Leadership & Alignment

Brian Beck:
Hello everyone. Welcome to Billion Dollar B2B eCommerce and our virtual book tour. I'm so excited to have my book, Billion Dollar B2B eCommerce, now in the market. I want to welcome you to our first session here. When I sat down to write this book, it was all about arming B2B companies with really a playbook for digital success. And during our virtual tour, we're going to be breaking down the topics in the book really chapter by chapter. I'm excited about today's session. We've got some great speakers here with me. For the book, a little bit of detail here, you can go right to this website here and learn more about the book. You can also buy the book on amazon.com. I want to thank all of our sponsors, in particular Elastic Path, who's our platinum sponsor for this series. So let's go ahead and dive in.

Brian Beck:
Here's the series at a glance. All of our sessions will air at 8:00 AM Eastern time. And today we're starting with leadership and alignment. These will be on-demand sessions. You can play them back at any time. We're going to go through the rest of the chapters in the book, well, a lot of them during the course of this series, this virtual tour. We're going to be talking next time about building an eCommerce foundation, but we're going to cover really every aspect of building an eCommerce business for B2B companies. So I hope you'll join me for the additional sessions after today.

Brian Beck:
Today's session we're going to talk about leadership and alignment. I say the title of the first chapter of the book is, The Time is Now, and I really believe that. These days the world has changed. I'm going to share a little context with you. But a call to action has been sounded louder than ever before with COVID-19. And I think that is really making it urgent for companies who are in the B2B sector to take action on e-commerce if they haven't already. So today I'm going to provide a little bit of context and then we're going to get into a fireside chat, a virtual fireside chat format with Johnstone Supply and Elastic Path. We're going to have a great conversation about those concepts after I go through them. We'll have a few minutes also for some questions.

Brian Beck:
So, the first part of the first chapter of my book is, this story has been told before. So I ask the question if I can see all of you today and ask you to raise your hands, how many serious shoppers do we have in the audience? And the unfortunate answer would be not many of you. In 1997, Sears had 3,500 stores and was one of the largest and most respected retailers in the United States. 20 years later, the company's gone through a bankruptcy, it only has 182 stores open now in 2020, and it's really fallen from grace. It's kind of a sad story of an icon in American business that has lost its relevance and a lot of that is tied to the customer and how they paid attention or didn't pay attention to what their customers were telling them.

Brian Beck:
And Sears wasn't alone. If we look at Big Box and Department Store sales over the last 15 years, it's an incredible story of decline in terms of revenue. $252 billion in sales in 2006 has turned into $143 billion projected this year. And again, a lot of this has to do with evolution of consumer buying preferences. So, this story has been told. At the same time, if I asked everyone in the audience, how many of you are Amazon shoppers? 99% of you would raise your hand. Amazon has gained market share, is now responsible for 50% of US e-commerce and is in part responsible for accommodating those shifts of consumer behavior and the decline of older business models. And really it's a shift. So I say that the story has been told before, well, the story has been told in B2C. B2C had less warning and had to adjust as they went. But B2B companies have a precedent. The good news in all of this is that that precedent allows us to write books like this and help you to make the changes necessary to address the coming changes in demand.

Brian Beck:
One of the key factors is today's buyers are digital natives. In fact, you could say they're Amazon natives. Millennials born between 1980 and 2000 have grown up using digital tools. They make 60% of their purchases online. That means 40% of their purchases happen offline. They make more online than offline, and that's up from 47% in 2017. This trend is accelerating. 97%, almost 100% use Amazon for at least part of their online shopping. And millennials, B2B stand up and listen, millennials will be 75% of the workforce within five years and a lot of these folks are moving into procurement roles. So, these are your buyers and they expect you to have an Amazon-like e-commerce experience or they will go elsewhere. This is a call to action.

Brian Beck:
COVID-19 as I mentioned, is accelerating B2B e-commerce adoption across all channels. I think it's forced the hand of e-commerce for B2B because look, homebound buyers, B2B, consumers too, have no other way to buy products. One of the key elements of my book is making the buyer's job easier. When you make the buyer's job easier, they don't go back. They're going to continue using these channels like e-commerce to make purchases interact with you. So B2B buyers that have been reticent to use e-commerce are now being forced to use it and accelerating the adoption of e-commerce by two to three years or more. Case in point is Amazon. Amazon sales are up over 35% in March and April of this year. They're hiring almost 200,000 people to accommodate this enormous demand. My firm Enceiba does a lot of work with B2B companies that sell on Amazon and we're seeing this firsthand.

