Rethinking Distribution: Adaptive Channels
RETHINKING DISTRIBUTION: ADAPTIVE CHANNELS
By sharing resources and capabilities, companies can meet their customers' most extraordinary needs.
Flawless distribution can seem an impossible goal. No matter how much inventory a wholesaler carries, when a customer places a rush order, the essential item is often out of stock. No matter how broad a range of services a dealer provides, what a customer desperately needs is often some out-ofthe-ordinary service that the dealer has never supplied. And no matter how much effort a distributor expends to beef up its capabilities, when a customer has an emergency, the distributor often lacks the critical skills to respond.
To solve these problems, a handful of forwardlooking companies are experimenting with their distribution channels to make them more flexible and responsive. Although the scope of the experiments and the specifics vary widely, each embraces a concept we call adaptive channels.
The managers whose innovations have given rise to this concept view their distribution channels as webs of capabilities embedded in an extended enterprise. They have realized that by sharing their resources and capabilities in novel ways and new situations, they can take advantage of profit-making opportunities that they could not exploit alone. To act on this realization, these managers first identify infrequent yet critical customer requirements that they cannot fulfill routinely on their own. Then they make progressive, cooperative arrangements with other channel members for the assistance that will enable them to meet those requirements. The nature of such assistance, the procedures for providing it, and the appropriate remuneration are all defined in advance.
Business dynamics and emerging technologies make this new approach to distribution both essential and feasible. Tough competition is forcing managers to scrutinize every aspect of their operation. Increasingly, they are recognizing that distribution channels
By sharing resources and capabilities, companies can meet their customers' most extraordinary needs.
Flawless distribution can seem an impossible goal. No matter how much inventory a wholesaler carries, when a customer places a rush order, the essential item is often out of stock. No matter how broad a range of services a dealer provides, what a customer desperately needs is often some out-ofthe-ordinary service that the dealer has never supplied. And no matter how much effort a distributor expends to beef up its capabilities, when a customer has an emergency, the distributor often lacks the critical skills to respond.
To solve these problems, a handful of forwardlooking companies are experimenting with their distribution channels to make them more flexible and responsive. Although the scope of the experiments and the specifics vary widely, each embraces a concept we call adaptive channels.
The managers whose innovations have given rise to this concept view their distribution channels as webs of capabilities embedded in an extended enterprise. They have realized that by sharing their resources and capabilities in novel ways and new situations, they can take advantage of profit-making opportunities that they could not exploit alone. To act on this realization, these managers first identify infrequent yet critical customer requirements that they cannot fulfill routinely on their own. Then they make progressive, cooperative arrangements with other channel members for the assistance that will enable them to meet those requirements. The nature of such assistance, the procedures for providing it, and the appropriate remuneration are all defined in advance.
Business dynamics and emerging technologies make this new approach to distribution both essential and feasible. Tough competition is forcing managers to scrutinize every aspect of their operation. Increasingly, they are recognizing that distribution channels