Subscribe to our newsletters & stay updated
It was an honor to be invited to participate in the 51st annual AIM/R conference, but it’s even better when you’re asked back a second time by popular request! Basking in the afterglow of this year’s conference, I can say that it was yet again a great learning and networking experience. It’s always exciting to be in the company of an excellent speaker such as Janine Driver and so many independent manufacturers’ representatives (IMRs) willing to share their expertise with others.
At the 2021 AIM/R conference in San Diego, I discussed emerging best practices around cross-generational talent management. This year, our roundtable discussions went into more detail on best practices regarding recruiting, talent development and how to sunset reps out of the firm while ensuring knowledge transfer.
IMRs are challenged to recruit, develop and retain talent; there are different expectations when that talent is new to the industry or mid-career. With the advent of innovative technologies, the IMR industry is going through a sea change as founders age out and data science becomes necessary. This transition is often referred to as IMR Version 1.0 and IMR Version 2.0.
To do business effectively, IMRs need to re-strategize their traditional business model to deal with disruptions from manufacturers and distributors. With distributors growing their private-label offerings, they have become manufacturers. When manufacturers source globally, they become distributors. The distinction between an IMR and a distributor has continued to blur, but it can be a competitive advantage.
IMRs need to rethink what they consider their competitive advantage. It used to be about giving manufacturers access to distributors through the relationships IMRs cultivated. That strategy is problematic because once the business grows large enough, the manufacturer typically fires the rep and brings in the business in-house.
With increasingly sophisticated and affordable technologies, IMRs can now be a real threat to traditional distributors that aren’t developing new markets. Manufacturers can unbundle the distributor’s services by using a third-party logistics firm and a public warehouse to transport and stock the product. The rep firm can print the orders out directly with the manufacturer and use a credit card company to manage the commercial credit.
However, manufacturers will need IMRs to gain new customers; that isn’t accomplished by relationship selling but by data collection and analytics. For example, IMRs can provide manufacturers with competitive intelligence and useful feedback from their distributors, such as “Don’t introduce this new product. It’s not viable and will waste time and resources.”
A New Level of Professionalism
In IMR 1.0, the traditional growth path was adding additional lines or geography. IMR 2.0 uses new tools to find new channels of growth in their existing footprint for existing suppliers. These new tools, like CRM, provide a new level of professionalism by making IMRs more valuable to manufacturers. The key is for IMRs to adapt to change and use best practices to improve revenue and profit.
How does an IMR improve both revenue and profit? By using all the industry’s best practices to improve service level and cost. As you can see in Figure 1, an IMR in model 1.0 can improve service and profit if it is only using some of the industry’s best practices. Adopting them all, including the evolving ones, puts the IMR on the solid line. The innovation in services offered jumps from the solid line to the theoretical dotted line. Over time, these innovations become best practices.
How can an IMR achieve this?
Analyze the market to identify where real growth opportunities exist, looking at what is important to both your channel partners and your principals.
Identify your firm’s selling costs and the upstream or downstream value they create today. Some that used to be important are probably less so today. Cutting or trimming in these areas creates the funds necessary to reinvest for growth.
Reallocate these recovered costs in the second step to areas of identified growth opportunities.
Attend AIM/R every year to learn from industry leaders and network on best practices for adoption in your firm. Over time, this becomes a source of competitive advantage.
By networking at the AIM/R conference, reps could look at the differences between what the high-profit, high-growth firms did and everyone else. The roundtable discussions are a hallmark of this organization; the questions were very specific and the responses were actionable.
They found that if the high-profit, high-growth companies used a practice much more frequently than everybody else, it differentiated them and signified a best practice.
When undergoing a paradigm shift, it’s important to stop doing business as usual. Focus on developing a talent pipeline by:
• Recruiting a diverse group of talent and ensuring enough challenge requiring innovation and personal growth to avoid long-term burnout or complacency.
• Develop that talent by providing an employee journey map and the tools needed to succeed.
• Develop a plan to sunset reps that incentivizes the old rep by how well the new rep does.
• Keep the experienced reps involved by instituting monthly lunches to continue passing along institutional knowledge — not only the contacts developed over the years.
Stop thinking your competitive advantage is simply about relationships. Don’t train the next generation of reps to do the same thing or your firm will not be around in 10 years.
Take advantage of the networking and breakout sessions at AIM/R next year. Take your Gen Z and millennials to next year’s conference so they can get excited about their future and the benefits of innovative technologies. Those generations know how to use them fully.
Over time, this strategy can help you transform your firm into an IMR Version 2.0, ready to adapt to this rapidly changing industry.
Mike Marks co-founded the Indian River Consulting Group in April 1987. He began his consulting practice after working in distribution management for more than 20 years. Over the years, his narrow focus in B2B channel-driven markets has created an astonishing number of deep executive relationships with virtually every business vertical in construction, industrial, OEM, agricultural and health care.