Brian Beck:
So, these behaviors are not going to change. As I mentioned, as people are using e-commerce, buyers are using e-commerce and finding it easier to get their tasks completed, they're not going to shift back to using the fax machine or calling the call center. New normal won't return for some time, probably till sometime in 2021. I'm not an economist or a healthcare practitioner but by best measures that seems to be the timeframe, we're looking at. So, this is a call to action now for you to take action on e-commerce.

Brian Beck:
This is a call to action for B2B companies. Almost 50% of B2B companies still do not have an e-commerce site. Why? Organizational inertia, lack of leadership. And a lot of this is due to the fact that business historically for these companies has been just good enough, right? Until COVID-19, in which case is threatening the way that you interact with your customer is entirely digital now. If you look at some of the companies and the quarterly reports from companies like Watsco and others, you'll see that those who invested are actually able to speak to their customers today and are growing as a result of this versus some of the other channels. And I'm excited to share some results today from Johnstone who's on the call with us.

Brian Beck:
This is a survey from Digital Commerce 360 which asks the question, what are your biggest challenges in building your B2B business? Look at the top two reasons. Lack of money and lack of support from top executives. Historically, leadership has not gotten it. Well now it's time to wake up. This is a very loud call to action. So we're going to talk through some of the foundational elements of organizational evolution. These concepts are in the book in chapter two and leadership and alignment really requires these things. Number one, redefining leadership starting from the very top. Your top leadership has to align with this and agree to it and be behind it. Getting the right people on the bus and the wrong people off of it. We're going to talk in a few minutes about that. And then establishing a cross-functional accountability matrix.

Brian Beck:
So, how do you to make sure that the organization is aligned? Digital touches every aspect of the company. You need to make sure you have a path and a way to do that. And then finally is hiring really commerce expertise and giving that leader actual executive authority. Too often I hear about B2B companies hiring their 20-year-old nephew who knows how to code to run their e-commerce business. It's not about that. You have to hire people with real chops. And we're fortunate to have one on the call or on the webinar with us today.

Brian Beck:
So with that, again, my name is Brian. I'm the author of the book. I'm the managing partner of a company called Enceiba. We are the only company in the market focused on business-to-business for Amazon. So Amazon business work. I also, by the way, do some advisory work through my company Beck eCommerce. But I'm joined today by a couple of great industry practitioners with a lot of experience and I'm really excited to introduce them. Brian Klaus, do you want to go ahead and introduce yourself to the group?

Brian Klaus:
Absolutely. Thank you, Brian, for having me on. My name is Brian Klaus. As you said, I am the director of eCommerce at Johnstone Supply. I've been there for the last 10 years. I've actually been involved in e-commerce in some regard for the last 18 years. So I do have some experience all the way back to creating a very first website for a company. And as you said earlier, Brian, kind of partnering with that guy that worked out of his basement at the beginning, but times have changed for sure. Back to Johnstone Supply, I have been involved with a lot of our projects from our product information management system to our websites, our mobile apps, and a lot of things in between. Currently I'm focused on enhancing our solutions and improving the adoption both with our employees and our customers. So I'm glad to be here and I appreciate you inviting me.

Brian Beck:
Awesome. Thank you Brian for being here. I'm excited to chat with you. Andrej, you want to say hello?

Andrej Maihorn:
Yes, thank you for having me today, Brian. It's always a pleasure to discuss our industry with you. So just a few words about my background. I'm Andrej Maihorn, VP Industry Solutions at Elastic Path. I've basically spent over two decades in the e-commerce space by now in various roles and various continents. I was actually fortunate enough to gain experience in e-commerce through various facets by leading large commerce implementations for companies like HP, [Zonage 00:11:07], GSI Commerce, to name a few. Running next-generation product development, leading product marketing and strategy and building pipeline RS solutions. But no matter what the role, it was always kind of critical for me to really stay close to the market and follow its trends. So I'm glad to be able to participate with you all.

Brian Beck:
Awesome. Well, thanks for joining us both of you. I want to get into a little bit of sort of a fireside chat. We have no fire, but that's okay. We've got virtual fire, we'll pretend. So guys, I want to... Brian, you're at Johnstone Supply. I mean, a lot of people know the business but some people don't. It'd be great if you could tell us just a little bit about Johnstone Supply and what you guys do and who your customers are and all that good stuff.

