Avnet CEO Shares His Experience In Leading A Pivot

When I joined Avnet as CEO in 2016, the company was clearly in need of change. The past 10 years had seen a lot of consolidation in the technology distribution industry, and gross margins were under pressure. We faced a choice: keep squeezing down costs or find another revenue stream.

We created a transformation office, we hired a chief transformation officer, and a strategy and innovation officer. We took eight weeks for a deep dive diagnostic on how to unlock value inside each of the different workstreams—HR, finance, operations and logistics—in order to find that new revenue stream.

We decided to pivot to follow the Internet of Things (IoT) trend. By the year 2020, 20 billion devices will be hooked up to one another; by 2025, 50 billion devices. But customers still have problems implementing their own IoT strategies, and a lot of them get stuck in proof-of-concept purgatory. Meanwhile, at Avnet, we have thousands of engineers working in 140 different countries around the world. We can take an idea off the back of a napkin, turn it into a full-fledged product for any customer and do it to scale. There aren’t too many players that can do that.

So, we created a comprehensive ecosystem to give customers the tools and resources to bring their products to market, putting the pieces of IoT together like nobody else can: the device, the gateway, the network, the cloud, the applications and the A.I. that brings them the insights from all of those connected devices.

That level of transformation starts with getting buy-in because a scenario of a slow decline of gross margins isn’t an immediately compelling change story. It’s like the proverbial frog in the hot water and the temperature is rising so gradually, they don’t realize they need to jump out. So, we needed to paint that story for our team, to explain, “The market is changing faster than we are, and that means the end could be near. We need to do something.”

We started laying out that compelling vision for the rest of the company. Getting that buy-in is the biggest challenge, and you can’t be fearful of the fact that some people will leave because they are not going to buy into that vision. We asked, “What don’t you buy into this? What can we do to change your mind?” In some cases, you’ll get them to change, but there are also cases where they won’t.

Fast-forward to today, and we have essentially accomplished what we expected to accomplish. Through a rigorous transformation initiative, including four acquisitions, Avnet turned its business model into an ecosystem so we could provide more value as trends like IoT and A.I. reshape our world. One of those acquisitions was a software company with a platform that allows our customers to connect every device [they implement] to the cloud in a seamless fashion. That’s key because if they don’t have a platform for that, they need to build it themselves, and then it’s not scalable. So, we made a platform that’s scalable, that anybody can use.

We also partnered with Microsoft to provide customers with a highly secure device that ensures a safe and secure experience from the intelligent edge to the cloud: Azure Sphere. That’s huge because you don’t want an IoT-enabled thermostat in your home that someone can hack into to get access to your bank account.

We’ve been able to unlock significant value and to create a real innovation engine inside the company. The journey is ongoing, but a lot of the heavy lifting has been done. Now we’re on other the side of the coin, where we have an opportunity to really excel.

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