search starting there. And everything that Amazon is doing in B2B, which I know firsthand, it’s relevant to almost every single category.I was still surprised.

Andy: Well, the standard that Amazon is setting, a lot of the interaction, the expectation, these things are certainly relevant. So, maybe, they can quite get that part of it but it is surprising, it’s surprising to think some of me would say, Amazon’s not relevant to our business, when, in fact, it’s clearly relevant on the customer experience side. And I found that it’s more relevant than they realized. I was in a presentation once, several years ago, and somebody was talking about Amazon. It was an industrial company. He said, “Ah, we don’t care about Amazon.” And I just happened to look online right immediately prior to the meeting. And I found some of their stuff was on Amazon. I said, “Well, what’s this?” And they said, “Well, that’s not supposed to be there.” I’m like, “Well, it is.” It’s a whole conversation about that.

Brian: So, yeah, it’s necessary. A strategy is absolutely necessary for every B2B company. I don’t care if you have complex products. It’s still important. So, yes. And then, Jared ran a roundtable around who should own the digital customer experience. That’s a hot topic. We had a whole session on that in some of our executive roundtables last spring. I mean, the answers that we heard there, what were they?

Andy: Two paradoxical answers. Everyone. And no one. The two most consistent answers. But perhaps the most surprising answer was no one said the CEO. Now, they mentioned that, “Oh, this digital thing is too tactical. The CEOs concerned with other issues.” But I think that’s a little surprising and disappointing because maybe the word “ultimately” should have been added in there. But why wasn’t that even in the conversation that ultimately the CEO is this customer experience?

Brian: Well, you and I are agreement, violent agreement that the chief digital officer should actually be the CEO? So, yeah, I was surprised to hear that too. One other hot question, and so hot that we turned around and asked our LinkedIn community this, “Who will be your next hire for the digital team?” This is one that Carrie facilitated at the Summit. And again, people wanted more time on this question when we surveyed our LinkedIn audience, it was fairly consistent with what she heard. 49 percent said next hire should be data analyst or data scientist or analyst. This theme of data keeps coming up in B2B, PIM systems. I’m annoying you here because you need to pay attention to this. Data scientist analyst number one hire 49 percent followed by product manager for a digital functionality or capability, 24 percent. And then behind that digital marketing and web developer, just developer period. So, I think what’s fascinating to me here is the analytic side. The data and the analytic side continues to be a major theme and a need amongst these folks. And you heard it in your next dollar discussion too?

Andy: I did pretty consistently. It’s the one area that scares companies the most because they don’t have a firm handle on it. And when you don’t understand something, get a strategy. I also often said that I think it’s something that differentiates companies. When you peel everything else away, you can hire people, you can acquire resources. You can’t create custom customer data. Your customer data and everything about it is what separates you. You know what they want. You know when they bought from you, you know what they’re anticipating. You know all these things. And I don’t know, I think a lot of companies are missing the ball here on data.

Brian: So then we broke out into round tables. We had seven of these executive round tables. These were smaller groups of 15 to 20 folks that we broke out into smaller classrooms at the graduate school. And we covered a bunch of topics. We’ll just hit a couple here. I facilitated a conversation along with American Eagle on your dirty data is no excuse. Again, we had standing room only. We had actually turn a few people away because we didn’t have a room to seat them in this round table. So, we need to expand this one next year, I think. But the discussion was fascinating because we had distributors, big distributors, and big manufacturers in the room. And there was a debate going on about who should be responsible, for example, for customer and product data? Should the manufacturer be providing better data to the distributor? Does the distributor because they’re using it in their commerce channels, they hold a lot of responsibility here, even to tell the manufacturer what they need, provide back data and analytics around what they’re what they’re optimizing their digital shelf, all those things? So, I joked that we could have manufacturers and distributors line up on either side, give them the water balloons, the let them go at it. But it was a debate. And I think we ended up in a happy place, which was that there’s responsibility on both sides. But it’s clear that manufacturers need to do a better job with the data and getting it to the distributor so they can be more effective in selling on every other channel. So, it was a great discussion. So, real practical solutions came out of it too, people talking about how they leveraged and improved their own data, how they leveraged systems to do that, et cetera, even AI came up too? And how was yours?

Andy: People talked about digital slush funds. And a few people in the room actually set up funds internally where they could tap into things and say, we need to, we need to make a quick decision, we need to make a quick upgrade. We can’t wait for a process and procedure and capital investment and all that kind of other stuff. And so, that was fascinating because some companies had it. Everybody else was jealous of the ones that didn’t. Everybody kind of agreed that it was a pretty interesting way to go to keep a separate set of funds to make some quick decisions and be able to react to the market.

Brian: Interesting. I’m curious, and maybe we could do a whole another Friday 15 on this, but curious how you justify a slush fund. If I’m the VP of eCommerce, how do I get a slush fund? And the business case to build that, we should do a session just on that to get into that, because the pressure we found in some of our research, the pressure to show an ROI on investments is faster than it ever has been. So, if you have a slush fund that’s sitting there, it’s kind of like a venture capitalist not putting money to work. It’s just sitting there, and you’re not showing any ROI on it, well, you’ve got to do something with this VP of eCommerce, what are you going to do?

Andy: What it was was it was “use it or lose it” money that they had allocated, but that’s specific one. So, through the year, they were going to set up meetings to discuss how to use it, but they were going to use it for sure. By the way, slush fund was my term. Nobody else called it that.

Brian: “Unallocated growth funds or something”, right? So, we also had these awesome case studies. We heard about a dirty data problem and how he addressed it. And he made some significant strides. He shared some data around his improvements in how both the sales team was using their system now for finding products as well as improvements in conversion rate and overall use of the website, penetration of e-commerce to total sales. We had some great case studies from Zoro, Snap-On, Sylvia shared some really interesting insights. Owens Corning, Dawn Foods, and Adrian at J.J. Keller shared a story of how she onboarded onto Amazon and avoided risks and avoided channel conflict and a bunch of other things. So, that one generated a lot of conversation. Again, these were conversational sessions. Like folks would share their problem. People would comment on it. Some people asked for solutions. Sylvia asked for some solutions. It’s Snap-On. And the group, full of 100 executives here weighing in on their problems and helping them with the solutions. It was really great. I felt a little bit like a talk show host in there, Andy, you and I?

Andy: I was always getting microphones in front of people, but yeah, this is, in many ways, probably the highlight of the day because people get a chance to kind of let down their hair and ask some questions, get some feedback. But who wouldn’t want to have 100 people giving you advice about how to solve a problem? Where can you get that?

Brian: They were very practical and people were suggesting specific solutions to solve problems specific software solutions and hires and approaches and mistakes they made. And we had a lot key themes emerge. Now, John Pehler, the former CDO of Rexel, did pre-Summit interviews. And then we heard a lot also during our Summit. So John did that research as a part of our leading up to the Summit. And we pulled a lot of key themes out of this. And we don’t have time, obviously, to cover all themes. Those of you watching the video here can see some of those themes, but we’ll just cover up on two of them. And one of them was digital maturity still varies quite a bit. We’re seeing some manufacturers that don’t really have any commerce function yet, but then you’ve got distributors who are far along the path. Any comments on digital maturity, Andy?

Andy: In fact, we just published a report about it. We’re doing a Webcast next wee where, we are revealing part two in the three-part series about how to think about digital maturity and how to advance through digital maturity. So, yeah, it definitely varies widely. And there’s no right or wrong answer to any of this stuff. Some people are far along with say, the organizational design and less far along with data. Nobody’s superior in all areas and nobody is 100% backward in all areas. So that’s, I think, the takeaway from that.

Brian: Well, and the framework we’ve created for that, that’s all, by the way, even after the Webcast next week, it’ll be available on demand on our website. So folks can download that and watch it, but we have a whole framework, which doesn’t just talk about tools, it talks about organizational structure and hiring and things like that, that so people can assess, you can assess your own digital maturity and figure out what you need to do to move to the next step. We did that in partnership with commercetools. So another key theme was all about AI and AI is not yet foundational, but it’s an opportunity as a differentiator. One of the roundtables I ran, Andy, was about AI and we heard some very practical ways people are using it. A lot of it is around content – product content, getting product content started, some normalization cases, some very specific tools were shared with the group at the roundtable talking about hey, I’m using this solution to do this; where it’s falling down video creation, for example, people said, hey, it’s just not working for that, even though you have Sora and other solutions in the market, it’s not really ready for, at least for advanced product content in a creating videos. Any thoughts on AI?

Andy: Yeah, not perfect, but very promising. I think the very promising part makes it well worth your time because in some areas, it’s a new process.

Brian: I think people need to be working and experimenting with it. So we got some incredible feedback, yeah, I’ll share a little bit of that with the group here, a little bit of, I guess self promotion, but it’s really not us saying it? I mean, VP of eCommerce at Catchmaster, which is a leading producer of professional pest control products, Elias, he said, “an incredible experience filled with valuable insights, innovative ideas and engaging discussions on the future of B2B e-commerce.” Rob Richardson over at Miller Knoll, which many of you sit on Aeron chairs, they’re a big furniture company. “Great atmosphere and conversation”, he left wanting more. Denise Foley, EVP of e-commerce, the ULE group, they’re a distributor of electrical products. “So many learnings, crowdsourcing of challenges and solutions, meeting peers and getting inspired, a brilliant event.” I can’t wait until next year. And by the way, it wasn’t just practitioners that were given the event Kudos. Also, James from Credit Key, James Wallen the VP sales, “hands down the best event of the year for sharing best practices and open dialogue.” Thank you guys for saying those things.

In this week’s episode, Andy & Brian give a preview of Master B2B’s State of eCommerce Report, which will be released in July.  But we didn’t want to wait to share some of the key findings about how both B2B buyers and sellers have changed their behaviors over the past year.

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Brian Beck: It’s Friday, Andy Hoar, welcome to Friday’s 15. Everyone, my name is Brian Beck, here with Andy Hoar, for another week of Friday 15 fun and we got a great topic today. Andy, great to be here with you. 

Andy Hoar: Great to be here too. 

Brian: So let’s jump in on some breaking news here, Andy. Where’s my breaking news music? There it is. [MUSIC PLAYING] Andy, did you see this? Home Depot sees first annual decline in more than a decade as housing streak ebbs and rates jump. So Home Depot came out with earnings, and said basically that, hey, we’re not doing as good as we were, in terms of a variety of factors. But what was interesting is they’re leaning into B2B on the B2B side. Home Depot saw stronger sales from larger pro customers than smaller contractors. Interesting to see this. I think we’re seeing some of that softness in the consumer side. But again, they continue to lean heavily on that B2B side. Any thoughts on this, Andy? Any reactions?

Andy: I think a couple things are going on here. One is that low end of the market, the handyman sort of thing, or do it yourself, person. There’s a lot of competition for that person’s dollar. You can go to Walmart and buy nails, right? And so Home Depot has seen some cannibalization of that on the low end because of other industries. At the same time, Home Depot is also realizing that B2B is a pretty good business. And that they’ve got that pro customer that’s really become the backbone of the company. And it’s the same thing with Lowes.There’s slight differences between them. But both HD and Lowe’s for pros, for example. These are serious B2B companies. In fact, I think if you look at their revenue, there’s more revenue coming to Home Depot and Lowe’s from B2B than there is from B2C. 

Brian: Yeah, it was interesting. Well, obviously that big distribution acquisition earlier this year, that Home Depot announced the last month. So they’re doubling down on B2B and I don’t blame them- It’s good business. I just thought the interesting part was the larger pro customer piece. They’re clearly trying to move up market through that distribution acquisition. So well, this week, though, we’re going to be previewing our report that we’re coming out with – The State of B2B e-commerce 2024, pretty exciting stuff. Andy, you spearheaded this from our side. 

Andy: I want to preview a little bit what we’re going to preview. Preview me to preview? I’ve done these even prior to this on an annual basis back in the day when I was at Forrester. And from year to year, you don’t see mega trends, but you see trajectories. And you see variation within the trajectory. And I think we’re going to reveal some interesting results here. I think what we’re continuing to see is this a continuance of what we’ve seen before. It hasn’t changed. It hasn’t gone in a different direction. We’re not going back to analog, so to speak. So the march of digital continues. But within that, there are a couple of interesting findings. So this is a survey of B2B e-commerce professionals in both the US and Canada. It’s in the hundreds. We do the supply side and the demand side. So we’re talking to the people selling as well as the people buying. Sometimes we compare the results. Sometimes they match up. Interesting enough. Sometimes they don’t. For years, we used to see the seller saying they think they’re really good at this stuff. And the buyers would say, actually, they’re not very good at this stuff. And never looking the other direction, by the way. And never was the buyer saying, oh, these guys are much better than they think they are. So the exaggeration takes place on the side of the buyers who think they’ve really nailed it. 

Brian: Well, our goal is to really assess the current state of B2B e-commerce. Where are we in this? And it even goes beyond e-commerce. I was surprised by some of the stuff we found in our survey, and of course, our report when it’s released will have more detail about our findings. You may all download that from our site when it’s released. So look out for that. But this is one of the things that was really interesting to me, Andy. Omnichannel. We talked about this in consumer for years, right? But it’s arrived in B2B. We asked this question: What percentage of your purchases for work do you typically research offline, like visiting a branch or talking to a sales rep, before you purchase online? Typically, everyone asks the other question. We asked that too. But what was interesting is 27% of people research, 50% of more of their purchases offline they were buying online. I was pretty surprised by that, were you? 

Andy: This is highly variable. It depends on whether it’s a highly considered purchase or not. If it’s a less-considered purchase, a more generic item, not as much, or if it’s a highly considered purchase, it’s higher. What’s interesting about this is that these channels, to your point, work together. And for years, kind of an open secret for people in the industry is that online influenced offline, and we’re going to talk about that in a moment, but also that offline influences online in a measurable way. For example, if you open a branch in a certain location, the online sales in that geography go up. That’s not something that people originally expected would happen. We know that when you put a website up, it drives people to offline environments. But who would have thought that when you build a branch that it drives online sales, it just makes the point that these channels cross-modify one another. 

Brian: We found this in retail. I lived in that space as a VP of eCom for many years. That these channels work together. And the other question we asked was, What percentage of your purchases for work do you typically research online? And the bigger story– and it’s been the story– is that 54% of people research 50% or more of their purchases online before going offline. But the overarching story here is that we’re seeing the offline side. And don’t you think these work together? These are not separate channels. And so this is an implication for everything. When you think about B2B organizations, how they’re structured, or where P&L lies, how you give attribution to digital investments, how you make your case. Right? We’re going to talk about this next week at our Summit Andy, right? That’s a top-to-top big one. 

Andy: It’s a big one because they undervalue digital. That’s why. Because they say, oh, digital sells online. And then the digital people say, no, it actually influences offline sales. And if you have a cross-channel attribution model in place, you can measure these things. But there’s the skepticism that online does actually influence offline. But it does because, clearly, the majority of purchases made offline are researched online. And so just because they’re not booking the business online, doesn’t mean that digital does have a tremendous impact on the offline business. 

Brian: So we wanted to know what companies, what are B2B sellers, what are manufacturers, distributors, driving their internal users, their customers to do. What are they focused on? So we asked a question, How much are you really focused in these different areas and what you do want your end client, your internal clients, your end users to do? Now, this was really interesting. The number one was research prices online. Really, that was shocking to me. That means that you want your customer to go, or your internal users to go, and use the online system to research prices. Which, OK, if we’re driving them to do that, there’s got to be a reason behind that, right? Other things that were highly ranked. So 86% were strongly agreeing or agreeing that that’s what they’re doing. Other things were using ratings and reviews, which is interesting because B2B has been reticent for a long time to use ratings and reviews. I don’t want customers to rate my products, how good they like them. I don’t want that exposed publicly. Buy more online was 69%. Agreed or strongly agreed. They want them doing that. They’re pushing them to do that. And the other interesting thing was auto reorder 62%. That makes a lot of sense. That one didn’t surprise me as much, but using auto order functionality online to have folks take those more transactional routine purchases and push them into a more efficient or lower cost to deliver a channel, right, Andy? What do you take on this? 

Andy: What we’re seeing here is the emergence of a sophisticated B2C-like B2B buyer. Because what they’re doing is they’re going to research things and then making purchases elsewhere. They’re offloading the replenishment orders online, which is what they do with B2C. You want an extra couple of shirts, whatever, just go in order, dump them in the cart and it shows up. The ratings and review thing – I agree with you. I remember years ago I was at the early stages of that talking to companies and the funny thing is the B2B companies wanted all the positive reviews, but none of the negative reviews. And it’s like, that’s not the way it works. And by the way, the dirty little secret about that is if you had only positive reviews, people were less likely to buy from you than if you had a mixture of positives and negatives because they don’t trust it. So try explaining to a B2B executive, you actually want some negative reviews in there because you know it causes people to trust you more and buy more frequently from you. They just didn’t get it. They get it now. 

Brian: This is a debate we had 15 years ago in B2C. And it was the same initial reaction. But yes, absolutely so. And when there’s some mix of reviews, the conversion rate on those products on the online channel was higher if there was some negative. It was interesting. We wanted to also know how do B2B buyers want sales reps involved. So we asked all different kinds of scenarios, hey, I want to just interact in person as my primary source, different scenarios. The number one, 68% top answer, 68% they strongly agree or agree that they want to gather info online before interacting with the rep. I find gathering information on my own superior to interacting with the sales rep prior to making a purchase for work. That was the number one choice. So I think this is again, we think about those stats about younger millennials and Gen Zers, actively avoiding sales reps. It’s playing out here in our data as well. This continues to happen, right? 

Andy: Well, wait until AI becomes a factor here. Pretty soon we’ll be asking: Do you want to interact with a human or a chatbot? And so there’ll be a third option here. And then I think eventually the chatbot will squeeze out the humans. Not for all purchases, but I’ve seen these. I’ve seen demos of chatbots that are empathetic. Talk like humans, they have infinite knowledge. No need to be trained. Don’t leave the job. Don’t ask for raises, et cetera. And– Working anywhere. It’s inevitable. Plus in B2B, we know a lot of these sales folks are very experienced people, but they’re also older. And they’re leaving the workforce. And so they can’t find enough 20-somethings who have their knowledge. So this is a problem they have to solve anyway. And I really think AI driven chatbots with the right data and the right sort of tuning and training of the bot could be a real solution here. 

Brian: We also wanted to know where are people doing their research? Where is the B2B buyer starting their journey? This one was fascinating. Number one, we asked a question. Where do you start your research? Number one was actually brand manufacturers. And to your study years ago, Andy with Forrester are about trust and the halo of trust companies get from looking at a manufacturer’s site. Number two, Amazon Business, almost 20%. What surprised me is that so much more there than industry distributor websites, industry distributor websites, only 13 or about 14% said they started their search there. Distributors, this is a trend!  We saw early last year, we talked about our predictions on the great distributor squeeze. Well, holy crap, this is showing up on our data. People going to Amazon significantly more than industry distributors.

Andy:  What’s interesting about this is that’s where they start their research. But for years, and it continues where they make their purchases, tend to be industry distributor websites. So they start on brand manufacturers and Amazon, for example, and then they make the number one answer is usually industry distributor and then, of course, increasingly Amazon. So people are not buying on the manufacturer website, but they’re doing their research there. And you’ll hear distributors say, hey, I don’t care, as long as they end up with me, I don’t care where they start. Well, you should care where they start, because increasingly brand manufacturers are selling direct and they’re selling through Amazon. Amazon. So distributors do compete for eyeballs at the top of the funnel. And the brand manufacturers do need to sell to folks, because it’s not a great experience to be on a brand manufacturer website, find the product you want, and then be told, great, here’s one of six completely different sites you can go to and have completely different experiences on. And you got to register, et cetera. And people are like, I just want to buy your product from you. And they’re willing to pay a premium for it. So that friction needs to be removed. So everybody’s got to do a better job here. But I agree, if I’m an industry distributor, I would be worried that people aren’t starting at my site. 

Brian: And why is Amazon winning at the top of the funnel here? We asked the question, why do I buy where I buy? Number one, and number two, number one, is easiest to use, right? And number two, where I find the broadest selection. Well, easiest to use is huge. And Amazon is great at selection. They have a huge assortment, bigger than most distributors in most B2B categories. And so I think this gets to the whole easing friction as being the key to winning in B2B commerce. And it said this in my book a lot, making the buyer’s job easier. This is clearly standing out in our data today. And so the buyer — and that combined with the sales rep data we shared earlier — this is telling a story here, right? You need a really well-functioning e-commerce capability. 

Andy: And you need to be aware of where your partners are and you need to be aware of where people are going to make their initial decisions, et cetera. It’s a whole ecosystem that you need to be aware of. But the day of churn and burn, and assuming just because they’ve been in customer of yours in the past, it’s not the same anymore. 

Brian: We asked – What about AI? How likely would you use generative answering functionality, like a ChatGPT on a B2B website, to find information about products? 45% said yes. You see they’re willing to use that. And you see this in it being integrated now into like Google search results for AI generated answers. This is coming. It’s here, right? So the customer is saying they want to use it. So that, AI is another major trend we pulled out. 

Andy: Do you realize that 2 years ago that was zero? Isn’t that crazy? Zero. 

Brian: Yeah. It’s nuts. It’s what I love about this industry, Andy. It changes so quickly. And to this point, we’ve got quick buyers. This is another key takeaway here. Buyers want speed above all else. What’s your chief reason for shifting more work purchases online from offline? Number one answer, 36% said faster process.I think this is telling us some stories about, easing the customer journey. It’s about omnichannel. It’s about removing the notion of channel, in terms of how you manage the customer relationship. It’s more about the overall experience. 

Andy: If  you’re a procurement manager or you’re a power user, your circumstance will be slightly different from somebody using the spot market. This is more kind of focused on the spot market, and I’ve had a lot of B2B companies just dismiss that. So, our typical customers use EDI or whatever, or they use their website, and all they care about is blah, blah, blah. Look, the world is a lot more complex than it used to be. Everybody goes and checks prices now, which is, by the way, why you need to have prices on your website. Because I’ve never been to Amazon, for example, and not seen a price. So, it does matter, no matter what. And this is a bigger deal in B2B than it is in B2C. If you don’t nav as much, they don’t browse as much. Speed matters, but that’s why search really matters. That’s why, friction points, removing those things matters. So, customer experience is really critical in B2B. If you make it hard for them, but go someplace else. 

This week on the Master B2B Friday 15 podcast, Andy & Brian talk about how to accelerate your digital maturity in 2024.

The discussion centers around a new report Master B2B published in association with commercetools called, “Accelerating Your Digital Vision” that digs into how organizations can quickly speed up their digital maturity.

You can download the report here.

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Brian Beck: Andy Hoar, welcome to the Friday 15. We’re with Master B2B, my name is Brian Beck. I’m here with Andy Hoarg. Thanks for watching this exciting session about accelerating digital. This is a really good one. We just did some research or prior to our research and we’re going to share some high level findings. So, Andy, did you see this week? MDM, right? Actually, this wasn’t this week. This is a report from the sort of the whole first quarter. MDM released a story about softening, trudging through a soft cycle. Now, MDM follows the wholesale sector in distribution management or modern distribution management. And, here’s a quote from this, from MDM, their article says, “Nearly, every major distributor in Q1 financial releases mentioned that softening market demand has led to modest sales growth or declines and the vast majority of the sector expects current conditions to persist.” There’s so many confusing signals in this market, Andy. I don’t know what to believe here. The stock market keeps going up and you get this stuff. What do you think? 

Andy Hoar: Yeah, will inflation go up, go down, we’ll interest rates go up, go down? I don’t think anybody knows, but I do think the uncertainty has kind of caught up with things. And I do think these companies are now starting to see a softening. We just saw yesterday, or recently, that Salesforce announced that their numbers have gone down pretty dramatically. They didn’t hit their growth numbers and their stock’s down like 20%. They’re at the tip of the spear. And I think they’re starting to indicate that there is softening demand. But I’ll say this, I’ll say the same thing I always say, which is – This could change next month. Well, the other thing I’ll tell you is, I don’t know necessarily, MDM is focused on distribution. As we revealed last week some of our research, some of that demand is going to other channels like Amazon Business. So it may not just be the economy we’re talking about here. It may be shifts in where people are buying products and the demand, really demand shifting more towards e-commerce, which is, hey, why we exist, folks, here at Master B2B. 

Brian: And our topic today is the keys to accelerating digital in 2024. How do you take on this opportunity and confront it head-on. We did a bunch of research here and asked some questions. We’re going to get into what that said. We have a whole report out on this now. We’ll have a link in the show notes. It’s called “Taking Your Strategy to the Next Level.” It’s presented by Master B2B. We did all the research. It was in partnership with commercetools. And this stat alone says a lot, Andy. 83% of B2B organizations plan to spend more money on digital in 2024, 83%. I mean, yeah, you can say the economy is softening, but my goodness, companies are paying attention. This is really a reversal from what we’ve seen in 2023 and 2022, right? 

Andy: Yeah. One thing is to reconcile this with the Salesforce news. Salesforce news is backward looking. It’s in hindsight. It’s retrospective. This is prospective. And what people are telling us is that they’re doubling down on digital. This is a pretty big jump. I think what happened was during the pandemic, there was a ton of spending on digital. Then, immediately following the pandemic, we had a bit of a hangover because people spent a lot of money and the companies were saying, hey, tell us where the ROI is on this. And there was a bit of a hiccup there. And now what’s happening is that it’s coming back because companies are realizing that some stopped spending money on digital and guess what happened? It didn’t go very well. So, you realize that spending on digital is not a project but rather a program. So, I think we’re starting to hit that stride where companies now realize we spent money on digital, we stopped, it hurt us. Now we’re going to spend money again. 

Brian: It’s actually fascinating because the number one driver of this, and I know when I was in Denver two weeks ago, Andy, or several weeks back, doing a roundtable, we talked about storytelling, getting C-suite alignment. Historically, the C-suite, the leadership, hasn’t been fully aligned. And that materializes in budget. But when we did our survey, we found – and this was shocking to me – Leadership is finally on board. Check this out. 94% of respondents to our survey, it’s just very recent, reported that support for digital initiatives from the CEOs, B2B businesses now have the executive buy-in needed to make technology investments. So, the tide seems to be turning here, right, Andy? Is that what you’re taking away? 

Andy: I think the debate is now over. The why question – why are we doing digital? I think it’s over. I mean, we had the pre-pandemic, then we had the pandemic, then we had the post-pandemic, and now we’re in the post-post pandemic. And I think people now realize this digital thing is real. So the real question now is about budget. So it’s not whether you should spend money on digital, but how much. And that’s where it gets kind of interesting. 

Brian: Look at this data we found. We asked the question, has your company provided you with sufficient financial resources to achieve your technology investment goals for 2024? Look at this. Almost 90% said, yes. Wow. If we asked that question last year, I think we’d get a very different answer, even in ’22, right? So, the money’s available. So with power, with dollars comes responsibility and greater demands. To me, Andy, this harkens back to my B2C days when I was running e-commerce at Harbor Freight Tools and Pac Sun and all these consumer brands and retailers. you were expected to drive all kinds of ROI. You were getting a lot of dollars in those days. I’m talking about 10 years ago. you’re getting a lot of dollars invested, multi-million dollar capital budgets, et cetera. But you were expected to deliver, it’s so funny. I talk about this in my book, right? The whole B2C, all this is very familiar to me anyway because it’s where we were, 10, 15 years ago in B2C. Because with power comes pressure compared to three years ago, the time frame in which I need to show an ROI in B2B commerce these days has, guess what? Sped up versus just a couple of years ago, more pressure, more pressure is here, right? 

Andy: So, good news and bad news. If you’re running e-commerce in a company, your C suite is bought into digital, check. You have the resources largely to make it happen, check. But now, they’re like, hey, you better deliver. And that’s where some people have a big X in their mark. And so some of them are like, hey, how do I measure that? And there’s also, there’s a problem in both directions. There’s, how do you actually produce the result for that amount of money that’s been out there because it’s a bit unprecedented for a lot of digital. Digital is no longer a side business. It is the business. And so it’s subjected to a lot of the same metrics and scrutiny that the rest of the businesses have been subjected to. The funny thing and the ironic part about that is, now I’m hearing from digital folks that they’re having problems convincing the C suite about what metrics matter because the CFO is used to depreciating assets and, and kind of standard, margin growth, et cetera. But how do you measure things like the fact that online you can change prices more quickly? And because you can change prices more quickly, you can be more adaptable to the circumstances. I guess at the end of the day, you’ll have better margins from that. But there’s a clear value associated with what online offers and what digital offers that I don’t think a lot of CFOs fully appreciate because they haven’t lived in this digital world long enough. 

Brian: Well, that’s right. it’s funny because when you think about B2B companies, Andy, and how traditionally conservative they are in terms of how they make decisions, getting full buy-in from every business unit. And you rarely hear the word “aggressive” with regard to the way people are investing in B2B. But we ask the question in our survey, how aggressively are you investing on improving and improving your customer experience and the vast majority said either aggressively or very aggressively. So I think this is a reflection of this pressure that’s come, right? 

Andy: So in parallel with all this internal pressure around results and ROI, there’s also this ongoing pressure from the market around customer experience. Every time Amazon launches a new feature, AI delivers a whole new experience. I think there’s a lot of AI in this, probably because companies are realizing that if you don’t keep up with the Joneses, you’re done? 

Brian: I was recently at Amazon up in Seattle for several days, and meeting with a number of folks, and it’s incredible, the things that they’re continuing to do with Amazon Business. I spent a lot of time with Amazon Business and understanding what they’re investing in. And that bar is continuing to go up because they really are customer focused in a way that I, unfortunately, I don’t see with a lot of distributors. Some of the ones who are succeeding obviously are, but it’s, I mean, anyway, to your point about the bar, it continues to go up. So the question is, where is investment going? Where is, what are people investing in? This is really the crux of our report. Obviously on a Friday 15, we don’t have the time to get into every one of these things. You’ll have to download the report. But where’s the investment going? It’s going into four areas and we cover these in our report: digital tools, so streamlining operations, improving customer experience, culture. This isn’t all about technology, although it is largely, but it’s not entirely. Team culture, how is your organization embracing digital? Are you hiring the right people? And then customer experience. So this isn’t just about digital tools. It’s also about what’s happening offline. What is your whole customer experience like? Are you creating the things, the functionalities that you need? Data and insights, putting data into the hands of business users to use data to make decisions. So it really crosses multiple areas. And we cover these in detail in our report, so we encourage you to take a look at that. And we have this framework of stages that you can put yourself into different stages. This is a companion report to a report we did last year where you can evaluate your business, your maturity as a business. Anything in here you want to highlight in terms of stage one through four and how mature you are? 

Andy: Well, you can be in stage one for data and insights in a stage three for customer experience. So it’s not like you’re one stage completely. You can be in different stages. Now, you’re not going to be in a stage one and a stage four. I haven’t seen a single company that is in a stage one for digital tools and stage four for customer experience. That doesn’t happen. That said, I think what’s helpful about this is you can figure out where you stand. So maybe you’ve got a real deficiency on the data side, but you’re doing pretty well around tools. You’ve got some really good tools. You’ve got a good infrastructure in place. You just are pumping bad data through it, which is funny because in the last slide you talked about that. It’s like, I think about how daunting this must be for a lot of companies. So you get through the culture, the tools, the experience, oh, and by the way, now you’ve got to deal with all these data problems. I still say data is the lifeblood of these organizations. If you don’t get that right, nothing else works. 

Brian: We’ve provided some tools here to the market where you can look at our first report, which is “Establishing a Baseline,” which is available on our website. And you can download that and assess where you are from a digital maturity standpoint. Then you can use this report, which we just released, again, in partnership with commercetools to show you what you can do about it. How do you advance your digital maturity? How do you get from a stage one or stage two in these different areas? 

On this week’s Friday 15 podcast, Andy & Brian talk about whether brands should sell on Amazon, even if they don’t get access to customer data.  The resounding answer is, “yes,” but with some caveats:

– Brian believes the Amazon 3P Seller Central approach makes more sense than the 1P approach…so why do brands still sell to Amazon directly?

– Don’t discount the value of Amazon as an awareness tool.

– Brian shared a survey of companies that don’t sell on Amazon and the number one reason why they don’t is that they don’t have the internal resources necessary to manage it — it wasn’t that they have an issue with Amazon in general.

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Brian Beck:  Andy Hoar, welcome to Friday 15 with Master B2B. My name is Brian Beck. I’m excited to be here for another week of fun and exciting conversation about B2B eCommerce. Happy Friday. How are you? Happy Friday. 

Andy Hoar: So we’re working in advance and actually trying to do this one in less than 15 minutes for the first time ever. So let’s roll. 

Brian: Let’s see if it actually works. It probably won’t. We’ll try. But first we have some – Oh, new music for that. Wow. Andy, do you see this? This could be a real thing. Software company BigCommerce, Explores Sale. Sources say this just came out a couple of days ago. Andy, this is your world. Ecommerce, platforms. What do you think about this news? 

Andy: Yeah, it’s not news. This has been around for a while. There are several companies in the e-commerce space that are in various states of being owned by what I think will happen here, a PE firm. So somebody is going to grab these guys. They put the word out because they wanted to increase the universe of buyers. But look, I think BigCommerce’s strategy, they’re giving it a shot. They’ve struggled against Shopify, who’s coming from the bottom. He’s struggling against the enterprise guys coming from the top, not to say they can’t do it. Product is strong. I have no issues with that. But I think they get squeezed by reality here a little bit. So we’ll see what happens. 

