Touch Channel Management White Paper

Ensuring Your Partner Investments Give You A Competitive Advantage Five Disciplines To Drive Your Channel Management And Improve Your Company’s Efficiency And Effectiveness

A WHITE PAPER FROM TOUCH BUSINESS CONSULTING

SITUATION:

Companies fail to leverage their partner assets into a competitive advantage.

In the battle to win with customers, many companies are turning to partners. Partners are the key component in their value chain.

Often, partners are the company’s virtual sales force and the only contact a company will have with most of its customers. They provide premarket qualification, sales generation and post-sale support. Without them, the company loses scale and the ability to drive revenue.

Companies do this to lower their SG&A expenses. But at what cost?

PROBLEM:

Many companies pursue the same set of partners with haphazard results.

The same handful of firms are alliance partners for all the major vendors. Many of these partners are equally comfortable selling any vendor’s offering as long as they win the deal. They have no loyalty to the vendor.

Each vendor then attracts a next-tier of partners. While these partners support fewer vendors, it is often a gamble as to whether they have the skills and capabilities necessary to be successful.

A third layer of partners is the “long tail” of the market. They conduct business on an almost incidental basis for the vendor. It is the number of these partners that drives the vendor’s success. A slight increase in the frequency of transactions can generate big results.

SOLUTION:

Five channel management disciplines drive maximum results.

Effective channel management focuses a company’s partner effort.

Crafting a winning channel management strategy, involves five essential disciplines. Failure in any one can jeopardize a company’s ability to effectively drive corporate objectives.

A company must have visibility and direction for channel management to be truly effective. Channel execution should not be static, but fluid to adjust with the market and win against the competition.

With these disciplines, channel managers are more likely to better position themselves against their competition, and win with the right partners.

RESULT:

Better ability to understand the impact and effectiveness of your partnering effort.

Visibility and direction allow companies to manage their channels more effectively. Line-of sight to desired business results will improve. Alignment of internal and external resources will improve. Agility and simplicity in execution will improve.

For savvy channel managers, these five disciplines provide a superior method of leveraging partners and generating faster ROI from channel management efforts.

Many companies rely on partners as their primary strategy for how they go to market. Partners are how they connect with customers.

Channel management is a critical competency to master and these five disciplines provide a roadmap for that success.

Executive Summary

2 | Touch Business Consulting

Five Questions You Should Ask

1. Are your business objectives achieved through your existing channel strategy?

2. Who are the right partners for you?

3. Do your investments drive the partner behavior you want?

4. Does your competition offer your partners more value?

5. Is your channel management execution effective and efficient?

Companies today are more dependent than ever on partners as their extended sales and support teams. For these companies, building and managing a channel ecosystem is critical.

This raises the stakes around channel management. It is not enough to seek operational excellence from your partner efforts. You must seek competitive advantage.

Sadly, many companies are failing to achieve this type of success. By some estimates, as many as 70% of alliances fall short of expectations for both the channel partners and for the companies selling through those channels.

But how can you tell if you are one of these companies?

There are some tell-tale signs that a company’s channel management is underperforming:

Poor alignment between how sales, product teams and the partner program define "best" partners.

Weak performance by significant numbers of top-tier partners.

Unclear ROI due to a lack of understanding of how partners deliver value.

Unsuccessful attempts to drive new partner behavior through existing partner relationships.

Passive execution that reacts to rather than fuels business outcomes.

Often, the root cause of a company’s channel management problems is not its people or its positioning, but its approach.

By adopting these five channel management disciplines, these companies can reverse their situation and become channel management all-stars.

Discipline 1 Manage your channel strategies methodically to align to specific business results.

Obviously, a company’s channel management efforts need to reflect the company’s corporate objectives. Every successful business aligns its activities to its goals.

But does everyone have alignment around those goals? Is there clear accountability? Do people see how their

efforts are essential to the overall success of the company?

In many companies the answers are not always yes to these questions.