Brian Klaus:
Absolutely. Thank you. Johnstone Supply is a fun company. We're very different than what you would typically see in a B2B industry. We are one of the nation's largest HVAC distributors. We have over 450 stores in the US and Canada and we specialize really in service and knowledgeable stuff. We do have a world-class train capabilities as well, and we do a lot of partnering with our customers. So it's not just about pushing product when it comes to our industry. We have really, really strong supplier partnerships that allows us to procure a large variety of parts for our customers as well. So we've become that place that you go to to get those different parts. And personally I'd like to think we excel in our e-commerce solutions, but I may be a little biased on that front.

Brian Beck:
That's okay. You're allowed to be. So you guys have a really interesting business model, right? One of the things I found fascinating, you've got owners that are around the country and you really are sort of a member, you call them members, right? Member-owned business. I think you said about 100 members. And when you have a business model like that, it's interesting, how did you kind of... what role did those members play in your e-commerce development? How did you keep them sort of aligned and engaged in this effort as you started it?

Brian Klaus:
Well, it can be a challenge. You are right. We have about 100 owners which means I have in essence 101 bosses. Any time we can have that phone call from an owner or a member, and have to engage them and work with them on the different solutions. But it can be a challenge. A few years ago we realized at the corporate level, we can drive those solutions, the things that we work on and build. But the issue that we were going to have, especially on the B2B side, it's not just a direct mail type thing. You don't send emails and flyers and different things and you're going to get people to convert and use your solutions. So we really tried to partner with our members and build those training programs and marketing materials that they can then execute and engage their customers. So a lot of what we build is things that then can be customized and localized. So we made a big push to get our members to assign an e-commerce owner.

Brian Beck:
Awesome.

Brian Klaus:
One of the things that we realized right away, without having that owner in place, we weren't going to get the execution we needed down at the local level. I think one thing that really registered for them, we're old school. We're an HVAC, which isn't the sexiest product. We do realize the importance of having the bricks and mortar, and I think one thing that really resonated with people is, we ask them, would they open a new store and not hire a manager for that store? And we tried to get them to have that same thought, that same belief around this channel. How are you effectively going to run an e-commerce channel when no one owns it? You don't have that leader, the person that's really leading the engagement with your customers. So that was really critical and working on adoption for us to really get our members heads around that kind of strategy.

Brian Beck:
I love that. That's perfect and it's a great way. I've seen that before with other companies. We're putting e-commerce in the context of something that the management understands historically. And by the way, you may not be the sexiest, but you're the coolest. Sorry, I had to throw that in. You set it up perfectly Brian. Pardon, corny. So, take us back a little bit. Take us back to... You've been there a few years now. When you started e-commerce, it was... when you started in this endeavor, it was a tiny piece of your business, 1%. Today it's a much larger percentage of your business. Take us through the journey though. I mean, I talked about at the beginning the leadership and how important it is to get alignment and leadership has to buy in on this and they have to make a decision. You guys, you told me you had a really interesting story. You had one attempt which didn't go so well early on and then you restructured and you looked at it a different way. Take us through the journey a little bit for Johnstone.

Brian Klaus:
Yeah, it started with the obvious, really to sit down with our team and show them we had a lot of room to grow. Taking a look at a project that benefited everyone. So when I came in, it's not like I came in and just said, "We need a new website." As I mentioned in the beginning when I was just kind of talking about my background, one of the things we focused in on early was ways we can improve our business. It wasn't e-commerce specific, but knowing that these different tool solutions were going to help with our e-commerce capabilities in the future. So one of the first things we did was that PIN, that product information management system.

Brian Klaus:
We really tried to get our arms around the data and the content. What we had to do and how that content got delivered was very important. And obviously anytime you search, visit a site, you want that content, you want to be able to find the products and then you want to be able to know that's the product that you need for that job. And then provide additional things like data sheets and different things you can download. So it was really getting our arms around internally what e-commerce meant. The foundational thing out of the gate was really getting our product and our information set.

Brian Klaus:
I think from there our business is known as the catalog. Our catalog specifically was kind of the Bible of our industry. So another quick win that we did early on just to show that there's... when we say e-commerce we're not talking just website, and that's one thing that we had to overcome a little bit. So we took that catalog and we made that interactive. We were able to put that online. So that became a resource that our counter could use and leverage different ways. All of a sudden our catalog became mobile and something that you could email someone or send someone instead of them relying on having this big thick book. So that was another quick win.

Brian Klaus:
And again just trying to get out of the mindset of a website, so to speak. A couple of other pieces just to share with you. We did get everyone involved in the project. So I didn't stand on the sidelines kind of in my own little bubble. Working with the development company, we ask for input. We engaged our senior leadership team, we got feedback and that was really important. I mean, we were getting down to you would almost say it's maybe in the weeds a bit, but as a senior leadership team, we were looking at the color scheme, the layout of the homepage.