Brian: I’ve always said that there’s an opportunity for mid-market, B2B, mid-market, and platforms in this sector. So I’m rooting for them. I’m a shareholder, BigCommerce. So let’s see what happens here. I’m a very small shareholder I bought them years ago. But this is an interesting evolution here. And I think there is real opportunity. But now you see Shopify moving in as you saw in the Wave last week, right? Andy, so we’ll see what happens and how this evolves. So let’s get to our topic today, which is, should brands sell on Amazon, even without access to customer data? We’re talking about branded manufacturers here. And Andy, I live this with my Amazon consultancy Enciba, where we work with B2B product manufacturers. And of course, this is a question we get all the time. Amazon is now accounting for almost 70% of product search. People starting their product searches, both consumers and B2B buyers. And Amazon Business, $40 billion now, it’s bigger than gosh, it’s four times the size of Grainger, you know, almost. So it’s become a real player in both B2B and certainly B2C categories. But the question is, it’s still, if you sell your products on Amazon, you don’t get access to the data. So we’re going to dive into this today, right? And so go ahead, Andy. 

Andy: So we did a poll. And we asked people and it was pretty overwhelming – Should branded manufacturers sell on Amazon, even though they don’t get complete information on the customers that buy? But what you phrased it was, yes, because it’s too big to ignore or no, because the risk of not doing so is too high. And I think it was overwhelming. 89% said, yes, it’s too big to ignore. That said, I think of that 89% if you double clicked on that, the vast majority would say they still have some reservations about selling on Amazon for a whole host of reasons, most notably, if you’re not selling direct, you don’t access the data. Amazon’s got all the data and the data is king here. 

Brian: It’s interesting too. And we’ll talk a little bit about it as we go through this. But the way you sell is also really critical. But given those numbers I was talking about, Andy, it’s both B2B and B2C, I think folks agree that it is too big to ignore it. Now the question is, How do you do it? Devil’s in the details. Because at the end of the day, the 70% of product search – if you’re not on Amazon, you’re risking your relevance. I always kind of joke about some CEO sitting there typing in a term into Amazon search bar, an example might be something like a digital caliper, a traditional B2B tool that’s used in industrial applications, aerospace, automotive, etc. And looking at the products that come up and more importantly, the brands that show up on Amazon when you do a search like that, if you’re the CEO and you see, oh my gosh, you know, who is this brand KINDUP? I’ve never heard of them. And then they go double click down into, you know, this is an example, double click down into the sales on these products to the tune of 1.8 million dollars a year from brands they’d never heard of. And guess where a lot of the products search is starting by our, today’s B2B buyer, starting on Amazon.  And the loyalty these days is more with the channel in a lot of ways, particularly with Amazon. And they’re doing a great job. So if you’re not there, guess what? The volume is going to go somewhere else. And these companies coming out of Asia and other places, Andy, they’re really good at Amazon. And quite frankly, the product is getting better too. Sometimes it’s the same factories making the product for the traditional manufacturer in Asia, in particular, that are now selling on Amazon directly, competing against their traditional partners in the year in the US. So fascinating dynamics and relevancy, I think relevancy is a key part of this, right? To stay relevant to that new buyer, any thoughts? 

Andy: Yeah, I don’t think you can’t not be there. The question is, how are you there? I always felt that Amazon had some manipulations, you’re manipulating you, you’re manipulating them, just go in with your eyes wide open, figure out what you should be selling there, what you can’t afford to sell there. But, you know, you got something there because if you’re not present there, then people buy from somebody else and you’ll eventually lose. 

Brian: So, the question is, the whole notion of resellers and channel conflict and we often say that if you’re not controlling Amazon, if you’re not proactively engaged with the channel, the channel will control you and will cause channel conflict and you’ll have unknown resellers selling products. You don’t even know how they get the product. Again, there’s ways to manage this, but it’s a challenge. So, selling approach really matters on Amazon as it relates to data, as it relates to control. So there’s two ways to sell on Amazon. There’s vendor central, or 1P, first party where you sell product directly to Amazon, like you would a traditional distributor. Now, if you’re an industrial products manufacturer, maybe you sell to MSC and Fastenal and Grainger and Motion Industries, it’s a similar dynamic in that you have a vendor manager at Amazon, a buyer quote unquote, that will work with you to buy your products, set up your product, the store, and etc. You sell them on a PO, you ship to their fulfillment centers. It looks and feels, particularly when it starts, like a traditional distribution relationship. You have some marketing merchandising opportunities, but Amazon sets the price, controls the content. There’s a whole variety of things that you’re giving to Amazon, just like you would give to a Grainger and MSC. So that’s a wholesale relationship. There’s also another method called Seller Central or 3P and this is where a vendor, a supplier, manufacturer would set up their own storefront on Amazon. Amazon still processes the order, and they take the order, but either you ship it to the customer or you use the Amazon’s fulfilled by Amazon service, but Amazon never owns the product. It’s bought, then the title transfers from you, the supplier, to the customer who buys it. The part that’s interesting about this model is number one, you set the price, but you also get a lot more data. If you ship the product yourself, you get the customer’s name, you know where it’s going, you can’t remarket to them, but you get the customer’s name, you can at least get some directional data on where  it’s going. In fact, if you think about it, folks selling through Amazon Seller Central get a lot more data than they would get through a Granger or an MSC or some of these other channels. So, in some ways, you can’t remarket to the customer. We’ll talk about that, but you get more of the information so you can actually use that to some degree for planning purposes and other things. 

Andy: So that seems like a happy compromise. Why wouldn’t everybody sell through Seller Central? Why does anybody sell first party to Amazon? 

Brian: That’s a great question and I ask it every day. Seriously. Well, the reason they do it, honestly, Andy, because we have companies that we work with that sell 1P. It’s comfortable. A lot of traditional manufacturers, let’s be honest, they’re not set up to support this. This is essentially consignment inventory. They’re not set up to ship this way, to account this way. There’s more resources required to do it. So Vendor Central feels like a traditional distribution relationship. It’s comfortable. Oh, yeah, here’s a buyer who is going to buy my product, but what it turns into over time is – Amazon doesn’t accept pricing increases. They’re doing what’s called, this is a great term. I’ve ever heard it, “crapping out”, you cannot realize a profit. Amazon will come to you and say, your product is crapped out. Crapped out. Why? Yeah, that’s funny, because I can’t realize a profit on it. And so therefore, you either have to reduce your cost. I don’t care if your cost went up. Either you reduce your price to me, or we’re going to take it off of Amazon and not sell it. And then it turns into a bit of a challenge. Now, it can make sense for some companies. It’s a really low price product, like $10 or less. But why would anybody sell Vendor Central? And I ask that question every day. It just feels comfortable for them. 

Andy: I can see that I can see that being comfortable. You’re right. It’s like they just seem like any other distributor, but the problem is they aren’t. 

Brian: Well, that’s right. And it’s funny. I was just on the phone with a big 1P Vendor Central brand, a huge company that you know. They were saying, gosh, you know, I can’t use the word “Amazon” and “relationship” in the same sentence because it works very differently than a traditional MSC relationship where you actually have someone you’re collaborating with. Amazon Vendor Central works very differently. So Seller Central is really a more self-service type portal. But you still don’t know, in many cases, who the customer is because if you’re selling third party and you’re using Fulfilled by Amazon, then in that case you don’t get the customer’s information. You just know where it’s going. And Amazon has  customer communication guidelines that are very specific that restricts your ability from contacting customers for marketing and promotional purposes, period. You can’t market to them. It is not your customer, regardless of the selling approach. It is not your customer, it’s Amazon’s. What I would say though, Andy is, well, MSC doesn’t tell you who the customer is. Neither does Grainger. Your traditional distribution channel isn’t going to tell you to the customer. So you can’t remarket into them, right? Or am I wrong? 

Andy: You know, you’re right. But I still think it’s a different relationship because Amazon will have private label products and so do old traditional distributors. But somehow you feel like the traditional distributors are more in your court. They feel like it’s more a joint customer relationship. Whereas Amazon feels like when you give it to Amazon, they’re going to do whatever they have to do, including putting you out of business. You don’t feel like your distributors are going to do it because they need you.

Brian: Well, the whole private label thing we get into on a subsequent one of these – It’s a very small part of Amazon. Business and guess what? It ain’t profitable. And guess what? They’re backing away from it because it ain’t profitable.

Andy: It’s always a lurking threat though. And they use it as leverage. 

Brian: We did this survey, and for those on the podcast, I’ll read it, where we asked the question, this is my company Enciba, but did this survey at the end of last year. One of the questions was, why of the firms that don’t sell on Amazon, we asked that group, that cohort. Why don’t you sell? The number one reason actually was internal resourcing. We don’t have the resources to do it. And that was followed closely by channel conflict concerns. So, the whole, hey, Amazon, we don’t get the data, wasn’t brought up because ultimately, they know, companies know they need to be there, but it’s really about, how do I manage these other things? How do I resource for it? How do I manage channel conflict? How do I make sure my program is profitable? These are the things that came up more so than the other.s So, anyway, interesting dynamics, I know we’re going to try to keep this one to 15 minutes, right, Andy? Any final comments on the Amazon piece? 

Andy: You nailed it. I think Amazon makes it very convenient, and that’s alluring to a company that’s used to that model, but you should really think hard about what the right model is. Maybe 1P is good for certain things, right, more generic products, but for stuff that’s high margin, your differentiator, I think 1P is a dangerous opportunity for a lot of manufacturers there.

In this week’s Master B2B Friday 15, Andy & Brian:

• Give a recap of their experience at the B2B Online conference in Chicago.
• Plus, they discuss what the latest Forrester Wave of Commerce platforms means for industry.
• And would you rather work with Gen Z or Gen X co-workers?

— 

Brian Beck: Andy Hoar, welcome to Friday 15. Everyone, this is Friday 15 on May 10th. And a busy, busy week this week with lots of reports from the field. My name is Brian Beck. I’m here with Andy Hoar, and we are with Master B2B, the leading most-trusted community for B2B E-commerce professionals. We did some good traveling this week and lots of good stuff to dive in on. So let’s start with some breaking news. (upbeat music) I love that. Here we go. So Andy, this week, Forrester Research released the Forrester Wave for B2B quarter two, 2024. Lots of platforms on it. This came out while we were at the conference. Lots of vendors talking about it. I didn’t hear as many practitioners talking about it, but interesting nonetheless. Do you see this? I’m sure you did.

Andy Hoar: I did. Yeah, and reminding me of the old days. I got the DT’s a little bit because I used to do this wave report. And one of the things I did when I left Forrester to start Paradigm wasto reimagine this report. In fact, there’s been much written by people in the last couple of years about these reports, Gartner, Forrester, et cetera. And I think my issue with it, and by the way, Joe does fine research. There’s a lot of detail in here. But my issue with the wave and the Gartner Magic Quadrant is that it’s kind of a loser/leader metaphor. Either you’re a leader or you’re a loser. So everybody fights for the upper corner and everything else gets lost. And by the way, as you pointed out, only the vendors always seem to care about it. So I came up with a different methodology and I’m in my sixth year of doing that. And in a couple of months, mine will be coming out, but just very briefly, how mine differs from that where I think I’ve resolved some of these issues, is that I’m not looking for decathletes here. You can’t get a composite score up in the leader category, which is what we always found. Every year IBM would be in the leader category, even though they weren’t great at anything, they were good at many things, but not great at anything. I like to double click and get deeper. So if those of you can see this on screen, you can see that I cover 12 categories and you can get a gold medal, silver medal, bronze medal, or no medal in 12 categories. As a result, what you end up seeing is what’s on the next slide, which is you can dig down into a particular area. So if you’re looking for a company with a strong promotions engine or a great partner community, you can find out who’s really good at that and buy according to that, because some things people don’t need, but that all factors into a composite score, which puts the decathletes in their upper right hand quadrant, when in fact people are looking for the world champions in each area.

Brian: I think it’s very practical the way you’ve broken this out, and very useful for practitioners as well. By the way, for those of you on the podcast, what Andy’s referring to, because you never said the name of it, Andy, is the Paradigm B2B Combine. So Paradigm B2B Combine. So look for that in a couple months.

Andy: By the way, I do it for both the mid-market and the enterprise because the solutions are different. I don’t think it’s a good idea to aggregate them all together. It’s like putting all the cars into one big category called cars, when in fact, if you’re looking for a truck or a small car, or whatever, they’re different. And so I think you’ve got to get more granular about these things.

Brian: Andy, for doing that. So let’s get to our report from the field, Andy, you and I were at B2B online Chicago this week. It was packed, man, there were a lot of people there. I think bigger than maybe they ever had. It was at the Marriott downtown, Chicago, over the course of three days. Lots of great networking. We had several dinners at the show, where we brought together the leaders. We got all the speakers for the most part, Andy, to our dinners, a lot of the luminaries joined us. And just really for some great conversation, and networking too. It’s great when you get folks into a room. When I was at my dinner, I had a whole host of, at my table, VPs like Stacey Hanks, was sitting at my table with me, Adrian Hartman from JJ Keller, Alexandra Lloyd from Altec, Rima Westermeyer from Schneider Electric, Carlos Camacho from Bausch & Lomb… And you know, it’s just a great group of people and the level of conversation was fantastic.

Andy: I think this is where the real magic is at these events now. I’ve often been told by the practitioners, if we want to meet a vendor, we’ll reach out to them. There’s lots of ways for us to find them. And people were telling me at B2B online that they were saying they’d get better traction, better traffic in the hallway, outside of the exhibit hall, than actually in the exhibit hall itself, because practitioners don’t really want to go into the exhibit halls because it’s a feeding frenzy. You walk in and there’s a light that goes off, I’m joking. And there’s a target on your back and everybody wants to talk to you and scan your badge and then get you in their system, et cetera. Why would they subject themselves to it? But they still have a need for solutions. And we think actually this format with dinners and meetings and informal approach to this is maybe a better solution to doing that because when you sit with somebody, you say, yeah, I’m really struggling with my data and they go, well, what are you struggling with? And you just talk person to person. I’m not saying it’s the only way to do it, but that’s why people like our dinners, it’s fun, it’s interesting, and you get to know people as people.

Brian: Kudos to Ryan and Frank at WBR too. They’re doing some things that are good at that event to try to facilitate that. I was a VP of E-commerce for years, I actually would get a lot out of the vendor halls, but I always want to take it in doses? Where I’d go through, and what I would do is I’d look for the vendors or the solution providers that I’d never heard of because I want to understand where the investments are going. These guys are all VC-funded for the most part? They’re investing in areas to solve problems.

Andy: It used to be the only way to get the information was to see somebody in person and meet them at an event. There are people, I’ve seen this with my own two eyes, where there are practitioners who’ve gone up to booths, and there might be a junior person at the booth. The practitioner knows more about the product than the junior person did. The vendors need to rethink their approach. Again, I agree with you that they do it well at B2B Online, but I think, you know, the Shoptalks of the world have shown that maybe there’s a different approach to these things, but we go with the practitioners and what they’re looking for, and what they’re telling us is, don’t call me, I’ll call you, to large extent.

Brian: It is the show that people need to be at for B2B in terms of a conference. So some key themes we pulled away from the event – these are some things that we noticed in the sessions. We heard in a lot of our one-on-ones, we met with, gosh, over 100 people at this event, and a lot of them are practitioners, but also we spent a lot of time with vendors. These are some of the things we heard. I’ll go through these for our podcast listeners. Data is still a mess. PIM is foundational, but not the complete answer. One of the folks, this is from some folks from O2 Commerce and Bloomreach, Andy, who we both met with – choosing a PIM can help, but you have to change the organization around it, quote, quote, it’s a new tool, but you have to change how you work, and this is coming from the vendor side. They’re saying, hey, we can provide the tools, but the practitioners are saying, that it’s not just about the tool. So that’s one theme we heard. Channel conflict was another, continuing to be a barrier in e-commerce, to ecommerce investments, particularly amongst manufacturers, and I moderated a session about this, and it was a clear theme. Investments in digital are picking up versus last year. We heard this from a lot of vendors, which is important because they’re the ones getting the dollars to build these systems and things, but caution is still there. We’re not quite at the same rapid pace, it doesn’t seem. The AI buzz is the other thing, and it was a lot of talk about AI. The buzz part, we feel is kind of starting to wear off, but we’re getting real use cases. Steve Martinez, VP of Digital Solutions at Univar, we met with Steve, just as an example, he said on his panel, “Don’t think of AI as a tool, think of it as a supplement to what you’re already doing.” So it’s almost a change of mindset in how you’re thinking about AI as it’s not a solution, to it’s not a panacea, it is something that, can create organizational efficiency within your company.

Andy: I’ll just make one quick point about this, on the AI set of things. I’m starting to see this, and I’ve seen some things that some of the search vendors have shown me that, AI in the form of a chatbot is now starting to display some of the search capability. Because if you go to a website and you go to the search box and you search for something, that’s one path, but you can also now talk to an AI infused chatbot, ask a question and get an answer back. That’s basically an alternative to search, which this is one we’re going to watch, because in B2B, imagine if you could productize a chunk of that content, educate a bot, have AI do a lot of the answering. I saw something the other day that made me think, my prediction about death of a B2B salesman, this is more evidence of that. I saw a chatbot that basically replaced a salesperson, not the warm and fuzzies, not the, potentially the obscure kind of edge case scenarios, but for the vast majority of questions people have, it can answer it using AI. And I think that’s going to be really important.

Brian: That came up, and one of the panels, Nils Olsen is the CCO, the chief commercial officer at Tacton, which is a manufacturer, I think. He said, “Generative AI is great, for the first step in the journey, discovery phase it’s really helping with that and helping customers to find out the product that will solve their problem.” So I think there’s something to that. Where AI is starting to really penetrate, maybe even take, quote unquote, maybe visit shares the word to use, but share of the time on site from traditional search, it’s interesting. So we had this debate, Andy, Team Modern versus Team Traditional. What was the core of this debate? What was the question here? This was a funny one, and fun.

Andy: We departed from our usual topics here, and decided to be a little bit more entertainingthan usual, and it was about this idea of generations communicating with one another. In fact, if you look at some of the data around this, you’ll see that there basically are six generations co-operating in the workplace today. We just focused on four, but the four are baby boomers, they’re like 60 to 78 years old today, Gen X, which is most of the people in senior management, 44 to 59. They’ve got millennials, they’re 28 to 43, and then the last part is the Gen Z group, and this turned out to be kind of everybody against Gen Z.

Brian: Look at the stat, Andy, 74% of business leaders report that they find Gen Z more difficult to work with than any other generation. “This group tends to feel entitled and demonstrate a lack of effort motivation, productivity”, my goodness. That’s from resumebuilder.com survey in 2023.

Andy: They’ll tell you that it’s because they’re not motivated, they’ve got to feel passionate about what they’re doing, there was a stat we showed, that we’re not going to show it here, that had something like 59% of Gen Z years felt tired of worn out at the end of a day of work, where there’s only 35% of baby boomers. I remember we joke that either one group is either really soft, and the other group is really hard, or the older group just has a different perspective on work, and the other group has different perspective on work. We’re not quite sure what it is, but it does create a conflict where twice as many people feel worn out at the end of the day, do you imagine what that’s like for the older group, the baby boomers, who were saying, hey, we just got started, it’s only five o’clock, you gotta work till seven, they’re like, no, I got a whiskey tasting at 6.30.

Brian: So this was our main stage debate, folks, so as you are listening on our podcast, where we actually asked the audience to vote on, which approach was better across a couple of different questions, we’ll get to that in a second, but one of the funniest things we talked about was this Gen Z speak, we actually had several folks who understood Gen Z speak, I don’t understand it, but here’s a quick quote, it’s so funny, Stacy Hanks read this, she’s a VP commerce at SureWorx, and she read this on stage, so she asked one of her friends who’s a Gen Z or to give her some Gen Z corporate speak. So if you understand this, Andy, “Corporate America can be low key be slay if you’re on your grind set, ready ain’t going to make itself, and on everything you gotta work hard, no cap.” What the heck is that?

Andy: No idea what that meant, none whatsoever, and everybody laughed, but this should show you, they have their own dialogue, built out of texting and social media where they shorten everything and try to be different with the language. Language evolves, it always does, it always will, but boy, to look at the English language and see this conglomeration of words that mean nothing to us was a little bit disturbing, but it was fun, it was fun to do, and some people knew what it meant.

Brian: Anyway, it was a lot of fun, and we actually asked these questions and got some results, the questions we asked, it was a sweep for Team Modern, is what we call it, but the questions were what approach is better to evaluating performance of employees this year in 2024, which approach is to working styles is better, which approach to business communication is better, and across the board people said, “Hey, we’ve got to adapt to this more modern style.” We talked about it across many different elements. So it was a lot of fun, and the audience got into it, and everybody voted, we had hundreds of people, and the audience was great. So one other thing I want to mention is, I did this panel, Andy, on demystifying marketplaces, and I talked about this a little earlier in our Friday 15, there’s so much confusion about first party versus third party marketplaces, people think about it in the context of Amazon, versus running your own marketplace, versus selling on a third party marketplace. So I had a great, great panel, and the key takeaway of this was really channel conflict. And there’s still this pervasive fear of channel conflict, and it’s manufacturers, it’s distributors, and one thing that came out of it was, hey, we can use marketplaces as a way to mitigate that, if I’m a manufacturer, drive traffic to my channel, but there’s also a fear of competing with the channel, and preventing manufacturers from doing some of these things. So it’s a fascinating discussion, but the overall theme was there, and there’s a lot to unpack here, but it was a really good discussion.

Andy: We conclude here that companies have an archaic mindset around the way a marketplace operates. They see it as competitive, and it’s all internally, operationally focused. Can we make this work internally? How does this work for our partner channel? And what’s never, ever said first in any conversations is “What do customers want to do?” “Where do they want to buy?” And if you flip it around, and really diagram it from their perspective, I have very rarely seen examples of large companies, especially brand manufacturers, who didn’t have a really good argument for participating in and running in many cases, their own marketplaces. We can talk about other areas where it might be different, but just to swear off a marketplace because our channel doesn’t like it, very, very rarely is that the better case for B2B buyers today.

Brian: I spend a lot of time with Amazon through my company Enciba, but where we work with B2B companies on their Amazon strategy, the language that’s used by Amazon business, and the people that work there, it’s a contrast – it’s all about the customer. It’s all they talk about. And so compared to talking to a distributor or manufacturer, the customer is almost secondary to our internal concerns and alignments.

In this week’s Master B2B Friday 15, Andy & Brian discuss:

– What the unemployment numbers mean for digital investments.

– Why personalization is so much more challenging in B2B than in B2C.

– How you define “the customer” in B2B will define what types of personalization you actually need.

— 

Brian Beck: Welcome to The Friday 15 with Master B2B.  And our music just suddenly stopped.  

Andy Hoar: Did we forget to pay the band?  

Brian: I guess, Andy.  Welcome to Friday 15 everyone.  Brian Beck here with Andy Hoar for another Friday 15 session.  We’ve got a great topic.  We’re going to be talking about personalization.  We want to hear your comments.  This has generated a lot of interesting comments on LinkedIn.  We’re excited about that.  But hopefully our breaking news music will work.  It’s a little bit of breaking news.  Andy, I don’t know if you saw this, but this was posted yesterday on LinkedIn.  Job openings are now the lowest since 2021.  The hiring rate across industries at 3.5% is the slowest since the pandemic hit in 2020.  And so many mixed signals about the economy right now, what are your thoughts?  

Andy: We just got some numbers this morning from the government, the unemployment numbers, jobs, numbers, we get every month in the first week, and the economy’s predicted to have 240,000 jobs created, it was 175,000, and this was on the heels of 300,000 last month in March.  So there’s clearly a decline, but not only that, but also there was a decline of wage growth, which is fascinating because that definitely indicates softness to the market.  People aren’t getting paid as much, but at the same time, in this top sea-turvy world we live in, inflation is still stubbornly high, but nothing’s worse than seeing your wage growth going down while inflation stays high, which means you’re working longer for less money, that really indicates weakness in the labor market.  

Brian: I’m sensing just in talking to a lot of manufacturers, distributors in our marketplace, there’s still some reticence, there’s still some caution in the market around investments for the longer term.  Even when there’s clear business cases, it feels like people are still delaying a bit, and I’m not sure what they’re waiting for.

Andy:  We’ve got uncertainty and we’ve got wars, we’ve got presidential elections, we’ve got all this stuff going on, and at a moment’s notice it could all change.  In fact, they even said economists said with these latest numbers that next month it could be up 400,000, it could just bounce back up.  And so, how do you have to be your Fed trying to figure this one out?  It’s going to indicate what we’re going to do with interest rates, and they put out some stuff like, well, people are going to cut rates later this year, but then this happens, something like, “well, maybe we aren’t, I don’t know.

Brian:  Yeah, tough job. So – the question today is personalization possible in B2B digital commerce? This is a fascinating question, and we posted this on LinkedIn, Andy, and what’s fascinating about it is that unlike our usual polls, maybe we asked the wrong question, I’m not sure, but unlike our usual polls, this was overwhelmingly when we asked the question” is personalization possible in B2B commerce,” 100% said yes.  Maybe we didn’t ask the right question, I don’t know, what do you think?  

Andy: And it wasn’t one person, either. This was like dozens and dozens of people.  I think this is fascinating because there really are two different questions here.  One is: Is it possible? And I think we’ve heard overwhelmingly, yes, it’s possible.  Perhaps the better question, and we’ll see here in a moment, based on some of the comments, “Is it useful or valuable,” or “How can it be done?”  And that’s exactly what Jacobi and Jason waited on. So, in this case, Jacobi had a great comment, I’ll read that one, and when you read Jason.  So Jacobi said, “I want to see any of the ‘no’ answers here.” He wants to call people out, maybe appropriately, who think it’s not at all even possible?  He said that the operative question is not whether it’s possible, but whether it’s valuable and useful.  Jason says something kind of similar.  

Brian: Jason Hein said, “There is a big difference between doing personalization and doing personalization well.”  And there are a lot of things required to cross the chasm between the two – Amen, Jason.  And as we go through some of the data here, and some of the comments, we’re going to see this.  We got about 3,000 views of this post, Andy, and clearly a hot topic, and we’re also starting to see now some of the search and personalization vendors weigh in as well, because they need to be thinking about how you address this, because the stakes are really high.  So let’s first, let’s start by defining “What is personalization.” I took this definition from SAP, and for those of you on the podcast, I’m going to read it.  “B2B personalization is the act of tailoring your advertising offers and communication efforts to fit the needs of each B2B customer.  It involves smarter targeting and better understanding to deliver faster, more relevant, and expected experiences to business customers.” I highlight here the word “customer”, because what is the customer in B2B? Is it the company, the individual, the role, the account, think about account-based marketing, where you’re marketing multiple people?  When you personalize, who are you personalizing to? To me, that’s one of the key questions.  

Andy: That is THE key question. And unlike B2C, where there’s usually a one-to-one relationship, where it’s a seller and a single buyer, in B2B, it could be a seller and two, three, five, ten buyers. I always go back to one of my favorite things about how companies kind of back into this sort of thing.  Shopping cards in B2B are used very differently than they are in B2C. Many companies bastardize the use of a shopping cart to be kind of a procurement system, where it’s close to the shopping cart.  And they’ll send an email out to everybody and the company will say, “Hey, anybody needs to weigh and take a look at this, let me know.  And by the way, if it’s approved, let me know.”  The business has a shopping cart, it’s an approval hierarchy. Nobody in B2C is doing that. Maybe some people put stuff in there and ask their spouse or whatever, or a kid can do it, but that’s very different.  So you’re right. What is the customer? First of all, there’s no one customer. It’s usually a team of people who have different roles, some are approvers, some are validators, there’s a whole bunch of stuff.  The user is the budget approvers, yeah, the procurement. And the customers can be very different, right? You might have, you’re selling one thing to a company and there’s one customer for that, or a team.  You sell something else, like Granger sells light bulbs to a company, but they also sell fasteners and they sell boxes or whatever else to that same company.  So what’s the customer? The customer? The whole company? Or is it pockets of people in the company? Is it teams for each product purchase? This gets very complicated.  

Brian: Well, it does get complicated. And but the stakes are high because at the end of the day, the expectation of the buyer, there’s some data here, we pulled from Accenture.  The expectations are high, 73% of B2B buyers want a personalized B2C-like experience. That means they’re looking for the Amazon experience all these companies that have invested for years in creating a relevant experience that has their name on it and understands their past purchases and looks at their web behavior and makes recommendations on content.  All these things they expect them, but it’s complex. And the stakes are high. As I mentioned, this is some data here, Andy, I pulled from Wonderman Thompson that says 90% of B2B buyers will turn to a competitor if the suppliers’ digital channels can’t keep up with their needs.  You can lose business over this, right?  

Andy: I’ve always said that B2B is a lot more difficult in my opinion than B2C because they have to do everything now that B2C does based on the comment you just had up there.  People expect a B2C-like customer experience. They expect all of the experiences they get from B2C.  But on top of that, contract pricing, to allow approval processes, custom catalogs.  On and on and on. So it’s like, well, Ginger Rogers had to do everything Fred Astaire could do, but dance backwards in heels. And I think it’s what B2B is like.  B2B is a bit like, you got to do everything that B2C is doing now, but also do these other things. And most are not really well prepared to do that.  

Brian: Andy, where the heck do you get these analogies, man? But the other aspect of that too. And what you didn’t mention is application information, right? How are you using the product? I mean, B2B, sure, I mean, B2C, it’s maybe it’s a little easier.  I’m putting on my shirt to look good today, but I need to know which shirt is going to make me look the best. But in B2B, you’ve got all these application differences and how am I using this product in the field?  What does it go with? Compatibility? What equipment do I already have in place? And hey, does that work with my equipment? Do you already know that I have that equipment? The personalization level when you think about relevance of information is, it’s super complex like you were just alluding to.  

Andy: So, maybe we could question right and people misunderstood it. Is it possible? Well, in the context of all these variables, maybe it isn’t, quote, unquote, really possible. But I think we need to re-define what we mean by this.  How do you do a selling scenario where the person, the other end, has targeted offers and targeted experiences for them. What that consists of is really the question.  

Brian: Maybe we should have defined it maybe a little more tightly because personalization, it can be defined, it can be thought about in many different ways. And one way that people do think about it is as it relates to search.  Here’s a piece of data from our own research last year, 2023 from our State of B2B eCommerce. It says 61% of B2B sellers have lost sales because their site search wasn’t good enough.  So, site search is one element of quote, unquote, personalization. And it is perhaps the most fundamental and the one that’s called out the most when someone types something in the search bar, are you recognizing who they are?  Do you know their applications, their equipment, their past purchases, their geographic location, all those things.  By the way, in B2B, you have an advantage because they’re logged in, right? So you do have potentially some of the aspects that you need to build that.  But if you’re not doing site search well, you’re going to lose, you’re going to lose customers.  

Andy: Well, there are more SKUs and derivations of SKUs. You can have a product that has a number letter combination of 16 characters. If you get that one of those letters or numbers wrong because you fat fingered, it comes back with a null result. Nothing’s worse than doing a search, getting 15, 15 of 16  of the characters correct.  And then have it come back with not “did you mean this or that” but instead you get “we’ve got nothing.”That’s all part of that personalization equation.  And let’s think Andy for a moment about what is personalization when you think about it from a B2C context?  

Brian: When I go on Amazon or I’m going to shop for myself or a consumer goes out, they’re using their personal email address. They have a consistency of behavior.  There’s solutions out there that will look across all of my behavior across all websites and even create personas of me as I travel across websites.   But people move jobs in B2B digital commerce. That’s one of the core challenges here. Gen Z workers are expected to have 16 to 17 jobs over five to seven careers.  One in three Americans have changed jobs in the last two years. The median job tenure of boomers, those of the older generation, is three times higher than that of Millenials and Gen Z.  Man, these people would jump jobs. You got to follow them around. How do you do personalization when the people change all the time?  

Andy: You’ve developed this highly evolved, very sophisticated personalized experience for a person over the course of, say, a year and a half. And all of a sudden, the person leaves and all of that gets flushed down the toilet because none of it’s really useful because maybe the role doesn’t exist anymore or it was folded into another role or they hired a completely different person who has a different remit.  You know, maybe some of the stuff is useful. Most of it’s not. This is the problem. But if you and I go on Amazon, my profile in Amazon isn’t changing dramatically from year to year.  It’s still me. It’s still kind of the same stuff. But these people working for B2B companies, it’s just not. When a new person comes in, they have a completely different approach to how they’re going to buy things.  And so it’s a constant battle trying to catch up with things that are evolving.  

Brian: So on LinkedIn, Andy, we got some comments on this point and it was a lot of discussion and Jeff Hoogerhyde, who has a long career at 3M is now at Solventum.  He said, country, customer and role-based personalization has been the norm for over 15 years.  And Jeff I agree that those elements we’ve seen it certainly in consumer and in B2B. But then Doug Topkin weighed in who leads e-commerce at Ingredion, which is a huge B2B food products and ingredients distributor.  He said to take personalization to the next level, meaning I think beyond what Jeff’s referring to – digital needs not only to define a healthy set of personas and journey maps, but also get very good at collecting and managing first party contact data associated with the accounts.  And I think even beyond that, Doug, it’s the roles and then understanding and tying together CRM data, tying together ERP data. Because remember a lot of these purchases happen offline, not online.  So we have to look across all channels. That’s the other level of complexity. This is not an easy problem to solve.  But we’re getting some comments in on LinkedIn from the search vendors talking about how this is solved based on role-based personalization.  

