Putting pieces together

Putting the Pieces Together for Avnet’s Next Chapter

Avnet reveals the rationale behind the recent flurry of strategic business decisions the global company has made in the last four months.

Phoenix, Ariz.-based Avnet Inc. has been busy recently assembling the pieces that will define its strategic direction for years to come.

In September, the world’s largest electronics distributor announced it was selling its Technology Solutions business for $2.6 billion to Tech Data Corp. A month later, Avnet completed the acquisition of Premier Farnell PLC, a UK-based global distributor, for £691 million. And in November, the company acquired a majority interest in Hackster Inc., which serves the engineering, maker, and hobbyist community through its website hackster.io.

Premier Farnell brings Avnet a registered community of more than 430,000 engineers and “innovators” across 36 countries. The company’s U.S.-based Newark element14—and UK-based Farnell element14—has produced Raspberry Pi single-board computers  in the UK since 2012. The company manufactures Beaglebone Black, and is the exclusive manufacturer of educational programming boards such as the BBC micro:bit and Codebug.

Hackster adds about 200,000 additional registered users to the mix.

These moves have occurred on the watch of William Amelio, Avnet’s chief executive since September, following a two-month stint as interim CEO. He is taking the long view on building the company’s position with design engineers—including future engineers—that are expected to feed Avnet’s pipeline of component sales for years to come.

“As technology reaches deeper into more products and innovation proliferates through the Internet of Things, the ability to reach a wider base of engineers earlier in the design process will be critical to our future growth and success,” he said in October.

Avnet is not alone. Every distributor worth its salt is targeting design engineers, with a focus on the amorphous social phenomenon known as the maker market. Defined loosely as electronics DIY enthusiasts, one source estimates there are over 100 million adult makers in the U.S., or about 25% of the population. There were an estimated 190 Maker Faires in over 35 countries in 2016. President Barack Obama declared the week of June 17, 2016, as National Week of Making.

Gerry Fay, senior vice president, Avnet Inc., and president, Avnet Electronics Marketing, GlobalFor insight into Avnet’s rationale for these decisions, Global Purchasing talked with the man charged with executing Avnet’s new strategy, Gerry Fay, senior vice president, Avnet Inc., and president, Avnet Electronics Marketing, Global.

Targeting the Long Tail of Customers

“One of the things all broad-line distributors are struggling with is how to grow the long tail of customers in order to get new business,” says Fay.

The long tail refers to the millions of potential customers around the world—from established companies to startups to kids and independent designers in the maker market—that need parts for a prototype of their product design. The theory goes that a percent of these customers will one day drive volume purchase orders when their new product becomes the Next Big Thing.

“We cannot get to every 200-square-foot apartment around the world to find out who is drawing something on the back of a napkin that is going to become the next Fitbit,” says Fay. “So today, the challenge is how to find the next customer of tomorrow because the customer acquisition model is going to be different.”

Fay admits that Avnet was behind the curve in targeting the design front-end of the value chain business. “We were not positioned to seed our suppliers’ products to the designers and small customers,” he says.

“Avnet was attracted to Premier Farnell because it has the largest engineering user community in the world and rich technical content that engineers use,” says Fay. “By putting together what Premier Farnell is good at and what Avnet is good at, we now are the only distributor globally that can take the customer from product ideation all the way to end of life.”

Of course, that’s easier said than done. The new value chain is complex and multigenerational. It runs the spectrum from seasoned EE designers to kids who are just learning about technology.

“Those kids may someday go to engineering school and become engineers. They will remember Avnet because back in the seventh grade we sold them a Raspberry Pi board that helped them learn how to program and build a prototype,” says Fay.

There are other pieces of the customer-acquisition puzzle that Avnet has added to complement Premier Farnell.

In June, the company launched MakerSource, an online directory to help makers find services to get their new products to market. “Say you’re a maker and you have a prototype and you want to productize it, you need design engineering help. There are design engineering companies listed on the MakerSource directory. Do you need a prototype? There are prototype manufacturers on the directory,” Fay says.

Looking further upstream, Avnet is targeting the engineering and design education space through Hackster.io. “Approximately 60% of Hackster’s users are design engineers in their day jobs. Hackster helps them get to the resources they need,” said Fay.

“When they are ready to move to limited prototyping, we send them to Premier Farnell. Then when they are ready for production, we can move them to Avnet. It’s a way to take a customer all the way from a kernel of an idea to becoming a company,” he says.

Nurturing the Component Pipeline

Knowing when a customer is preparing its product for production is critical information for broad-line distributors like Avnet. That means having good visibility into the prototyping phase of customers.

“I can’t afford to send sales people to everyone who buys one or two of something, but I can analyze those leads to determine if they are production customers or not. If so, I can then turn them over to the Avnet sales team to go after and help with their time to market,” says Fay.

That means getting in early enough to discuss bill-of-materials issues—such as component lead times—during the design phase to ensure parts arrive on the production floor when production begins. Some companies new to electronics manufacturing don’t even know what a lead team is, according to Fay.

“If we can get to the customer early enough we can have those conversations, start to build a pipeline, and speed time to production. We can start planning so they get first-mover advantage,” says Fay.

There are a variety of metrics Avnet will use to measure the performance of its investments. But at the end of the day, there’s only one that matters: “Are we growing our revenue and are we growing our profits?” says Fay.

“All the digital investments we are making are focused on improving our ability to service our customers and our suppliers, which will generate more revenue and better profits for us if we are doing it better than anyone else,” he says. 

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