You must approach channel management in a manner that drives out this ambiguity. You need to document your growth plan for each business objective:

Recruit. Add partners or direct sales resources to your existing routes to market.

In Today’s Business Environment,

Winning With Partners Is Key To Winning With Customers

The Five Disciplines of Channel Management | 3

Many channel management efforts fail because they are run as an operational program rather than a competitive program.

Channel Management Growth Strategies

Develop. Establish a new route to market either through new or existing channel and direct resources.

Grow. Expand and extend the capabilities of existing partners and direct resources to extend product or customer offerings.

Prune. Increase efficiency and effectiveness by redirecting resources from low performing elements to higher performing elements.

A successful channel management plan has five imperatives:

Identify which company objectives rely on channel management.

Assess your current route to market strength.

Understand your ability, and need, to scale across multiple dimensions.

Define your growth strategies for each desired business outcome.

Cascade accountability throughout your organization.

Creating a robust channel management plan provides the foundation for channel management success.

Discipline 2 Manage your ecosystem to maintain the right mix of partners.

The partner ecosystem represents the extended reach of a company.

With successful channel management this reach can be broad and effective.

Through four levers, channel managers can create an almost infinite set of adjustments to their ecosystem.

Understanding these four levers is critical.

Partner coverage. The number of partners by segment. Ecosystem capacity is influenced by the mix of partner types, number of partners in each segment, and partner attributes such as customers served, business models, and solutions offered.

Are You Approaching Scale The Right Way?

Channel management is about leverage and therefore always needs to scale. But channel management can scale in three different directions based on the type of relationship sought between vendors and their partners.

Strategic or alliance relationships require the ability to scale executive commitment. As more alliance partners are added, executive attention and participation thins, relationship management gets passed down the organization and strategic commitment weakens.

Depth or managed relationships scale through field-based coverage and support. It is possible to optimize commitments and goal management through standard program structure, but ultimately the relationships fail when account management and joint sales activities become strained.

Breadth or programmatic relationships are supported through operations efficiency but truly gain scale through shared value. These partners need to be self-sufficient and self-serving. This requires constant communication and motivation. As value diminishes, scale fails, partnerships become unpredictable and return rapidly diminishes.

Vendors can scale across one or more of these relationship types but each adds a unique set of resources and extra requirements to a company’s channel management effort.

How effective is your ability to scale?


Partner capability. The required knowledge to sell and support the company's offerings. Without this knowledge, partners cannot be effective in the market.

Partner capacity. The velocity of sales per partner per year. It is a function of the size, frequency and number of transactions the partner completes each year.

Partner commitment. The percentage of partner deals that include the company's offerings. Most partners work with multiple vendors, so partner loyalty is a key determinant of channel revenue.

Channel Managers need to fully understand the resulting ecosystem model. However the model needs to be more than an academic exercise.

The model should inform specific channel management activities including the following:

Create actionable, data-driven targeting models for partner recruitment and development

Ensure balanced engagement based on business models, partner motivations, and different performance requirements.

Map necessary credential program for full ecosystem training and enablement

Create a predictive model for program investment

Validate partner business propositions across necessary partner segments

The ecosystem model forms the roadmap for all channel management activities.

Discipline 3 Manage your partner business proposition to gain competitive advantage.

The partner business proposition is the value a partner receives from selling your company’s products and solutions.

They provide the competitive filter a partner will use when determining which vendor they will sell and support with their customers.

Surprisingly, a large number of companies fail to develop a core competency in this area. They focus all their efforts developing a powerful customer value proposition and spend little time thinking through why

Building An Ecosystem Model


a partner should sell their great product. The result is slow or lack-luster adoption by the channel, frustration within the company with partners and sluggish success in the marketplace.

These companies need to create partner business propositions with three main elements:

Market Momentum. Partners naturally migrate to products and services that are in high demand by their customers. A company's market momentum is composed of customer demand, market share and leadership position.