Andy: I think we all agree that like what Jeff pointed out customer, country, role but there’s another level down from that, which is it reminds me of like you remember that thing we learned in biology back in high school, Kingdom, Phylum, Class Order, Family, Genus, Species.  I’ll never forget that, but you get more and more specific, right?  We’re at the Kingdom Phylum level here and you have to get down to the Species level and I think what Jeff is suggesting here is that they get to the role at least, but the technology exists today and it’s not true B2C-like personalization if you don’t get down to the actual person, the challenge is that person can change. So you’ve got to be flexible enough to do definitely role-based stuff but get to an actual person and be able to transition when a new person comes along, but I don’t think it’s good enough not to know at the individual level and be able to personalize to some extent.  But not like B2C where you can have that for a persisting case, it’s going to be episodic. 

Brian: So Andy at our Summit on June 4th at the University of Chicago, we are going to do a session on this because this research and personalization and everything related to this is critical.  We’re going to have Coveo as a sponsor helping us with that discussion. It’s going to be a really in-depth conversation that’s going to bring good value to the practitioners because this is complex and you know you saw the expectation is high B2B buyers need personalized experiences and I believe you have an opportunity to build a competitive advantage if you do that well.  

This week on the Friday 15, Andy & Brian discuss:

– Does it make sense for an online marketplace to have brick and mortar locations?

– Should you buy a PIM early in your digital journey, or once you’ve built up a sizable amount of product data?

– A PIM won’t solve your data problem, but it will force discipline on your organization around product data.  So why doesn’t everyone have one?

— 

Brian Beck: All right, Andy Hoar, welcome to Friday 15. It’s Friday April 26th. We’ve got a great session today. We’re talking about PIM. We’ll get into that in just a moment. But another week gone by, Andy, another great week of activity in the field, all the rest will get a report from the field from you. But welcome, Andy, to our Friday 15 this week.

Andy Hoar: Yeah, great to be here. Can we jump in? This is one of our favorite issues, and we’ll talk about why it’s one of our favorite issues.

Brian Beck: But first, before we jump in on that, Andy, some breaking news. This is really interesting from eMarketer this week. They did a story that talked about digital marketplaces, vertical marketplaces, and retailers that were launching their own marketplace. Talking about how they differentiate and trying to get more physical locations to gain an advantage over large marketplaces like Amazon. So I don’t know if you saw this, Andy, but I think this may be something that’s coming to B2B. What eMarketer said is that experimenting with brick and mortar is a smart play for smaller marketplaces who want to put their products in front of a larger audience because the majority of retail sales on the consumer side are in store. So for example, Target and Michaels and some others who have these virtual marketplaces, ecommerce marketplaces, that are now bringing those sellers on their marketplace into their stores, which is really fascinating. And I’m wondering if this is coming to B2B. I don’t know. It’s hard to scale this, but they’re trying to find ways to differentiate from the big marketplaces like Amazon. What do you think, Andy?

Andy Hoar: I was only a matter of time before this happened. I remember hearing years ago that online would be a compliment to offline. And then Amazon came along and said, hey, everything offline, we can do online. And then the script kind of flipped, then it was “online was going to sort of eliminate offline”, which we never thought was going to happen. But the center of gravity is different now. Online is now driving offline. And this is a consequence of that. And your online business is driving things offline. All of a sudden having an offline presence has a special meaning.

Brian Beck: Yeah, you see it with Amazon, obviously, because they’ve obviously moved into physical retail over time, things like that. I just don’t know, for me, I just don’t know if this is a play that’s going to work from a marketplace perspective, because if you think about it: How do you scale a business like this? Marketplace sellers, Amazon, for example, has millions of sellers. And companies like Shein and Wayfair and Michaels – How do you translate all those sellers, where a lot of small sellers are online, into offline settings? Maybe it’ll work. I don’t know.

Andy Hoar: I still think that a lot of this physical location to online stuff is really about returns and about reverse logistics, because nobody really talks about this, but a lot of people buy stuff on Amazon and then return it to places like Whole Foods and Amazon Fresh and Kohl’s. You can’t just say Amazon is 100% online. They’re doing a lot of offline stuff. Maybe it’s not quite as massive as you think it would be, but there is a connection between the two, and I really wonder if some of this is really about the reverse logistics side of it

Brian Beck: I think you’re right about it as they expand their assortment. Now that it puts it on the retailer in this case to actually be responsible for taking back product sold by a third party seller on their marketplace. So I agree with you. I remember my days at Harbor Freight Tools, Andy, when we would get people in the store from our online website, return or buy online, pick up ib store, they would buy a lot more in store. So it’s the data is there. So Andy, we’re going to talk about a favorite topic, PIM. Is a PIM needed in B2B e-commerce. My goodness, we put this on LinkedIn. We had thousands of impressions, likes, comments, shares. It was crazy. Everybody wants to talk about this.

Andy Hoar: Who did we not hear from?

Brian Beck: Well, that’s the crazy thing. We didn’t hear from anybody at the PIMs. I even called them out. I even called out every single freaking PIM in the market, not a single person commented from any of the PIM companies. I’m like, what’s going on here? Damn, there’s a problem here. I don’t get it. I don’t get it, man.

Andy Hoar: We talked to everybody in the industry. The search people talk to us. Obviously, the commerce platform people talked to us. We talked about how big the data problem is. We’re going to talk about it here in a moment. The PIM fits right into that. When we talk to PIM people, the conversation goes nowhere. I don’t get why these PIM folks are not all over this. We’re going to talk about some data here in a moment that’s just mind numbing about why they wouldn’t be more involved with, for example, us and B2B ecommerce. I’m sure they’re going to tell us that they’re selling directly whatever. I don’t know. I don’t get it. I don’t know.

Brian Beck: Maybe it’s such a big problem that they don’t need to engage in the community. I don’t get it. But our community folks, if anyone from a PIM is listening here, you have a big problem with B2B commerce people. They have a big issue with data inconsistency, normalization. We’re going to talk about it in a second. Anyway, I may be screaming in an empty chasm here, but anyway, there’s a real opportunity here, I think, for companies to solve this issue, because it is a big problem as we’re going to share. Andy, you were in Minneapolis this week at a roundtable, and a great one. We had close to 40 people at this thing, and you facilitated it. You were talking about AI, right? But I’m sure data came up as part of this conversation as well, right?

Andy Hoar: Half the conversation was about data. The first part was we wanted to do AI. The second part was, oops, we can’t do AI because our data is such a mess. We’ve got to get our data into order. AI can help with that, but you have to put it someplace. A PIM is a perfect application for this. It’s probably the most emergent issue we’ve seen in B2B is about the data. You know, I’ve talked about this many times. PIM is a critical component of that. In fact, I would argue the most interesting thing about PIM is when do you buy it? Do you buy it earlier? Do you buy it late? This is what we have a lot of conversations about. It was a great event. It’s the Minneapolis or Twin Cities chapter. We actually held it in St. Paul, which is right next to Minneapolis. Twin Cities chapter really showed up. Great brands that were there. Great Northern was there. Toro was there. 3M. A lot of great companies there. People were thrilled. And we’re doing it again in the fall.

Brian Beck: Yeah, that’s a really kind of unrecognized center of B2B. Minneapolis is. So thank you all for joining us there. And we’ll continue to do these round tables around the country. We’ll get to that a little bit later. But yeah, again, it gets back to this data issue because it truly is, Andy, a problem for B2B commerce. And it’s not even just e-commerce. We see this in my work with Amazon even. Every single one of these channels, whether you’re selling to a distributor, you’re selling yourself online as a distributor, you’re consuming data from a manufacturer, you’re trying to sell in a marketplace like Amazon, or even just your sales team is trying to communicate accurate information. There is a data problem and this data problem is causing issues for B2B companies. Gartner said this: 40% of businesses failed to achieve their objectives due to missing, incomplete or inaccurate data. So there’s an issue here that talks about real business results. In fact in Harvard Business Review, Andy, a couple years ago, they revealed only 3% of companies had data that meets basic quality standards. And they put a number on it: bad data costs the US $3 trillion a year. It’s insane. So if you think about this from a practitioner standpoint, why doesn’t everybody have a PIM? It manifests all the way down to the e-commerce site. What makes B2B buyers go elsewhere? I’m showing a study here, Digital Commerce 360. Number one reason, products are unavailable or hard to find on a B2B e-commerce site. What does “hard to find” tie back to? Oh sure, it’s the search functionality. But what else?

Andy Hoar: Let’s figure out why can’t you find this product? Well, it has a bad description, incomplete description, one picture that’s grainy, the attributes are not well defined. That’s what a PIM really helps with is attributes. Because if you put a product in a PIM, it’s going to force you to describe that product. Those attributes are really the mother’s milk of a product, in merchandising and selling a product. It doesn’t solve your data problem. You have to have clean data, but a PIM will force discipline on you and mandate that you describe a product accurately and put it in the system. And then a company like Salsify and others. You can syndicate this to multiple sites. If you’ve got a good PIM, you could be selling stuff on your website and a vertical marketplace, on Amazon, you name it. But it’s a step in the process. The question is, when do you actually get the PIM? Because I know a lot of companies that bought PIMs and two years later, just sitting there like the gym equipment in your garage doing absolutely nothing. And then it’s like a sunk cost. Like, we have to use it because we bought it. And it’s like, I wish we’d just cleaned up our data first and then bought the PIM. There’s no argument for not having a PIM. You can’t just fill this stuff in an ERP. And a lot of e-commerce platforms can get you started on the PIM front. They have native capability. But if you’re a serious player, you’re going to need a best of breed PIM.

Brian Beck: Yeah, no question. We’ve got some great comments. And I’ll read a couple of them. But I think it’s also important for our audience here to define what exactly is PIM, right? And this is a definition that I pulled from Adobe’s website, which I think is pretty good. Product information management, PIM systems, let users store, enrich, and manage complex product information. PIM tools centralize product-related data streamlining the process of updating and managing accurate information through multiple sales and marketing channels. So it’s really a tool or a platform. And you asked the question, Andy, just a moment ago, why doesn’t every company have a PIM? This is a study by a company that does PIM, called Informatica. And what this study revealed is – the question they asked is “why you’re not considering the implementation of a PIM solution?” Number one reason was lack of a cost-effective business case? Negative ROI analysis? What?

Andy Hoar: That’s the same story you hear from CMS. eCommerce actually is in many ways blessed because they can show an ROI. But CMS, you know, we got a catalog. Why is a better catalog going to produce more revenue than a slightly worse catalog? On an incremental basis, you can’t really establish that one CMS is significantly better than another. And PIM suffers from the same problem. Hey, if you’ve got clean-er data and it’s clean-er than some other data, how do you establish that it’s clean-er data? And I think there are ways you can actually measure this stuff, for sure, like the velocity of it, the appearance of it, the accuracy. You know, you can measure these things because, again, innacurate data means low conversion rates. But it’s hard for a lot of companies to make the argument that data is a mess, the better we manage it, the more money we can make. They’re like, well, stop with the “data is a mess thing.” I’m not sure. Is it? Because I see data on our website.

Brian Beck: Two things I’ll point out here. One is that, as we look at, for example, Melissa Walner, who’s a longtime industry veteran, she commented on our LinkedIn post. And this is the perception of ROI. It could be different here than the reality of it, meaning, PIM is not intended to be a direct revenue driver. So that can make getting buy-in for the investment more difficult. So your executive team, if they don’t see that you’ll open up a new channel, launch a marketplace or do this or that. But PIM is foundational and you look at how Forrester defines it. ROI from a PIM system, you can use a product information system, PIM system to decrease time to market for new products, acquire and grow new customers and accounts, and increase customer lifetime value. There IS a return on investment to this. I was doing research on this yesterday, Andy. It’s clear. Maybe it’s not as clear to the executive team and doesn’t get funding, right? Like Melissa said. I think there’s a clear ROI here, but it’s not just the system, right? There’s other things which I think make it a little tricky.

Andy Hoar: And you need to know what your metrics are. We talked about this in Minneapolis, and spent quite a bit of time talking about it because all roads lead to metrics. If you don’t measure it, you’re not going to know it. And you should start out with the metrics. Okay. How are we going to define the success of the business? The funny part about that is that forces companies to figure out what business they’re in, which is part of why they don’t like to do the metrics thing, because it forces them to say, this is what we’re doing. We’re selling to these people. Here’s how we’re going to measure that and then everything cascades from it. But yes, there is a way to measure the value of a PIM. And I still think there’s this understanding in the industry that data is a cost center. Less mature companies perceive it to be a problem that needs to be solved. It’s not. It is what differentiates you. We’ve talked about this, Companies can build, buy, borrow, steal every other part of their business, except the one about their customer and their product data, in particular customer data. So how is that not the most important thing you own?

Brian Beck: Exactly. Well, here’s the thing. And Amber, thank you for your comments. In fact, I even Amber Robinson, who’s commenting here on our stream, on our podcast. You know, Amber, thank you for your comments. I actually pulled one of your quotes out of this. One of the things that emerged in all of the dozens of comments we got on our LinkedIn post and poll was that it goes beyond the system. So I’ll read Amber’s first because she’s on the commenting here. Amber Robinson said it’s interesting to me that many companies want to invest and seek AI solutions, which are fundamentallyl based on data. But they haven’t gotten their data governance and management systems well organized. And what she says is build credibility, operational efficiency, enable AI. And that will be the next generation of this, and I agree with you. But another comment here from Ken, management of data. So it’s not just about the system. It’s also about how you utilize what goes into the system and the process. Ken said outputs and inputs of systems, how it needs to be consistently enriched and the management process for data. That’s what he’s talking about. So the system is a foundational part, I think, but it’s also what you put into it and behind it.

Andy Hoar: So the good news is that AI now can actually help solve part of that problem. It can help organize the data that it then will, allow you to use AI to syndicate more effectively, promote more effectively. AI is actually a game changer on multiple levels when it comes to data. But there is a fundamental notion that you’ve got to have your data organized enough so that even AI can do something with it.

Brian Beck: So the question is, Andy, does PIM solve the data problem? I would argue that it is a foundational component on its own. It doesn’t solve it. But it forces you to address the issue. You know, I’ll read you a quote we got from Tonya Coletta, who’s head of e-commerce at Metri, which is the largest U.S. manufacturer, distributor of mill work. We asked he – what should you do first?An e-commerce platform? PIM? What comes first? She said, e-commerce came first for us, but I wish a PIM had and what’s interesting here is her quote, implementing our PIM forced us to focus on product data and asset cleanup in governance. We’re still on the journey, but a PIM with accurate data quality content was game changing. So she’s saying, hey, listen, before you do some of these other things, we need to do PIM first because it is foundational. And what she said is it forced them to engage in a process to clean all this up.

Andy Hoar: So a PIM help to organize data. That’s what it does. It doesn’t solve the data problem. It helps you organize data. I use the analogy often times that if you’vr got a dirty garage, you go buy some containers, which is like the PIM. If you put the containers in the garage, the garage doesn’t clean itself up. It will help you organize it. But if you have a problem with just loading stuff up in your garage and you’re constantly having to organize it, the PIM isn’t going to solve the problem any more than the containers are going to solve the problem.

Brian Beck: Exactly. So, we asked our community on LinkedIn Andy, is a PIM system needed for B2B e-commerce? And by a huge margin, everybody said, yes, 92%. They want to solve it. So we should just send this to the PIM vendors so they can actually do it.

Andy Hoar: We’ve got to do it. We had almost a hundred people come in on this. It was well voted on. It was a large group of people. So I’m going to go start a PIM company.

This week on the Friday 15, Andy & Brian tackle:

– Is Amazon being unethical when they started selling on other marketplaces to gain intel?

– Do you need to bring in outsiders to help you revisit a digital strategy?

– How do you prioritize the changes you want to make to your digital strategy?

— 

Brian Beck: All right, welcome to the Friday 15. I’m with a very cool looking Andy Hoar just back from Miami. Well, hey everyone, this is Friday 15 with Master B2B. Thank y’all for joining us today. We got an exciting session today. Andy was on the road this week. He was in Miami. And I was in Charlotte, North Carolina. So what’s the report from the field?

Andy Hoar: Conference season is alive and kicking, you and I both know this is when we start to get hot and heavy in the next couple of months, big time.

Brian Beck: Yeah, I was impressed with the companies that were at the Industrial Supply Association. I heard an economist speak, which was really interesting about, the state of the economy and where we’re going, and this guy is predicting a depression in six years. I don’t know, I don’t know how these guys come up with this stuff, but anyway, maybe it’s true. (laughs) So, we’ll see, but hey, Friday 15 today and we got some exciting news and Andy let’s roll into this because we got some exciting stories to cover. Let’s get our little music on there. Here is some breaking news and you see this week, Inside Amazon Secret Operation To Gather Intel on Rivals, what the heck is this about, Andy, their staff went undercover on Walmart, eBay and other marketplaces as a third party seller called Big River and the mission was to scoop up info on pricing, logistics and other business practices. This sounds so Amazon. Andy.

Andy Hoar: This reads like a spy novel. Honestly, this is from a new book called, what’s it called, the Everything War by a Wall Street Journal reporter.. And it’s got hundreds and hundreds of former Amazon employees, partners, ecosystem members, et cetera, and kind of pieced all this together and determined that Amazon was actually participating in rival marketplaces under the auspices of Big River services. And they were Amazon employees, but they didn’t identify themselves that way. There were a bunch of lawyers involved, telling them exactly what they can and can’t do. So I know they got the legal side of this, right? But they probably got the moral and ethical side of it, very wrong. You’ve got to hear some of this stuff. So we all know about them copycatting products, right? Everybody does that and the brain sucks where they invite people in and pretend to want to invest in them and then steal all their best ideas and dump them by the side of the road. Every company does that. It’s not nice, but they do it. I’ve got some stuff written down there. They had a set of something called Project Curiosity where they went to rival events. They actually pumped a lot of products on Amazon’s own website to increase their seller status so they would qualify for pro status on eBay and Rakuten and other sites. So they could get pricing discounts and they were learning basically about the pricing methodologies of all these companies. The thing is they can actually technically do this, but they weren’t allowed to share this information internally. So they were getting proprietary information from companies like FedEx about pricing logistics and they were sharing that information within Amazon, which was where they made the big mistake, but I got to tell you, they had no intention of making money doing this. They were hiding who these people’s identities were, but you know how it got blown? Not only does this reporter find out about it, but LinkedIn, these people could not fake who they really were. So they were actually working for Amazon and in public filings, which they also can’t fake, they had to put the address of these fake companies. If you dig really deep into it, which some people did, when you got down to the last page, it would say corporate headquarters and would have Amazon’s address.

Brian Beck: Andy. And this is news why? Because in the world we live in today, it’s Amazon and they’re the behemoth. Retail’s been doing this stuff for years, dude.

Andy Hoar: Yeah, I know. I can tell you. I think there’s one big difference. Amazon is a marketplace. Amazon’s a retailer, but it’s also a marketplace and you can’t really put your thumb on the scale when these people are selling through your marketplace. It’s definitely borderline on Amazon. It’s terrible PR because third party sellers are now thinking, “Uh-huh, I always suspected this. They’re using our sites, but the operation, and you know what, end up blowing it. Not only did some of these public filings, but the employees themselves at Amazon started feeling really uncomfortable living like a, a dual life is like a Mossad agent and while working for Amazon.”

Brian Beck: This has been happening for a century. I can tell you stories from my retail days. We would send people with private label, on our private label bands, into other retailers, to trade shows, to, I mean, competitive research has been happening for thousands of years. This is not news. Distributors – one of the things we do at my Amazon company Enciba, we tell distributors to do this with Amazon, and guess what, they don’t even have to hide it. They just go launch in a program on Amazon, and they learn everything about how Amazon works.

Andy Hoar: Right, so are clients, but they’re not misrepresenting themselves as something they aren’t. Again, when you’re, when you’re the marketplace and the seller, that’s a real problem. But anyway, this is only the first because there was a story a couple days ago as well about another Amazon operation, and this is one of the B2C side, but again, they’re starting to see a pattern here, that’s been around for a while. Short story, Amazon hired an executive from Trader Joe’s, because they wanted to crack the code, because Trader Joe’s is not selling online. They wanted to create something called Wickedly Prime is what they called it. They were a food brand, and they thought, “Trader Joe’s has got this cult following. Let’s do it, right?” They didn’t know what it was, because they couldn’t access stuff online, so they thought, “Well, we’ll hire somebody.” They pressured her into sharing sales information, margin information. They put black bags covering the doors. They had all these Trader Joe’s foods, which is totally fine, but what ended up happening here was interesting. She refused to do some of this stuff, but one of her colleagues reported to the legal team at Amazon that this is something they shouldn’t be doing, and her boss got fired. So the guy who actually hired her to do this stuff and pressure her to do it, I think he got fired because they got caught, but so there is a bit of a moral, ethical line that they even, they won’t cross, but the story is laden with narratives about how Amazon does this all over the place.

Brian Beck: People never hire anybody from competitors. That never happens anywhere again.

Andy Hoar: Yeah, but you can hire people from competitors, but I lived in Silicon Valley there for 10 years, and if you took information from a company, – you probably do GLG and stuff like that, and they make you sign all these documents and you’re not sharing specific company information. There’s a line you can’t cross, general understanding, yes, but sharing specific data from a competitor with another company,

Brian Beck: Did you see that the boss got fired? So he crossed the line, okay, so some guy, some person crossed the line in Amazon, they got fired because they crossed the line, okay, fine. Look, people do this all the time, they hire from competitors, and then one of the reasons to do that is because they have their expertise. Now, yes, sure, there’s certain data you don’t, you can’t really really use.

Andy Hoar: But sharing margin information, that’s pretty bad.

Brian Beck: I don’t know, man, I think you’ve been living under a rock. This has happened forever. You want to put all of retail on trial because that’s right, you’ve been doing these things forever, indict them, okay. You want to go around the FTC, Andy?

Andy Hoar: Yeah, but you know, this makes a great point, is Amazon a retail or a marketplace? That’s another discussion.

Brian Beck: Here’s the topic for this week, what’s the best way to recalibrate your digital strategy? Last week we talked about the timing, so we did a poll here, Andy, and… This is the question, there’s not much debate about when, or what causes the revisiting. I mean, look at the data from our earlier poll last week, which said, “How often should B2B companies revisit their strategic plan for digital?” It was pretty clear. There’s a cadence here, once a quarter, or anytime, reading business signals, business changes happen, that signal will change. But if the when might be established, but the how to do it, right, Andy? That’s the piece that we wanted to come into this week.

Andy Hoar: It leads to loads of questions, like I can’t know how often I should do it, but how should I actually do it? How do I recalibrate if I discover that there are things that need to change? And so, we talked about this, this is done in exhaustive lists, but it’s at least these three questions. How do you know if your strategy’s working? I know that sounds like first-grader-ish and Crayola, but you’d be surprised how many companies don’t actually know if it’s working, or they can’t quantify it. So we’ll talk about that. Who should lead the review process? This is the insider versus outsider question. We actually did a poll on this. We’ll talk about that, too. And then, ultimately, great. So, you think you know what’s working, not working. You’ve got the right person in charge of leading the review. You know the time frame, the cadence, like we talked about, but how do you prioritize the changes? We have a little framework we’re gonna share about that one. So, let’s dig into each one of these.

Brian Beck: Right, so how do you know the strategy’s working, Andy? And some thoughts here. Reviewing objectives, right? Certainly, are you against where you are? You know, how have you performed? And if, you know, obviously, if you’re missing profit and sales goals, that’s a big piece. But what else here?

Andy Hoar: Well, do you have, do you even have goals? We talked about a company that doesn’t really have a goal. Number one, what are the objectives? And are you meeting them? That’s kind of a first pass. Second one, and this is the most important one is, you’ve got to measure your activities. Let’s say you have some goals, but how do you know how you’re performing against those goals? The big three have always been customer satisfaction, cost effectiveness, and then revenue. Are you generating, in particular, incremental revenue, not exclusively, but how you’re performing quantitative and qualitative, and it’s gotta be customer-centric. And the last one is, how do you compare your competitors? I’m not a big fan of benchmarking everything, because then I think you’re just the fastest turtle in the race. And I don’t think that’s really the way to go. I think it’s better to have independent objective standards that you’re measuring yourself against, but for all intents and purposes, you’ve got to measure yourself against your direct competitors, industry pure plays. You cannot exclude them. They may have a different model, they may have different metrics, but they’re competitors. I think there’s also best in class examples like Amazon, ultimately everybody has to compare themselves in terms of the customer experience to them. But do not forget, you can get great competitive intel from partners and customers. And if you’re Amazon apparently from everybody else.

Brian Beck: You wouldn’t have a project curiosity. You just have a “Project Crawling into a Cave and Hide.” Because you don’t want to go see what anyone else is doing, right? (laughing) Yeah, you’ve got to benchmark. You need to know how you stand against competitors, but ultimately you’re right. The customer needs to come first. So, I think it’s clear, if you have a plan, I think it’s clear to folks, when they are, whether the strategy’s working or not, but then when we get to the point of, you want to revisit the plan, who should lead it? This is a question that we have some debate on, right?

Andy Hoar: Yeah, we write on this a lot. Companies have a kind of default position that somebody internally should do it because they’re going to execute internally. And then frankly, other companies are just the opposite. We’re like, no, no, we don’t trust ourselves. We need an outside view. I can’t tell you how many times in my career, in the last 15 years at Forrester and Paradigm and Master B2B, when I’ve been asked to come in and talk to a company, and essentially tell them exactly what the person who hired me has already told them.But I’m told, they’ll listen to you, they won’t listen to me. And I’m like, this kind of begs a question about what’s wrong with this company, if they don’t respond to the right information. Especially if it’s backed by data. If you’re presenting real data, why do you need someone from the outside to come in and present the same data?

Brian Beck: The root of that is, and I’ve been asked the same question so many times, whether it’s B2B commerce, Amazon, whatever, it’s the strategies there. I think a lot of it has to do with a view across businesses, across industries, you and I, as sort of industry people, quote unquote experts, people will ask us to say those things because people we’re not vested, right? That’s the outside perspective and that’s why a consultant can be helpful – because you have that perspective. So I hear you, but you’re right. Is there some internal dysfunction around, well, is this guy just trying to get their thing going? I think self-interested, so the VP of e-commerce is just trying to get more investment for themselves around this particular issue. You know, that sort of thing, and advance their own interests at the cost of everyone else’s, right? Because you can only invest in so much.

Andy Hoar: Well, and there’s some pros and cons. Quickly, the insider knows the system and the people, – we have this on the screen for our podcast listeners – but there’s also kind of a question of will to change, you know? If you’re part of the problem, so to speak, what’re you going do, we feel that you’re the problem. There’s a bias against doing it. And the outsider can bring a broader perspective, isn’t beholden to the internal systems, but there’s also a steep learning curve because you don’t know the people, you don’t know the internal workings. We can question whether that’s valuable or is valuable as companies think it is, but it’s certainly important. You need to know how things can get done. So, but we did a poll on this. We’ll share in a moment to let people know what people thought, but this is the most important part. Okay. How do you prioritize this stuff? So let’s say you figured out what you’re good at, what you’re doing well, how you perform against your strategy. You’ve got the right persons or people involved in kind of executing on the change, but how do they actually decide what to do first? We think there are basically three things. Again, not an exhaustive list, but three things that everybody should map these priorities to. One is, what’s the return of investment timeframe? Is it short term? Is it long term? You can argue that one is not necessarily better than the other, but you need to figure that out because there’s a reality here on money. Second one is, what’s the size of the benefit? Is this a small win? Or is this a big win? Again, there’s value in both. And the last thing is, does this give you competitive differentiation? And so I’ll give you an example of one thing that we’ve talked about here is like better search. Let’s say you do this analysis, you figure out that your search on your site is just not up to snuff. It’s not good enough, objectively and subjectively. And so you say to yourself, okay, what’s the ROI timeframe on this? Well, it’s very quick because we’re going to see conversion rates go up immediately once this is in place. And we can do it on a monthly basis, kind of using discretionary funds as opposed to a big capital investment. So this is a win on ROI timeframe – Size of benefit is huge. I mean, revenue, incremental revenue, new markets, Big check. But last one might be in question though, because it could be that you’re not actually going to differentiate, you’re just going to achieve parity or even just catch up with everybody else. So maybe that’s a small check. So you look at it and go check, check, small check or maybe an X. Then you have to say, what’s the opportunity cost? If we do this, what could we do with a dollar instead? And there’s other stuff. You could have stuff that the benefit is big, the differentiation is big, but it’s gonna take forever to get the ROI on it. You gotta consider that too, right?

Brian Beck: Well, and I think you also have to think about the customer first in all of this. Andy, we just got a comment in from David Rolo, which thank you David for this comment. He says a couple questions to say, revisit the digital strategy. So I think, who are your staff for it? Can you elaborate how to optimize staffing strategies that might help increase the bottom line on this P&L? Andy, David raises an interesting point. You think about AI, right? And AI is a signal that you need to revisit your digital strategy. Great, great point to what David just mentioned. You know, listen, that has implications for cost to serve. That has an ROI in terms of number one. Does this mean that you can use a tool like AI to make your people more efficient, right? And when we looked at the polls and all the data that’s coming around around AI, the number one use case that, and the reason people are investing, I think it was a Forrester poll. So in fact, they found late last year, is efficiency of staff and delivery of projects and content and all the things that AI can help accelerate. So yes, I think staffing tools or changes in the market can lead to this kind of a change or shift in digital strategy and say, hey, it’s time to look at this. And it has these prioritization attributes here, these three we just described. It can impact all three of these, right? So yes, David, good question and comment. Thank you for that. I think that’s just another point you would tackle as it relates to what caused you and how to do it. Now, when you think about how to do it with an AI tool, you know, or AI approaches, you will need most likely some external help in that because there’s a lot of ways to skin the cat with that, there’s technology, there’s also approaches in how you do it and then there’s change management questions too, right?

Andy Hoar: Well, I’m just saying, staffing strategies is the third rail of all this stuff. I was on a panel the other day and somebody asked me, what is it that people are not doing that they should be doing based on what’s happening in the marketplace? And I’m like, re-thinking their model, Behr, the German company, just announced recently that they’re getting rid of a bunch of people in the middle management layer and they’re going with like little teams, four to five thousand teams, they’re going to organize around use cases and it’s a very interesting idea. It’s either going to be a smashing success or an abysmal failure, but it does kind of make you wonder, massive change in the market, customer interaction, et cetera, but nobody’s changed their organizational model in like a hundred years. And so, you know, maybe this is the last thing to touch because it’s the most controversial and it’s the one they least understand, but I completely agree, this is one that has been way below the radar for too long. Companies are not designed for the market we have today.

This week in the Master B2B Friday 15 Podcast, Andy and Brian talk about the balance between sticking to a plan, and reacting to external factors – and how do you know when to make a change to your plan.

Andy talked about the difference between the 3 year vision, the 18 month strategy, and the constantly evolving tactics.

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Brian Beck: Good morning, Andy Hoar. Welcome to the Friday 15 on April 12, 2024. We’ve got an action-packed section for today, Andy.  We had a crazy, crazy week, Andy. We were all over the country.  And we’ve got some exciting news to report from the field about some things that are happening around the industry, but before we do all that, let’s get into our new music. Actually, I just hit the wrong button, Andy. 

Andy Hoar: Are we getting a new studio too or just new music?

Brian Beck: We’ve got some breaking news here from the Master B2B world. I don’t know if you saw this, Andy, but Andy Jassy, the CEO of Amazon, released just two days ago, I think, that 2023 letter to shareholders. And what’s fascinating is, this is a long letter. You read it, yeah? 

Andy Hoar: I did. And some things really surprised me. I had no idea that Amazon had satellites. Did you know that? 

Brian Beck: Yeah, actually, I didn’t know about the satellite effort. It’s just incredible. The number of businesses they’re going into. It’s incredible. 

Andy Hoar:  I didn’t know about the satellite. So one stat released it out to me, which I guess I sort of knew, but it just hit me is a wow, wow, statistic, which is that I think I, 85% of global IT spending is still on-premise. Despite all of this work in the cloud, all people moving to AWS or Azure or the clouds or whatever, it’s still only 15% of all global IT spending. The other 85% still on-prem. On-prem still! 

Brian Beck: Yeah, wow. Yeah, I actually missed that. I missed that stat. That’s interesting. That’s incredible. I didn’t realize that. And well, that’s that’s addressable market for AWS now, isn’t it? 

Andy Hoar: They always repeat the same thing about retail – I think they quoted 20% of retail sales are online, but 80% is offline. And then this AWS TAM, like you said, only 15% penetrated. I was like, wow, amazing. 

Brian Beck: Well, it struck me and for those you watching, I have a quote up here from the letter, but I’ll read it. What struck me about this, Andy, was this concept. They have what they call Primitives, which has been sort of, it’s almost the operating system of Amazon. And he described in great detail, really an interesting read. He described in great detail how Amazon breaks down their business and it’s not just technology. It’s the fulfillment side. It’s how they built marketplace. And the whole notion was almost a precursor in some ways to this whole notion of composable commerce – where you need to be really flexible and break things down individual units in order to be nimble, which is a great precursor to our conversation today. But let me read what’s on the screen here. Sometimes people ask us, this is Andy Jassy speaking. What’s your next pillar? You have marketplace, you have Prime, you have AWS. What’s next is that this, of course, is a thought provoking question. However, a question people never ask it might be more even more interesting is what’s the next set of primitives that you’re building that enable breakthrough customer experience. And he said, Gen AI, as the answer. And so he spent a lot of time in this letter talking about Gen AI as a next frontier for Amazon as a huge new addressable market. But again, what’s fascinating about these primitives, the way they just define them, the raw parts or the most foundational building blocks, they’re indivisible. They’re meant to be used together rather than as solutions in and of themselves. And you think about FBA, fulfilled by Amazon, you think about the way that marketplaces, the actual third party selling marketplace is built. If they’re well done, they actually accelerate a builder’s ability or creator or seller or business’s ability to innovate. And I think that speaks a lot to the business planning and strategy conversation we’re about to have. So let’s keep that in mind as we dive into this, but it was a great reading. We recommend it. 