Brian Klaus:
But what we felt is if everyone had that level of engagement and they take a little more ownership about [inaudible 00:18:49], it becomes a little bit more what is important to them I guess. So we did get them involved. And I think the last thing I would want to say, we finally got our members and our customers involved. So on the member side, again we have about 100 members. We worked with six or seven of those members to establish what we call a steering committee. The steering committee helped us really figure out what's important at the member level.

Brian Klaus:
So they help drive some of those things that they're hearing from their customer or would like to see with our solutions. And then they would turn around with their customers and figure out, what really keeps them up at night? What are some of the things that we can make it easier for them to do? So we had to develop what I call our toolbox, again, which is a lot more e-commerce. There's a lot more than just a website. So trying to figure out what is it that that customer really wants to do and getting that feedback from our member level and from our customer level were vital on that side of it too.

Brian Beck:
Awesome. That's great. Those quick wins you described sound like really good ways to align the organization, show them the value of what digital can really do, right? I'm sure that went a long way to getting the leadership aligned. I love the fact that you engage them in all the details, other senior leaders in your company because, yeah, that really does engender ownership in a way and pride of what comes to market eventually and that sort of thing. So that's fantastic. Andrej, I don't want to dominate the whole conversation. Do you have some questions you want to turn on on me?

Andrej Maihorn:
No, no, no. And I think that's a great... I mean, it's like great to hear what Johnstone has done. I think that these are great examples, right? It shows also some of the complexities and multiple professors B2B companies are facing. Especially in B2B, no company has the same challenges. It's fairly unique to each company. And I have to reiterate a few things. One is, I totally agree. It's not just about selling online through the web store, right? Digital touches on all aspects on how we engage during the entire customer life cycle, right? Brian, you mentioned it in your introduction. This really means that various parts of the organization are affected including technology, operations, finance, product development, customer service, marketing and so on, right?

Andrej Maihorn:
Based on my experience also, I have to reiterate over and over again, I think we have seen the biggest success is accomplished when you really bring everybody together, right? All the different stakeholders. And we understand the day of a life of a sales rep, of a contact center representative, right? Or like in the case of Johnstone Supply, maybe a branch manager. Really understand, what is involved from their perspective? How do you engage with the customer in order to recognize really their pain points, right? What systems are involved, what data is effected? And at the end, these are the people that are closest to the customers. There have to interact with the customers, right?

Andrej Maihorn:
At the end it's really, when we talk about digital transformation, it's about digitally enable and support those various roles in order to make their life easier or to automate processes. I think leadership must really carefully consider their interest. Like what you said, from the top down engage them, bring them together. I think it requires really a fine tuned, orchestrated and collaborative enterprise-wide effort, right? And so look, many B2B organizations, they have been around for quite a while and they have successfully built their business over decades and they've looked the way they were working. There are a lot of established traditional processes.

Andrej Maihorn:
But on the other hand, again, like we have the current situation, you have technology changes that drive customer behavior, different customer behavior and engagement. And as you mentioned, Brian again, the next generation of B2B buyers grew up in a digital world and alternatives are just a click away. To me, my question to you Brian Klaus was, what kind of traditional processes and business practices needed to change on the Johnstone Supply side to create e-commerce success?

Brian Klaus:
Well, we personally had to get over the hurdle of thinking our customer isn't ready for e-commerce. We thought they like coming into our store, working with our sales and counter staff, and I'm not saying they don't, but we... Our mindset was that was their preferred method. And when we actually went out and we asked them what their preferred method was and took surveys, we were surprised by the percentage, I should say, of customers that said, "No, my preferred method is through an e-commerce channel," whether that's the website, the app, or other solutions that we have in place. So, our model being a little bit different than normal B2B in a [co-app 00:23:53]. Again, we have 100 owners that own each one of those stores. So when we looked at the traditional processes when it comes to adoption, ours is twofold.

Brian Klaus:
So really working with our owners, our members, to really have them adopt that strategy and those solutions, but then have them work with their customers to adopt their solutions. So it definitely was not a build it and you come industry. We were very hands-on and training and educating the customer, which again are typical processes that you don't see. A lot of times it's outward, outbound type stuff. This was a lot more hand holding, a lot more engagement and a lot more proving ourselves to our customers.