Joint Alignment. Partners seek companies that complement their strategic objectives. Partners assess alignment based on vendor fit against their strategic objectives and the reputation, either experienced or perceived, of the potential vendor.

Partner Economics. Partner economics is the financial return a partner can gain from the vendor relationship. It factors in the profits around the

sale, the required investment costs and all benefits received through the relationship.

It is unusual for a single company to have strength in all areas of the business proposition. All companies will have soft areas within their business proposition with some partner segments.

Understanding your company’s strengths and weaknesses is key.

But not enough. You must also understand your competitor’s business proposition.

A truly effective business proposition assessment benchmarks a company’s business proposition relative to its key competitors with each targeted partner segment.

This will avoid costly missteps in channel management.

If you have poor market momentum, then you must either reposition your core offering in the marketplace or greatly enhance the partner economics or joint alignment to offset your market position.

If you are recruiting partners with poor alignment, your targeting or messaging is ineffective and your efforts are unlikely to yield the desired results.

If your partner economics are weak with partners but better than your competition, then running rebates or other margin programs may not add much to your business proposition, but will cost you profit.

Tuning your competitive position and conducting regular business proposition assessments is critical to driving effectiveness in your channel management.

Discipline 4 Manage your investments to drive specific behaviors.

Every channel management investment you make should be for the explicit purpose of driving partner behavior.


You should measure the success of each investment based on its ability to drive desired behavior in an economical manner.

Relevant behavior can be categorized into four buckets:

Focus. Are partners concentrationing on the customers and solutions you want?

Performance. Are partners driving the business results you require?

Action. Are partners meeting your requirements and receiving sufficient rewards to stay satisfied?

Retention. Are you securing your best partners with benefits that keep them, and their customers, loyal?

The architectural and operating elements of a channel management program, such as incentive structures and performance measures, should compel desired partner behaviors.

A company needs to engineer its partner program to drive these behaviors in a consistent, predictable and measurable fashion. The program must also be flexible and responsive to changing market conditions.

This is often a significant challenge as partners want a program that is stable and constant, and companies


The Four Levels Of Execution Excellence

require significant time and effort to change underlying systems and processes.

The key is to architect a set of “levers” into your partner program:

Segment. Allows clear identification and outreach for specific partner types. Optimizes all channel communications and engagement.

Expertise. Documents and tracks partner enablement activities. Allows for tight alignment of company sales resources with competent and capable partners.

Requirements. Provides performance measurement against specific goals. Creates and maintains essential executive alignment around channel objectives.

Rewards. Establishes and delivers against partner expectations of the relationship. Provides an ROI framework for driving retention activities.

A well engineered partner program provides a stable and predictable operational framework for channel management activities, while allowing agility and responsiveness to changing market conditions.

Discipline 5 Manage your team to drive execution excellence.

Strategy defines the right things to do. Doing things well – execution – is what sets companies apart.

Most senior managers have an intuitive sense of how effective is their execution.

What is often missing is an objective scale against which to reference that intuition. There are four distinct levels of execution excellence:

Unstructured. There may be some successes and some losses. The approach is relatively haphazard and often dependent on the strengths of individuals. There are few, if any, standard processes. Organizational intelligence is poorly documented and erodes as individuals leave.

Basic. There is a basic operational structure in place. Regular meetings and communications

occur but are not always effective. Staff generally follows defined process, but not always. Knowledge is compartmentalized within teams.

Functional. Standard processes are identified and followed. There is a regular rhythm of the business. Structured corporate planning exists but is often disconnected from individual or team commitment setting.

Robust. Processes are followed and documented. A culture of learning is pervasive with deep feedback collected along essential processes. The focus of execution excellence has shifted from "are we able to execute" to one of continuous improvement. Strong alignment exists between goals, investments and commitments.

Channel management execution excellence is easily benchmarked and should be measured and managed in seven areas:

Governance and organizational design. Where are decisions made and how do you get them to stick? Do you have alignment with all stakeholders? Do you operate as a cross-functional group or in silos?