Andy Hoar: I’m just saying one thing about that is that I think Amazon, I think they’ve known this. They’re just now telling the world. They’ve become a platform. You will no longer building for yourself, you’re building for the community that sits on top of your infrastructure, which is where the real money is. We all know from the Amazon marketplace when they sell their stuff directly, that’s one business model, but when they have other people in their marketplace and they make a percentage commission and they’re doing the fulfillment and all the rest, that’s a whole new level. Tthe total cost to serve is much lower. All the work is done by the people in the marketplace. It’s a way of scaling yourself. And I think what Amazon is not telling the world is we’re going to build a foundation, the building blocks to let you scale your business. And we’ll just take a little piece of every little transaction. 

Brian Beck: They’re applying this agile model to everything they go into. I’m curious how they’re going to do this for satellites and rockets But it’s really the operating system. So our topic today, you know, is talking about how often should your digital strategy be revised. How much do you need to stay on course, keep your resources focused and stick to the plan versus paying attention to business changes that can come from many different areas and we’ll talk about those. But I was at the, this week, Andy, we had a roundtable in Dallas. Beautiful, beautiful facility. We were on the 49th floor of this building in downtown Dallas, the Tower Club, just incredible, you know, you see the sunset. It was just, it was awesome. It was about 30 practitioners there, people from, from Eaton and Primesource building products, a fascinating, fascinating group. We asked this question, how often should your business plan be revisited? Andy, half the room said, you know, hey, well, what plan? We challenge your assumption that the companies even have a plan because these are VPs of commerce. Andwe had a couple CEOs and some kinds of different folks in the room who were managing e-commerce and digital. It was funny to hear that from the room. And in fact, it bears out in the data. But while the comments heard, we’re like, hey, when business conditions change, if I’m not meeting my plan or something happens to the business. Oh, hey, a global pandemic will do it, right? Once a year was common- we have this planning process and we revisit once a year or hey, when the CEO says so, that’s when we revisit it or, hey, we got to stick to the plan. So I heard a lot of different things. I think there’s some confusion, but also some consensus came out of it. And we’ll get into that. 

Andy Hoar: I think there’s good news and bad news here. The good news is this in a way, I think this unintentionally reinforces the idea that the digital strategy reinforces the business strategy. And they’re really one in the same because the digital really is a means to the end for the business. So the question is, how often do you revisit your business strategy? The bad news is we’re not 100% there yet. And digital is still organized as a separate entity. And so it can’t be treated fully as embedded part of the business strategy. So the good news is it is part of the business strategy. The bad news is it still needs individualized attention. 

Brian Beck: What’s fascinating though, and I found some statistics, Andy, from Forrester, that came out a couple of years ago, that said that only 61% of B2B decision makers said they have a formal digital strategy in place, which really goes to the point in the room.  They were saying – hey, we don’t agree with your assumption that everyone has a proven or written kind of documented strategy. I found this article here and I’ll read a bit of it for the folks on the podcast from the Harvard Business Review, which talks about, and it’s from McKinsey, they’re citing some McKinsey data. “What holds most leaders back is they don’t translate vision into a structured plan that they keep in focus over time.” Of course, leaders know how to set goals, create KPIs, use dashboards, keep people accountable, et cetera. When change efforts require years, however, tracking it often gets fuzzy and it requires constant adaptation to produce day to day results. So they’re saying it’s important to have a plan. This Journal of Management Studies found companies with written business plans grow 30% faster. They did a study of all thousands of companies and found there’s a significant correlation between those that have a plan and their business results. And this is, you know, to the McKinsey information in the Harvard Business Review, they can fall away from the plan, but it’s important to have one. What are your thoughts? 

Andy Hoar: I think the challenge here is the short term versus the long term. A plan is by design over the long term, but these companies, many of whom are public companies, they don’t have the opportunity to set the three to five year plan. So even an 18 month plan and then just wait 18 months to look at it, they have realities of weekly, monthly, and especially quarterly, quarterly, deliverables. And they’ve got to produce numbers. And so that’s really the art and science is how do you balance the quarterly expectations with the multi year plan? You can’t just have quarterly plans and say, okay, at the end of the quarter, this is it and we start a whole new plan, and next quarter you can’t just set it and forget it for an 18 month or three year strategy and then just, hey, we’ll revisit it in three years. So that’s kind of the challenge here, but it is a bit disturbing to think that such a high percentage of companies don’t even have a plan. It’s crazy.

Brian Beck: So this may be a case where a lot of those companies don’t yet think of digital as a real business yet. And maybe that’s the case. So I pulled this from Jeff Bezos, the CEO of Amazon in 2016. He famously talked about day one versus day two companies. And this is a quote from his shareholder letter in 2016. It says, good process serves you so that you can serve customers. But if you’re not watchful, the process can become the thing. This can happen very easily in large organizations. The process becomes the proxy for the result you want. You have to stop looking at outcomes and just make sure you’re doing the business process, right? Goal, right? He says, you know, becoming a day two company, slave to process. It’s stasis followed by irrelevance followed by excruciating painful decline followed by death. Who wants that? 

Andy Hoar: This is so true. Most companies are built for stasis. They’re built for stability. They’re built to execute. But they’re not built for disruption. They’re not built for self assessment. And that’s what he’s talking about here. Day one companies don’t have any of this stuff. So they’re not beholden to anything.  Day two companies put a bunch of processes in place, which are intended to help them execute and stabilize the company, especially for public markets. But then they become beholden to that. And all of a sudden they’re executing for the sake of executing the classic statement goes having meetings about meetings. 

Brian Beck: There’s a real balance here and our practitioners struggle with that. Ultimately where we walked away in Dallas at the roundtable was that  a plan is important. But there are change signals that are important also to pay attention to. You can’t stick your head in the sand and just follow the plan. That said, you have limited resources, right? You can’t necessarily take your resources and pivot them 180 degrees in an instant and you have to give up. This is what Rob Howl said, CDO at Reserve Bar. He said, hey, listen, when the CEO says to me to change direction. Do this thing. He says, well, what am I not going to do to do that?. Show me the data that says we need to do that. That’s what Amazon would say. What I care about is what are the customers telling me, but that’s another discussion for another day. Here are some potential change signals when you have your plan: What if you miss your goals? What if you miss your profit or sales goals that tell you you’re doing something incorrect and you need to adjust the plan? Emergence of new channels, marketplaces. I see this all the time with Amazon with B2B companies. Should I pursue an Amazon business program? Change of leadership. Hey, the CEO presenting a shiny object or maybe you have a new CEO or a new boss that needs to weigh in and wants you to change your plan. Competitive pressures. What if your competitor launches something new, a new product line, new features, new website, new new channels, new technologies, AI. Customer requests, with the customer saying, I want you to launch this feature so I can do business with you more easily. Macro changes, acts of God. Hey, a pandemic, anybody that can happen, right. How about a merger and acquisition? These are all things that can signal that you need to revisit your plan. The conclusion that the room came to in Dallas was that there needs to be a balance between having a plan, a structure, and being agile. It’s almost like it’s getting back to the primitives of the Amazon world, maybe not as extreme as Amazon goes where everything’s broken down into components and agility, but it’s almost being composable about your business plan, about how you approach your strategy. 

Andy Hoar: I would use an analogy of having a game plan for a game. We had a national championship last, this week, or, yeah, this week. And both coaches came with agame plan and they decided this was the best path for them going forward, but they made adjustments throughout. So, maybe that’s a good analogy here is to think about minor adjustments you make through the first quarter and the second quarter at half time, you step back, you take a breather, you go, okay, what have we learned? Sometimes you make some major changes. You take some people out, you change the offense, you change the defense. And then the goal is to win the game. What the challenge is Simon Sinek said is there’s no end to the game. So, there isn’t a fourth quarter, there’s not a countdown saying the game’s over in 20 seconds. That said, I think companies tend to be more reactive than proactive, and they use these changes in the market that you cite – all of which are legitimate as excuses to do things. I’ll give you a quick example. On the merger and acquisition front, somebody whose company recently acquired another company, and it took them completely off what he was working on. Now, maybe that’s the right thing or maybe it’s not, but it’s just like a coach with a game, if a player gets injured, you just throw the whole plan out and say, okay, now we’re going to, we’re going to move from man-to-man to zone and I’m going to have the center point point guard? No, you figure out how to accommodate that, but you don’t start completely over and I think too many companies, because they’re about stability and process, all those things you describe create disruption, and they react to that almost like the antibodies in your system to a virus, they attack it. Let’s attack the new technologies. We’ve got to do something to destroy these things, put them down and as opposed to saying, okay, this is part of our longer term business plan. It takes us in a slightly different direction, but it doesn’t change what we’re doing here. 

Brian Beck: To me, the conclusion of this is, it’s important to have a framework for a plan. You don’t know what’s necessarily coming. I did this for a long time. You don’t know what’s coming. You have to leave some margin to be agile. You can have a plan. You have to have a structure. You have to have something to march against. You have to have a vision, and some of the articles talked about some of the B2B leaders who every year, they put out a vision, and this is how we’re going to work against our vision. But you have to have a structure to start with, but it’s really important to be flexible. And this is one other point I’ll make and then we’ll wrap up here in a second. But in my book, I cited a study by Korn Ferry a few years ago that talked about the successful digital leader is one who is not necessarily a driver, as much as a collaborator and someone who can accept that information is not perfect. You can be at 80% and you’ve got to make a decision. And they have to be able to align the organization. And when you’re working in this kind of environment and to be flexible with your strategy, you have to take an approach that’s a little more flexible. 

Andy Hoar: There’s three things I would separate here. There’s a vision, a strategy, and tactics. The vision should not change that frequently. If it does, you’ve got really big problems. That’s the north star. And how do you rally people around something that’s constantly changing? The vision should be fairly fixed. Maybe revisit that once every couple of years. We look at Amazon. Their vision doesn’t change dramatically over the years. Every couple of years, they revisit it. And maybe they change a few things here, but it’s the same idea, right? Customer obsession, etc. The strategy should be like 18 months. And that should be fairly fixed, but you should be looking at making changes based on things in the marketplace. But that one should change a little bit more than the vision, but not as much as the tactics, which is the last piece. The tactics can change depending on the circumstances, but I get nervous when I hear about companies reacting to another company and changing their vision. I get just as nervous when people say, these are the tactics we’re doing and we’re locking down on them and we’re not going to change them. So there’s a spectrum here. And you’ve got to realize that it’s the vision and tactics. They’re not the same. 

This week on the Friday 15:

– Amazon’s bigger investment in Anthropic and what it means for the future of eCommerce

– A new AI chatbot tool called Hume and how it’s going to affect first-line customer service workers in the future. Plus, Andy shares and example of an interaction he had with Hume…

— 

Brian Beck: Andy Hoar, welcome to the Friday 15 with Master B2B. It is Friday, April 5th. I’m excited to be back with you today. Andy Hoar and I are here, my partner in Master B2B, our thought leadership series. This is Friday 15. We’ve got a jam packed and very, very interesting topic today, Andy. Talking about AI and where it’s going to be applied and B2B commerce. In this case, we’re talking about customer service. So excited to get into our topic today. And of course, as always, we start with some… breaking news. We didn’t know if you saw this this week, but Amazon doubled down on its investment in Anthropic, completing its planned $4 billion investment. This is huge. They’re placing a huge bet here, competing with Google, with OpenAI, Microsoft. So they’re doubling down here, Andy. Any thoughts?

Andy Hoar: Yeah, it’s game on now. First of all, it’s a big sum of money. And the fact that they’re, again, doubling down on it. And like you said, Microsoft, Google, Amazon. And by the way, Apple is rumored to be close to revealing some of their strategy around AI. So those are the big four. Of course, we’re going to have Meta and others. It’s going to be at least four or five companies that are going to be competing in the space, which makes for an interesting question about what is AI going to become? Or we’re going to have versions of AI. We’re going to have AI that works better for you versus for me. This is all to be determined.

Brian Beck: What’s fascinating to me is that Amazon, obviously, is a commerce business. So I think we’re going to see a lot of our applications emerging with AI. For the commerce side of things is with what Amazon is doing with Anthropic. Now we’ll see. I think we’re going to have a series of different options here that companies have available to them in terms of taking advantage of AI. And we’re going to be talking AI next week at our roundtable in Dallas. So I’m excited about what the industry has to say and continue the conversation there. But let’s get into our topic today, which is, will AI-driven chat bots, such as something called, “Hume AI,” which we’ll show in a moment, replace first-level customer service reps in B2B commerce? And first level, Andy, these are questions, right? Think about what does first level mean? It’s the questions that people come in and they ask and they’re looking for a quick answer. Or they’re looking for some level of service which may not be as advanced or complex as asking application or configuration questions. And it seems to me that we may have, we may be there already. And I know you looked at this Hume tool. Tell us first what this is. What is Hume?

Andy hoar: Well chatbots are not new. They’ve been around for a while and they’ve been, some have been good, some have been bad. I remember looking at one like 10 years ago that I thought was really impressive because I couldn’t tell whether it was a human or software and I thought, wow, that blew me away. Well, I was, I’ve been blown away again. There’s this product called Hume that is the first – that I know of – empathetic AI voice. And it’s interesting because what it does, if you go to the next slide, it actually analyzes your voice as you’re asking a question. You can’t really see it very well. People on the podcast, there’s a box on the side that shows a chart where it’s taking your voice, breaking it down and trying to determine whether you’re angry or happy. And then it actually answers based on its analysis of your voice in real time. It’s very conversational. And when we saw this, we thought, wait a minute. So you’re point about first of a customer service- How often have you gotten on the phone or been in a chat or even tried to text somebody and been stuck? You’re next in queue or you’re 18th in queue, right? I’m waiting for software. With something like this, I don’t think this is going to be a problem. This is infinitely scalable, at least in theory. So we wanted to show the audience how this works. So we did a little recording. It was a recording of interacting with Hume so you can get a sense for it. So:

[Hume Recording Plays]

Andy Hoar: Notice how all I did was ask a question. I tried to express frustration. It analyzed my voice and figured that out because it replied saying, “Oh, that’s a bummer.” “Oh, I’m sorry.” And it gave very practical advice. Now, just imagine a straight line between this and the future. How long before this is going to be first level customer service? You’ll contact a company, and it will ask you, “Hey, what’s going on? What’s the challenge?” And be able to process what you’re saying and read your voice and respond accordingly. So if somebody is really upset, you don’t say things like, “Hey, good to hear you today.” And if somebody is really excited, you can go, “Oh, that’s a bummer.” I’m sorry to hear about that. It seems pretty good and seems it sort of figured it out. Now, that was a practical use case. And I thought I would try something else. So if you want to see another video that I did here.

[Hume Recording Plays]

Andy Hoar: There you go, Brian. I’m here if you need to talk to me.

Brian Beck: This reminds me of “Blade Runner” or “Total Recall” or one of those movies way back when it’s more of like a buddy. Like you go out into your house and say, hey, how are you doing? How was your day? This is an empathetic voice. I mean, it’s a little too Southern California, right? But all that aside and obviously there’s processing time delays there. So it’s really trying to understand what the tone is. But I have to say that is incredible because if you just listen to how it responded and changed as you changed the approach. The problem was it was with MY team. It’s with my friend. Oh, I get it. Okay. Right? So I can see where this is going. This can be really incredibly powerful and almost almost a little disturbing, right? If you think about the applications 40 or 50 years from now we’re heading to dystopia. But anyway, let that aside, let’s get back to customers and what can we use this for with customer service and chat bots. They’ve been used for a while. This is a huge market, Andy.

Andy Hoar: I think some of this research was done before the release of Hume and some of these AI enhanced bots. But the predictions were that by this year we’d hit about a $7 billion mark. And I think that’s fairly accurate. Any of us who use customer service on sites, there are robotic chat bots powering those things, but they’re going to seem like child’s play compared to an enhanced version of say, Hume that is powered by and informed by all the knowledge that, can just be loaded in in different combinations, questions, answers. There’s some time associated with that. But imagine this for a moment when you bring a person on board and you train them, it takes a period of time to train them and the person can leave. And they only work certain hours of the day and it’s difficult work. With Hume, for example, you can train it once, you can keep training it. And it’ll never forget what you trained it. It’ll work 24/7, 365. And it’ll get better and better and better. And I think it’s pretty good at this point. So, even these predictions that by 2028, or 2029, it’ll be a $20 billion business. I think those are low. We’ve hit an inflection point. I think if these chatbots can actually be as good as what we just heard, you’re going to see these numbers go much higher than that.

Brian Beck: It’s incredible because I think this has implications for efficiency, for customer satisfaction, and also just for jobs. I mean, think about it. You’ve got call centers full of people doing first level. But what’s interesting here too is how do people use chatbots? People are not afraid to use them. The data is clear here. 88% of users engaged at least one conversation with a chatbot. Only, what, 9% of consumers oppose companies using bots. Millennials use them all the time. 40% engaged daily with digital assistance. This is becoming part of our behavior. We’re not afraid to use them. But there’s reasons for this. And it’s really about convenience, isn’t it Andy?

Andy Hoar: Yeah, it’s all about convenience. In some research that was done recently, a majority of customers said they would use an online chatbot instead of waiting for a customer service representative. And well, that’s just a perennial problem. We’re always waiting for customer service representatives and then increasingly disappointed with what they tell us. Two thirds of people said, look, on the margin, I’ll talk to a chatbot. So I think though, the thing that’s held the chatbot’s back is exactly what Hume seems to be addressing, which is – when you talk to a chatbot you know you’re talking to a chatbot, and it’s very transactional and functional. And the answers are just informational answers, which is why this last piece of research is particularly interesting. So they said “what would you personally use a chatbot for?” And there’s a series of maybe eight or ten answers here for the people on the podcast, the things like asking a question, making a complaint, making a purchase. Things like that. And what you see is the only stuff that’s above 50% is “finding a human,” which is funny. It’s good for asking a question, but not going very far down. I think the reason why is because we don’t really trust them. We don’t think they understand us. It’s a little too robotic. When there’s a human we assume they understand our frustrations. If you have a technology like this, I think it could bridge that gap and bring some of these other ones like making a complaint or making a purchase. These are things that can now go from being below 50% to much higher. And again, if it’s theoretically infinitely scalable and it really does a good job of understanding and empathizing, this could be a real game changer for customer service. There’s a point where honestly, why would you talk to a human anymore? A human who’s got information, maybe is having a bad day, him or herself. Why not talk to the robot?

Brian Beck: The way that the robot, the AI interacted with you, if you take away the lag time, it actually would sound very much like a real conversation. Now it’s still clear it’s something’s processing. You’re waiting two, three seconds for it to answer you. But that’s going to change. That’ll speed up. And you know, what’s fascinating to me about the data we’re looking at here, the number one, “what did you use a chatbot for?” It was finding a human customer service agent. And I agree with you. And at some point, these tools are more human and will reach a point where it’s indistinguishable. You don’t know you’re not talking to a human. There’ll probably be clues, you’ll suspect, but as the technology continues to get better, it’ll be able to just handle things like an escalation. “Oh, you have an application question, sir. I’m sorry. Can you hold for a supervisor, please, or our technical expert will help you?” So it’ll be a natural sort of progression through customer service.

Andy Hoar: Do you think that you think that the chatbot escalation will have a different voice? Do you think if we talked to the first level it’ll be a younger voice? And then when we refer this to my manager and the manager will sound like an older person. One thing we didn’t talk about, which just occurred to me is, on top of this – imagine when, not only can it handle you in real time, but actually connect it with past interactions. What if it welcomes you back? “Hey, Brian, good to hear your voice again. How did that thing work out for you?” “I know you bought this – did you have fun with your jetski?” it’s like, “what seems to be the problem?” “Yeah, well, it’s broken.” “Oh, really? Wow.” And that is, again, that is very easy for something like this to do and just think how connecting those dots would take this to the next level.

Brian Beck: We asked our audience, will AI driven chatbots, such as Hume replace first level customer service reps in B2B e-commerce? Oh, guess what? 80% said yes, first level goes to AI. It begs the question, Andy, if that’s true, then when is it actually going to be ready for that? And how should companies be investing in it? There’s opportunities for pure plays here, like Hume and others to come in, solution providers, as opportunities for Amazon, like we talked about in others, to create solutions here.

This week on the Friday 15:

– Home Depot’s $18 billion purchase of roofing distributor SRS Distribution, and how that will impact Home Depot’s strategy moving forward.

– Who should own customer experience? Master B2B recently held an executive roundtable in Atlanta and asked this question and the answers were all over the map.  The guys discuss where they think customer experience should live in an organization, and why that matters.

— 

Brian Beck: Welcome to Friday 15 with Master B2B. My name is Brian Beck and here with me – Very well dressed – is Andy Hoar. Welcome to Friday. You look very handsome today. You put a clean shirt on, though, man, for once. Here at the end of March, almost at the end of the month. We’re here for our weekly Friday 15. We got some great stuff to talk about today, including breaking news. Did you see this Andy? Home Depot acquired SRS distribution for $18 billion to attract pro customers. Couple quotes out of this article I want to highlight from this in USA Today, but it was all over the news this week. This strategic shift comes as Home Depot, which has about 2,300 stores, faces declining sales in its core retail business. Executives believe Home Depot can grow by winning over more pro business because the wholesale market is fractured, and many companies don’t have the advanced e-commerce sales that Home Depot has. Andy, what’s your reaction? 

Andy Hoar: There’s so many layers to this story. First of all, these guys like Home Depot and Lowe’s are fairly similar in some regard. A few years ago they were crossing the 50% mark. And so when it says it faces declining sales in its core retail business, well, if it’s less than 50% is that the core business anymore? Also, are they running from something or to something? That’s what kind of comes to mind here. Is it because the retail business is struggling that you’re moving more into B2B or is it because you see genuine opportunity?  Probably a little bit of both, but they are definitely right about the wholesale market. It is fractured. We’ve known that for a long time. This is kind of the first time I’ve heard somebody say the quiet thing out loud, which is, hey, we’re kind of better at e-commerce than the B2B companies are. And so maybe if we can roll those guys up underneath us, we’ll handle the e-commerce and the customer relationships. And it’s actually an interesting segue in our conversation here about who owns the customer. And you guys can handle the stuff we don’t know as well, which is the sales and the marketing, but it kind of does reduce the B2B company, like SRS, I hate to say this, but to a sales and marketing operation because even the fulfillment has become commoditized of late. But I don’t minimize that, but it’s kind of like, SRS knows these customers, they’re on the job sites, they live and breathe in this world, but we’re going to handle the front end of the website. I don’t know, I’d be a little concerned if I was a B2B company, if I was being reduced to this. 

Brian Beck: Yeah, but I don’t know. I think it’s a really smart move, SRS, they’re a top five distributor in building products, they’re one of the leaders, thousands of locations, trucks, et cetera, and, actually, I think about 700 locations, but thousands of trucks, great fulfillment. But also, they target a different market. They bring, than Home Depot is traditionally targeted. They’re in with the contractors. I think there’s a lot of supply, synergy here, in terms of bringing folks together. And Home Depot, honestly, even with HD supply, is more of a consumer or residential play. This gets them into the other side of it. And yeah, I mean, the disruption is clear. HD Home Depot is fabulous with e-commerce. And so, to me, this is a great move for them, and we’ll see how it plays out. 

Andy Hoar: Well, keep in mind, there’s one question I had about Home Depot in this is, we’ve seen this movie before. It’s not perfectly analogous, but there is a parallel here between this and HD supply. And if you know the history of HD supply, but it’s called HD supply. It’s Home Depot supply. So they owned them, they acquired them, they spun them off and they reacquired them again. I wonder if that’s going to be the fate here of SRS. It makes you wonder, why did they buy them, then sell them off and buy them again? I know one thing about it though, it’s keeping the private equity, the PE firms in good business.

Brian Beck: SRS was a roll-up in and of itself. So it does get into this really interesting topic today, which is who should own the digital customer experience in B2B? So this topic, Andy, came up last week. So I was in Atlanta last week for one of our Master B2B executive roundtables. It was a fantastic group. Everybody from Genuine Parts Company, to Cooper lighting, Kimberly Clark, a bunch of other folks were in the room. These were the ecom leaders. Even, by the way, Home Depot and HD Supply were both there also. So it was a fascinating group. And the question came up and it started where the question that Jason Abdo from HD Supply asked, which was all about who should own the experience, the digital customer experience in B2B? And when we field that it to the room, Andy, we got all kinds of different answers. Somebody said, hey,  Chief Revenue Officer, they were standing on their laurels. This is the person who should definitely own it. We had other folks say, no, it should be the VP of e-commerce or the  Chief Digital Officers.  Others said, hey, no, it’s more of a product function. It should actually sit in the CTO’s organization or the VP of IT.  Then the marketing executive came up. Somebody even said, hey, everyone should own it. Well, if everyone owns it, then nobody owns it. So it was a great conversation. We could have spent probably two hours talking about this through the afternoon. It was a great way to start. And so we decided we wanted to tackle this on a Friday 15. But I think it gets to if you think about what the customer experience is and those of you on the podcast listening to this, I’m showing a picture of the customer journey map. If you think about the B2B customer journey all the way from discovering and becoming aware all the way through buying, purchasing, researching, et cetera, and then coming back and loyalty, there are so many different functions that touch this: marketing, sales, fulfillment, management, reporting, accounting. So this digital experience from a customer perspective, it involves many different aspects of a company. I think one of the challenges we have here is defining what the heck is customer experience. And so we pulled up this definition. 

Andy Hoar: Well, I find this interesting because my curiosity was when we first started talking about this, and when you told me about what happened in Atlanta, is – I thought, why is this a controversy? Why did this actually come up? And why is there so much disagreement about who should own it? Look, this happens in every business about who should own the customer, right? But on the B2C side of the house, I don’t hear this as much anymore. I’m sure we heard it years ago, you were in B2C. Remember when some companies had a separate division for their .com from the rest of the company, and there was all this controversy about who’s talking to whom. I bought something online. I took it back in the store. And gee, nobody owns me. But I think there’s a similar part. That’s part of the nature of just being early in this digital transition. But also that this is an inward/outward approach. They should be taking an outward/in approach. If you’re going to outward/in approach, it becomes a lot clearer who should own the customer. And I will say this, there’s no way in God’s green Earth with all due respect to our technical friends that it should be the CIO or the CTO…But again, I was joking about this earlier. I mean, if you talk to the car companies, and they say, who owns the customer, the drive experience? Nobody says the guys who build the car. The answer should be something that’s more customer-facing. And that’s why I said if it’s outward/in it becomes a lot clearer who isn’t in the running to own the customer experience. 

Brian Beck: Let’s look at this definition here. And basically, in a nutshell, customer experience is how customers perceive their interactions with the brand or company at different stages of their customer journey and in various touch points. So your outward approach I think makes a lot of sense. You’re thinking about it from the customer’s perspective. Then I think it does become clearer, right? But think about the benefits, too. And how the benefits to the organization, how they translate– and that also can be a signal, I think, to where this should sit. 

Andy Hoar: I think the controversy here is – is this a digital customer experience, or just a customer experience. Because if you just focus on digital, then what about the other channels? What about the interaction with the customer service group? What about the face-to-face interaction or the over-the-phone interaction with the salespeople? What about through partners? Do we just forfeit that and say, well, we got the digital stuff and we got the non-digital stuff? But I’m sorry. Customers don’t really see your company that way. When they interact with your company, either over the phone, buy fax, you name it, it’s just an experience. And so I think we’ve got to have a whole other conversation about whether digital is still the relevant definition here. But when you were talking about what happened in Atlanta, what came to mind was we put these metrics on screen, because somebody said  Chief Revenue Officer. What do you mean by  Chief Revenue Officer owning a customer experience? And as we talked about in a bit, you and I came to the conclusion that the people who will suggest that are probably being driven by the quantitative side of this. And they’re thinking, oh, whoever owns the revenue profit component of the relationship should really own the relationship. And I don’t know if I agree with that in any way, shape or form, because then the premium is placed on generating revenue and profitability, which may not be the best customer experience. 

Brian Beck: I think the kinds of measures as you look at, for example, different metrics that drive the great customer experience. Certainly you’ve got revenue metrics. You’ve got a decreased cost. But you think about efficiencies and loyalty. And you talk about increasing customer satisfaction also as a metric to improve the customer experience. Well, frankly, that shows up in things like loyalty and repeat purchases. My favorite metric of all, share of wallet, things like that where you could argue – and I think that’s what David from KEH was arguing when he made that point (he’s a CIO, by the way) that these things show up in metrics, even if they’re soft, kind of measures of the customer experience. So that’s his argument. And you make it a part of the CRO’s responsibility, not just top line revenue, but also the profitability of the operation. And that helps to service that. But I don’t think you agree. 

Andy Hoar: There’s another dimension of this too. I would imagine the CRO is more focused on short-term, right? OK. Quarterly, annual revenue, right? Profitability. We know that the digital customer experience, the customer experience, is something that is not a project. It’s a program. It requires continued investment. And if you don’t have somebody who is invested in that, I can see the CRO saying, ah, it sounds really expensive. Let’s do this on the cheap, because it’s generating cash. And over time, they fall farther and farther behind. The customer experience gets worse and worse. So you need somebody who’s interested in, like you said, retention, loyalty. And I just don’t think that’s part of the remit of the standard Chief Revenue Officer. 

Brian Beck: So the question, then, we’re begging here is that where should the responsibility for the customer experience live? I have an org chart here, which shows kind of a typical chairperson, CEO, and then all the functions. And should it sit with the CMO? Should it sit up with the CRO, the CTO? And of course, you can’t forget about the  Chief Digital Officer, because that’s a newer role that’s come into organizations. And with a VP of e-commerce or the SVP of e-commerce, sometimes they report to the CEO, for example. So where should it live? Andy, what do you think? 

Andy Hoar: And you forgot the chief experience officer now. Some people have created that. Maybe it makes sense, but oftentimes it’s because they can’t settle the arguments. So they go, well, let’s just create a new office for this. But if they don’t have a P&L, like we had this discussion about  Chief Digital Officer versus a VP of e-commerce, if you don’t have P&L responsibility, it turns into a center of excellence and standards. But you don’t have any real power. So to me, it’s going to depend on the organization. But I think the answer is by taking an outside/in approach. Now, there are good arguments for various people here, and we could go down the list. The CMO is responsible for acquiring and retaining customers. That gets kind of close there in a lot of organizations. The  Chief Digital Officer is responsible for the digital component of this, and digital, not just online, but enablement in the call centers, et cetera. But that doesn’t really hit the mark, in my opinion, for a customer experience, which is, kind of, maybe beyond digital. We talked about the CRO. I think this Chief Experience Officer– again, it feels like a default. We can’t figure somebody else out. Who owns the customer experience in every other walk of life?

 

Brian Beck: I think it really does end up depending on how you structure the role. Ultimately, I think a CXO or Chief Experience Officer can work, but they have to have real organizational influence. It’s the same argument as a Chief Digital Officer. There has to be some real meat to them. Otherwise, they turn into the chief cheerleader. And they end up selling the whole time and have no real power to do anything. Whoever is in this role has to have power to do something. And whether you call it Chief Digital Officer or Chief Experience Officer, you put it under the remit of the revenue officer or the marketing officer, it’s almost less relevant or less important than the actual way that the organization is structured. But don’t you agree? 

 

Andy Hoar: I do agree. But I think if you were looking for one thing that would drive your decision making, the one thing that occurs to me is whoever has access to the data about how customers are interacting with your company and has the authority to make changes. I’m thinking a lot. Who is it at Amazon? Well, I think Amazon would say, it’s the data. We believe the data. The data is the Chief Customer Experience Officer so to speak. But it’s not just the data because if you’ve got all the data in the world if people do not have the authority to make the changes, it is a culture at that company around using data to drive things. And I don’t think that’s in question. So maybe it doesn’t even matter at Amazon who does it? We seem to charge the customer experience because it’s just obvious from the data. Now, that does raise questions about long-term investments. So probably a combination of the data and an enlightened CEO. 

 

Brian Beck: Andy, I think that at Amazon, the customer is God. It’s embedded in the culture. And it’s all the way down through the rank and file. You talk to anybody at Amazon. It is embedded in their DNA and their culture, how they speak, how they act, how they measure, how they do everything. So in the world of Amazon, it’s almost like the whole company. That’s a company where you can reasonably say, the Chief Customer Experience Officer is everybody, because they really have a culture that reflects that. It’s quite impressive. So we asked our LinkedIn community, Andy, what they thought. Who should own the digital customer experience in B2B? Now, we put up a poll. For everyone who’s listening here, most of our community is filled with VPs of e-commerce and Chief Digital Officers. We had four options here: VPs of sales are Chief Revenue Officer, Chief Marketing Officer, and VP of Marketing, or VP of e-commerce,  Chief Digital Officer, or none of the above. 59% picked VP of e-commerce,  Chief Digital Officer. A distant second was Chief Marketing Officer. It’s a self-fulfilling, 

 

Andy Hoar: I think it depends on where you are. The maturity of the digital organization, the way things are changing so quickly, this reflects, I think, in B2B, how it’ll prepare a lot of B2B companies for digital transformation. So this makes sense because companies are in the digital transformation part of their development right now. I’d say in five years it should start shifting more to our CMO kind of role, because – I think we talked about this once before- I did a survey about this a couple of years ago, and I asked B2B companies, what percentage of them had a Chief Marketing Officer? Now, in the B2C space, it was like two thirds-ish. In the B2B space, one third. So, if you don’t have a CMO, then that’s a little bit later in your development, more companies will have that. They’ll be focused more on acquiring and retaining customers, as opposed to what a lot of CMOs are, I think, in B2B companies today, more aligned with partners, trade, trade shows, etc. branding. That’s a dimension of the CMO role, but it’s an advanced dimension of the CMO role.