Brian Klaus:
So, we took this outside of the catalog and in store experience and that's where our mindset was, is around we're Johnstone Supply, we send out a catalog, we send out flyers, and we just kind of started to shift that process a little bit. So we had to educate our members and our customers on the importance of e-commerce and then showing them how much money is wasted on these non-billable time if they're driving all the way to our store or if they're waiting for that call back from a salesperson. These are the type of things that are hard costs like travel, gas and time. And there's opportunity costs that are lost too by having more calls in your day or installs or less callbacks.

Brian Klaus:
So again, it's an education process. Again, on our side it was twofold at our member level but also at our customer level. And we were really going up against a lot of the old school traditional processes of coming into the store or using our catalog. So that's really the big thing was all around education and getting them comfortable with these different solutions.

Brian Beck:
And Brian, I really love that you raise this topic because customer adoption, it's not just about customers interests but it's how you align the internal team, whether it's a salesforce or your counter staff or what have you around this effort and the benefits that you can have. It's funny, Andy Hoar, who wrote the forward of my book a few years back when he was at Forester, he wrote an article about death of a salesman. I don't know if you guys remember that. Anyway, it was tongue in cheek. I mean, it's not death of a salesman. It's really about aligning channels and getting everyone on board. And I'm curious, Brian, when you guys rolled this out to the members, did you have any incentives in place? Sometimes companies will put incentives in place for the sales team to benefit from sales conducted online. Was there anything you did to ensure they were on board with e-commerce as you rolled this out?

Brian Klaus:
We did not. Now, with me working for the corporate office, the sales team really reports to the local owners. I know local owners did. When I say we did not, it's corporate but the local owners definitely had different incentives or ways to drive their salespeople to really get in front of this solution and market it. It could be as simple as... a good sales team is really driven by competition. It could be as simple as putting up a board and saying, "Here are the 10 salespeople this month and this is their percentage of e-commerce." I'll be damned if I'm number 10 on that list. I want to get to that list so I'm not at the bottom, everyone else making fun of me. So it could be one of those things, just driving competition.

Brian Klaus:
It could be a financial incentive. We definitely did some of that. It just didn't come from me. It really comes from our owners and we would help guide some of those discussions. I think one thing that we had to take away was the thought of our salespeople that e-commerce doesn't help them. In the initial part, there was some thoughts around, well, my targets around sales for this account, and it goes through an e-commerce channel, that wasn't sales through me so I'm not going to get credit for that. So those are the types of things as well that we had to reduce or eliminate to make sure that they were giving it their all and it wasn't going to be a negative thing for them.

Brian Beck:
That's amazing. And Brian, I'll have to have you back for a future session because I've got a chapter in the book about channel alignment. That's awesome that you're doing that. So I think that's important and that's why it's... it's clear that this touches every aspect of the organization, sales being one of them. So, what do you think the hardest part was for Johnstone of digital transformation?

Brian Klaus:
Oh, I think there's a lot of hard parts. When I started, I had long flowing hair-

Brian Beck:
You're a rockstar. 

Brian Klaus:
The hardest part is really getting everyone to understand the channel's more efficient and important for longterm success. I think when you first launch e-commerce, there's a lot of channel shift in the beginning, so it's not sales group. So if you have this massive sales target and you're looking at growth, you might see more of that transition from channel to channel. But as you start to perfect these solutions, and this is where I mean it's more of a longterm select success thing. As you start to perfect those solutions and kind of build up the toolbox, then you have products and solutions that differentiate you.

Brian Klaus:
And that's when you can really start going after your competition and you can start getting new customers, stealing customers, do more prospecting, and really target customers that you haven't done a lot of business with to show them that you're different, to show them the solutions that you have really do improve and impact their day to day. So I think just getting that one of the hardest parts of that transformation is it is a longterm thing. It's about building those solutions, improving those solutions, building up that toolbox so then you can differentiate yourself from your competition, and then you can also start to build those walls around your current customers. And then eventually grow their share wallet. So, it's a process to start to understand this. It takes a little bit of time and it can be difficult to get your head around.

Brian Klaus:
I'd say the other thing I'd like to throw out there, it's an interesting channel where it easy for me to say strategies do change a lot. With technology, if you sit there and ask me to build a three to five year strategic plan, that's a very difficult challenge because of how much things change within those three to five years. I mean, you look back, look how different things were just 10 years ago. Mobile wasn't adopted as much. I remember when we had to make the decision when we were building our website to go responsive, responsive wasn't supported that well. So we actually made the choice not to go responsive at that time, knowing that this is something we'll probably have to redo, but it just wasn't there yet, right? So it's hard and it's one of those things where strategically you have to be fluid and you have to be able to, and willing to change that strategy as needed as different things come.

