Breaking the Barriers: Four Critical Roadblocks to Business Model Innovation in Distribution

This article was originally featured in the March 2025 issue of MDM Premium Exclusive. Nelson Valderrama is the CEO of Intuilize, helping mid-size distributors transform data into profits with more than 25 years of experience in the industrial distribution industry.

Why Innovation Matters Now

Recent MDM research revealed a striking insight: 63% of distributors see business model innovation as a top priority, with 73% ready to invest in making change happen. Yet despite this recognition, many struggle to implement meaningful innovation.

Those who continue "business as usual" risk falling behind in today's rapidly evolving marketplace. Your business model—how you identify customers, satisfy their needs, and create value—needs to evolve beyond traditional approaches.

Four Critical Barriers Holding Distributors Back

While many distributors are scrambling to respond, the most successful companies are implementing systematic approaches to protect their profits. Industry analysts predict that over 60% of distributors are woefully unprepared for the current tariff environment, creating a clear opportunity for prepared businesses to stand out.

Remember the trade tensions of 2017-2018? Companies that adapted quickly gained an average of 4.2% market share. This is your chance to shine.

Four Winning Procurement Strategies

Recent research with distribution executives identified these key obstacles:

1. Lack of a Clear Business Case (25%)

Many distributors propose solutions before clearly defining problems. A successful business case requires a data-driven plan that identifies impacts, risks, metrics, and accountabilities.

Best Practice: Create a detailed project charter that establishes direction, framework, timelines, and risk assessments.

2. Lack of Experience (37%)

Organizations worry about their internal systems and people aren't equipped to manage transformation. Internal teams often resist change with "if it ain't broke, don't fix it" thinking.

Best Practice: Leverage external expertise through trade associations and buying groups to supplement internal knowledge.

3. Lack of Critical Skills (55%)

Most distributors lack three essential capabilities:

• Project Management: Organizing and delivering milestones on time and within budget
• Change Management: Transitioning people from current to future states while minimizing resistance
• Communication: Translating business requirements into clear messages across stakeholders

Best Practice: Secure external resources trained in developing and executing change to complement internal teams.

4. Lack of Capacity (60%)

The most significant barrier exists across three areas:

• Human Resources: Skills gaps and employee burnout
• Technical Infrastructure: Outdated systems
• Process Readiness: Inflexible or inefficient workflows

Best Practice: Evaluate organizational readiness in these dimensions and address gaps systematically.

Where Does Your Organization Stand?

Boston Consulting Group research categorizes distributors by technology readiness:

• Leaders (6%): Fully future-built organizations
• Advanced (19%): Making significant progress
• Developing (45%): Early stages of transformation
• Lagging (30%): Struggling to begin

Mid-sized distributors who don't prepare now for emerging trends risk missing significant opportunities to delight customers, disrupt competitors, and drive sustainable growth.

READ THE ARTICLE ON MDM HERE

Join Our Upcoming Workshop 
From Tariff Chaos to Control: 5 Steps Every Wholesaler Must Take Now

Date: June 11, 2025
Time: 11 AM EDT
Duration: 45 minutes + Q&A
Presenters: Nelson Valderrama (CEO) and Phil Samuels (VP of Sales)