Making industrial products is a tough way to earn a living. Producers of everything from adhesives and chemicals to metals and specialty paper have had to cope with a decade of disruption in their sales channels whether they dealt with original-equipment manufacturers directly, through distributors, or both. Distributors and end customers have consolidated, undermining long-established sales strategies; large customers have adopted increasingly sophisticated approaches to buying; and new technologies have made the producers' pricing schemes more transparent to all.
Consider the plight of electrical-wire and -cable producers. In search of economies of scale, distributors of these products consolidated during the late 1990s.1 Utilities—which are the end users of electrical wire and cable—also merged rapidly. Meanwhile, metals and other inputs to wire and cable products began to be sold through on-line marketplaces, which made the producers' cost base transparent. The result was that long-standing customer and supplier relationships were upended and the bigger surviving customers and distributors could extract pricing concessions from producers.
Despite these developments, few industrial-products manufacturers have altered their approach to selling. It is easy to understand why. Making changes to sales structures—for instance, by rapidly augmenting or replacing channel partners—is risky. One electrical-equipment manufacturer that...