Brian Beck:
Right. Frankly, that's one of the things I love about this business guys is the amount of change, right? It's so intellectually challenging and interesting. Having been in your shoes, Brian, in other companies, yeah, I hear you. It's just a different kind of model and for B2B that are traditionally conservative companies, it's something that takes a shift and I feel how hard it is sometimes to get that leadership alignment. And so, appreciate your perspective.

Brian Beck:
Let's talk about one of the biggest things that's happened in our lifetime, coronavirus, and how that shifted things. I talked a little bit about in the intro to this session, this is unprecedented in the modern times anyway. It happened 100 years ago with Spanish flu. Today it's a much different world in we have e-commerce, right? We're blessed to have the ability to actually speak to customers and even do stuff like this, right? But Brian, I mean, what has this done to leadership and challenges to your leadership in how... what kinds of things are you seeing at Johnstone in terms of how this has shifted the importance of e-commerce or digital channels? Anything you want to comment on there?

Brian Klaus:
Yeah, I think, I mean, we were very hypersensitive of that, certainly more of the current situation, I guess. We met as a team and we asked what are those things that we can do in order to support our customers and our members during that time. So a lot of that conversation or those ideas became what we really focused on right away. We're pretty strenuous about, these are our releases and this is what we... when we update and all that type of stuff. But once we figured out that we got to change some of these things and we got to change quickly, that obviously became one of the things and one of the drivers to get us to change those things.

Brian Klaus:
So we really looked at communication, how can we communicate better with our customer? We looked at ways that we can improve processes in order to support new things like pick up. Some of our members might've done delivery, will cause a big part of our business, but all of a sudden you can't open those stores or you don't have the people to really man those stores, what are those alternative solutions and how can we support those things? Even things like if a... so the way we work is we have those 100 owners that own roughly 450 stores. One owner can own let's say seven stores. If he has to close one or two of those stores but there's other four that are open, how can we support that? How can we temporarily close one of your locations so when they log in, they're not backed with an order that'll go to a store that's not fulfilling orders at those times.

Brian Klaus:
So really getting our arms around ways that we can communicate and support our members through those times was important. I think e-commerce in general, the whole... touchless is now a big buzzword. But that whole e-commerce channel during this time becomes more and more important because you don't have that person to call, or there's not as many people at the store. Or again, you can't walk in and travel through some of the projects and different things there. So having the e-commerce capability, having the content and the data out there that they can go out and get those answers became obviously a really important channel for us.

Brian Beck:
Yeah. No, that's great, Brian. Andrej, you want to add anything? Again, don't want to dominate. Go for it.

Andrej Maihorn:
No, absolutely. I mean, it is unprecedented times as he said, and I think the current situation is kind of a wake up call for a lot of companies as we increase business leader. We have already seen constant evolution of B2B commerce over the years, like on one hand you have the customer expectations all shifting up for the technology and stuff and demands. You have technological innovation. But many traditional B2B organizations, and you had a slide right in the introduction, 50% don't have necessary B2B e-commerce outplay now. Especially larger ones, they're entrenched, inflexible. So they are structured to support existing channels and relationships. They're having a hard time to adopt easily.

Andrej Maihorn:
So not only do these enterprise needs an agile and adaptable technology ecosystem to constantly direct those markets, but I think with the leadership aspect, the organization now needs to support it and to embrace it, right? And I think it was never more critical than in current times. As we said, stores and branches are closed, right? Person-to-person interaction is limited. People actually both on the buy and the sell side are working from home. It changes quite a few dynamics in B2B, right? Companies are dealing with supply chain disruptions and production delays as well as reduced sales. I mean, you see that left and right. So I think companies have to react to those changes in order to sustain business.

Andrej Maihorn:
And I think in many industries, we actually see an acceleration in that channel shift. You talked about like three years we might get ahead of the game right now because of the situation now. And while general sales might go down, actually a lot of the industry's online orders for many go up, right? So leadership is about understanding the dynamics in market shifts and then really empowering the people and driving those changes throughout the entire organization. I think you look at this specific case with VFC for example, as you know, well, what are good ways to do it? One thing could be to enable actually sales reps that are maybe not as busy to support the online onboarding of their customers, right? It's a good opportunity to kind of educate customers and get them familiar with the tools and kind of accelerate this process to establish maybe automated systems and checkbots to call it like increase in the actions that you might have now through phone and chat.

