What do groceries, flowers, and old computers have in common?
Webvan and Gerald Stevens forewarned us why Arrow Electronic's foray into IT asset disposition was doomed.
I was hired by Arrow when I fired Arrow.
In April 2014, Arrow Electronics was making industry headlines in IT asset disposition. It had already acquired Converge, Intechra, Flection, TechTurn, Redemtech, and other leading ITAD vendors. Unfortunately, integration efforts were failing, and performance was suffering.
My company was a client of Arrow, and their issues were becoming my issues. Like many, we never actually chose Arrow as a vendor. We had strong relationships with several companies that Arrow ultimately acquired. Like many, Arrow's integration problems were significantly affecting us.
Arrow's integration problems had reached a point where I was forced to suspend sending assets to Arrow, and instead, redirect shipments to our other ITAD partners.
In an effort to retain business, Arrow arranged for the senior executive in charge of ITAD to meet and explain how the problems were going to be corrected. As expected, there were a lot of promises. The executive assured that Arrow was going to correct problems "in weeks, not months." We had heard promises many times before.
When I sarcastically suggested the fixes better not be five years out, he didn't appreciate the joke; Arrow had introduced a visionary new tag line, Five Years Out, to depict the intersection of what is possible and practical.
Following the meeting, I continued to discuss the problems with the executive privately. I explained how I felt Arrow seemed doomed to be the next Gerald Stevens. Big-shot Blockbuster alums, Gerald Geddis and Steven Berrard (yes, they named the company after themselves), failed when they attempted a roll-up of the florist industry. The founders failed to recognize how the flower market differed from videos.
The Arrow executive argued that retired computers were not flowers, so I suggested Arrow might be the next Webvan if it continued to commoditize ITAD. While the physical processing of unwanted electronics may be considered commodity (grading, testing, refurbishment, remarketing, recycling, etc.), the value-added ITAD services that clients required are not.
The ITAD services, like florists and grocery, is not a one-size-fits-all industry. Client preferences differ across geography, technology environment, risk tolerance, and IT asset management maturity. Logistical issues are largely local. Economies of scale cannot compensate for the costs of consolidating equipment for massive centralized processing.
We agreed to disagree, but over the next few weeks, we discussed how Arrow could avoid a fate like Webvan. Honestly, it was refreshing. Discussing a new strategy was energizing. Arrow had the opportunity to transform an industry, but it had to retain talent and clients. It had to focus on client needs. It had to fix the operational issues. It had to differentiate from the faceless competition.
Naturally, it can be a challenge for any organization to combine different cultures, systems, and business models together. But Arrow had the resources to do it! After a dynamic exchange of ideas, the executive challenged me to help fix it.
Within a month, I was on board. I was tasked with leading Arrow's latest acquisition, US Micro. As promised, the US Micro business was initially kept separate to shield clients and employees from problems occurring with the previous acquisitions. Although we collaborated, we were not fully integrated with the other businesses. Also, as promised, Arrow took steps to innovate and differentiate with enhanced chain-of-custody and other services. It was exciting.
Unfortunately, the organizational temptation for short-run savings proved too much to resist. A decision to fully integrate US Micro with the other acquisitions was made, and efforts to differentiate died. It felt like I was living the fable of the Scorpion and the Frog. It was just a matter of time until we drowned.
Arrow Electronic's sudden exit from the ITAD industry should not have been a surprise to anybody, but of course, it was a surprise to everybody. We all thought Arrow was too big to fall. In hindsight, Arrow's ITAD failure seemed inevitable.
Since Arrow won't be the last ITAD to fail, what can we do to mitigate the cost and risk of future vendor failures? How can we future-proof our ITAD programs and save?
To start, the first thing a business should do to shield them from ITAD vendor risk is to have a vendor-neutral approach. Activities performed by ITAD vendors should be considered a commodity. Our process for managing ITAD, however, should not. Businesses should have programs, policies, and tools in place where we control the process. Our process can be transferred to other vendors should we want, or need, to switch.
The second thing a business should do is prepare a plan to change vendors. Preparing a plan will pay dividends for our ITAM program, regardless if we make a switch or not. Preparing and sharing a plan will help identify gaps in current procedures. It will also help gain buy-in from senior management. We will be empowered to hold vendors accountable instead of being held, hostage. Whether you switch or not, at least you will feel confident that you can.
A vendor-neutral approach will ultimately save you time and money, better ensure compliance, and ultimately reduce risk. Remember, your process should not change when you switch vendors, decide to work with multiple vendors, or when the once-trusted vendor goes bust.
This article originally appeared in a LinkedIn post
Kyle Marks is the CEO of Retire-IT, a consulting firm specializing in vendor-neutral ITAD management.
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