 

Brian Beck: It also presents an opportunity, because people can structure the role in such a way that they’re effectively the customer experience officer, and builds in a lot of the things we’ve been talking about, and then puts the eCom function under that person amongst other functional areas. 

This week on the Friday 15:

This week, Andy & Brian talk about Honeywell’s digital transformation, and whether their CEO’s decision to be incredibly hands-on is what made that transformation successful.

You can read more about that story in this HBR article.

— 

Brian Beck: Welcome to Friday 15 everyone with Master B2B. My name is Brian Beck. I’m here with Andy Hoar and it is March Madness. I know Andy, you’ve been watching March Madness and you have your favorites in your bracket in the top 1% or something, right? 

Andy Hoar: That’s right. No, I mean the top 10% for the one where I just basically showed what was my heart and my gut and then when I did all the analysis I’m in the bottom 20%. 

Brian Beck: Oh man, sorry to hear that, sorry to hear that. It’s a fun time of year.  So, we’ve got a great topic today folks for you on our Friday 15 episode. Thanks all for joining us. So let’s go ahead and get right into it Andy. Let’s get into our breaking news. (upbeat music) If you saw this week Andy, Mark Cuban says, there will be two types of companies in the future: Those who are great at AI and everybody else. He said, this quote in this article. This is from Yahoo Finance. If you don’t know AI, you are going to fail period. End of story. And if you’re a CEO, you can just, you can’t just leave it to the tech guys. Mark Cuban is a multi-multi billionaire. He’s on Shark Tank, you know, that’s what most people know. Right? Anyway, Andy, what are your thoughts on this? 

Andy Hoar: You can’t just leave it to the tech guys. Well, it’s that last line. You can’t just leave it to the tech guys. I think that’s part of it.  People are starting to realize that AI is transformational. But I think initially many  C-level executives think it is a technology transformation. When in reality, as Cuban pointed out here and you and I have been talking about for a long time, digital is the same way. It’s a business transformation. 

Brian Beck: And you know, we ran a roundtable this week, Andy in Atlanta, we had 30 executives from across industries gathering to talk about the latest things they’re doing and digital transformation. And these are companies like Kimberly Clark and Cooper Lighting and you know, the leaders in their industry. And they know, they’re all looking at AI and these are all the business folks talking about it. And then we had some CIOs in the room too. But the theme is: exactly how do we integrate it? How do we practically use it? But everybody is thinking about it and I would agree with you on the business side. Who needs to lead the charge here? What is the business use case? Starting with the pain it can solve. So folks, if you want to go back and check out our past podcasts you can hear that we talk about AI all the time. And you can listen to them at any time. You’re doing laundry or driving to work. Anyway, our topic today, does a successful digital transformation require the CEOs direct involvement? Andy, we opened the freaking floodgates on this one, right? I posted this question on LinkedIn and we’ll reveal the answer to the poll question a little bit later in our Friday 15 episode. But man, we got a lot of comments. We got close to 3,000 views of this thing when we posted it on LinkedIn. It’s a hot question. I didn’t realize how hot a question this is. But , it touched people. It touched people and we’ll read some of the LinkedIn comments. You got a little bit later, but it all started when Andy, you found this article talking about Honeywell, right? And this is the former CEO who’s now the executive chairman. I will see if I get his name right. Darius, Adamczyk. Is that how you pronounce it? Adam, that would be my guess. Okay. This is what he said about their digital transformation in Honeywell. “There is zero chance we would have made it through COVID, inflation, the ups and downs, geopolitical risk, all the challenges we faced over the past several years had we not developed a transparent and coherent digital strategy.” And they started this back in 2016. And he cited it as a five year effort. This is something that took them a while and significant level of both resource and capital investment to get through this. Were you surprised by this, Andy? 

Andy Hoar: No. I was surprised by one thing that they actually set out in 2016 to do this and stuck to it. And he appointed himself the lead on it. That all surprised me, but, glad they did it that way, because you know, I’ve been talking about this for a while. That is, we believe the best way to do it. Perhaps not the only way to do it. You know, it depends on the agility of the organization, depends on how open people are to digital, how well understood the digital imperative is, there are several things that can make your company dynamic different. But without fail, I think you and I would agree that when the CEO leads the digital transformation effort and now the AI effort, it’s a lot more successful than when it’s delegated to somebody, south of that in the organization. And the fact that he actually appointed himself and led the meetings, which we’ll talk about in a moment, I think made all the difference here. 

Brian Beck: Well, that’s what really opened up. We had some chief digital officers and some other folks and they’re doing digital transformation, quote unquote, at their businesses, chime in on our LinkedIn post. And there’s not consensus on this. And at the end of the day, what does it mean for the CEO to be directly involved? And that was the question we asked. But I mean, you can’t deny looking at the results of Honeywell. No, so for those of you on our podcast, I’m showing a graph here that you can’t see, but just to give you some context around it. Essentially, Honeywell’s results from a top and bottom line perspective, were starting to fall. And as they noticed this, this CEO made this digital transformation a component of his, really, key component of his leadership. He quoted a six year, simplifying digitized journey of transformation, which started in 2016. And they concluded this first phase in 2022. They cite, since the digital transformation started to take effect, their growth has returned. It would improve from 3.5% to 5%. Their segment margin, which is their measure of net margin, improved from 18% to 21, almost 22%. And they say it laid the foundation for their, what they call “innovate and grow stage,” which now that they have, they consolidated their ERP systems, they had, I think the article said, 2700 ERPs, down to less than 1,000. They reduced their websites, down significantly, they consolidated the data. Anyway, the results, I think kind of speak for themselves. This is a $35 billion company. This is not a small company, right, Andy? 

Andy Hoar: Yeah, and you know what, I wrote this down, actually. They had 150 ERPs. And then here’s the kicker. And we hear this a lot. You, I know you’ve heard it, I’ve heard it too. 1700 websites within the company, that they reduced to 100, because just to be able to move forward on this digital journey, required them eliminating noise. There was just too much noise. They had too many things to sustain, maintain. Imagine I mean, how many licenses they had internally. How many people who had very specific knowledge about one particular application, and everybody was beholden to that person, for that information, it was just structurally terrible. But the most amazing thing to me was, and this is a quote, “We had no plan for collecting and using data.” Let me repeat that, “no plan for collecting and using data.” That was the most important thing, I think they stumbled across in the process of doing this kind of evaluation, triage and preparation for the actual journey. So there were multiple steps here. One was they had to figure out what they had. That took a while, and that took some courage to do that, because they had to kind of tell some people their babies were ugly in the organization. So they had to figure out what they had, then they had to make a path forward, obviously to change it, but then they had to execute. And that’s why he had to put himself in charge of the whole thing, because there’s some terms that he mentioned here that it got painful. Have we heard this one before? There was lots of pushback internally, and people who literally said, “It’s not going to work.” Now, if you’re not the CEO, and people are saying that kind of thing, in every culture, usually the people who yell the loudest, and the ones who have the entrenched kind of political power in the organization, can veto anything. And I’ll bet there were people who had those characteristics, who were saying the painful pushback, it’s not going to work. They were the ones who had those entrenched entrenched political power, and the only person who can break that up is the CEO, the only person who can say, “I don’t care, we’re doing it anyway,” is the CEO. 

Brian Beck: Yeah, it’s interesting. It’s an interesting dynamic, and by the way, 2700 ERPs, that would be a few too many, I suppose. 

Andy Hoar: But I’ve heard of companies with thousands of ERPs though. 

Brian Beck: The complexity he was dealing with, so this fellow was dealing with a 30, this is a $35 billion company. This is the size of small countries. So, the complexity and the number of people, and everything else and the entrenched interest, so to your point, Andy, but at the end of the day, what made it work, and how involved did he actually have to be? Well, there’s a quote from the end of the article, this again, it was in Harvard Business Review, just this past week, it was released. He says, “When you are the CEO, the organization doesn’t listen to what you say as much as it follows what you do. So you can’t delegate mission-critical strategic projects. By running monthly meetings and operation reviews, I send a message to everyone that I care about this digital transformation personally and we’re committed to this path.” He ran the freaking meetings. This is a CEO of a $35 billion company, running the meetings and looking at the KPIs, and again, driving through some of those silos, Andy. And by the way, looking, this is controversial because – think about it from a size of company perspective. Not everybody agrees. I was going back and forth Jacobi from Luminos Labs. And Jacobi was a CIO for a long time for a sizable distributor. He said, having been through a fair bit of this, valued, influential, and trusted lieutenants are worth their weight in gold, but more importantly is the CEO’s faith in them. Team sport, I said, yeah, Jacobi, sure, team sport, indeed. And I know you’ve been through this, but does a CEO actually need to sit in and contribute to the meetings? And he kind of said, nah, not really. And so Jacobi, I don’t fully agree with you, I think the CEO might have to do this. And that was kind of Jacobi’s tenor. And again, he came from a different size company and they digitally transformed. Maybe at a company like this, multinational, highly complex, lots of intrench insurers, maybe the CEO at a big giant company, they have to run the meetings versus other places where maybe it’s more about direction. What do you think, Andy? I mean, can the CEO delegate some of this? He can’t do everything, right? 

Andy Hoar: The question I have is how big is the problem?. And if the problem is as big as it was at Honeywell, and I think it’s as big as it is at Honeywell, just about everywhere, then the CEO has to run it. Other exceptions, sure. Are there companies where the founders and the CEO are on board with this? And by a simple nod and a wink, things can get done because everybody believes in the cause and they get that it’s a business transformation not a digital transformation? Yeah, I’ve seen very few companies like that, but yeah, sure. I guess theoretically it’s possible, and in reality, there are examples of it. But to me, the vast majority of the companies are more like Honeywell, where they think they can do it, but then what ends up happening is at some point, there are these painful choices. Are we going to go with a self-serve, e-commerce model principally, or are we going to go with an assisted one that requires salespeople, and commissions? That’s a strategic decision that must be made at the CEO board level. I don’t care how well you understand digital transformation. It’s these change management issues that are the big ones. And I don’t know who can solve that other than the CEO and the board. And the fact that part of it helped that this CEO at Honeywell is an engineer, and he started an engineering thing where we’re going to test and learn and like putting the space program on the moon. I think that’s what he thought as, and he had to go in charge of that. Now does he run everything? No, but as he said in this quote, “I sent a message to everyone. By running these meetings in the operational reviews, I cared about this project.” And he said, you can’t delegate mission-critical, strategic projects. So the question is, how big is it, and is this mission critical, and does it require ultimately decisions made by the C-suite? I think that’s pretty much check, check, check for every major B2B company, but I guess not every company. 

Brian Beck: Yeah, I think it does vary a bit by size of company perhaps. We had another comment here from someone at credit key now, but he was also at Gartner. He said, when I was at Gartner, I found that the clients who CEOs were handing down digital first strategies were the only ones that were succeeding in making a real impact. So I think he actually agrees with us from his experience at Gartner. So I think what’s interesting is when we polled our network on LinkedIn, our community, they kind of agreed that the CEO does have to be, it wasn’t overwhelming, but we asked the question, does the CEO of a B2B firm need to be directly involved in order for digital transformation efforts to succeed, or can he or she delegate? And 57% said direct oversight is needed, 43% said no, it can be delegated. So I think there’s a consensus that the CEO has to drive this to some degree. It’s really the nuts and bolts of how much do they have to drive it where I think people disagree, do they have to run the weekly meetings, that kind of thing? 

Andy Hoar: Well, you know what I was wondering when I see things like this, and I wonder if it’s already embedded in people’s psyche that the CEO is not going to be involved in it. They’re answering the question based on the reality of things. Like, well, in a perfect world, we’d love for him or her to be directly involved, but it’s just not going to happen. 

This week on the Friday 15:

– Fast food chain Wendy’s faced a PR debacle after they talked about their dynamic pricing initiatives.  As Brian said, “don’t raise the price of my Frosty!”

– Is dynamic pricing coming to B2B?  Or is it already here?

— 

Brian Beck: Andy Hoar, welcome to the Friday 15 everyone with Master B2B. My name is Brian Beck and here we are back for another exciting Friday, breaking news and all the rest. Andy, happy Friday, pretty good weekend, I hope. 

Andy Hoar: I can’t believe it’s halfway through March already. That’s just amazing to me.  

Brian Beck: I know, isn’t it crazy? That’s unbelievable. And all the B2B companies out there listening, will you guys finalize your budgets already? We’re a quarter of the way into the year. I keep hearing about it. “We’re not sure what we’re investing in this year.” Well, you guys need to decide before the year and over. Right? Anyway, yeah, so welcome to Friday 15 everyone. We have a really interesting and exciting one today. And Andy, we’re going to talk about dynamic pricing, right? And how did this one come up? Well, some fun, breaking news, all about Wendy’s, that juggernaut of B2B commerce. 

Andy Hoar: So this was big news a couple weeks ago in late February, Wendy’s CEO announces that they’re going to be breaking new ground here and in the fast-food industry, they’re going to go with dynamic pricing. They’re going to buy digital boards, change the numbers, like you’ve sometimes seen retail locations because we moved away from the static pricing model to dynamic pricing, here we go, right?

Brian Beck: You’re going to overcharge me for my Frosty???

Andy Hoar: We’ll get to that in a second, but dynamic pricing is not a new concept. For the audience here, it just means that the prices change with supply and demand. And we’ve seen that in multiple industries, I mean, this has been around for 40, 50 years, if not longer in the airline industry, where you guys next to use paying one price for a seat and somebody else is paying a different price for a seat, but you’re all in the same plane. They’re trying to match supply with demand, right? And hospitality, same way. I’ve paid different prices for hotel rooms on one night and the different night, right?  But what’s interesting is it’s become more, it’s kind of crossed over into other areas more recently, in particular, into the rideshare business, right? So we know from companies like Uber and Lyft, that they’ve got this whole idea of dynamic pricing, but in Uber and Lyft’s case, it’s surge pricing, right? The prices don’t ever come down. They only go up when there are conferences going on, large groups of people. Well, unfortunately, and people re-framed this idea of dynamic pricing that Wendy’s was offering into surge pricing. And if you look at surge pricing everywhere – and this caused all sorts of problems. So much so that Wendy’s CEO had to drop the whole idea within a couple of weeks. The problem here is, as you and I both know, dynamic pricing goes up and down, not just up. Happy hour. You know, off-season bookings. 

Brian Beck: Yes, I have, I’ve heard of Happy hour. I think I’ve been to one or two. But Andy, did you see like that? I was reading up on the Wendy’s thing before our Friday 15 today. And it was that there was actually a group of netizens, and that’s the citizens of the internet, who came out and started a boycott Wendy’s, hashtag boycott Wendy’s. I mean, this is serious, emotional reactions to this stuff. It’s interesting because, you know, you just talked about the airlines, right? That’s been around for so long now. It’s almost like gamification, right? I talked – you know, my mom, God bless her. She’s sitting there looking at airline flights to come out to see us in California. And she’s like gamifying. She’s like, ooh, I book it now, but then I’m going to wait till tomorrow. And by book it tomorrow, well, I get $5 off. I mean, it’s so fascinating how this, almost, you know, the more it exists, the more it kind of adds to the psyche and the gamification and how people react to it now. It’s accepted, but fascinating that Wendy’s is, you know, it’s perceived as surge pricing, but to your point, people don’t realize it also goes down in the case, right, dynamic pricing. 

Andy Hoar: And that’s what they want to be able to do too. In off-peak hours, you know, when there’s less demand, they want to lower the price and draw people in, but somehow that got lost in the story. So what we wanted to address was, hey, is this dynamic pricing kind of metaphor coming to B2B e-commerce? And it’s a fascinating question because you can argue, it’s already here. You can argue that with sales reps, for example, there’s dynamic pricing. They’re setting the price as they go. You could, in certain instances, like electricity, you know, it’s already there, inputs into a lot of these things or they’re going to be price like oil, for example. These prices change constantly as inputs into the output. So you could argue it’s here, that said, they still publish prices, right? And there are contract prices that are fairly fixed. So the idea of truly dynamic pricing, you could argue, has not come to B2B yet, but you used to be a B2B practitioner.  Did you guys publish all your prices? 

Brian Beck:  I don’t think so. How many times are you hearing the conversation about published pricing still? Yes, I lived this, Andy. For 20 years, I was on the B2C side of e-commerce. And a long time ago, we were thinking, oh my gosh, if I published my prices on the internet, if I’m a brand, then all my competitors are going to see that and they’re going to know what I’m charging for my products and… okay guys, come on. This is the age of transparency. I talked about this in my book a lot. That’s old thinking, but it’s still persists, right? Hiding prices is something that B2B companies still want to do. They’re worried about competition. They think the pricing is a competitive advantage. Nope, ain’t anymore, in my opinion. I don’t know, Andy, do you agree? 

Andy Hoar: No, you’re totally right. And, you know, when was the last time you went to Amazon and didn’t see a price. I was just reminded of some research we did last year, a fascinating piece of research actually that said, among other things, 88% of B2B buyers research prices online. You go, okay, well, no doubt, right? But contrast that with the idea of hiding prices, hiding prices online, if the prices aren’t online to be seen. And again, have you ever gone to Amazon and not found a price? This is over. I mean, I am still shocked that we have this conversation, but I had a conversation with somebody just a couple of months ago. And they said we don’t want to reveal all of our prices because it’s a competitive disadvantage. And I’m like, have you ever thought about the lost sales associated with not revealing your prices? Because that’s also important here. 

Brian Beck: Yeah, it’s almost like there’s a whole swath of invisible opportunity costs. These companies don’t see when they don’t publish pricing. I think of this almost as an element of personalization of the experience, Andy, thinking about when someone needs the product or there’s a higher demand for the product. This is capitalism 101, man. The price goes up when there’s less demand, happy hour, or price goes down, right? If we think about the fundamentals of B2B pricing, dynamic pricing has actually been around for a long time. Think about contract pricing. Think about some of these companies that have thousands of price lists stored in the ERP and being able to present those, it’s a slightly different notion because it’s negotiated, but it’s the same general idea. We’re varying the pricing based on the need, the use, the buying power, the market conditions. Ultimately, the definition of dynamic pricing is varying price based on market conditions. Well, it has to do with everything from timing to the use case for the product, the value the product has to the buyer, the contractual buying power of that buyer. All these things, how much product you’re buying, this is dynamic pricing, guys. And to me, this is a key element. And guess what other big element we’ve been talking about, a lot lately, Andy? And it creeps into this with millions of products is AI, right? The ability to price correctly in a very intelligent way. This all harkens back to that airline example you gave early in this. And I think, I think it’s already here in B2B, I think the transparency argument is dead. In other words, you have to be showing pricing. Frankly, it’s one of the reasons Amazon Business is winning market share. 

Andy Hoar: And let’s face it, I would at least categorize it as at least slow motion dynamic pricing because there’s seasonality, the promotions that people do. There’s selling things at a lower price, of course in B2B, we know there’s a difference between the spot pricing and the sort of spec-in pricing. If you’re building, you know, a building, you’re not going to be looking for the concrete on the spot market that day. You have to plan that well in advance. That kind of pricing is different from spot market pricing, but my God, there’s a lot of spot market pricing in B2B. And increasingly, a lot of this planned stuff is getting shortened, the time periods have been shortened. People are making decisions in shorter frames of time. And so how do you have fixed pricing in shorter periods of time? Plus, again, the inputs are changing constantly. And when the inputs are changing, the price has to change. So I think we already have dynamic pricing in B2B. We’ve seen it. It’s either slow motion or fast motion, but your point about AI is a really good one. And the reality is, not only is price non-transparency impossible anymore. I think price arbitrage is almost impossible because bots, AI bots are going to be looking everywhere at all the prices that are published. And it has to be published. So how are you going to be able to charge economic rent on a certain product, as they say, in economics, right? When everybody else is charging different price. And one of our favorite topics, of course, is marketplaces. And those are 100% price-transparent. 

Brian Beck: That’s right. You raise the notion of getting into channel conflict a little bit here, Andy. Think about the value of the pricing being an element that the brand wants to control. And there’s actually software systems out there that will go out and it’ll scrape and they’ll look at all the different places that people post prices. And this is how Amazon does it, right? And they go out and they look, and they find the lowest price. And they say, we’re going to match that price. We’re not going to honor a MAP policy, et cetera. But you think about this price transparency as it relates to B2B. And the culture of B2B, very conservative, very relationship-based, the sales rep having the relationship. The price transparency thing and dynamic pricing and all of it, threatens, quote unquote, those relationships, and so I think this gets into foundational fears of channel conflict too. When we start talking about dynamic pricing and B2B true, when I say dynamic pricing, I mean in the spirit of American Airlines, you know, flight pricing or Wendy’s, surge pricing, whatever you want to call it. You know, it’s that kind of pricing dynamic, which I think strikes fear in a lot of B2B companies. But as you learned in B2C, you can’t control it. And because if you’re not there, look at what’s happening on Amazon and other marketplaces. Competitors will be exposing price. You’re going to have folks coming in or brand new entrants, brand new competitors that are offering products that are comparable to yours. And that customer who’s loyal now to the marketplace or the channel is going to buy from that other brand. So you’re losing relevance…but I’m extending my argument a little bit here, but bear with me. You’re losing relevance with that buyer because they’re going to buy something different than yours. If you’re not transparent with your price.

Andy Hoar:  I like your point about channel conflict too, because when you discount products through the channel, generally speaking that works, the manufacturer sells it for X and you discount it to 0.75X. And the difference is the value the channel offers. But when you’ve got a horizontal marketplace like Amazon and others that don’t have the same fixed cost and they’re not paying sales reps, then that discount changes a bit. And so all of a sudden you’re like, wait a minute, maybe the price is even better or more attractive on Amazon, which forces the channel to react, which means that that arbitrage opportunity changes. And that’s becoming, here’s the word dynamic. So, well, you know, it’s interesting because we actually did a poll like we do for all of these. And so this is our question: “Is dynamic pricing coming to B2B?” There’s a little graphic up here that shows kind of what the difference is between, you know, it’s like an economics textbook. But it makes the point that you’ve got to capture the different prices along the curve depending on the supply and demand. I think we both agree. It’s here. So we wanted to hear from practitioners. And so we posted a poll and Linkedin and we said, is dynamic pricing, which means very prices based on market conditions such as peak demand periods, coming to B2B?  I was surprised by this. Overwhelmingly, yes, 68 to 32%. 

Brian Beck: Yep, 68% said yes. And I think it’s acknowledgement of the fact that it’s really already here. I think the industry is somewhat comfortable with it. I don’t know if there’ll be some channel conflict concerns, some pushback from traditional selling. But look guys, this is here. I talk about this in my book, for example, it’s the age of transparency, arbitrage, you know, I think about it even as it relates to things like the car industry, Andy, like buying a car. And you know, there’s so much transparency now in pricing when you’re buying an automobile that you know you should pay. And so companies have to find different ways to add value. And to me, this is a good thing. This is sort of a natural evolution of capitalism to what it ought to be, right? It’s good, perfect information. Things aren’t being hidden from the buyer, things of that nature. So it’s a good thing. It allows real value to bubble the surface.

Andy Hoar: It’s a good thing except that all the layers in between and all the arbitrageurs built into the value chain, we’ve got to find new lines of work.

In this week’s Friday 15, Andy & Brian talk about the role marketplaces play in alleviating (or causing) channel conflict.

The big takeaway is that manufacturers need to accept that they simply need to be where their buyers buy, and that they can no longer push buyers into the channels that the manufacturer wants to use.

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Brian Beck: Andy Hoar, welcome to Friday 15 with “Master B2B.” Brian Beck here with Andy Hoar, my partner in this leadership’ series. And we’re rocking it out this Friday, March 8th for this topic today. Andy, we’ve got some cool stuff going on. Welcome. Hope you’re ready for the weekend. 

Andy Hoar: It’s good to be here and we’ve got a good topic today about channel conflict and it’s a perennial topic. So it’ll be fun to discuss.

Brian Beck: his is a huge topic again. I continue to hear buzz in the industry about concerns about it, fears about it, preventing action all over the place. So we’re going to tackle this one head on and we’re going to talk about it in the context of marketplaces. So even our breaking news today, Andy, is all about marketplaces. So, this is our topic today is do marketplaces resolve or complicate channel conflict. And this weekend here, I guess it was last week, I had an opportunity to catch up with one of the big VCs that focuses on this space called Bowery Capital. Now, I check in with these guys every so often, you and I both do just to find out, now kind of what’s going on in this world? We hear today all about AI and the whole buzz is all about how to use AI for your business and B2B. Well, we rewind maybe 12, 18, 24 months. It was all about marketplaces. Should I create a company on a marketplace? Should I, that sort of thing? And some of the news we’re seeing, and some of the things I heard from Bowery is that these investment cycles are sort of cyclical. They go up and down and folks invest in things when they’re hot and all the rest, AI is that today. But in the marketplace sector, look at these valuations, those on the podcast, or those seeing on podcast, I’m showing a slide here that shows series A marketplace valuations of marketplaces versus other sectors. And marketplaces have plummeted back in 2021, $100 million valuations, pre-money valuations on average, is what the value which companies invest in these business models, it’s followed by two thirds, they’re not down about 33 million. And this is a, in the world of what’s coming next, this is a big deal, right? Andy, I mean, companies are not getting the same values. 

Andy Hoar: I think there’s a lot going on here. There could be other reasons for these valuations falling, which is just a general downdraft and investment in all things technology, except for AI, we’ve seen a lot of software vendors and SIs, et cetera, the valuations have come down from peaks in the 2021 time and the on the heels of the pandemic. So that could be exploiting some of this. But I do think in the United States that there’s something else going on here as well, there was maybe a bit of froth and exuberance around the idea of vertical marketplaces. But let’s be clear on this, when we say marketplaces, there really are kind of at least three different types of marketplaces and sometimes they get conflated. One is the horizontal market place where they sell everything across all different verticals. That’s the Amazon’s of the world.  Then there’s the vertical specific marketplace, like a ChemDirect, which sells things in the chemical industry. That’s kind of what we’re talking about here. There’s also a third one, which is kind of a company owned marketplace. And this is technology powered by companies like Mirakl and VTEX and Oro and others. Everybody seems to have kind of a market place capability. That’s where you can be a brand manufacturer and bring your channel over to your website. Take the money for an order and then distribute the order based on geography or preference of some sort. Those are the three types in general. I think what we’re talking about here is kind of these vertical marketplaces, which I think there’s something that’s become kind of clear about them. And I think you’ll agree on this, that they do require scale to be effective because in my opinion, they’re the best of both worlds when it comes to selling and the worst of both worlds. They’re the best of both worlds and that they don’t have the legacy infrastructure that a lot of companies do with branches and longstanding delivery, promises, etc. that distributors have. And they don’t have the disintermediation that brand manufacturers have. But on the other hand, they also don’t have the legacy of customer interaction and they aren’t selling anything, direct themselves. They don’t make anything. So what we’ve seen, just like with the horizontal marketplaces, they’ll really be successful here is they have tremendous scale and be able to deliver very specific domain expertise and monetize it. That’s a lot of ifs. 

Brian Beck: That’s right. And it’s interesting Andy, you have an example here. It’s a fellow named Brad Jacobs, who started the United Waste and XPO logistics, which were both kind of roll ups, massive roll ups, and they have marketplace elements to them. Well, he just announced recently that he’s getting into the building supply industry with something called QXO. And to your point about scale, Andy, a billion dollars, right? Is what is being invested. He raised some money, he’s putting some of his own capital into this. So to your point about scale, I think you’re right. I think we’ve realized that, these vertical marketplace models in particular are actually difficult to execute. Your worst of both worlds is true in some ways. And we follow the sector. We know that companies, we talk to the people building these marketplaces and we know how hard it is. 

Andy Hoar: It’s a tremendous opportunity, it’s very alluring because it’s fractured. Both sides of the equation don’t do it particularly well. There’s opportunity there. But they think it’s a bit like founding a software company. I think sometimes – we see an opportunity here. Let’s go do a new CRM. Let’s just launch it and everybody will use it. You’re also, you know, interfering with longstanding customer relationships and how do you monetize this? You can’t just be the place everybody goes and does research and says, oh, this is great. Now, we go back to my distributor and make the purchase. So you can be web-roomed as well. 

Brian Beck: Well, that, see there, then now this is the heart of our conversations today is channel conflict and how do we define it? You know, I go to the authority of all things Wikipedia, right, Andy? So I pulled this definition from Wikipedia and I think when we think about channel conflict, it’s really about the manufacturers in many ways, right? That’s where a lot of it centers. And this definition I think captures it. “Channel conflict occurs when manufacturers, brands, disintermediate their channel partners such as distributors, retailers, dealers, sales reps, by selling their products directly to buyers through general marketing methods or over the internet.” Now, if you look at the math, Andy if a manufacturer is selling its products, directly just to an end buyer, they’ve got a lot of margin to work with. They can be scary for the distributor, you know, and but the manufacturers, you know, they’re terrified of channel conflict. They hear it every single day from the bid market and large manufacturers out there. We don’t want to disrupt our channel, you know? This question is a big one. 

Andy Hoar: But here’s the news for all those folks. And I don’t mean this in kind of a cute way, but the channel conflict predated you. Right. And the channel conflict will post-date you as well. You’re not going to be able to change the channel conflict because it’s inherent in the business model. The question is, how do you grapple with it? And you can resign yourself to saying, well, we’re not going to change anything about our traditional selling models internally and externally because you make a great point about sales reps who are also an internal kind of channel that you have to manage. But you can either do nothing and just let the chips fall where they may or you can actually re-prioritize your strategy around “where are your customers?” That should be what’s driving all this stuff. And I’ve said this many times, I feel like a broken record on this one, I joke that I don’t think I’ve ever met a customer who wakes up in the morning and says, I’m going to go to this channel and make my purchase. Channels are a discussion that take place with companies internally because they’ve aligned around these different resources, they allocate budget. And there’s only one problem with that. In the end, customers don’t care about it. 

Brian Beck: Yeah, now I agree with you. Where I see the discussion often focused around the company’s price. It’s the dollars, it’s the concern about the undercutting of price, but even beyond price, it’s also about, think about what is the fear generated from? It’s the relationship also. You talk about the sales team. You talk about the relationship with the distributor. You talk about the relationship with the end customer, disrupting that whole sort of flow. You did this marvelous thing years ago at Forrester where you laid out all the channels and how they’re changing. And I think that’s really true. Today, the end buyer, we saw this in consumer, the end buyer in B2B has more power than they ever had in the past to make channel choices. And I argue that manufacturers at the end of the day need to understand that end buyer’s choice and why they’re making it the channel choice, but they can’t necessarily control it. So to your point, channel conflict will persist. Manufacturers shouldn’t try to- you’re not in the channel business. The channels are the channels, and the customer will make their decision. So how do you manage this in this world of marketplaces? You had some interesting data here that we’re showing on the screen about– this is some stuff you did, I think, back at Forrester, right, Andy? So we’ll grab this for us. 

Andy Hoar: I call this the wheel diagram. And essentially what it says, it seemed controversial for some reason. And I still don’t understand that, too, this day. Except that I think all the things we mentioned around companies being aligned a certain way, having a traditional– but basically, what this said was, for those who can’t see this, there’s basically three concentric circles with the brand in the middle, the channels in the next concentric circle, and then the outermost concentric circle where the customers are. And what you can see is, for example, I call them B2B traditionalist customers. They don’t want to buy things online. They used to buying things through a sales wrap or a will-call window in a branch. They’re going to go through your traditional distribution channel or traditional wholesale. Or let’s say they buy through Granger – the off-line version. Then there’s a group of people who I call digital-first traditionalists. They might buy through Granger.com to get that product that 3M sells. So that’s great. That accounts for a 30, 40% of the different options there. But then there’s all this other stuff now that emerged in the last 10 to 15 years around people want to buy directly from you. And there’s a lot of research that shows that people want to buy from a brand. Research I did showed that 40% of B2B buyers would prefer to buy directly from a brand manufacturer, all things being equal. There’s kind of a halo effect around it. You know you’re buying directly from the people who made it, it’s being handled by various people or diverted inventory in the worst-case scenario. But then half of those people– so 20% of all B2B buyers are willing to not only buy directly from them, but even pay a premium to do so. So if you’re not selling directly through your website, then you’re missing those people leaving money on the table and more importantly avoiding important channels. And then there’s horizontal and vertical channels and of course Amazon. The next slide here shows that you’ve got to pay attention to each one of these slices of the pie. Because guess what? It’s where customers are. It doesn’t matter about all the stuff in the middle, and the second concentric circle is all the channel conflict that customers don’t care about, but that companies for legitimate reasons – I don’t want to begrudge them that – focus way too much on. And at the end of the day, you’ve got to be focused on where the buyers are. 

Brian Beck: It raises the next piece of data I’m showing here, Andy. We’re seeing this. Buyers are now in many cases becoming more loyal to channel than they are to brand. This is a question that was posed in some research a couple of years back said, on Amazon, would you buy from brands or sellers you’ve never heard of? Almost 65% said, yes, they trust the channel. So this loyalty has really shifted. And we’ve seen that, in fact, at scale to your point earlier, looking at Amazon Business, it can really work. The buyers are there. $83 billion projected next year, 2025, by Bank of America. Incredible volumes and not being their risks, in my opinion, the relevance of the manufacturer brand to that buyer, because the buyer’s going to buy something else. 