Andrej Maihorn:
They're kind of like for repeated or simple questions, you have the automated option and then the agent comes in when they need to take order and it gets really specific, right? Extend obviously your self service capabilities as much as you can. And especially like these times where inventory visibility and delivery predictability is a challenge, I think it's a big aspect and a big opportunity to do something like that. Ideally I would say like digital first and technology is the enabler to be able to react to some of those situations. But again, the execution is still what needs to be driven by the team at the end.

Brian Beck:
Yeah. That makes a lot of sense. Thank you Andrej for that. I love that idea of taking the salesforce during this time and having them enable e-commerce. Coming at this, to your point earlier Brian, really getting people involved and taking ownership. That's just another way to do it. I love that concept. Just a couple more questions guys as we get close to wrapping here. Brian, accountability is important, right? You talked about collaboration structures earlier and how you gauged the steering committee of customers and members and such. What kind of accountability metrics do you guys have for e-commerce in terms of measuring its success and growth, et cetera?

Brian Klaus:
Yeah. We're always measuring the success of this channel. The metrics change over time though. That's one piece of advice I'd throw out there. In the beginning it was all about percentage of business. And we still look at that. It's still a good indicator obviously. But it's pretty high level and what we've started to notice is it can skew the results a little bit. Let me explain to you. Again, our model being a little bit different, we'll use that same example with a member that owns seven stores. Let's say they're doing 30% of their business through e-commerce and that sounds great. Would be considered what we call a leader by our metrics and our standards.

Brian Klaus:
But when you slice it down, you start to see [holepost 00:39:10]. And let's say, again, they own seven stores. And when we look at percentage by store we can start to see maybe one store is doing 60% and another store or two stores are going 5 or 7%. So it's really starting to take a look at it not by our, well, we could say our group level, our highest level, 30% of your business, but really looking at it by the individual stores. And those are all in a little bit unique markets for them so they can start to see, is it something that I need more training at that branch? Do they have a TM, sorry, territory manager? Do they have a sales manager that understands e-commerce?

Brian Klaus:
You can start to figure those things out and see where you could improve. So again, very high level. So look at percentage of business, but we're starting to dial it down a little bit to that store level. A couple of other areas we've really dialed into a little bit more, percentage of customers as well. So we're really looking at the solution, who's truly adopting it? Because it can be the same issue that we have, not only at the group level where a store or two might be doing bad, but when you start to take a look at the customers that are driving the sales for that member or for that store, it could really be one or two large customers that are doing majority of that business.

Brian Klaus:
So you start, again, to ask yourself, do I have true adoption at that chain or that market, that store? And we can really start to look at who's using the solutions, and we do have that capability as well so we know each and every single tool that we have, what the sales are by group and then by store. And then we also take a look at automation. You got to remember e-commerce is also about efficiencies. So it's, how can we improve processes internally? Another hurdle we've had internally with our sales and counter staff as I mentioned this a little bit is they think e-commerce can replace them or take their job, which has never been the case. I've never walked into a Johnstone and said, "You guys are doing so much e-commerce business. Let's [inaudible 00:41:15] of your member staff." It's never happened. And we have groups that are over 40% of their e-commerce. It's never happened.

Brian Klaus:
What it allows us to do is grow. When you're doing more e-commerce business, it allows us to grow without having to hire additional counter. But it makes our counter staff even more valuable because they're the ones that are on the frontline working with the customers. And it allows them to be more of a partner, more of someone that you can sit down with and actually walk through an issue, a problem. You can help with quotes. You can do different things rather than faxing in an order and that counter guys is manually entering a 60 line order which doesn't really help anyone. So we look at automation on a number of lines that gets automated through e-commerce, number of orders gets automated through e-commerce. And obviously we look at sales and we look at the number of customers. So, we're really trying to get our arms around what is the true adoption and where can we improve on some of these things at the same time gaining efficiencies internally so we can do bigger and better things.

Brian Beck:
That's fantastic and it's a real tribute to you guys on how you're getting these channels to work together. So I have one last question for you Brian and it has to do with... I'm going to ask everybody this as we go through these sessions in the virtual book tour. If you had to give one piece of advice to a CEO who is just starting their digital transformation journey, what would it be?

Brian Klaus:
Am I allowed to have two? I have two pieces.

Brian Beck:
Sure, take two.

