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 stores in increasingly convenient locations across a growing interstate footprint. We could not help but laugh during the research when Richard earnestly suggested that growth was tougher in 2015 than it had been in 2010 through 2013. He semi-jokingly suggested that the best years for growth were when companies were being sold below true value and real estate was being auctioned at fire-sale prices. He was optimistic in even the toughest times! It is no wonder he has grown the business his father started into the obvious choice not just for the local tradespeople, but for the disruptor (Amazon) as well.
Optimism underpins everything that follows. If you find it hard to be optimistic about your business, take a minute and think about what worries you. Is it that your current business model won’t survive? Is it a new competitor driving margins down? Perhaps it is the burden of legislation slowing your ability to service your customers. The truth is, these things most likely will continue to happen. The trick to reclaiming your optimism is to realize that disruption is actually normal—people are always finding new ways to solve problems. No single offer or business model will ever stand the true test of time. Change is how an environment continues to unlock new and vibrant forms of value, so you will have to keep moving, keep looking for where you can have the highest possible impact. And to do that, you have to be optimistic about your ability to move with the changes; you have to be willing to understand them while looking outward. It takes curiosity to find the edge of disruption and stay on it.
EXPLORE THE UNANSWERED QUESTIONS
Being willing to challenge assumptions and being optimistic are the first two consistent characteristics we have observed in companies that have successfully found their edge of disruption. They all shared a third characteristic that is worth discussing. It became clear as we talked with these companies that you must have an insatiable desire to explore the unanswered questions that face your industry, your company, your team, and your customers, wherever you find them. This is fueled by a desire to know about what’s going on around you, wondering what others are doing and what might be possible. That keeps you watching for the next opportunity, pushing to understand what’s happening broadly and how you can create more value for your clients, and doing the work that matters most by solving complex problems with innovative solutions.
Unanswered questions that are worth exploring are the “what if,” the “where else,” the “how might we” questions. When was the last time you asked a curious question about your business? Do you know the basics of your industry at the moment: the stock price of your own company and those of others in your industry, the health of your suppliers, the technology changes happening for your customers, what’s going on with your competition, how new employees learn the ropes? These are serious questions—we are regularly surprised by how removed people can be from their own business and how their industry operates at a foundational level. When you lose touch with those kinds of basics, it is hard to contextualize larger, more important problems that need solving. Too often these types of questions are left up to a specific function like marketing or research and development, while the rest of us stay focused on the task at hand. This is not okay in companies that matter. Inside those companies, almost everyone is curious about their company, industry, and market—they are continually exploring. It is ingrained into the culture to be “ever forward,” as DPR calls it.
If people in your company aren’t investing in exploring those unanswered questions about how your business gets done, you will entirely miss the edges of disruption that can propel you forward. If you personally aren’t exploring, the people around you likely won’t be, either, so it is up to you to model the way. It is critical, no matter where you are in the company, that you take the time to be curious about your business and your customers, and that you allow others to explore, too.
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