Andy Hoar: You know what scale gets you, too? Scale actually establishes as you as a viable channel. You put the Amazon stuff up there. If you’d asked this question 15 years ago of Amazon, the number would not look like that. And the reason why is because at that point in time, nobody in B2B trusted Amazon as a place to buy stuff. Now they do. And a lot of people, it’s just because they can return things easily. But they can buy things easily, they can return things easily. And I think vertical marketplaces that achieve scale and have some kind of lasting business model are going to get the same benefit as this. Because when you’re buying stuff in B2B, your job’s on the line. You’re not going to risk it over saving a few bucks, which is why sometimes price isn’t the biggest issue. 

Brian Beck: Well, that’s a good point. Trust, I would agree with you, and the relationship to some degree, but it’s really about the trust. And you have to look, I think– this is good to our earlier point– why do customers buy in these channels? And understanding that is important. And then you can build your channel conflicts management strategy around that. Here’s some data that says more than 1/2 of B2B buyers are now completing 25% of their purchases or more on online marketplaces. OK, why? This is vertical, horizontal, all of them. Number one reason: discovering new products. It’s about assortment. It’s about getting greater vendor choice, faster purchasing, versus traditional channels, things like that. So one of the things that when we think about the use of a marketplace by a manufacturer to ameliorate channel conflict, quite frankly, these reasons don’t actually apply, I don’t think, as much to a manufacturer. And as we look at when we look at some of the highest volume marketplaces in vertical marketplaces, manufacturers are not among them. I’m showing some data here that shows where the– it’s about two years old, but it’s still relevant. We’re showing the biggest marketplaces in B2B are in other verticals– they’re not launched and operated by manufacturers. These are vertical and horizontal marketplaces, equipment, chair, Indigo AG, others that are– some of them are shipping-related marketplaces, but all these different– the product-related ones are verticals. And I don’t personally think that the manufacturer has as much of a reason to have a marketplace itself. I think it sits better with distributors. I don’t know if you fully agree with me. You did some research a couple years ago. It said, you think this is a good model for manufacturers. I’m not sure it’s as applicable. 

Andy Hoar: You know what’s funny about this is that distributors are marketplaces. They are. They’re just cross-manufactured marketplaces. And that’s great if your customers are going to that particular distributor. But it’s also this challenge of if you’re a manufacturer and you’re selling through a distributor, then how do you maintain loyalty? I mean, the distributor might spiff you out with another brand manufacturer or their private label product, right? So there’s channel conflict everywhere. And for people who just trust the distribution channel is the single best and only channel with which to sell, they forget that, wait a minute, I’m competing against a bunch of other manufacturers. And that just distributor’s not loyal to me. We’re going to go and sometimes they’re loyal to the lowest price they have. And did we forget about private labels? So there’s a bunch of like dimensions here. But again, you’re not going to control any of this. And a brand or distributor. At the end of the day, you’ve got to follow the customers. And I think your point in the last slide about why people use marketplaces really does reinforce the point about scale, discovering new products, 72% of the reason why, well, how do you– people go in there and discover new products. You better have new products. Right. You’re having new products. You’re going to have to have scale. So you can be a tiny, vertical marketplace or a very niche-y horizontal marketplace for very long, because if you’re not constantly giving people new products, and by the way, that can be the long tail. It doesn’t have to necessarily be the short tail. So you can compete with the long tail, but that requires scale. 

Brian Beck: Even in specific niches, Andy, we’ve followed some marketplaces like Julie at Chamf and others that are very nichey, very specific. Even in that niche, she still has to have tens of thousands of products to meet the need of the reason the buyer buys there. So I think this model fits much better with distribution than it does with manufacturing, because I think it’s a natural extension of their business model. So we asked our community, Andy, do first party, or company owned e-commerce marketplaces complicate or resolve channel conflict. We put a poll in LinkedIn. And 57%, the majority said “complicate,” because it just adds another channel to the mix that you have to think about, right? So it’s not a solution to channel conflict. I think that’s the verdict we’ve come to, and the community has as well. Any comments on this? 

Andy Hoar: Yeah. I come back to what I said earlier. All that matters is where customers are. You’re not going to resolve or change anything. That’s like saying, I don’t like the weather outside. So I’m going to change the weather. No, you don’t get to change the weather. You can just change your approach. You can put a coat on. You can avoid certain things. But you can’t change it. This will be on ad infinitum forever, there will be channel conflict. The question is, how do you grapple with it? And I think you’re going to start with – I’ve got to be where my customers are. 

Brian Beck: Amen. I’ll say, I agree with you completely. You’re a manufacturer. You need to be in front of the customer wherever they want to buy. You’re not going to control the channel choice. So you can help the channel do a better job. But you can’t close your ears and go, la, la, la, and ignore where the customer is. 

Andy Hoar: And also, you’re not going to be able to control your channels that you don’t control, by the way. You’re not going to be able to say, well, we’ve been selling through this distributor for 30 years. And we’ve got a great relationship with them. They will drop you like a hot rock. There’s a better alternative because they’re running what’s called “a business.” And so this idea, not that you should be disloyal to your channel partners. I’m not suggesting that. But this idea that they’re loyal to you because your loyal to them is bunk. In this day and age, nobody’s loyal to anything anymore. And so the only thing they’re loyal to is a great customer experience, which means you’ve got to produce that on your own site for the home games, also the away games. And you’ve got to be everywhere that, again, your buyers are going to be.

This week on the podcast, Andy & Brian discuss:

– Sora, the new generative AI text-to-video tool

– The demise of Amazon product aggregator Thrasio

– The changes in how B2B practitioners find job nowadays.

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Brian Beck: Andy Hoar, welcome to the Friday 15 everyone, Brian Beck here. And it’s my birthday. 

Andy Hoar: It’s your birthday. Happy birthday, Brian. 

Brian Beck: Thank you, sir. I can’t stop this progression. I’m not getting younger. You know if I was born one day earlier, I would only get older every four years, right? Because of the leap year. But I have been born on March 1ist, not February 29th. Anyway, welcome everyone, we’ve got a great topic today, and a lot to cover. So let’s get right in, right, you know, Andy with our, with our breaking news. Let’s see, where’s our breaking news? (upbeat music) All right, first off, Andy. AI continues to astound us in what it’s doing, and the things that come out incredible. Tell us about Sora, this is a new open AI thing.

Andy Hoar: Yeah. You know, this one, frankly blew me away. I mean, I’m thinking back to the last time I was blown away, and it was when chat GPT was launched what a year and a half ago. If we’re going to keep getting hit with these kinds of announcements, you know, buckle up because there’s a technology Open AI released recently, which is text to video called Sora, S-O-R-A. And I think this headline actually says it all, it’s fascinating. It says, Open AI’s Sora has left AI experts either enthused or skeptical. It’s left most everyone else terrified. And the reason why is because literally with, in one sentence, you could create a video on your own. So there’s a couple of examples here we wanted to show. So this is a video, and we’re not going to show the video, but for those of you who can see it, it’s a group of labs, dogs that are playing in the snow. We ran the video. Now, this would have taken professional graphic designers to create something like this, or a film crew, quite a bit of time to create. Instead, in a couple of seconds, there it is. Another one is a video of an animation that they created that they shared, which will rival anything that you’ve seen on Pixar. This is a little goblin creature that’s looking at a candle, and you can see the reflection in the eyes, et cetera, the detail on it. The point of this is, this is what Pixar’s animation studio would have spent months or years creating, like at the detail level, with Sora, it’s done in a matter of seconds. So, what’s funny is, we’re not just surfing the internet looking for videos, maybe you are Brian, but, you know, we’re not out looking for videos and looking for evidence like this, but we did see an interesting article that prompted us to consider Tyler Perry. For those of you who don’t know Tyler Perry, he’s Medea, he plays his character in these comedies, and he’s also a movie mogul because he created his own series of movies and he produces other people’s movies, well, this headline caught our eye because it said that he announced he was going to hold off on an $800 million studio expansion in Georgia, which is where he was building out his own version of Hollywood, basically, after having seen Sora, and he said, “How could I possibly justify, investing, if you’re creating all these studios with professionals who are using cameras and fake backgrounds to make it look like somebody’s on the moon or on Everest, when I could just literally use this Sora to create it. He said, He’s already tried using it to put makeup on his face, that he would have to sit in a chair for hours to do, and Sora can do it now instantly. So, you know, within one week of announcing this new technology, this happened. 

Brian Beck: I saw another article, I wanted to highlight, Andy, because, you know, I’ve been saying for five years that these aggregator and accelerator models in Amazon selling and for brands to sell on Amazon, they don’t work. So, let me give you a little bit of context here. So, five years ago, a business model called aggregators came about where small 3P Amazon sellers were selling their business to these aggregators who would then instantly improve the business with better supply chain and marketing and data and analytics. But the problem with the model, Andy, is that, is that there’s no differentiation that, when you go and you buy these small companies, you don’t control the channel, like they’re all dependent on Amazon. And you don’t control the product either. I mean, there’s no real product differentiation, they’re small brands and they’re all selling through Amazon and a couple of other marketplaces. So, this company called Thrasio, which is one of the biggest Amazon aggregators, it raised a billion dollars in 2021. That was three years ago, they just filed chapter 11 this week. Oh my goodness, there was another one called PharmaPacks, that filed bankruptcy, they were doing a billion dollars in revenue on Amazon, a billion dollars. So, you know, think about it, if you don’t control the channel, and you don’t control the product, then you can’t differentiate. I mean, what do you control? What do you control? Well, what you control is your declining margin. I mean, you have no margin left, the P&L doesn’t work. 

Andy Hoar: There’s no barrier to entry.  Yeah, we can just scale your way into this business and out of this business. And, you know, if there are, if you’re not making something or selling it, then there’s no barrier to entry, other people can raise money. But I think the real issue here and reading the articles about it was that you’re not making the product. Forget about the channel for a moment. There’s so many variables associated with selling somebody else’s product that really does require some expertise. You can’t just genericize it and scale it. And I think that was another dimension here, but interesting how three years ago, worth $10 billion, actually less than three years ago. 

Brian Beck: Economies of scale do not solve a bad business model. Sorry, you can sell, you can’t build volume and make up negative profits in volume, sorry. Anyway, so there’s better paths for brands and ways to approach Amazon and the other marketplaces, but fascinating development, I continue to follow. As I posted on it yesterday in LinkedIn, this also gets to our core question, which is, you know, with all these folks going, now coming on the market, you’ve got obviously people that have a lot of digital skill, e-commerce skill from businesses like Therasio and others that are going to become available. And you and I, we talk to people frequently, how do you master this B2B e-commerce job search process? What are some of the biggest obstacles that people are finding in terms of finding the next role? Get all these people coming on the market. And the same time you and I hear about people looking for talent, what’s going on? Why aren’t they matching up and why aren’t they getting into the roles? What’s getting in the way? So you found an interesting article, Andy, about this, from Harvard Business Review. Why career transition is so hard? Do you want to tell us about this? 

Andy Hoar: Yeah, so you’re right. We hear companies complain constantly by not being able to find talented people. And we hear talented people complain constantly, I’m not being able to find the right kind of role. It’s, in this case, we’re going to take the perspective of the job seeker. They’ve done a lot of research around this. They just still did find really two reasons why job seekers struggle. One is that when you leave a job, you lack the institutional support that you had when you were in the job. You know, it was pretty clear what a promotional path was. You went from, you know, director to senior director, senior director to vice president. There were markings along the way. You sort of knew what was in front of you, but today it’s a more of a gig economy where people are working in kind of amorphous areas, like digital transformation, you can’t really point out in a structured way, what value you’re adding, plus it’s hard to tell people what value you did add when it’s like, I thought about digital transformation. Like how would you justify to somebody, you did a great job of digital transformation. You got some metrics, but a lot of that soft stuff, like we changed the way the company thinks. Those are hard to explain to people, especially when you’ve got a pretty significant comp package and they’re saying, okay, what does that really mean? Did you just manage a bunch of people? And what happened? The other thing is you kind of lose your professional identity, especially if you work for a company a long time, all of your network is within the company that you were just laid off from. But the other kind of high point in this article was that, the biggest barrier is that people don’t know what they want to do. They know what they don’t want to do, but they don’t know what they do want to do. And again, if you don’t do this very often, you’re not really accustomed to sort of explaining to people, hey, this is my ideal job. I know when we talk to people, I always ask that question. Money aside, what would you like to do? And half the people really don’t know. They refer to what they were doing before, which is the state that, I get social psychologists call liminality, which is halfway between a past that’s over and a future that’s uncertain. And people are not comfortable in that area. Again, sales people are because every month is like that, right? But the average person is not. And so that’s why sometimes it forces you to think about stuff that you’re not used to thinking about. And why do we always hear stories about:  I never would have jumped, but when I did, I found something I really love doing. Let’s be honest, you weren’t in that mindset. And so you’re stuck in that middle ground.

Brian Beck: So how do people find jobs? We pulled this data together too, about the traditional paths to, you know, finding the next role, right? And these are kind of the ways people do it, networking using LinkedIn, right? And we see people endorsing one another on LinkedIn. That sort of thing, recruiters obviously, but you know, the recruiter world is one where they know about the jobs, but also it’s very focused. I find that it has to be what they’re working on today, right? So the recruiters, you have so many of them. And if you’re a job seeker, going to a recruiter, making sure that you’re networked to them, et cetera, but in terms of actually, you have to fit what they’re looking at, right, at that moment, right? And then there of course traditional, you know, job sites and boards, right? And this is the way that most people think, particularly they’ve been working for a company for 40 years or 30 years or 20 years, they go and they go, oh, let me look  on Indeed, or Career builder, or Zip recruiter, or LinkedIn, right? So any thoughts on this, I mean, this is what I see. 

Andy Hoar: Well, just that, you know, the article, I’m going to point it in this, that too, about the networking part. That’s clearly the most important. It’s also the idea of the strength of weak ties, called the bond group, and that’s the group where you go deeper with the existing friends and they’re kind of your emotional support network. But it is, they studied this, LinkedIn and article about this, 20 million people in this research study, and they found that the vast majority of people who got jobs through LinkedIn or reported having success got it by networking with people in the second, third and fourth concentric circle. 

Brian Beck: Well, so we’ve got this unconventional and conventional way. This was generated by AI, right? 

Andy Hoar:  Yeah, so just very quickly here, you know, people don’t do this very often, so the last time people did it was maybe years ago, and so they think the way to do this is to create a resume and apply for jobs. Now, you can potentially get a job that way, but we’ll talk in a moment why that’s not very effective. The new way of doing this is, and we’ve even talked about this before, that, you know, it’s better to, I like to joke, work for a company before you work for a company. So the unconventional way of doing this is, see if it’s a good fit. The only way you’re ever going to know whether the company is a good fit on both directions is to work there. They can hook you up with a CEO, they can wine and dine you, you can put on a good show. At the end of the day, you’re not going to know whether you like it there, and whether they like you there, and so you actually do it. So why not just do it? That way you kill a couple of birds with one stone. Now, it’s not always possible to do that, but with executives when they’re, for example, RIF’ed, they do get packages and there’s time. So take advantage of that time to do some work. Work for a couple of companies, see what you like. I think that’s a good way to get over the hump too. And this is you should target companies, find out which ones and leverage your experience. 

Brian Beck: Right, and of course, I find the networking is the key to that, but we went out and asked some folks firsthand to give us some color on this. Andy, you interviewed a job seeker, I think just yesterday, right? What did they say? 

Andy Hoar: Yeah, so the comment was about executive recruiters and they said, they often keep new positions confidential or the executive recruiter prefers to reach out to candidates directly who are most often already in the role. So it’s kind of like, don’t call us, we’ll call you. And because of that, the other point was, it makes it hard to find top jobs on LinkedIn, for example, because a lot of the top jobs are hidden, which we’ll talk about in a moment. The other point was that said, there are some maybe opportunistic chances on LinkedIn. And this person said, I actually started my job search by applying for jobs on LinkedIn. This is a very senior person and had an interview with the recruiter for head of commerce in a few hours. He said, unfortunately, the role was too junior, but it shows that for the right kind of roles, LinkedIn could work.

Brian Beck: And you also talked to a recruiter, this is interesting, this is some interesting data here. 

Andy Hoar: Yeah, it just was fascinating. So this person who’s been doing this for a long, long time, you’ve seen through multiple generations of recruiting said, look, networking’s the name of the game, that’s where most of the jobs are filled. Your odds of landing a job through a job posting is something you’re on 3%. Well, that’s not very good. Those aren’t very good odds. So just blindly applying for jobs probably doesn’t make sense. This is the biggest insight. 30% according to this individual, 30% of the job market is hidden, meaning there’s no job requirement that’s been created. The company oftentimes wants to keep the job confidential, especially the more senior the position, or a person literally just left. And they haven’t a chance to do this. You’re on top of mind. If you’re Johnny on the spot, so to speak, you can slide into some of these opportunities before it ever gets out because that’s the other problem. By the time the job description is published externally, this person said, the company is late in the recruiting process because the job has already been socialized internally quite extensively. So when you see something come available externally, chances are several internal candidates are already on the docket and it’s really hard to compete with people internally. So you’ve got to be there when the roles open up and that’s somewhat difficult to do. But the way to do it, to your point, is to have extensive networks. One last point he said is create a target company, set of companies and reach out to those companies and basically offer your services. And he said most people here are pretty talented marketers, and turn it into a marketing campaign where you measure your success. 

Brian Beck: 100% Andy, you know, the best way to do this, my opinion, just take some time to publish some things about where you’re an expert. Go on LinkedIn, publish stories or blog posts or put a perspective out there. Jobs will come to you if you do those things. Market yourself a bit, you know, build your personal brand, that’d be my advice. And it’s worked well for you and for me, through our career for sure. So we asked our community what the biggest obstacle to finding a new job and B2B commerce was. We asked on LinkedIn and we offered four choices and the one that came out of the top, Andy, was the old way doesn’t work, 55%. When we say the old way, what we’re referring to is the build a resume and go on Indeed and Zip Recruiter and LinkedIn and look for a job and submit, it doesn’t work. Trying to find the perfect job was number two at 30%. So not to your point at the McKinsey article earlier, you know, not trying to find, not to solve her perfect, right? Also, limited professional network was 15%. Nobody said they needed the security of a big company. So the one thing, Jason Hein, by the way, chimed in on this on LinkedIn. Thank you, Jason, for your comment. He said, hey, you know what the number one obstacle to finding a new job is that the company that’s hiring doesn’t understand what they’re hiring for. So yes, Jason, I agree with that. There’s not much a job seeker can do about that, but I would agree it is a big issue. But the nice part about all this Andy is, you know, the networking piece, which is very important is something that we at Master B2B, solve for.

In this week’s Friday 15, Andy & Brian discuss:

– A new dating app based on people’s credit scores (and what that has to do with B2B)

– The next generation of conversational commerce.

– The Affiliated Distributors Marketing Summit and all of the buzz around AI.

—

Brian Beck: Good morning, Andy Hoar. Welcome to Friday 15. 

Andy Hoar: Or good afternoon, from the east coast. 

Brian Beck: I’m Brian Beck, we’re with Andy Hoar, my partner in crime.

Andy Hoar: You’re on the road, it looks like. 

Brian Beck: I am on the road, sir. I can’t disclose my location, (laughing) my knock on the door, so I got my window escape here, I got the sheets tied up, I’m gonna crawl out. I’m in St. George, Utah on my way up to Park City, Utah, to the little skiing this weekend, so yeah, taking the drive up from Southern California, it’s a long drive, so we decided to stop halfway through and I’m here at the, we find us at the Holiday Inn Express. (laughing) Got my coffee. So welcome folks. 

Andy Hoar: I saw an interview with the people who are an Oppenheimer and to put you in good company when they were filming in I think New Mexico, all the stars stayed at a holiday in Express, we’re talking about A-Listers, Academy Awardwinners stayed at the Holiday Inn Express. 

Brian Beck: Oh, well they have good coffee, what my son likes is the pork sausage, he’s 12, (laughing) he’s like, you can’t get barely in California, you can’t get pork sausage where we live, so, you know, here in Utah, you can get pork sausage and he loves it, so, (laughing) you go back and stay at the holiday inn. So folks, welcome to Friday, 15, we’ve got some great stuff going on this week, some really interesting things, we’re gonna do a report from the field, but before we do that, Andy, we have some. (upbeat music) He knew, he just loved that sound. So Andy, you found this week, this is absolutely hilarious. 

Andy Hoar: I was looking for this, so let’s be quiet. 

Brian Beck: All right, we’ll talk to Cindy about this one, but go ahead. 

Andy Hoar: We occasionally depart from B to B, rarely. This one is just too good to be true, so there’s a new dating app called Score. Yes, it’s a double entendre, as you’ll hear in a moment, but-

Brian Beck: Is that SCOR or E? Score? – SCOR or E. 

Andy Hoar: But not what you think, it’s actually a dating app that is tuned to people’s credit rating. So, crazy. I guess somebody decided this was one of those missing variables in the evaluation of a potential mate, is you wanna know what the credit score is. I guess you don’t want some deadbeat, showing up on in a Trans Am for the 1980s but with a credit score of 320. So they can match you up with people with similar credit scores. I think that’s fascinating. 

Brian Beck:  Did you just say that someone driving of Trans Am in the 1980s? Actually, that is kind of cool. If you have a Trans Am from the 80s. (laughing) Anyway, when I was in high school, that was awesome. So, all right. Now, that’s a fascinating thing. So, what we’re gonna talk about today is actually more about AI. And one of the fascinating things, this story came out, Brett Taylor. He was a CTO of Facebook. He’s the chair of OpenAI. He’s on their board. He was the co-CEO of Salesforce. Everybody knows this guy in Silicon Valley, but nobody knows him outside, right? But he founded this company here called Sierra. And this was in TechCrunch just a couple of days ago, two days ago, I think. How Brett Taylor’s new company is rethinking customer experience in the age of AI. He’s got some interesting goals here, Andy. Tell us about him. 

Andy Hoar: Well, you know what? This is only a matter of time. Now, we’re seeing kind of gen two, maybe even gen three of what’s called conversational commerce. And the original bots were a little bit problematic. They made some improvements. They’ve gotten better. They still have some weaknesses. They had an experience the other day with one with e-trade. It was terrible. But I’ve also had really positive experiences with these. But I think Brett Taylor finally realized, when it meant now we can take this to the next level. Those before were not AI-based bots. This is a pure bottom-up AI bot. This guy’s got a lot of credibility. And you can see what he wants to do. It’s pretty ambitious. He said, “AI will become the dominant form factor that people will use to interact with brands, not just for the sort of current trends like customer service, but all aspects of the customer experience.” I agree with them about this. I do think they’re gonna be better. They’re moody. They have infinite knowledge. But they’ve always just been limited. AI actually takes the limits off. It takes the guard rails off of it. So it’ll be an interesting thing to see what happens here. 

Brian Beck: Well, to me, Andy, this also reflects what Amazon, the announcement we talked about last week with Amazon Rufus, or two weeks ago, where it’s contextual, right? It’s adding all kinds of different aspects to the, to now companies that can put these things on their own site. And answer contextual questions. I think that’s part of the promise here too, is not just answering routine, where is my order, but contextual questions about where do I, and how do I use something, application questions? What’s the best for this particular use case? 

Andy Hoar: Well, and we talked about this. This is particularly, talk about this last week. This is not only a nice to have in B2B. This is quickly becoming a must have, because we have a workforce that’s starting to retire and a lot of their domain knowledge is leaving with them. Because it brings up some 25 year old good natured person who’s gonna work at the will call desk at Granger and expect them to know how this particular part or piece is gonna fit into this. How do you bridge the gap? It’s gonna have to be something like this. 

Brian Beck: Yeah, no doubt. And so, yep, so it’s fascinating. And the whole AI theme, our topic today is the buzz from the field. And I’ve had a busy, you know, last week and a half, 10 days, Andy. You know, you’re sitting back drinking lattes and I’m running around the country here doing all the work. I’m just teasing you. But, but seriously, the buzz from the field folks, as you may suspect, is all about AI. And I was fortunate. Thank you to Caroline Ernst, the head of e-commerce at Affiliated Distributors. I was able to attend their 2024 AD conference and marketing summit in San Antonio, a very cool city, by the way. Andy if you haven’t been there. And, you know, AI, just looking at the agenda and sitting through, you know, the talks and the keynotes, a lot about how to use AI practically. And there was some high-level trend stuff, I’ll share in a minute. At the end of the day, a lot of it was about the, you know, these companies and how are they, how are they practically using it? So, AD for those who don’t know, is basically a trade group. It’s not an industry association. They’re really a buying group, but they’ve introduced all these, you know, sort of groups within it. So they electrical, plumbing, different categories, HVAC. And they bring people together and they started this e-commerce division, I wanna say maybe 10 or 15 years ago and it’s really about, you know, enabling their distribution members with tools. For e-commerce, for data management, for PIM, things like that. So you’ll see a lot of the PIM companies, e-com platforms at their conference. But Andy, it was really about AI, this conference. And it probably, I don’t know, several thousand people were there. And some of the use cases, you’ll find these interesting. I won’t, you know, go through everyone. For those of you who are listening on our podcast, I have a list here of a couple of different use cases that I’m sharing that companies talked about in their panels. The one I wanna call out here is, I thought was really funny, Andy, is APR Supply Company, which is a mid-market distributor. They’re using chat GPT to write policies on how to govern AI. 

Andy Hoar: I love it. (laughing) Hey, each of your dog food. In fact, we have a story come up a little bit later about this. It’s, if it’s not good enough for that, then what is it good for? 

Brian Beck: Yeah, I mean, but, I mean, other practical things too, like ingesting sales orders into the ERP from emails. So think about the inefficiency, right? Of re-keying orders or emails coming in. I mean, B2B, you’re still getting a lot of these manual orders, even fax, right? PDFs, you’re getting orders coming in through email, taking and using AI tools to extract that information out of the unstructured data that’s in an email or the PDF and then bringing that into the ERP. Writing code is another common one. Ideal supplies using it for incoming traffic, predicting personas so they can create a better experience on the website. I heard all kinds of things. You know, everyone says AI is all about, you know, just content, writing content. I heard, I’m hearing lots of use cases in other areas as well. So it was a fascinating, fascinating to hear this, you know, practical ways people are using it. But this is something which is really interesting, Forrester Research did a presentation on day two of the conference and she talked about something called B-Y-O-A-I. What is that? “Bring your own AI.” 52% of B2B decision makers are concerned about B-Y-O-A-I in which employees use unsanctioned AI in their work. Have you heard about this Andy? 

Andy Hoar: I have, you know, reminds me of the first wave of innovation with all new technologies. We had the same thing with storage technologies, dropbox, one box, if it even still exists. That’s what it was. People would just, you know, do whatever it took to be more productive and then all of a sudden CIO’sI would realize it’s thousands of people using DropBox. DropBox then showed up and said, hey, you want to do a corporate license? This is going to follow a similar pattern. But it does show you that this has penetrated the consciousness of workers. And they realize that it can make them a lot more productive. Companies, however, are scared to death. Right. This could become the wild, wild west and open them up in all sorts of negative possibilities here. 

Brian Beck: Well, and for good reason, Andy, I mean, think about, I think the quote unquote, sort of risks to sort of security and information, privacy, and confidential information are significant. Check this out, Andy, less than a day ago. I think about 18 hours ago found this leak from an Amazon internal document or an email that this is reported in Business Insider, Amazon’s internal documents warn employees not to use generative AI models for work. Now, they’re not talking about Amazon’s, right? But they’re talking about using external AI to use it for putting internal information into so that someone can create notes or a summary document or something else using ChatGPT. Amazon doesn’t want their employees doing that, right? They’re worried and the key of the worry here is info security. 

Andy Hoar: But is there something ironic about this? Don’t use Gen-AI because we can’t trust it. Now, go out and sell Gen-AI because you can trust it. Right, right. Right. 

Brian Beck: Well, I mean, they’ll think about it too. I mean, they remain competitor, Microsoft, invested heavily in OpenAI, right? So ChatGPT. So they’re concerned about it from a global competitive perspective. What do you think about it? What if all of Amazon employees start throwing internal information into ChatGPT because it creates a nice summary of my meeting the other day. But then that meeting the other day was a whole bunch of things about what Amazon is doing, and then competitively, right? And now Microsoft gets all this information. So anyway, there’s a lot happening here around info security. 

Andy Hoar: This is the world of bartering information. We’ve had early incidents with this. We’ve all been in this scenario where a company is trying to give them the email address and exchange for a discount. This is no different. It’s bartering for value. It’s like, hey, put something in here. And what we’ll do is provide back a meeting summary, some synthesis of this, but you’re right. Once it goes into that system, it’s in the system. And you could be exposing yourself. So this is once again, another, just elevating the issue about the value of data. No question. And it was, I heard the Forrester person say something else, interesting at AD. This is what she said during her keynote: Humans aren’t going to be replaced anytime soon, right? So any time– so it was the anytime soon, please, they got me on this. We have this kind of the theme I’m hearing at these conferences is that, oh, it’s not going to change. Everyone will be OK. Everyone’s going to have a job. No, I don’t think so. 

Andy Hoar: I don’t know. I call these bedtime stories. You know, the fairy godmother saves the day, and everybody’s better off. Now go to bed and enjoy your slumber. This is nonsense. That is purposefully why they’re building these tools. What was Brett Taylor’s company Sierra about?  Working side by side with humans? I don’t think so. It’s conversational commerce, et cetera. It’s about taking what humans do, building it into a bot, having the bot handle it, not partially, but wholly. Now, we may play a game for a couple of years where it’s side by side in partial, but don’t kid yourself. The end goal here is for this stuff to replace humans in because it’s supposed to be better, more efficient, faster, more knowledgeable, et cetera. 

Brian Beck: Well, and there’s going to be new jobs created, no doubt, but there is going to be an impact. So this last just two days ago, Andy, we had this fabulous event in Los Angeles. So again, report from the field here. We’re at the 51st floor of the City National Bank Tower at the City Club LA. We had almost 40 executives from the LA area. We got together. We had a very robust conversation, I guess, about what? Guess about what, Andy? AI. We had really the who’s who of the LA area. We even had a couple people fly in from out of town for it. It was a great event, followed by dinner or cocktails. But in terms of what we shared and what we talked about, again, I heard a lot of practical use cases and how it’s being used. A number of different things here. A lot of folks talking about using it for content creation. There were two that were really interesting that came out. One is scanning thousands of customer service call recordings for sentiment analysis. Talking about how they’re doing this for some of their clients to really understand and also improve customer actual care quality, making sure the agents are answering questions correctly. He was describing thousands and thousands of calls a day for one of their clients and how they’re using these tools to extract information and trends and sentiment. The other one was really interesting. Pooja from Motion Industries was talking about online chat bots. And she gave this example Delta, someone apparently, a chatbot, a Delta apparently answered some customer’s question with some non-existent loyalty program. But had made it up. It was hallucinating. And the customer took Delta Airlines to task and said, your customer service promised me this stuff. He didn’t deliver it. I’m going to sue you. And they won $600,000. And then Delta had to end up adopting the loyalty program, it’s insane. You have to be really careful about what goes into these systems so you don’t get hallucinations. 

Andy Hoar: But you know there’s a solution to this, which is AI is going to monitor AI. I’m not kidding. So that was– you don’t just turn it loose and let it do whatever it wants to do because you’re right. It’s going to hallucinate. That’s the downside. But you can have a check in place to make sure that it doesn’t make up a new loyalty program. And you can use standard software AI to do that. That’s the piece. That’s the layer that was missing here. But I wouldn’t through the baby out of the bath water and said, hey, just because it hallucinated this loyalty program and Delta got burned, if they just spent a few more dollars, a few more hours, and had something double check, would it go insane in real time? They would have never had this problem to get the best of both worlds. 

Brian Beck: Yeah. No question. We also– one other interesting point Andy was the whole– the guys from Slope were talking about this whole sort of– making this whole process of credit approval much faster and approving people much faster. But also, interestingly, some use cases around suspending, proactively suspending accounts. Knowing if someone is going to default before they even purchase. I mean, it’s using AI to predict the default of someone so that they could actually say, hey, we’re putting your account on hold. Well, wait a minute, 

Andy Hoar: And how do you know why we talked about Score? Because this ties right back into that. 

Brian Beck: There you go. It circles back to Score. Yeah, people– maybe they should all work together. I don’t know. So we asked our LinkedIn community, what’s the most practical use case right now for Gen AI and B2B commerce? Far and away, number one, was 67% was marketing and product content followed by a distant second with customer service chatbots, writing code, and at the end here, technical documentation. I think everyone sort of sees the use case on marketing and product content. And a lot of people testing that. But this is really across the board. And I asked a question at our roundtable Andy, how do you prioritize? And somebody said, well, you do what Jeff Bezos did, right? You look at the customer first and you start there. And I have to agree with that. What pain can you solve for the customer using these tools? And there’s so many applications here for AI. It’s incredible. 

