Matter. Julie Williamson
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for success.
During our research, embedded in the case studies, and in our work, we’ve consistently found that optimism was a foundational element of success for people who decided to re-create their businesses. By adopting a more optimistic stance, leaders asked better questions—questions that pushed them to identify the opportunities, not just the threats, at the edge of disruption. Over and over, we saw optimism, coupled with the willingness to challenge assumptions, as crucial characteristics for success.
The power of optimistic thinking holds true for companies of all shapes and sizes, and in all industries. Let’s shift gears and look at an example of a company that is smaller in size, but not in impact: a mid-sized plumbing distribution company from the southwestern United States.
Standard Plumbing Supply is no multibillion-dollar giant like Homeplus. It is a family-run, increasingly vertically integrated plumbing supply business based in Utah, and it faced a competitor that strikes fear in the hearts of many established market leaders: Amazon. That’s right, Amazon wasn’t just unsettling consumer-facing retail giants like Barnes & Noble and Best Buy, but also business-to-business players such as electrical and plumbing distributors. Lowe’s and Home Depot were tough enough competition, but now this plumbing distributor was squaring off against this disruptive online wizard and its world-class user experience.
In 2014, with Amazon encroaching, a group of plumbing suppliers invited Karrikins Group (then ChangeLabs) to address its annual convention and offer guidance on how to respond. In conducting a preconference briefing, Karrikins Group brought multiple business owners into the same room to explore their perceived challenges and opportunities. Richard Reese, CEO of Standard Plumbing, dialed in, and for much of the discussion, was content to listen. When the question “What opportunity does Amazon actually present to the distributor and its current role in the value chain?” was posed, the other plumbing suppliers responded with versions, some unprintable, of “Amazon is the devil.”
Richard’s response was very different. He noted that while Amazon was indeed a disruptive force, in that disruption lay tremendous opportunity to grow their businesses, both in store and online. We were shocked to hear this. It may have been the first time we heard someone speak so positively about a competitor and the change they were bringing, let alone one as aggressive as Amazon. If we had known the history of this family business, we might not have been so surprised.
Disruption was not new for Standard Plumbing. In fact, the company was founded as a disruptive force. In 1952, following a graduate degree from the New York University School of Retailing and a stint at Macy’s, Dale Reese returned to his home state of Utah and did for plumbing supply what Piggly Wiggly had done for grocery retail—he made it self-service. Many years later, Standard Plumbing, now under the leadership of one of Reese’s sons, Richard, faced a choice: ignore the emerging forces of online commerce that were starting to bubble up on the fringe of the industry, or lean into them, move to their edge of disruption, and embrace this mostly uncertain online channel opportunity.
The company chose to move toward the edge, with confidence and optimism, and set up an online department. Although a pallet in the back of the warehouse is hardly a “department,” it was a symbolic move that the future was coming, and Standard Plumbing would be a part of it. Where did Standard Plumbing choose to sell most of its supplies? That’s right: Amazon!
Like most entrepreneurial businesses leaning into the online world in those days, Standard Plumbing did not realize that by doing so it was essentially making transaction and product information (called a “stock keeping unit” or SKU) across almost every product category on earth available to Amazon. Amazon would track SKUs and categories, and when one reached a sizeable enough volume, Amazon would begin competing with those suppliers who had been listing on its site. The B2B industrial product space is twice the size of the entire retail market in the United States,6 so it’s no wonder Amazon decided to target a pretty large share of it.
Now one might be forgiven for crying foul, but Standard Plumbing’s leadership team saw no value in complaining. They merely dealt with the facts and made future-focused decisions instead of exerting effort holding on to a world that would eventually crumble. Reese had been learning at the edge of disruption the whole time, and had come to know two things. First, in an online market, it was all about search. If you could rank higher than the competition, you won. And no one could beat Amazon in search. Amazon dominated organic rankings on sites like Google, and could also control rankings on its own site. Second, Reese also knew that to truly win with plumbers across North America, Standard Plumbing would need to stock and make available a much broader range than just the highest-volume SKUs, and this would include the heavy and bulky items that Amazon traditionally resisted carrying.
Here was Standard Plumbing’s opportunity—its edge. Richard Reese asked the more optimistic question: Could Standard Plumbing become partners with Amazon, rather than the two being competitors?
The answer turned out to be a resounding yes. There were two relatively important and high-value challenges Standard Plumbing could solve for Amazon. First, Standard Plumbing could assume the inventory-carrying risk and storage cost for larger bulky items that have lower volume. And second, it could act as a direct distributor for these same expensive-to-ship items in the states where it has physical locations.
In our conversation with Richard, he noted that 85 percent of Standard Plumbing’s sizeable online business is currently with Amazon, on its behalf.7 Focused mostly on carrying inventory risk and associated costs, Standard Plumbing now makes available for Amazon customers some 63,000 SKUs, which are sent across not just Standard Plumbing’s eight states, but the entire United States and Canada. This small Utah-based family business has become the obvious choice not just for its traditional market, but also for the biggest disruptor in its market, because it solved a relatively important problem for Amazon—the need to penetrate this important and growing market in a way that worked for Amazon and for its customers, which meant being able to manage inventory and delivery effectively at a local level.
Reese is not just optimistic about the disruptive opportunity that Amazon provides; he also speaks very positively about its approach to business. He admits that “when doing business with Amazon, there is the Amazon way and there is the Amazon way. Choose.” And yet he adds that an abundance mind-set (an expression of optimism) pushes the company to do business with its competition as well. To Amazon, Reese explains, a “box is a box, and as long as they are part of the transaction, they are more than happy to share the margin.”
The explosion of Standard Plumbing’s online business has enabled the company to aggressively grow its brick-and-mortar wholesale supply business as well. With the increased volume came greater buying power, and therefore better prices and enough capital to expand its offering in the physical world, too. It was win-win. When Richard Reese took over from his father they had thirteen stores. In 2015 they had more than eighty, in eight states, and now do business across a North American footprint. “My father could never have imagined this world,” said Richard. But he could raise a son with the same optimistic and entrepreneurial attitude he had way back in 1952.
This entrepreneurial attitude was evident not just in Richard’s optimistic response to the threat of Amazon, but also in his response to the largest housing downturn since the Great Depression. As you can imagine, the plumbing business was battered by the bursting of the housing bubble in July 2008. It was a time when many manufacturers and distributors just like Standard Plumbing were struggling to survive. And it was during this time that Standard Plumbing was the most optimistic. The company was in no way enjoying the social consequences of such a severe downturn, but at the same time it looked for the proverbial silver lining.
Change is how an environment continues to unlock new and vibrant forms of value, so you will have to keep moving.
As more and more manufacturers came up for sale, Richard began a process of vertically integrating his business, using his powerful distribution position—both online with Amazon and offline through its growing store footprint—to increase Standard Plumbing’s sales by acquiring other distributors and bringing them into the Standard Plumbing processes. He bought real estate for pennies on the dollar as well, placing wholesale