Overcoming business barriers to profitable growth
What is stopping companies from managing their rebates properly and attaining profitable growth? In this article, we answer questions including, ‘What is profitable growth?’ ‘Why do distributors and manufacturers fail to grow?’ and ‘Why is strong collaboration so important for growth?’. By the time you’ve read this article we hope you’ll understand why so many of our customers call investing in Enable’s rebate management software a no-brainer.
What is profitable growth?
Profitable growth is when a business grows revenue, while also making sure growth is profitable. Some say profitable growth is the combination of two elements: Stable and growing revenues; and productivity gains and innovation. Regardless of how you define profitable growth, expanding a company while making it more profitable isn’t just a nice-to-have, it’s the holy grail of business success.
“Maximizing productivity is no longer enough. To support any hope of lasting competitive advantage, companies know their operations must achieve more than ever before: stronger resilience, faster innovation, higher customer satisfaction, and more engaged workforces. And it all needs to happen at once.” – Katy George, McKinsey & Company
At Enable, we focus on business growth between trading partners who produce goods as part of a B2B deal chain. We call this the deal economy. And although the deal economy includes both manufacturers and distributors with very different operations, both groups aim to serve the customer and achieve profitable growth.
Unfortunately, as Katy George of McKinsey says, “maximizing productivity is no longer enough”. She suggests that digital transformation is one of the key ways of improving growth and profitability. We agree. Turning age-old ways of managing deals with spreadsheets into an automated process is key to both, especially since a significant amount (up to four percent) of rebate can often go unclaimed. This can amount to millions of dollars left on the table each year. For companies trading with extremely narrow margins, claiming the right amount of rebate can be the difference between profit and loss.
Why distributors and manufacturers fail to grow
In saturated markets with significant competition, many distributors and manufacturers are simply competing for the same (or a diminishing) slice of the consumers’ pie. When you add all these factors: The complexity of global supply chain challenges brought about by the pandemic, increasing costs, lower margins, an over-reliance on over-stretched suppliers, and a higher level of personal and business stress, it’s hardly surprising that profitable growth is hard to come by these days and even more difficult to sustain.
What can we do to avoid this negative growth spiral? An article in tEDmag reminds us to ask “what is happening in our business ecosystem that creates discontinuities that can be leveraged into opportunities? And, do we have opportunities to scale our processes to gain efficiencies that we can then invest back into growth opportunities?”
One way of gaining efficiencies is by investing in software that makes life easier.
At Enable we see rebate agreements that are fraught with ambiguously worded agreements, unclear sign-off procedures, no single version of the truth, and over-reliance on individuals. Combine all these factors and you get a ton of risk and uncertainty.
The alternative is taking a systematic approach to rebate management. When you’re able to monitor deal progress together with your trading partners and work towards meeting achievable deals, you can track performance against them and course-correct swiftly if the deal doesn't seem to be working as planned. A perfect solution for uncertain times.
What are the business barriers in rebate management?
As with many supply chain-related processes, the enemy of efficiency lies in manual processes, not enough visibility, and cash flow challenges. These are six common business barriers to profitable growth that we observe taking place in typical rebate management scenarios.
- Missed deal earnings that did not appear in manual tracking processes affect profitability.
- Failure to spot opportunities to renew arrangements and be more suited to the business climate results in missed opportunities.
- Net margin on trading activities can be really opaque.
- It can be very hard to determine our margin on selling activities.
- Relationships with customers and suppliers can be sub-optimal, with everyone spending far too much time trying to realign and work out deal accuracy.
- Poor cash flow reconciliation and a lack of access to cash which is held up due to disputes.
- An increased chance of financial risk and compliance risk and associated lack of confidence in deal accruals leads to a lack of confidence.
These business barriers to profitable growth often stem from a lack of connected systems. As Stephanie Yee says, below.
“I think oftentimes these systems are disconnected, I think technology could go a really long way in trying to build that bridge and, and feed in more real-time information around when you’re about to hit those tiers so that you are actually maximizing the profitability completely end to end.” – Stephanie Yee, Management Consultant at Bain & Company, in an interview with Pricefx
Why strong collaboration is so important for growth
We believe, and our customers’ success stories confirm, that increasing digitization and collaboration in the materials demand chain also presents a significant opportunity to drive profitability. Collaboration helps all parties drive mutually-profitable growth.
A bit like the collaboration between colleagues in an organization, by working together on rebates, the whole is greater than the sum of the parts. When trading partners work together efficiently, based on a mutually beneficial incentives plan, this can be a powerful force for growth.
Without collaboration around B2B deals, discrepancies creep in, disputes arise, and instead of mutual benefits, these trading arrangements deliver mutual headaches for both parties. Without good collaboration tools, companies that are hard to work with will eventually lose out to those who are easy to work with.
The alternative is to view trading not as a bargaining tool, or a necessary evil, but as a mechanism for mutual cooperation and growth. With this worldview, it becomes possible to identify the most strategic trading partners and focus on designing deals and negotiating deal structures to drive growth for both parties.
Using your deals to your advantage to attain profits and growth
How do you leverage deals for profitable growth? In an article in tEDmag, Bridget McCrea recommends finding new opportunities where your competitors aren’t already operating, walking the fence line to identify the struggles and challenges within your business, making it as easy as possible for customers to get what they need when they need it, opening your mind to new opportunities and focusing on small process improvements.
Research by an SAP customer benchmarking study indicated that 81% of distributors believe simplification is essential for their organization, while 88% admit IT investment is critical to achieving simplification. While using deal management software may not seem simple, it results in significant improvement: In the short and long term.
By using a collaborative approach to rebate management you improve visibility, openness, trust, and clarity. If both parties share their data any issues can be highlighted as soon as possible, allowing process discrepancies to be fixed at source, removing friction and distraction, thereby improving the trading relationship.
How Enable can help you achieve profitable growth
Collaboration in the cloud is already powering new ways of working, allowing trading partners to collaborate rapidly on their deals, synchronize their efforts to operate those deals, automate processes, and unlock opportunities.
At Enable we truly believe, and we see every day in practice, that moving rebate deals to a digital platform in the cloud and implementing them more strategically and collaboratively presents a great opportunity to unlock profitable growth in the construction industry demand chain.
To find out more about how to break down barriers that unlock profitable business growth, watch our on-demand webinar recording on this topic. Or, if you’re ready to overcome B2B deal management barriers that are stifling profitable growth, get in touch with us. You can also try Enable rebate management yourself, for free – no credit card details required!