Andy Hoar: Yeah, wherever there’s high level thinking and taking place by humans, there AI is going to fit in there. And even some low level thinking. The thing about product and marketing information that makes AI so powerful is that if it exists anywhere in the known universe, AI can find it. That’s a weakness to AI. If it doesn’t already exist, then it might just hallucinate something. Again, that’s going to get better. But what would you do? Pay a human to scour the internet to find all this stuff, do a bunch of searches. Why don’t just have AI do it? I do think you’ll see these numbers change, though. These are the very early use cases. They’re a little safer. It’s a bigger problem. There isn’t much of an alternative. That’s why marketing and product content is so high. But I bet if we do this in a couple of years, customer service and anything around the customer experience, will start to rise because that’s the next problem that people are just realizing. They can’t get talented people. There’s people making mistakes. It’s an annoying process. It’s a friction in the flow. You don’t contact customer service unless you have a problem. You don’t come off and say, just wanted to thank you guys for such a great process. So if you can eliminate friction with AI, you sure is how it going to do it. 

In this week’s Friday 15 podcast, Andy & Brian talk about:

-Owens Corning buying doormaker Masonrite for $3 billion

-The initial feedback from the Beta group testing Microsoft’s co-pilot AI tool

-Whether online revenue is just shifting revenue from the offline channel to the online channel

—

Brian Beck: Good morning, Andy Hoar, welcome to Friday 15 or good afternoon if you’re on East Coast. The middle of February, 2024, ready to be here. Welcome to Master B2B Friday 15. Andy, happy Friday.  Well folks, we got a lot of really cool and exciting stuff to dive into today and we got a lot of data to share and we’re tackling a great topic, but before we do that, Andy, of course, as usual, we have some breaking news. Let’s go ahead and share some of that. Andy, exciting stuff happening this week. Our friends at Owens Corning, bought door maker Masonite for $3.9 billion. My goodness, if this was a consumer retail acquisition, it’d be like headlines on CNN or whatever, but yeah, right? But it’s for us to, you know, tree dropping in the woods here, right? No one watching. 

Andy Hoar: Yeah, it’s $1 billion, I mean, you’re right. I mean, this is a big deal and this is what makes the real world operate and like you said, it was hardly mentioned in the news. 

Brian Beck: Well, it’s interesting, Andy, and it’s anecdotal, but I’m seeing a lot of this kind of activity happening, particularly in distribution where companies are buying, you know, other companies as a way to grow their business. So, really interesting and grads to our friends at Owens Corning on that acquisition, I’m sure it’ll help them grow. Another story, early adopters of Microsoft AI bot, wonder if it’s worth the money. This is out of the Wall Street Journal. Andy, what’s happening here? This is an interesting one. 

Andy Hoar: Yeah, well, you know, we’re in a hype cycle around AI and I think everybody saw it last year with Chad GPT and their jaws fell to the ground and then Microsoft said, hey, you know, through their 12 or 13-billion dollar investment in Open AI, let’s get this into the product. So they embedded it in the productivity apps for the office suite, so Word, PowerPoint, Excel, and they started charging companies, like $30 a month per user to have it embedded and they’ve been going through some beta testing for and guess what they discovered that most people don’t find it very useful. It hasn’t matched the hype, because the reality is it has not matched the hype yet. And so they put it out there, and they had quotes in this article from various CIOs, CDOs, CTOs who signed up for this and said, you know what, it’s basically a really impressive writing app. It does a lot of writing stuff, but the PowerPoint stuff and the Excel stuff is iffy at best at this point, but they’ll smooth that stuff out. What I found interesting is you know what the killer app has turned out to be, and I know we’ve even used this before. 

Brian Beck: Yes, I know where you’re going. 

Andy Hoar:  Meeting notes, and what’s happening is people are turning that on, especially on Teams, and many of them aren’t even attending meetings now. So we love a meeting of 10 people across multiple time zones, so they’ll just send their AI app to join the meeting, it’ll read this summary afterwards and they’ll just skip through all this stuff that wasn’t relevant to them. You can’t do that when you’re sitting on the call. So look for this, and what could be really interesting in the line is we can all have our bots having a meeting on our behalf. 

Brian Beck:  Right, well yeah, and I’m gonna start sending my bot to our meetings…Actually one thing I noticed, Andy, I was at the AD summit, the Commerce Summit this week in San Antonio, and AI is all the rage, but what’s fascinating is we’re starting to see like you just mentioned on note taking some real practical applications coming out of the woodwork. One, in one funny example, one company said, “Hey, I used AI, I used Chat GPT to write my AI security policy.” So it’s monitoring itself, it’s really funny. So I mean, how people are using it, and a lot of it is around sort of content. So let’s get into our topic today is online revenue cannibalizing offline revenue. Now this is a question, I heard it at AD this week, Andy, a couple of executives are like, I’m still fighting the fight of really making the case that digital investments are existential, the investments that have to be made, but I’m still getting the pushback from the C-suite saying, “What’s my incremental revenue?” And aren’t we just shifting revenue from one channel to the other? And we pulled some interesting data on this and the whole shift versus lift argument, right, Andy, which is it, right? And honestly, it’s some of both, isn’t it?

Andy Hoar: It is, but what I find with B2B companies, and I think B2C companies did this 15, 20 years ago, is they would think about online as another channel, right? Even the channel language is amorphous, but they think about it as another channel and it had to be self-supporting, it had to be self-sustaining, right? The problem with that is that the online channel’s unique and that it actually modifies all the other channels, in particular the offline channels. So you can’t use it in isolation, but how many times have you and I heard this, people try to make the business case for digital, and the C-suite say, “Well, you’re gonna have to lift some revenue here online.”  Ignoring the fact that online actually is saving money that might be defecting to a competitor by moving from the offline environment, where it’s not, you know, wanted, or it’s not, well cared for, to an online environment, where actually all the research shows, when you move somebody from the offline to the online, they spend more, they have a better experience, et cetera. So there’s a definite reason in B2B to move people from offline to online, but too many executives, I think still see that as a one-for-one trade, and they look at the cost of it and say, “Well, it’s gonna cost us money, “we’re not getting much out of it.” It’s like, “No, wrong approach.” 

Brian Beck: It’s the wrong way to think about it, I think, and we’ll see, we have some data in here that will show that, but I mean, B2B e-commerce, it’s huge, $2 trillion…talking about this prior to our podcast today, and there’s enough marketing here, to satisfy both shift and lift, right? But I think, folks have to recognize, this is a broader effort, a broader trend, any comments on this? 

Andy Hoar: Yeah, there’s enough room here for everybody, and the fight is for the future, not the past, and the team of these companies still think like, Brian you were talking about this earlier, you said you went through this, and when you were in the B2C world, 10, 15 years ago, it’s just amazing we haven’t learned these lessons, but if you go to the next slide, what’s even more interesting is that  most agree that B2B e-commerce, excluding EDI and the rest of that stuff, there’s really about 17% online penetration. So what about the other 83%, are they really that concerned that if we go from 17 to 18, it’s gonna destroy the business?  And more importantly, it’s going from 17 to 18, but it’s gonna go against a larger denominator because the industry’s growing, so it isn’t a zero-sum game, and I just think both approaches are highly flawed, but there’s a lot of room here for all the channels to win, and more importantly, it’s what customers want. 

Brian Beck: Yes, that’s exactly right. Look at this data from McKinsey, B2B decision makers are using more channels than ever to interact with suppliers in 2016. It was five, right? And now this is as of two years ago, it’s probably increased since then, 10 as of the end of 2021, 10 channels, adding channels. So the data is telling us that those folks, that people want to use all these channels, and it’s interesting, Andy, you know, some of this, what I would consider to be some of the smartest and the fastest growing and most advanced sort of thinking-wise, many factors in the market, they say to me, “Hey, I just want to be in front of the customer wherever they want to buy, and I want to be represented there really, really well, and I can’t control buyers’ preferences on where they want to shop, or where they want to buy and look in research products, why am I trying to control that if I’m a manufacturer?” 

Andy Hoar: I heard from the comment we got on the LinkedIn about this, too, is I mean, I feel like a broken record saying this, or is it a broken stream now?  A broken podcast, yeah. (laughing) – But, you know, that isn’t the way you judge these things. And I just think that’s why oftentimes we start with metrics, because that’s really where you need to begin these discussions, like, what are we really measuring against? I think that the fact that people who are buyers, prefer to use more channels, means that the buyers, as they always have, determine where and how and when sellers are going to sell to them, right?  And there’s some more, there’s another fascinating finding from some a McKinsey story, or McKinsey report that, this one’s a little denser to read, so I’ll explain it that the more channels that B2B companies offer selling through, the more successful they are at stealing share from the competitors. So, for example, companies that are selling through two channels, they reported 51% of those companies that sell through two channels, stole share from the competitors the prior year.  72% of B2B companies that sold through, seven or more channels, claim that they stole share from companies or before. So, there’s a correlation here between the number of channels you sell through and the amount of share you’re stealing from the competitors. So, buyers want to participate in multiple channels, and it’s showing here that sellers that maximize the number of channels they sell through are actually winning this year or some game against the competitors, but stealing share. 

Brian Beck:  It’s fascinating. So, is the story then, and again, I hear this, I heard this this week, is the story that a Chief Digital Officer or a VP of Marketing and eCommerce or director of eCommerce – how do you translate this, Andy, into a story that the CEO or C-suite’s gonna buy off on, when, particularly when you have like the sales team, and this still happens, I heard it this week, the sales team going, no, you can’t sell over there, you can’t sell directly, you can’t sell in Amazon, you can’t sell these other places, it’s gonna destroy our relationship. We know it’s gonna cannibalize our existing business, I heard this firsthand from people saying, oh, I can’t convince my SVP of marketing and sales who manages both online and offline, you know, I can’t convince them to invest in some of this stuff because they have to feed the beast, they have to feed the traditional distribution channel, right, I can’t cannibalize that, why would I sell directly? It’s gotta all be incremental, right? 

Andy Hoar: I don’t want to minimize that argument because there is some truth that they’ve heavily invested in certain channels, but what it gets lost in this whole conversation is, it doesn’t matter what you want as a seller, all that matters is what do buyers want because they’re gonna decide on their own, and you could have a great experience that you’re offering to buyers, but if they choose not to like it, it doesn’t matter, it’s all wasted, sunk me cost, and so that’s what’s missing in the conversation. When I talk to companies, I always ask – what is your buyer data say? And sadly, most of them don’t know.  Especially online or omnichannel companies, they got offline buyer data, but when you ask where are people researching, where are they buying, where are they servicing, can change based on product and change based on customer type, you need to service all these channels, and most companies don’t know, and as a result, they sort of default to what they’ve always known.  

Brian Beck: I think in the book, in my book, I argue that you really have to understand the ultimate customer, the user of the product in the field, and understand their buying preferences and things like that, as you make these decisions, but you’re not going to change how they want to buy. I think one of the greatest examples, you know, of all of this, Andy this is Grainger, right? You brought this example to light, and how Granger has evolved, how it’s thinking about, presenting multi-channel selling. 

Andy Hoar:  Grainger’s always had a will call window, which was typically you would call the store, you’d call the customer call center, they would message the store, and you would go pick it up, because a lot of people needed these things same day, and they couldn’t wait for it to be delivered, right? So there’s the will call window on the left, and then inside the branch, you can see there’s will call right next to customer service, right, that’s all fine, and Andy, that’s existed for a long time, increasingly though, this is people ordering online and going to the store, which by the way, that’s a net positive. When people order online and go to the store, that means online, you know, people are offline, and it increases the ticket value. You can pick up other stuff. What’s happened recently is that these have now, probably post pandemic, they’ve converted from being exclusively will call, which has an old metaphor about it, to an online order pickup, and you can see that little one in the bottom there, in the picture for our podcast, you can see it says, express slash will call. So now express has overtaken will call, and at the top, if you look very closely, under the express pickup sign, it says place order, which means you can actually place an order in the store. So what’s actually happening here is, all these channels are cross-modified with another, and you and I have seen this in the research, online lifts offline sales, and offline lifts online sales. 

Brian Beck: Absolutely. Andy, I lived this. This is another example of B2B adopting stuff that’s been in B2C for years.15 years ago, when I was running eCommerce at Harbor Freight Tools and PACSUN and the consumer site, we were bringing on products, we were allowing people to pick up product in store that they would order online and vice versa. Andy, funny story, our number one selling item at Harbor Freight Tools on the e-commerce site, was a trencher, a $3,000 trencher, guess why? The stores couldn’t put it in their back room, it was too big and bulky, and it was our number one item, and we would get people coming to the store and ordering it from the store, having it delivered to their home. We had people ordering in store other times, but when we were driving traffic to the store, we proved out, at both of those companies I mentioned, we proved out that folks were buying more when they went into the store and vice versa when we extended the aisle from the store through e-commerce or associates would have the extended aisle available to them, and they could order for pickup in the store or shipment to home. It all works together, and it’s just another example of B2B catching up to B2C, right? Thinking more on the channel. 

Andy Hoar: Buyers have already decided they want the channels to blur and to blend, but the challenge has always been on the sell side. They organize a certain way, they struggle with it, they think a certain way, and the reality is there’s no question here. The buyers have already decided, this is only a question when the sellers actually get on board with where the buyers are, which is why the conclusion here is that it’s about both shift and left. You need to judge all channels, not just digital, all channels by these very same metrics, because I often joke that digital is held to an unfair standard. They have to demonstrate incrementality around everything, but one of the offline channels don’t, does the customer have to demonstrate incrementality? 

Brian Beck: Yep, it is the wrong way to think, and I think as you look at companies to your point that are winning share, Grainger, Amazon, others, they do not think about incrementality, the way that a lot of traditional B2B does. Guys, you have to, CEOs that are listening here, you gotta be thinking differently about this. It’s about everything working together. I love to say, Andy, it’s not incremental. It’s existential.  

This week, Andy & Brian discuss whether a recent court case means Amazon will be treated like a distributor and be responsible for the quality of the products it sells.  

Then they dig into the new Amazon AI chatbot called Rufus, and whether Rufus will put the salesperson out of business.

Brian Beck: Welcome to Friday 15, everyone, with Master B2B. My name is Brian Beck, I’m here with Andy Hoar. We’ve got some good stuff coming today. We’re talking all about Amazon. We got some news about Amazon this week, which is really interesting and exciting we’re going to dive into that in just a minute. But Andy, I’m excited about some breaking news, which of course is all about Amazon.

Andy Hoar: Hey! You messed up the breaking news. – What’s the other guy look like?

Brian Beck: What other guy? (laughing) – You know, oh my nose, yes. Well, for those of you on the podcast, you can’t see my nose, but I got smacked by a volleyball last weekend. My wife and I like to play volleyball. I’m 52 and for some reason, we decided we wanna play against high school volleyball players who like to hit the ball really really hard.

Andy Hoar: Are you talking about all girls though?

Brian Beck: Oh, shut up. It’s okay, by the way, girls can hit the ball really hard too. (laughing) – Yeah, they can, they can for sure. Anyway, it’s fine. So, I recovered, luckily, didn’t break, but yes. So, our breaking news, I’m going to go back to our breaking news. Amazon could be held responsible for third-party products sold on its platform. So the US Consumer Product Safety Commission has a case in front of it where they’re ruling, they may rule that Amazon is a distributor, and if they rule Amazon is a distributor, that means that it would be liable for third-party products, including the safety of goods it sells, it sells for outside vendors on its website and ships for them through its logistics network, not just the platform. Amazon has historically claimed, “Hey, we’re not responsible for those products. If a third-party seller puts them up on the site.” And you have cases, Andy, where some stuff was documented in the Wall Street Journal over the past few years, where bicycle helmets used by kids that don’t work or motorcycle helmets, I think it was a motorcycle helmet, somebody died from a helmet that was not actually compliant with federal safety regulations, and they bought it from Amazon. They bought it through a third-party seller. So this is a real issue, and it has implications, I think, for the folks who manufacture and sell products on Amazon, particularly some of the big established brands. What are your thoughts?

Andy Hoar: I’m 50/50 on this one. On the one hand, I think they can’t be absolved of responsibility for what they sell. On the other hand, it will significantly curtail what’s available. They won’t take as many risks. And so there’s good and bad about this, but no doubt about it this would be a monumental shift. If Amazon had to be responsible for this stuff, I’m sure the distributors are thrilled about this idea, because they are, if Grainger ships the exact same thing it shipped on Amazon. Amazon’s not responsible for it. Grainger technically is. They want an even playing field, but yeah, it’s going to be interesting when to watch.

Brian Beck: Well, I think too, if the other side of this too, is those companies out there that stand by their product, that’s the traditional manufacturers who, they stand by the quality of their product, it’s their key differentiator in the marketplace. This could actually be good for them, ’cause what Amazon would do, if they have to do this, there are billions of products on Amazon, Andy. And they would have to really go in and make sure that the sellers, they’re going to have to make some broad stroke decisions on some of these sellers. Just the order of magnitude of the challenge of addressing this issue, they’re going to probably have to make some significant changes in how they manage sellers and tighten that quite a bit. And so I think in a lot of ways, that would be good for those traditional brands, and ultimately potentially good for the customer of Amazon too.

Andy Hoar: Well, final thoughts, it might actually finally force them to clean up for the last time-ish, their rating stuff, which has been highly suspect. And so it might raise the bar for that too. So yeah, it would be interesting to watch.

Brian Beck: So today guys, we’re talking about – will AI change the game for B2B on Amazon? This is a really fascinating topic, Andy, and again, all about Amazon today. Well, for those of you not watching our on LinkedIn Live or watching the recording, those of you listening on the podcast, there is, we’re showing a picture of a dog. What the heck, why are we showing this?

Andy Hoar: That’s any dog too, a royal dog. These are corgis. – That’s a very impressive dog. – I think it’s a corgis. – A royal dog, that is a corgis.

Brian Beck: Yeah, short legs and really cute. Why are we looking at a dog? Well, Amazon, when they started, had a dog, well, it was an Amazon. It’s one of their former editor-in-chief and principal engineer, had a dog named Rufus that he brought, it was a fixture in Amazon. He brought him to work every day. He was called Amazon Shortest Volunteer Worker. He was, you know, actually called that. And he was in the office for, I don’t know, 15 years or so, and really became a part of Amazon’s culture. So what does this have to do with AI? Well, funny enough, Rufus is now the name of their new Gen AI-powered conversational shopping tool. Rufus is wandering around going, “Oh, I thought I was a dog.” (audience laughing)

Andy Hoar: Yeah, just like people know, we’re not in front of a live studio audience. That was a, laughtrack, very clever Brian.

Brian Beck: So Amazon named their AI after Rufus, after the dog, right? Why, hey, why not? It’s pretty creative. I think it’s a little too close to Dufus. (laughing)

Andy Hoar: I agree. I think that if it doesn’t work, all people are going to call it Dufus, right?

Brian Beck: Anyway, sorry, Rufus, but it is what it is. Here’s some context for everyone. Amazon traditionally plays in what’s called the tailspend or spot buys. What we mean by that is the customer, when a customer knows what they want, a B2B buyer, they want it in small quantities, the orders unanticipated, it’s uninfluenced by the procurement department or the parts of the business, and they need it fast. That’s where Amazon has built a lot of its volume, both in B2B, and to some degree, B2C too. A lot of B2B buyers will buy through standard Amazon. That’s 15 to 30% of overall B2B spend. We have some data we’re showing on the screen here from the Hackett Group from a few years back, but it shows, you know, kind of the, you know, where spend lies for B2B companies. And a lot of it, 40% is influenced by strategic sourcing or influenced by the buying desk where it’s what’s called more of the sort of the planned spend or, you know, more consultative or involved selling. So the question, Andy, is, you know, really around this new tool, does it have the potential to help them shift this. So tell us a little bit about what this Rufus is, Andy.

Andy Hoar: Well, you know, in the tradition of chat GPT, and BARD and the others, now Amazon has its version. Maybe a little late to the game, and as a matter of fact, but it’s a Gen AI-based product finding tool that’s been trained on Amazon’s product catalogs, reviews, information, et cetera, that allows shoppers and B2C buyers and B2B to ask contextual questions now. Conversational commerce, as they called it a couple of years ago. And to your point, what makes this particular interesting is it seems like it’s now Amazon also throwing down the gauntlet that they now want to get out of just being a finding company where if you know what you said, what you want, you go to Amazon, you can find it. They want to actually add to that the ability to discover products, which traditionally they have been weak on. We’ve done content about this before, where Google’s stronger on the discovery side, Amazon was just stronger on the finding side. Both want to get into each other’s businesses, but Amazon now with Rufus, we think, has the ability to do that, getting the discovery stuff. It really is kind of a recommendation engine on steroids, that’s the way I sort of think about it. Again, conversational commerce, and there’s a significant opportunity here for Amazon and the advertising side in B2B. This is the part that has been sort of flown below the radar, I think, with a lot of people in the last couple of years. Amazon has dramatically increased its revenue associated with advertising. So once you become a, once you reach critical mass, now you make money off of selling people’s stuff. You can make money off of sponsoring sales of things. Now you control the Buy Box, and so Rufus could do this, and we found an example of this. So I was just thinking in preparation for this, what if Rufus was looking for a coffee drip maker? And so there was an example of that where somebody asked Rufus, what’s the best drip coffee maker out there? Rufus instantly replied with Mr. Coffee, showed a picture, an image of it, and recommended it. Well, I thought, what if I ask Alexa? So last night I asked Alexa, and Alexa says, “are you shopping?” I said, “yes,” and Alexa said, “the top rated coffee maker by ratings is…” and it listed the name of some Italian coffee drip maker. Interesting that Alexa seemed to be more objective and unbiased about it, whereas it feels like at least in the outset here, Rufus was pushing a sponsored product.

Brian Beck: Well, I think we’ve seen precedent for this too, Andy. In Amazon, I mean, clearly, as you look at their most recent earnings report, just came out this week. You know, advertising is a key area for Amazon, and I think they’re thinking about ways to monetize this. So it’s going to be a fine line, to truly deliver this contextual, quote unquote, unbiased. But I mean, are traditional sales processes unbiased, Andy? No. So maybe that’s okay, and maybe that’s part of what the AI is going to capture is that. And by the way, Amazon collects so much information, behavioral data, obviously purchase data, but even think about things like Amazon Prime Video, and other behavioral signals that they can collect, they have an advantage on this kind of conversational commerce, quote unquote, like we would talk about it five years ago, but this sort of next generation moving up the funnel, getting into more difficult and complex sales, they have an advantage versus really anybody, because even over at Google, certainly over at ChatGPT…

Andy Hoar: They’re going to have to establish something, and B2C, hey, if they say the coffee drip maker, I bet I don’t like it, so what, right? But if you’re a B2B company, and they recommend a product that’s sponsored, that isn’t actually the highest quality product, maybe a knockoff from Asia, for example, if they’re not responsible for what they’re selling, and it breaks a machine or you get fired, that’s a whole other level. So trust is really key. So Amazon’s going to have to demonstrate that Rufus is a trustworthy advisor.

Brian Beck: That’s right, and then you get back into the first part of our session today, talking about being now held responsible for or liable for third-party product. So yes, you’re absolutely right, B2B has a lot of implications. We’re showing on the screen a couple of examples of Rufus in action here, it’s actually, and you made this point, it’s not integrated into the search experience, it’s actually a sidebar application. So it’s not forcing customers to use this, at least not today. But is this pickleball paddle good for beginners, provide some back and forth? What are the best toys for a dinosaur-obsessed five-year-old? These questions being put into this AI tool, are contextual, and there’s lots of other examples. “What do I need for cold weather golf”, or “what to consider when detailing my car at home”? I mean, these are questions that aren’t, “hey, find me this product with this SKU number”. So that begs the question, I pulled up an article from a few years ago from Inc. Magazine, Andy, that says, three reasons why artificial intelligence will never replace sales jobs. And what was interesting, Andy, this is a few years back, and they were citing your research when you’re at Forrester about the death of a salesman, B2B salesman, and this is a quote from the article, I’ll read it for our podcast listeners, “While some purely transactional sales positions move to the way self-serve model, jobs that involve high consideration products through a complex sales process will be enhanced, not replaced by AI.” That’s what they talked about, but as far as, what we’re talking about here though is AI really helping with that more complex sales process, potentially, is it there yet, no? But is it going to get there with this Amazon piece? And is this, in fact, the beginning, truly of the death of a B2B salesman, Andy, as you predicted 10 years ago, or whatever that was? It’s interesting, ’cause we keep going back to the death of a salesman research, I keep seeing it everywhere that you did, ’cause I think it was prescient.

Andy Hoar: Well, I remember when I was writing the research in 2015, I had no idea that we were going to have AI, or pandemic, or any of that stuff, right? I mean, we sort of knew AI, but it seemed like science fiction at the time, but it didn’t take a genius to figure out, as software gets more sophisticated, recommendation engines were getting better. Now you have this AI, and I think everybody was thrown for a loop last year with chat GPT because it took it up on an order of a magnitude level. I mean, it was that much more impressive. People saw this, and then it seemed almost like magic. Well, take that and apply that to the circumstance we have right now, and it does not string credulity to think that within a couple of years, you’re going to be talking to a chatbot, powered by AI, that’s going to be able to recommend products that have great ratings, that they’ll be able to bring in social signals, be able to tap into what’s going on in communities, not to mention, like you said, just droves of information, that they’ve had over sales, over use cases, by use case over years. So no humans can be able to compete with that. Now, what I think is going to happen is AI is going to augment or enhance, like the Inc article said, initially, but I don’t agree with that statement that that’s an end state. The end state is it will replace what humans are capable of, it just has to because it’s so much better. It’s so much more sophisticated.

Brian Beck: And think about this too, you know, if you’re a B2B application, let’s say you’re installing an HVAC system and you have a specific application for that HVAC system, as Amazon deepens, its reach into B2B with Amazon Business, you’re going to get more and more customer feedback, Q&A sessions, purchases by specific types of customers. Amazon’s going to mine that information, to then understand, across millions and millions of transactions, to then understand what is the best application and be able to communicate that through AI, to a buyer who’d ask the question, “What is the best system or component for this application in my HVAC system”? So, you know, it has enormous sort of implications, I think, for the B2B cycle.

Andy Hoar: Oh, it does. And actually, there are a couple of interesting parts about it. One is that I think, initially, it’ll be humans that are backed up by AI. So, humans will make recommendations, and AI will check the humans to see if it’s correct. But over time, that’s going to flip. And eventually, it’s going to be the AI making the recommendations and humans will be double checking it to make sure that it works. Now, the reason why this is almost like good timing, it’s not good timing for people who want to have these jobs, but it’s good timing for B2B because many of the people in B2B are trading out of the workforce that knowledge they have about applications is disappearing as these people leave. And so, you can’t hire a 25-year-old who’s never installed insulation and teach them the nuances of decision making, as well as the guy who was retiring and had that. So, AI is necessary because I hear this all the time from companies, they’re really struggling to find A) enough young people who want to do this and B) enough young people who have knowledge in the space. They’re really hard to find.

Brian Beck: I wanted to just get through our LinkedIn poll. We asked our community, “Will new generative AI tools allow Amazon to capture sales of more complex B2B products in its marketplace?” The answer 75% was yes. So, clearly the community agrees that, at least to some degree, you know, this is going to impact Amazon’s ability to climb up the funnel into some of those other categories of spend we talked about earlier.

Andy Hoar: You know, I think if we go back in history, but what have been an interesting thought experiment. If we’d asked this question a year ago, what would the number have been? It probably would have been much lower, but a year later of Chat GPT and BARD, et cetera has changed the way people perceive this.

This week Andy & Brian talk about recent studies looking at remote work.  Are in-office workers getting more promotions than those who work remotely?  Are people who work in the office actually more productive than those who work at home?  And does that distinction even matter?

Brian Beck: Happy Friday, welcome to Friday 15, My name is Brian Beck, I’m here with Andy Hoar. Andy, great to be here with you this week. Action packed week, lots of breaking news, we’re gonna get into that in a minute, but happy Friday, Andy.

Andy Hoar: Yeah, this is a really good topic. When we’ve talked about a few times before, but now there’s some new research as we wanna talk about. So I say we jump right in.

Brian Beck: Absolutely, Andy, so here we go. Let’s start with our breaking news. So, Andy, are in-office employees favored to over-remote workers – new research shows that maybe that’s the case as Elon Musk says, go pretend to work somewhere else. Is this coming to pass? Wall Street Journal says remote workers are losing out on promotions. So, what’s the data telling us, Andy?

Andy Hoar: Well, there’s always been this kind of bias toward you, feel closer to people you see more frequently, either in person or in Zoom, but out of sight out of mind is the old saying goes. And I think what we’re finding is post-pandemic people who’ve returned to the office as a part of their job versus stayed remote are getting more opportunities for promotions, they’re getting more favorable treatment, et cetera. The question is, is that legitimate? Does the data bear out that they’re more effective, they’re more productive if they come into the office? Because that’s how you should be promoting, right? The more effective, more productive people, not just if you’ve seen more often.

Brian Beck: Well, look, I mean, this I read through this article from the Wall Street Journal and this one of the things that stood out to me, Andy, was this stat, a Gartner survey in 2021 found that 68% of executives and managers believe that in office workers were higher performers than remote workers. That to me says it all.S o, you’re going to line yourself up for a promotion by going to the office, are we going to end up with people in the office, all the people who have any kind of aspiration of advancing their career, going to the office, everyone else staying at home, is this like a dichotomy? I mean, it’s fascinating. Are we going to have two different types of workers and those that go in and the ones who actually want to succeed in life? I don’t know. Well, that’s a big number.

Andy Hoar: There’s a problem with this too, which is in B2B, you have a particular issue because you have a lot of people who work in factories, manufacturing plants, and then you have a kind of a political problem where you’ve got the white collar workers who can work from home because that’s their job, makes that possible. We’re going to talk about this one in a moment. And then you’ve got more of the blue collar workers who were working in the factories and distribution warehouses, et cetera. What do you have a two-tiered company where all the white collar workers worked from home, all the blue collar workers work in the office? I was told at a conference, but two years ago,that was just not viable. But I want to come back to one thing you said, that piece of research that you quoted. There was one word there that mattered more than any other word. It’s the word ‘believed’. They said they believed they were more affected. They were more productive.

Brian Beck: This is the most important thing.

Andy Hoar: I don’t know.I’m kind of a reality guy. No, you’re a data jockey. You’re a data perception. But certainly the perception is of this. But it’s the old perception about the first person in the office is the most effective. Well, it’s interesting. We had this Wall Street Journal article that came out a couple of weeks ago. Now, we had another one that just came out very recently, which is also fascinating, because not only on the positive side are the people going to the office getting the promotions from the negative side, they’re also the ones avoiding the layoffs. Once again, bosses are saying, if I don’t see you, you’re more likely to be rift. Are they basing that on data in the silence?

Brian Beck: It’s happening.I think the stat was what? 31– I was looking at the article yesterday. It was 31%. There’s something like that, or more likely to be laid off.Is that the number? I think it is.

Andy Hoar: But do you want to be one of these companies that keeps all of the extraverted go-getter types? You don’t necessarily do better work or any work. We’ve met people like this before. Oh, come on. They come in, they hang out, they make everybody feel good, they talk about the game, and they don’t do any work.

Brian Beck: Don’t pretend to work somewhere else, Elon Musk.I like it. I mean, come on. You are one third less likely to succeed in life if you don’t go to the office. That’s what this is saying.You’re more likely to get a promotion. Come on.

Andy Hoar: Yeah, I mean, that’s clearly what a lot of bosses are doing,a lot of senior managers are doing.T he question is, is that smart? I would argue it’s not. There’s got to be a more objective methodology other than I see the guy in the office more, therefore, he gets the promotion. But hey, look, you know what? We saw another article recently around this. IBM, this was kind of a big deal just a couple of days ago, announced that they told their managers. Not their employees yet, but I think the managers are the first step along the way. Move close to an office or quit. Whoa. So this is IBM, which by the way, a lot of people are knowledge workers. IBM, most people are talking about here, not working in factories. These are white collar workers. But again, it starts with the managers. So this is how this went down. I’m sure they have all this real estate that nobody’s using. They’re getting criticized by investors for not hitting their numbers. Somebody goes, huh, if we got people back into the office, we could kill two birds with one stone, ostensibly one. We put them in the office, which means we’re maximizing the investment we made in that. OK, fine. But then the other one is we can tell investors that everybody’s back in the office, therefore, because we see them more, they’re more productive. I don’t know.That’s what they’re doing. And you know what’s happening here is lots of employees are pushing back.

Brian Beck: Well, here’s the other stat that’s interesting that was in these articles. People that work remotely are more likely to quit, Andy, they’re more likely to quit. If you’re– it was about third more likely, with some data from–

Andy Hoar: But Brian, couldn’t that also be because they’re more productive? And there’s more–No, it’s because–There’s more demand for their skills. These are higher quality people. Look, it goes both ways.

Brian Beck: That’s a huge assumption, Andy. Come on.Give me a–

Andy Hoar: But not assuming that you see them more often.They’re further more effective, isn’t?

Brian Beck: Well, I mean, there is some data–There is some data that supports your discussion, which is versus this. This new research from University of Pittsburgh that suggests that office mandates may not help companies’ financial performance, but they can make workers less satisfied with their jobs – interesting. So what this is saying is there’s no financial benefit. That having companies– people come back to the office. Interesting.

Andy Hoar: And there’s a financial cost, which we’ll get to in a moment. You know, a lot of people will stop calling this return to office and they’re starting to call it return to the past, which is interesting because that’s what it is. There’s no evidence that return to the office is actually makes the company more effective. In fact, this data actually disproves the whole idea. I think the jury is out. I think it depends on the job, depends on the person, et cetera. But there’s a real risk here that people, especially I think, stay at home moms– I’ve said this for a long time now– who can get a lot more work done at home. And they don’t have to go get dressed up, commute, pay for the commute, pack lunches, all that kind of–this is a far better circumstance. Our company is willing to sacrifice highly effective, say, stay at home moms is a very kind and narrow group– at the altar of we need everybody in the office because that’s what we’ve always done.