Brian Klaus:
First. It's not necessarily about the technology. I mean, you have to have a solid solution, don't get me wrong. In B2C, a lot more direct marketing driven where you can send emails, texts, advertise online, retargeting and prospecting through SEO, SEMs, so on and so forth. Whereas your B2B customers need more coaching and handholding. At least that's what we've found with our customers. So we use the solutions to show the value e-commerce brings. So we don't ever lead with a solution. We sit down with a customer and we ask them, what does your day look like? How do you transact? How do you get the orders to us? We never ever go into a customer and say, "Hey, you should be using our mobile app." We really try to let the customer guide some of those things and then find the solution that's right for them.

Brian Klaus:
Let's kind of play that out in example. Let's say a contractor is on the job site, he needs a part to complete his job and it's not in his van. If he leaves and drives to Johnstone and picks up that part, that could be easy, right? And it could sit there in his mind it only take 30 minutes. Well, that's 30 minutes that he's off the job site. It's 30 minutes that he can not bill the homeowner and that's time wasted. So how many times does he do that in a day, in a week, in a month, a year? And start to actually spread that out to show them the importance of being able to get information and transact, place orders through something that's easy. So really shining the spotlight on those activities which money is wasted, just to show them again that technology is there to support their business and is critical for them. So really that's the first thing. It's not about the technology, it's about really showing the value of e-commerce.

Brian Klaus:
The second piece is an extension of that, but it's really, I would say that the CEO needs to talk to their customers. I don't know how many times I've been with other folks that are with other companies and they sit in a room and they make the decisions on what e-commerce should do and is doing. We're all smart people. We've all been in this for five, 10, 15, 20 years. We know how things work, but that might not always be what your customer needs. So really listen to your customer. Have conversations with them. And I mentioned this earlier, what keeps them up at night? What are the things that you want to do? And it could be instead of trying to build this massively complex, really cool solution, it might be as simple as reprinting an invoice. And that includes a signature capture. That is something that hits home more than something that might be super complex. So really listen to your customers would be my final advice here.

Brian Beck:
Yeah. Brian, I love that. You sound like Jeff Bezos, the CEO of Amazon. No, seriously. I mean, if you look at why they've had success, it's all about the customer, all about the customer always. Andrej, do you have anything to add?

Andrej Maihorn:
Yeah. I thought to add just one or two things. But I have to second what Brian said, obviously. But I think it's also, what I would add is, it's important that the execution of a digital strategy is a no binding process, right? There is no beginning and end. I mean, there's a beginning obviously but not necessarily an end, and it will not happen overnight. And I think it can be quite overwhelming for a lot of those companies. I think it is. But companies have to realize you just got to start. You got to start small, you can start small, right? Think big, get a stretch out there. What do you want to get accomplished? But then really dive into a.... there's the small aspect, the small steps by defining key use cases, pick the right stakeholders, and really like build, measure and learn.

Andrej Maihorn:
Kind of really evolve from there instead of kind of really been stuck and do nothing which we have seen over and over again. So I think it's very important to, and Brian you mentioned it before, always like it's key to have a well defined process that has clear goals and objectives, they have measurable metrics and KPIs, clear timelines and milestones, like make it measurable, right? And kind of have the success, again, get the customer feedback, incorporate and build it from there. So it's up to you on how you break it down and how you get started. And then learn from other companies. Other companies have done it, I think that's important tool. See if there are best practices that apply to you and leverage them.

Brian Beck:
That's awesome. And Andrej, I have to say before we wrap, I love the fireplace you got behind you there. It's very cool.

Andrej Maihorn:
I should have thrown in one for the fireside chat, right?

Brian Beck:
You should have, man. This is a fireside chat after all. I'm going to go ahead and share my screen again, guys. And just to walk through a couple of things here. So thank you everyone for joining us. Here's our contact information for myself and Brian and Andrej. Feel free to reach out to me if you have questions. The book website is right here, and my email, and that's my mobile number. I'm a Jersey guy living in California. So my 732 mobile number. Brian and Andre, thank you so much. I'm going to just go through a little bit of housekeeping here about our next session.

Brian Beck:
Our next session will air June 10th. Again, will be available on demand. It's about building an e-commerce foundation. I have some fantastic guests for that as well, both from Elastic Path and from Keysight Technologies. So we're going to be diving in on what it takes there. And here's the rest of our schedule here. If you have questions, you can email Meg or myself at the bottom here of this slide. Well, thank you all for participating. Most of all, I want to thank Brian and Andrej. You guys have been awesome to have together on this virtual book tour. Lots of great points and really appreciate your time guys. So thank you so much for joining me on this journey and helping everyone else in our universe mature their own playbook for digital transformation. We hope to see everyone next time. Thank you very much for joining.