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.