Metrics and scorecard. Is a single set of measures used throughout the channel management process? Is business intelligence and data-driven modeling the basis for decision-making? Are revenue and cost projections modeled or guesses?

The Four Levels Of Execution Excellence


Compensation and incentives. Is field compensation linked to partner performance and requirements? Are the critical activities required to meet corporate objectives rewarded? Are compensation and incentives structured to give line-of-sight to causes and effects? Is deal registration for partners required?

Systems, processes and tools. Are systems, process and tools aligned to company strategies and objectives? Is there adequate change management during times of large transition? Have agility and flexibility been built in? Is data quality sufficient to drive insight?

Communication and feedback. Are best practices identified and shared? Is execution feedback collected and acted upon? Is information communicated and understood effectively?

Territory design and account management. Are rules of engagement between direct sales, partners and cross-channel clearly defined and enforced consistently? Does account management map to the guidelines of the partner program? Are responsibilities between customer and partner reps well understood?

Project prioritization and implementation. Is there a process for prioritizing and sun-setting projects? Do projects maintain momentum or stall? Is accountability for success shared and understood?

Ultimately, channel management execution excellence becomes a keystone in the company’s sales operations model. The sales operations model must define the company’s management system and set the rigor required for execution excellence.

Failing to view channel management as a competitive selling strategy weakens the leverage a company would normally gain through partnering.

The Bottom Line

If companies are ineffective with partners, they will never be as successful with customers as they could be.

It is the channel partner’s drive, capabilities and skills that will determine whether customers buy and how they will feel about you.

Unfortunately, the traditional approach to channel management has been to run it as an operations program. “Cost-to-serve” and “how-to-scale” become the important mantras. While operational elements remain important, companies cannot afford to continue with this approach. As dependencies on partners and alliances increase, winning with partners becomes the key to winning with customers.

This requires effective channel management to approach the problem differently. Channel management must drive performance around company objectives, through the right partnerships, in a manner that guides behaviors, creates value, and is operational for the company.

With the right approach, channel management is not only an asset, it can be the key to competitive success.


Concluding Summary

Are you satisfied with your level of success with partners?

Your channel management investments should be about how you will win with partners in a competitive context.

Follow a five discipline plan to make that happen:

Create a channel management plan. Manage your channel strategies methodically to align to specific business results. This provides the foundation for channel management success.

Build a partner roadmap. Manage your ecosystem to maintain the right mix of partners. The roadmap lays out the roadmap for all channel management activities.

Conduct business proposition assessments. Manage your partner business proposition to gain competitive advantage. This drives competitive effectiveness with your channel management.

Architect your program to drive behaviors. Manage your investments to drive specific ecosystem actions and results. You need stability and predictability while enabling agility and responsiveness.

Define a channel sales operations model. Manage your team to drive execution excellence. This defines the company’s management system and establishes rigor applied to execution excellence.

For more information on how you can use competitive-oriented channel management in your business, please visit Touch Business Consulting at www.touchbc.com.

Following five channel management disciplines increases your ability to compete and win with partners


About the authors,

Ray Rasmussen, Chris McCall and Richard Flynn are the Principals of Touch Business Consulting and are based in Redmond, Washington.

We Are The Experts

Touch Business Consulting is an expert on building and managing the channel.

Our clients have one thing in common. They want to gain business advantage through partners. They include Fortune 100 firms like Microsoft, Novell, Dell, Starbucks and others.

Our unique approach of collaborative consulting works with your team to form strategy, implement operations and drive communication.

We listen. We apply discipline. We focus. We deliver results.

In other words, we help you become more successful.

For more information, please visit Touch Business Consulting at www.touchbc.com.

Copyright © 2009, Touch Business Consulting www.touchbc.com

Visit www.touchbc.com to find out more about how Touch Business Consulting can help you generate better results from your channel management.

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