B2B e-commerce, change, and the customer: A conversation with Ram Charan

At the recent Game Plan B2B E-commerce Forum in Chicago, I had a chance to sit down with world-renowned author Ram Charan to get his take on the future of commerce for manufacturers and distributors.

Charan, who delivered the keynote at Game Plan, has spent the last 35 years working with companies including General Electric, DuPont, Bank of America, Verizon, and more. His reputation for cutting through the complexity of doing business in today’s fast-changing world.

He shares his expertise through his books, articles in top business publications and, today, with The Future of Commerce. What follows is an edited transcript of a conversation with Charan that covers a wide-ranging exploration of what’s happening in B2B today, but, in the end, focuses on what is most important—the customer.

Why has it taken the B2B marketplace so long to embrace e-commerce?

Ram Charan: The change does not happen on its own. It’s always driven by a catalyst, and that catalyst is almost always a human being or a group of human beings. The largest scale change in B2C is driven by Jeff Bezos. They can disagree, and we may have some other people, but the concept is the same. He has also been driving for B2B with Amazon Supply.

Ram Charan: And so, until other people feel the pinch on them, they are not actively going after it. And that has to do with the management of each of these companies. When such a change comes, it levels the field for people. And that’s how the biggest companies that do not change go over the cliff. That tells me the leadership matters. And the other reason is, if you have a chain, you need the synchronization of the whole chain.

So you’ve got a leadership in place that maybe doesn’t see what’s happening in their market, and you have folks beneath them who do see, who are trying to be agents of change. What advice would you give to people who are in a situation where they’re working hard to be agents of change?

Ram Charan: First and foremost is that they have to have credibility with top management. They don’t go and say, “You guys are blowing it.” You don’t go and pontificate. What they need to do is first find a way to get them to commission a peer team to do benchmarking. So management commissions it. The second then is to take two or three or four senior people to go and see it themselves. [Then] have them meet the customers of others. And then, see if you can talk to the CFO in some way, and then say, what’s the risk? What are the analysts saying? Or what are the investors saying? But the most important part is the customers.

So, how many brands are really capable of this kind of change?

Ram Charan: The promise of a brand is through the eyes and experience of a customer set. And, if the brand delivers a promise that is different from others, then the brand will sustain. If customers [want commerce] online, and the brand doesn’t deliver that, it’s not going to sustain.

So it’ll get winnowed out on its own?

Ram Charan: That’s why the brands die…Advertising is not brand-building. It can support, but it’s not brand building. It’s a consumer experience, and the consumer says, legitimately, that it is something unique or better than something else, and I prefer this experience.

We don’t see a lot of B2B brands embracing social media, but it seems like there’s a missed opportunity there.

Ram Charan: Huge. Huge opportunity…social media causes transparency and…everybody knows there’s no substitute for word of mouth.

Let’s talk about Millennials for a minute, and how they’re driving change inside of companies as they come on board as employees.

Ram Charan: So we say Millennial are a fact of life, and their mental process is different from the bosses who are in their 40s, 50s, and 60s. And we’re going to see more of that conflict, unless senior people learn the new mindset and brand architecture of the Millenials…People have to learn how to work with them.

Are Amazon and Google a real threat to B2B e-commerce, or are they just going to put the pinch on brands?

Ram Charan: If you don’t have a platform. Most people cannot get a Google-type platform. It’s very expensive. But… you [can] create a segment, get your search engine, put up the scale, and build a service.

So they’re not as big a game-changer as, perhaps, as the media has made them out to be?

Ram Charan: No, no. They are a game changer. They are saying, “We look at the world. Where’s the opportunity for us?” They’re going to create value and, if that means changing the game, it will change the game.

What I’m taking away from all of this is that the winners will be the brands that are open to and able to see the next wave of change that’s coming, and also ride the current wave.

Ram Charan: Plus, the eye on the customer.

I think fear is a big factor. “This is the way we’ve always done it, and this is the way we always have to do it, or we’re going to fail.” So, when you encounter a business that is mired in fear, paralyzed by fear, what would you share with them to help them move forward?

Ram Charan: When there’s a fear, visit the customer. Observe the customer. Get the truth. Look at the customers you don’t know anything about. Business is risk-taking, but you must align with the customer.