Brian Beck: Well, the interesting thing too, and these are–reading these articles, Andy, one of the things that came out is that people are willing to accept–they’re cognizant of the fact that if we’re not in the relationship, they’re not there sitting with the manager or the boss. There’s no face time there. That there’s in fact some risk- -they’re at some higher risk of layoff of not getting a promotion. But they’re willing to accept that. And they had a bunch of quotes in these articles talked about, the interviewed people. And they said that, listen, I know I’m at greater risk here, but I am willing to sacrifice that potential, quote unquote, intangible opportunity or now tangible with data for the fact that it gives me flexibility to be with my family, et cetera. So I think people are cognizant of that there is value in that relationship. I agree with you, though, Andy. I think the jury is still somewhat out on this. I’m not 100% convinced there isn’t going to be some– in some industries and categories of workers, some impact, some financial impact of not having people together in a team. And I think that’s why you see companies like IBM, so a lot of tech companies, you see it with Amazon. These are all roles that can be done for the most part, obviously not their warehouses, but they can be done remotely.

Andy Hoar: Where’s this office going to be? Where’s this magical office that everybody can commute to? Because the reality is, too, when the pandemic hit Google and the rest of these companies resisted this whole idea, they were famous for telling a bunch of people creating technology tools to work remotely that they had to be in the office to do that, which is ironic. But what they found was that the pandemic forced them to look elsewhere and guess what it did? It enabled them to hire people in the Czech Republic and people in Ireland who were less expensive, just as effective. And that’s what they’re sacrificing here. When you force people to come into a physical office, they have to physically be near an office, like the IBM article said, what if IBM doesn’t have an office in the UK? What? They can’t hire anybody from the UK? I mean, I’m making that up, obviously, but that doesn’t seem smart.

Brian Beck: Well, just keep you going.The other dynamic is we’ve got–it’s kind of a new normal that people do this remote sort of Zoom-based or Teams-based meetings and things. So I was talking to someone at Amazon recently. I talked to folks at Amazon all the time. And he was telling me that the return office made a– he lives three hours from the office .But he has to go to the office. He moved during the pandemic. So he goes to the office three days a week. He’s like, I get to the office. I turn on my computer. I spend the entire time on virtual meetings and I go back home for three hours.That’s right. It’s ridiculous. Why am I doing this?

Andy Hoar: Yeah, but the boss saw him, therefore, he was effective .I mean, you just see this somebody left a note here. They had a comment. New leadership is tuned into empowerment and balancing personal quality of life versus rewarding people who are acting busy. That’s the term acting busy.

Brian Beck: Thank you, Ben, for your comment there. That’s awesome.Y eah, no, it’s crazy. Thanks, Ben. Appreciate that. It’s really an interesting, almost, change in culture. But the data is proving that people are–people are a shock provider and giving up some things that if they don’t get to the office. So there’s some real cost, though, to doing it. Andy, look at this Fortune article. Employees are spending the equivalent of a month’s grocery bill in the return of the office and growing more resentful than ever in a survey finds. I mean, there’s real cost to people doing this. So again, if I’m forced to go to the office,I may resent my– start resenting my employer.

Andy Hoar: Well, think about this. So the number they asked me was $561 per month that people spend more who have to return to the pastor the office. They spend on transportation, additional child and pet care and domestic assistance. These are real burdens that people have to pay all in the name of what? Face time? Literally? To be there in front of a boss? I mean, again, I’m not discounting face-to-face interaction. But the question is, is it worth it? And they sit in the surveys to finding people who have to do this return to office thing, have higher levels of stress and burnout and turnover, et cetera? So I don’t know. I’m not sure this makes a whole lot of sense.

Brian Beck: Yeah. And I think as we think about this, Andy ,for B2B e-commerce leaders, which is most of our audience here, this but I hear consistently from B2B leaders that they are, in fact, hiring remotely. They are– they will and are willing to and have figured out how to manage people remotely. And I don’t get the impression, again, this is anecdotal, but I don’t get the impression that they’re going to hold back on promoting someone because they’re not sitting there in front of them. That’s because largely a lot of these heads of e-commerce are also remote, right? They may go to the office a week a month or something, but they’re mostly–a lot of them are, in fact, remote. So fascinating. And then this whole degree of this gets to this next point about the degree of teleworkability. There are some functions that you just can’t do remotely, right? Speak to this, little Andy.

Andy Hoar: Yeah, so just quickly at the top, obviously, data processing, internet publications, that kind of thing, 80%, according to the Federal Reserve Bank of San Francisco, that is to make 80% of those jobs can be done remotely. But as you go front of that on the list, obviously, working in a grocery store, you can’t do that remotely, so that’s a lot more willing. A lot of B2B is kind of in this middle area, but which does tend to huge toward people being in the office, that said, it kind of depends on what you do. Because if you’re working in digital in B2B that’s a kind of a knowledge worker role. You can work remotely, but you do have a tier two–you do risk a two tiered system. That’s a real problem where you’re working in digital for a distributor, and you’ve got guys working in the warehouse who have to go there every day. And then you’ve got people working from home. I don’t know, that creates maybe the wrong political environment.

Brian Beck: Well, I think we’re still– the jury’s still out, but at the end of the day, we polled our LinkedIn audience. We got quite a few folks weighing in on this comments, but we asked the question, are in office workers favored for promotions and other benefits over remote employees? 65% said, hey, in office is favored. So there’s a recognition amongst people working that it benefits me to go to the office and get in front of people. Relationships still matter, Andy, some ways that gives me hope. That it’s not all just AI and virtual. But at the end of the day, people recognize this, and I think they’re acting on it.

Andy Hoar: So–I think we’re going to see the water finds its own equilibrium. We’re going to see how this pans out. I think really talented people, right now, even though companies like Apple and Amazon is an extreme example, they’re very much interested in forcing people back into the office while the West Coast companies are.But you know that for really talented people who don’t want to do it, what do they do? They look the other way. And so there’s going to be a lot of look in the other way, but at some point, when is looking the other way, become a policy? It’s going to have to, because there are talented people who are just not going to want to be a part of this environment. And so what do you do? Just walk away from talent? I don’t think so.

This week Andy & Brian talk about:

– StitchFix’s perplexing decision to open a digital transformation office

– The concept of a “post-digital enterprise”

– How much you need to budget for change management during a digital transformation

Brian Beck: Welcome to Friday 15, everyone. I’m Brian Beck. Welcome to Friday 15 with Master B2B. Andy, welcome. And Andy, as always, have some awesome breaking news for everyone. Let’s go ahead and jump right into that. Thank you and congratulations to our friends at MDM Tom Gale and his crew. They just, Andy, sold the company. Whoa, that’s great. MDM for those you don’t know is a research and media company that publishes all about distribution even in business, I think Andy 35 years, something like that, long time. – Yep. – So they’re required by the NAW. And what should you take on this? I mean, when a company like MDM which again, it has a publication it’s a, people follow their news. When they get bought by an organization like NAW what does that mean? Do they continue to be independent? Or how does this all work? What do you think?

Andy Hoar: That’s a big question. I mean, there’s probably good and bad about this. The good is that it’s gonna give a voice to wholesales and wholesalers, resellers, distributors on a larger scale. But, there’s probably this temptation over time to turn this into kind of a PR organization for, or PR arm for NAW. So hopefully they’ll avoid that temptation and just the good part, not the bad part, but we’ll see. But yeah, congratulations to Tom and his crew on this one.

Brian Beck: Yeah, yeah, it’s always I love to see this one. It happens to the good guys, right? Like Tom and MDM has been a partner of ours at Master B2B in terms of socializing some of our activities and being a good, you know, kind of thought leadership partner. So congrats to Tom and MDM. So Andy, today we’re gonna talk about this question which is a big question, right? I mean, it’s, when is digital transformation complete? Ever ongoing? We asked our community, we’ll reveal the LinkedIn poll later. But what started all this was an article from our sort of our stalwart of research and just market intelligence, Mr. Jared Blank. Thank you, Jared. He said this is article this week, Andy. Talk about Stitchfix. Okay, so what is Stitchfix, right? What, describe the business?

Andy Hoar: Well, it’s a business where you basically discover brands. You pay $20 a month, I think it is. They send you a box of fashion items that have been curated by their experts. Sounds like a perfectly reasonable concept, especially during the pandemic. But, you know, they struggled of late probably because the pandemic is gone. And if you wanna discover a brand you can discover that directly through the brand itself through the B2C site and/or social media. So Stitchfix is really struggling with a business model issue. Not surprisingly, there’s, there are revenues declined, their stock is going down. And it usually means they’re replacing the senior management, which they did. Sadly, one of the first things he did, and that’s what we wanted to talk about, was he created a transformation office and put somebody who was in charge of strategy at Stitchfix in charge of the transformation office which kind of begs the question. – What did , they hired him for. – The first one in charge of the strategy before. Why is this person in charge of the transformation to a new strategy? What was this person doing before? And not to be critical, but that just on its face seemed odd to me. But we wanted to talk about this because we see this temptation over and over and over again by the c suite. Now, this is a B2C example. We’re trying to prevent it from happening in B2B where companies, they bring somebody new in and then they try to outsource transformation, business, in general, digital, doesn’t matter. And that’s exactly what the CEO did here. And it’s like, I’m shaking my head as you like, what are these people thinking? This never actually works.

Brian Beck: Well, then how do you how do you digitally transform a digitally native business?

Andy Hoar: Yeah, that’s another interesting question. (laughing)

Brian Beck: And we’ll get to some interesting stats coming up here in just a moment from some study that McKinsey did around this. I mean, look, at the end of the day, we’ve said it for a long time, Andy. The digital function transformation of a business the CEO is the digital officer. That person, him or her, they need to be leading this. And it’s, anyway, but so, so this is kind of yeah, you can’t delegate this stuff and it won’t work.

Andy Hoar: It doesn’t work. It just doesn’t work. Period. And it’s like, you know, these come from some steering committees and taskforces. But to gather information, fine. But the part I always struggle with here is, why would this guy, he came from Macy’s, right? He’s a chief digital officer at Macy’s. And he may have done a fine job there but they put in charge of Stitch fix. Did they put him in charge because he should know what he’s doing? I mean, why do you have to set up an office of transformation? Staffing with people from the existing company who apparently didn’t do well. When, to me, it feels like a delay tactic. It feels like kind of excuse making. And it feels like, I just want to borrow like six to nine months to figure out what I’m going to do next. And that might just appease the market. But look, we’ve got to be smarter than that. That just doesn’t feel like a real move. –

Brian Beck: Yeah, yeah, no exactly. So we wanted to look at this. So we got to talking about it earlier this week and based on this article. So we wanted to ask the question, digital transformation. Is it ever done or is there a point at which you can say, okay, I’m at a point where I’ve got everything in place and can I move on to executing as a digital first company? This is the way McKinsey, they released a book last year and “Rewired”. I haven’t read the whole book, but we read it. I read, I think he read some, just some excerpts and summaries of what they’re talking about here. This is how they define it. Digital transformation is the fundamental rewiring of how an organization operates. The goal of a digital transformation should be to build a competitive advantage by continuously deploying tech at scale to improve customer experiences and lower costs. Okay, fine, but my reaction to that definition is, is it really about tech? Is that really the core of this? I don’t know, Andy, and you pulled out some interesting stuff too. What do you think?

Andy Hoar: Yeah, I think that is where they anchor too much in this definition. They have to, tech is what’s driving a lot of this stuff because it’s really about customer behavior changing, but that’s also driven by technology because people carry mobile phones around using social media. So technology is really the thread that runs through all this on both sides of the equation. So I get why they talk about it, but I think you and I also believe that technology is the means to the end, not the end in and of itself. And so really, and I think it’s as interesting because they actually say in the same book I took this quote out, that as a rule of thumb, for every dollar you spend on developing a digital solution, which is technology, plan to spend at least another dollar in implementing process changes, user training, and change management initiatives. So this is as much about change management, perhaps more than is about technology.

Brian Beck: I’d argue it’s more. Yeah, I think obviously you need a foundation, a technology foundation, which is using some commonly used buzzwords, agile and flexible, right? But you need to be able to and they say this in the book as well, you need to have enough ability for the business user to create change and meet customer demands, and flexibly do that without having to put a massive project in place that takes a year to implement because your IT team has to do this and that and all the rest. So there is a real practical notion of flexibility that’s behind this, but I do think it takes, that’s fine, that’s a capability. It goes beyond that, it’s the mindset, in my opinion, it’s the mindset and it’s the change in thinking, and we’ll give an example later of a company that I think really embodies that mindset and the organizational approach, because I think that’s really the core of transformation. The technologies are there, the tools are there, the foundation and best practices are there, it’s really getting to the point where you can execute as a digital person which to me today means customer first organization.

Andy Hoar: Well, I think so. Yeah, and I think you can break up the process into stages and you can reach certain milestones. That’s not a surrender to the idea that it’s a beginning and end but there is no beginning and end because technology will continue to evolve, customer behavior will continue to evolve, a competitive landscape drives change constantly. And so the reality is digital transformation like all transformation, every business is constantly transforming. Every day they wake up and they’re slightly different in some form or fashion. So to argue that transformation is a process that comes to an end at some point, it’s just kind of crazy.

Brian Beck: It is, but without some kind of framework then you end up, you don’t know where you’re going, what to do. And so quite selfishly and self-promotingly in my book, Billion Dollar B2B Ecommerce for those you listening on our podcast I’m sharing a sort of a stages of digital evolution framework. And so I think it’s helpful. And we did this too last year, Andy where we have sort of the stages of maturity. We’ll talk about that in a minute. But I think it’s helpful for companies. How do you take this nebulous concept of transformation and break it down into something you can actually act on and do? So that’s kind of the notion here. And one of my posits in the book or one of my suggestions is, let’s get through these stages and have some tactical things we can do to get through these stages. And well, digital transformation as a concept is never done. Do you reach this stage and Andy, you coined this term of being sort of a “post-digital enterprise”? We joke, what does that mean? Well, it means you have enough of the foundation in place which includes tech. But it all, importantly, includes your organizational alignment to really start opening up new value for the business. So in these stages, I’ve got five listed here going from “no digital presence” all the way through some online content sites, to selling in eCommerce commerce. Look, selling eCommerce these days is table stakes. You have to, if you’re transforming you can even start to think yourself as transformed if you don’t have eCommerce. But getting to further future stages, like a stage four which is aligned selling channels, being truly omnichannel your sales team is fully aligned with eCommerce. They’re working together. The customers are enabled to self-service tools. You have mobile, obviously, advanced mobile capabilities. You’re starting to bring AI into the business. Five is where this final stage here in my framework, you’re a digitally transformed organization. And that means, really, your organization is thinking customer first and thinking through a digital lens because that’s how your customer thinks these days. Anyway, any thoughts on this, Andy?

Andy Hoar: Yeah, I think you do cross a chasm at some point where you are fundamentally different. Some people like to use the percentage of total sales that are digital sales as a proxy for this. Like, if you cross over say 50%, meaning more than 50% of your sales are driven by the directly or indirectly online then you’re no longer an offline centric company. You’re more of an online centric company. But digital is a more complicated than that. And I think you could be a demand side online driven business, and still be a supply side offline driven business. The digital hasn’t come to the supply chain, for example or the opposite. I’ve seen companies where digital is really heavy in the supply chain. They’ve upgraded everything there. They can track orders, et cetera, but they’re still using sales reps and call centers and will call windows to actually front the company. So to me, it runs across the entire spectrum. But I, yeah, obviously agree with this. And we have our own framework, too, that we developed through Master B2B. Yeah. Let’s talk about that. Yeah. And it enables you to identify where you are in the journey. I think that’s the most important part here. It’s about identifying, honestly, and objectively, where are you? Are you in a stage one? Are you in a stage four? We have four different dimensions. We looked at like digital tools and culture, data and insights. The various things we looked at, you can be a stage one company or a stage four company for each one of those dimensions. And what’s really critical is you’ve got to figure out where you are with each one. You might be a stage three digital tools company. I mean, you bought the tools, but you might be a stage one culture company, which means you can’t even use the tools you bought.

Brian Beck: That’s right. So we had this thing we released last year called “Establishing your baseline assessing your digital maturity.” You can go to our website, masterb2b.com, and to the resources section. You’ll find it there. And you could actually score yourself. So, and what was interesting, you know, score where you are, was interesting about this process, Andy, is, you know, we found that, you know when we looked at digital maturity, it wasn’t just about one element like, you know, it wasn’t just about tech. We had to look at all the different elements. And in interviewing, we interviewed a bunch of people. We’re going to do more work on this this year, this concept where we’re going to talk about how do you advance yourself from one stage to the next. So there’s a lot in here. We encourage you to go to our site and check it out. And does that mean, you know, digital transformation when you get to the, you know, in our model stage four you know, are you done? No. But at least, you know, you have some guidance and tactical things you can be doing to advance the business. And hey, maybe that’s what StitchFix is doing. Maybe they’re downloading our model, Andy, and using it.

Andy Hoar: Yeah. Maybe that.

Brian Beck: So, you know, this is, so a concept that I’d like to share with the group here is, you know, looking at what we would argue is probably the most digitally transformed or centric company on the planet, Amazon. And, you know, how do they, how do they think about being a digital or customer first company you know, Jeff Bezos, the former CEO and founder said you know, he has his concept of day one and day two. And we’re always going to be a day one company which means acting like a startup. And he says, you know, day two is stasis followed by irrelevance followed by excruciating painful decline and death. And that’s why it’s always day one and Amazon. And what’s interesting here is he points out how do they stay a day one company? How do they act like a startup? Well, they require their employees to do four things. Be obsessed with the customer, focus on results over process, make high quality decisions quickly and without perfect information, right? And embracing external trends quickly. What’s not here? Technology, right? Okay, well, technology supports all this. But from their point of view, it’s all about the culture and the decision making and the process. It’s not about the other stuff. So, you know, I think there’s a lot our B2B folks can learn from this, Andy. Any thoughts?

Andy Hoar: Well, one big thing that’s embedded in all of this and is arguably the most important thing that’s not explicitly called out is data. You can’t do anything without data. You can’t be obsessed with the customers. We don’t know what they’re interested in. You can’t progress on results if you don’t have data. You can’t make high quality decisions when you’re making it based on, you know, your gut feel and trends are all driven by data. So, you know, Amazon and a lot of digitally transformed companies are really at their core powerful data companies which is what we always say to everybody in B2B – before you spend a ton of time doing anything really, you need to audit and triage your data and understand what you have. Because you can have the most talented people in the world, the best technology in the world. But if your data is crap, you’re not going to get very far.

Brian Beck: Yes, that’s right. Yeah, we emphasize that. And that’s the subject of a lot of our upcoming events. So we asked our community on LinkedIn. Is digital transformation ever finished at B2B companies allowing firms to move on and execute as a digital first company? Overwhelmingly, our audience said, no, never done. 91%. Thank God. [LAUGHS] Right? It’s true, right? And I’m curious, you know, those who think there’s a finish line – where is it?

Andy Hoar: Well, 91 said, no, you’re never done which is the correct answer. 9% said, yes, I’d be curious. What do they mean by that? Maybe it’s a matter of interpretation but I was surprised even 9% said there’s a finish line. But again, the finish line may be the end of a milestone, for example, but you’re never done with this.

In this week’s podcast, Andy & Brian take a look at the state of industry conferences and discuss the results of a recent survey on conferences.

Brian Beck: Andy Hoar, welcome to Friday 15 with MasterB2B. Welcome to another week. I’m Brian Beck. I’m here with Andy Hoar again as we do every Friday to keep this fascinating news of the week and topic of the week. So Andy, welcome.

Andy Hoar: Yeah, it’s good to be here. Where are you calling in from there?

Brian Beck: I am calling in from sunny San Diego, unlike the rest of the country here in mid-January. It’s actually warm. I’m here for a conference. The solar show, all these solar manufacturers and distributors here in San Diego talking about all kinds of different things, including of course, eCommerce. And it goes to our topic today, Andy, because we’re talking about trade shows. We’re talking about industry events in which ones to go to. So I’m excited about this topic, Andy, because you and I, you know, we’ve been involved in this for a long time, industry events, going to them, speaking at them, hosting them, you started one. And now we’ve started one too. So we’re going to talk today about what in-person events are on your calendar in 2024. So Andy, I mean, we get asked this question all the time. Where should I go? You know, I’ve got, you know, I’m a practitioner and B2B e-commerce or an executive, a CMO, a CDO, a VP of e-commerce director. What events should I go to this year? And we wanted to get ahead of this at the beginning of 2024 so we can give you some thoughts about what’s coming and what we think is worth, you know, you hitting, depending on your goals. Andy, you got some data. Let’s talk about it.

Andy Hoar: Yes. It was a great study that was done by Bizzabo, which is a company that manufactures software to do both online and offline events. They came about during the pandemic, but they’ve sort of been, you know, navigating this over the last couple of years. And it’s become pretty clear that in-person is back. You can see in the data here, 52.1% of people in the survey said they’re growing their in-person events. So, and we’ve seen this, you know, NRF just took place a couple of days ago, you know, in 2022, there were 10,000 people in NRF right after the pandemic. Today, 2024, 40,000. So clearly, people are coming back. And I think the reason why is because we’re living in a, not only do they want to return post-pandemic, but the pandemic was over a couple of years ago. I think the new reason people are going to these in-person conferences is is uncertainty about the economy and thinking about AI.

Brian Beck: Yeah. That’s fascinating. You see, I think you think about it from the reverse, right? If the economy actually was uncertain, wouldn’t there be, you know, less attendance because budgets are getting cut? But yeah, I was pretty shocked to see those numbers out of NRF, Sucharita, your former colleague at Forrester posted something. I think just yesterday about that. And it was fascinating to see their back to where they were and beyond, I think. So, I, you know, I, I agree with you, but I think it’s also that, we’re still dealing with some of the post-pandemic, you know, heck, I was, I was on Zoom and just people are still on Zoom. People are still remote. People are still working hybrid. They want to be back in person. And I’m hearing this, Andy, from all kinds of different conference people that organized conferences as well as the practitioners that I want to get out from behind my computer out of my home office and get out and network and learn peer to peer. Andy, we’re seeing it in our own events. I mean, my goodness, we’ll talk about it. But oversubscribed, we have waiting lists on most of our events already in the first half of the year. It’s incredible. And I think, and so I think we’re seeing it across the board.

Andy Hoar: I think that some, yeah, there’s some truth to that in that. It’s certainly the case that people felt caged up in the last couple of years and now the doors open and they’re flying out. But I’ve also just seen in the years I’ve been associated with this when there are movements, when there are maybe existential threats, you know, it happened with Amazon maybe 10 years ago, people run scared a little bit and this is not a bad thing. They just want to know what other people know so they don’t get blindsided in a conference and events are a good way to go.

Brian Beck: It’s the peer to peer networking and sharing. So here’s another statisticWhy do they go to learn a network, right? To your point, this is an interesting statistic here from Bizzabo, want to speak to this Andy?

Andy Hoar: Yeah, 77% of attendees agree or strongly agrees. In other words, they agree that in person B2B conference is one ofthe best networking opportunities and we’ve seen this ourselves. I mean, it’s really, you know, say what you owe about Zoom is a lot you can do with it. We’re on it right now, but we can’t do as effectively as networking. And so that’s not surprising is that number, but the other reason people go is to learn, right? And you know, this depends on what level of maturity you’re at, but this is pretty clear that you’re going to go learn at least one thing, maybe only one thing, but you’re going to learn at least one thing new that could be consequential to your business.

Brian Beck: You know, it’s people, people connection, connections, In my years, my almost 20 years, Andy as a VP of e-commerce. The best way for me to learn and just to make decisions, one of the key things I would do is pick up the phone or go to a conference and call or talk to peers, peers that I had met at conferences that, you know, hey, have you used a solution? Have you taken this approach? How is hiring going? These are the questions that, you know, that are best answered by peers. And then, and then on the other side, right? We talked to, we talked to solution providers all the time, marketers at solution providers. And what do they say about these events, Andy?

Andy Hoar: So it’s got to work for both sides of the equation because a lot of the funding for these comes from those folks. And, you know, these people were a bit biased because these are event marketers who responded to this particular part of the survey, but they say in-person events are the most impactful marketing channel of all the channels that they’ve seen. 80 plus percent are saying this. And I think we’ve seen this too. We have. You know, it requires a multitude of different approaches. But the nice thing about an in-person event is it’s a good way to hit people at the top of the funnel. If you’re a vendor and also the bottom of the funnel, you can close deals, you can also get to know people and start a conversation. It’s uniquely qualified to do that.

Brian Beck: Why do you think about a lot of these, you know, the, what, what, when you’re a solution provider also, you know, a lot of it is about solutioning for the customer. The best way to do that is to develop a rapport and understand and really listen in a one-to-one type of way. And events provide that opportunity. So I’m not, I’m not surprised that the marketers said that 80.4 percent said that it’s the most impactful marketing channel for their organization.

Andy Hoar: I think we live in the world, a microwave world now where you can just put in there and heat it up and it comes out warm and instant gratification society, Amazon can deliver anything to you within a couple of hours. I do think that oftentimes the software companies put unrealistic expectations on an in person event. And they treat it like it’s an online campaign where you can send an email out, people click on it, they sign up, they buy it and we’re done in the same day. Maybe at the bottom of the funnel, you can do stuff like that. You can finally close that deal. But a lot of this is really top of the funnel stuff. And in B2B, these are long sale cycles. That’s right. So they make 12 to 18 months. But we often say this, if you don’t meet these people, if they don’t see you, eye to eye, they’re going to see this thing as risky. So there really isn’t an alternative in that regard. And it’s really necessary that you start a conversation with somebody in person because there’s a lot of risk associated with that.

Brian Beck: And that’s at the end of the day, our B2B community. We know this from our practitioners is, they are folks who are conservative. And the one element, which is, you know, it’s not tangible, but it is, is trust, right? And trust is established by meeting and talking to people. And that’s, I think, a lot of this driving this from, frankly, from both sides, people buy from people they trust, right? So if you’re looking for a solution, you want to meet and stare people in the eye. And this is really true about B2B, more so than B2C, consumer.

Andy Hoar: For sure. And especially if it’s a six figure, seven figure decision, that’s going to be material to their business in the long term, you know, B2B, you get fired if make a bad decision like that.

Brian Beck: That’s right and we’ve been talking about why people are going, why people are, you know, companies are sponsoring, but what are the events? So here, here we have a list of a few, and for our podcast listeners, maybe we describe these.

Andy Hoar: So these are what I would call kind of the significant six, which are six event producers, let’s say, in some cases, they have multiple events. So B2B Online let’s just highlight them first. So B2B Online has a big event coming up on May 6th. We’re going to be there. It’s in Chicago. They also have an event in the fall. There’s the only ones in the space that do two B2B commerce events a year. And the one in the fall is in November. So again, we’ll be at that one as well. The organization that runs B2B Online, WBR, also has another event, which is more intimate called B2B Connect, which is a big event. You have been to this before. I’ve heard good things about it. The small group where you get everybody togethe over the course of a day. That’s in June.

Brian Beck: I like that format myself, the smaller event like that. Yeah, go ahead. What else?

Andy Hoar: And then, you know, just not in a particular order, Shoptalk is another one, which is a B2C e-commerce event. But it’s going to be so large and the format has become so successful around, you know, connecting people with other people that we feel incumbent, being incumbent upon us to mention it. This is in Las Vegas in March 17th to the 20th. And a lot of people compare what we do actually to what Shoptalk does. In terms of the interactivity, there’s great content there, but also just a level of interaction that you get that’s built into the DNA of the event.

Brian Beck: I talked to folks and we do see people B2B companies going to Shoptalk for that reason that there is a lot of one to one, a lot of the solution providers are there. And that, actually, that piece of that one to one connection, I think they’ve executed well where, they’re getting people in individual meetings based on certain criteria and qualification and in some ways, similar to what we’re doing with our roundtables and other things. Andy, we’ve seen ourselves as demand for in person. I mean, it’s unbelievable from both sides, you know, the vendors of the solution providers and the practitioners. So we’re doing our second year of our Mindshare Summit this year at the University of Chicago and our regional round tables. And my goodness, we’re, you know, as I mentioned, we’re oversubscribed on these. The demand is incredible. And the Mindshare Summit itself, I think, we’re almost half full.

Andy Hoar: It’s a unique format. The round tables are quite unique in that nobody’s gone out to where the practitioners are. They always make you come to them. All these other events are in specific cities, pretty consistently in those cities and you have to fly their drive there. We decided, hey, why don’t we go to them? So we’re going to LA, which nobody goes to for B2B, but we’re oversubscribed for that one. Chicago, Atlanta, Dallas, Minneapolis, Denver. You know, these are all cities that don’t often have folks know up and say, let’s get together. So again, we just started marketing some of these. Some of the early ones were totally ove subscribed. There are two other events though. I wanted to highlight here. So Envision, we understand they just announced that they’re going to be moving their event from almost like the Q2 time frame to the fall. So it looks like that’s in September in Chicago. And then our friends at MDM are doing their distribution-focused event in Denver, September 11th through the 13th. We’ve been there before. It’s very heavily focused on distribution, but it’s a really good group of people and it’s called MDM SHIFT.

Brian Beck: And so, you know, as an e-commerce B2B, e-commerce professional, you have a variety of different, options here. Obviously, we’re going to encourage you to come to our events, but we got some really good options depending on what you’re focused on. Some larger, some smaller, but then Andy, we also have all these industry events. Industry specific trade shows, Grainger’s got a show. Affiliated Distributors has their marketing e-commerce summit. I’m going to that. You’ve got these other things. So how should a practitioner think about Andy?

Andy Hoar: You’ve got also got a list on Brian’s LinkedIn account because this came from my pocket at MDM. And you can see that 30 events between now and the middle part of June? And this doesn’t even include vendor events. So, commercetools, for example, is doing an event in mid-April in Miami, which we actually may be at. And vendor events are just like the old Imagine show for Magento. Those are great if you’re using the platform. They’re really user conferences. It’s where you can go get tips and tricks to be more effective and network with people who are struggling or succeeding with the same platform. So, yeah, there are a lot of opportunities here, but in terms of how to think about it, you know, I think our general approach is pick a couple of big ones that are out of the city you live in, go to those. And then if you happen to have one in the city you’re in, definitely go there. Again, that’s why we did our regional roundtables. If you live in Chicago, it’s golden for you because there are regional events, there are national events, there are international events. But if you’re in other cities like Dallas, etc, there aren’t that many events like these ones that we haven’t seen. So, we’re hoping to fill a void.

Brian Beck: From my perspective, you need to get to one of the big e-commerce events. You know, we like B2B Online, ourselves. It’s it’s important to get the pulse of the industry at a bigger e-commerce events. So, if you have two or three to choose from, you know, look at one is smaller, one of the general ones. And then I think, you know, look, industry events like the ones we have here on the screen for those of you who can see it, you know, in the ISA, I’m going to the Industrial Supply Association. If you’re an industrial equipment manufacturer, if you’re an AD member or thinking about it, you know, joining that organization, I think those are really good events because they’re very focused on your peers. And that’s really where you make some of the best connections and learn and learn things specifically for your business.

Andy Hoar: They all talk about digital too. Every one of you has some component of digital. They didn’t grow up that way, but they’ve become that. And I just want to weep with one quick thought on this about how to think about it. On LinkedIn Ben Rudnick, posted a pretty interesting quote. And I think it’s captures the essence of how people should think about it. He said, the smaller niche B2B events are awesome. The intimacy facilitates deeper connections and a high signal to noise ratio. Yet, see you at ShoptalkI’m going to go to these smaller ones because I get more out of them, but I should and will also go to one or two of the larger ones. And I think that’s the proper balance.

Brian Beck: So we asked our community on LinkedIn, Andy, you know, how many events are they going to go to in 2024 B2B e-commerce and trade shows. And we offered a few different options, just one event, two or three events, four or five or more than five events. And more than half of folks had two to three. So I think that kind of fits into, to me, that’s a, that’s a great number. It gets you to one of the bigger shows and then also allows you to be focused, maybe go to one industry event, one roundtable or something like that, where it’s very specific to your needs. And, the good news about a lot of these conferences, like our roun tables are free for practitioners to go to for the most part. So if you’ve got a roundtable in your market, you ought to go to it. There’s no cost to you when it’s local. So, I mean, why not, right? And you’re going to make some great local connections. Let’s talk a little bit about what we have coming up. So our Summit, we talked a little bit about, it’s on June 4th, it’s the University of Chicago’s Gleacher Center. We have limited sponsored seats available. We’re almost half full on this event. So if you’re interested, it’s still four, five months away. If you’re interested in this, make sure you go to our website and you’ll see it. And sign up because this is going to be a fantastic event. We’re going to have about 130 people. This is not a conference, it’s a Summit. Think like a mini Shoptalk in some ways. These are intimate groupings of people. We break up in small groups. It’s going to be a fantastic day. It’s a one day long event. People coming in the night before may stay the whole next day. We have an event that night and then they can, people can head out next morning. So it’s going to be a really good group. If you go to our website, just click on the events button, you’ll see at the top, you’ll see our upcoming events, you know, Los Angeles, you mentioned round tables. These are 20 to 25 executives from the market. And we already have waiting lists on I think four or five of these Andy. So significant waiting list.

Andy Hoar: Yes. Quite a number of people. 30 people. That’s crazy.

Brian Beck: Folks, you know, suggest you check these out. We, you know, email Andy or I or send us a note on LinkedIn or whatever, but, you know, if you want to join, we’ll definitely get you on that waiting list.