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Touch Channel Management White Paper


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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.

Follow five channel management disciplines to make this happen.

Published in: Business, Technology
  • Nice article! I agree with the comment about monitoring the ROI of the partner relationship and 'pruning' underperforming partners. That being said, many companies are reluctant to 'prune' partners for fear they will not come back or even worse, become a partner for one of their competitors. Companies should first evaluate if the demand of their customer base still align with their partner channel capabilities. Once this has been done a company can modify the channel value chain if needed then 'influence' the channel (via rewards, policies etc) to drive the right behavior. Doing this work would allow a 'redefined parter' to meet key business metrics.
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Touch Channel Management White Paper

  1. 1. 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
  2. 2. Executive Summary SITUATION: A third layer of partners is the “long tail” of the market. They conduct business on an almost incidental basis for the Companies fail to leverage their partner assets into a vendor. It is the number of these partners that drives the competitive advantage. vendor’s success. A slight increase in the frequency of In the battle to win with customers, many companies are transactions can generate big results. turning to partners. Partners are the key component in their value chain. SOLUTION: Often, partners are the company’s virtual sales force and the Five channel management disciplines drive maximum only contact a company will have with most of its results. customers. They provide premarket qualification, sales Effective channel management focuses a company’s partner generation and post-sale support. Without them, the effort. company loses scale and the ability to drive revenue. Crafting a winning channel management strategy, involves Companies do this to lower their SG&A expenses. But at five essential disciplines. Failure in any one can jeopardize a what cost? company’s ability to effectively drive corporate objectives. PROBLEM: A company must have visibility and direction for channel management to be truly effective. Channel execution should Many companies pursue the same set of partners not be static, but fluid to adjust with the market and win with haphazard results. against the competition. The same handful of firms are alliance partners for all the With these disciplines, channel managers are more likely to major vendors. Many of these partners are equally better position themselves against their competition, and comfortable selling any vendor’s offering as long as they win win with the right partners. the deal. They have no loyalty to the vendor. Each vendor then attracts a next-tier of partners. While RESULT: these partners support fewer vendors, it is often a gamble Better ability to understand the impact and as to whether they have the skills and capabilities necessary effectiveness of your partnering effort. to be successful. Visibility and direction allow companies to manage their channels more effectively. Line-of sight to desired business Five Questions You Should Ask results will improve. Alignment of internal and external resources will improve. Agility and simplicity in execution 1. Are your business objectives achieved through will improve. your existing channel strategy? For savvy channel managers, these five disciplines provide a 2. Who are the right partners for you? superior method of leveraging partners and generating faster ROI from channel management efforts. 3. Do your investments drive the partner behavior you want? Many companies rely on partners as their primary strategy for how they go to market. Partners are how they connect 4. Does your competition offer your partners with customers. more value? Channel management is a critical competency to master and 5. Is your channel management execution these five disciplines provide a roadmap for that success. effective and efficient? 2 | Touch Business Consulting
  3. 3. In Today’s Business Environment, Winning With Partners Is Key To Winning With Customers Companies today are more dependent than ever on Discipline 1 partners as their extended sales and support teams. Manage your channel strategies methodically to For these companies, building and managing a channel ecosystem is critical. align to specific business results. Obviously, a company’s channel management efforts This raises the stakes around channel management. It need to reflect the company’s corporate objectives. is not enough to seek operational excellence from your Every successful business aligns its activities to its partner efforts. You must seek competitive advantage. goals. Sadly, many companies are failing to achieve this type But does everyone have alignment around those goals? of success. By some estimates, as many as 70% of Is there clear accountability? Do people see how their alliances fall short of expectations for both the channel partners and for the companies selling Many channel management efforts fail because they are run as through those channels. an operational program rather than a competitive program. But how can you tell if you are one of these companies? efforts are essential to the overall success of the There are some tell-tale signs that a company’s company? channel management is underperforming: In many companies the answers are not always yes to  Poor alignment between how sales, product these questions. teams and the partner program define "best" partners. Channel Management Growth Strategies  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. 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. The Five Disciplines of Channel Management | 3
  4. 4. Are You Approaching Scale The  Develop. Establish a new route to market either Right Way? through new or existing channel and direct resources. Channel management is about leverage and  Grow. Expand and extend the capabilities of therefore always needs to scale. But existing partners and direct resources to extend channel management can scale in three product or customer offerings. different directions based on the type of  Prune. Increase efficiency and effectiveness by relationship sought between vendors and redirecting resources from low performing their partners. elements to higher performing elements. A successful channel management plan has five Strategic or alliance relationships require imperatives: the ability to scale executive commitment. As more alliance partners are added,  Identify which company objectives rely on channel management. executive attention and participation thins, relationship management gets passed down  Assess your current route to market strength. the organization and strategic commitment  Understand your ability, and need, to scale across weakens. multiple dimensions. Depth or managed relationships scale  Define your growth strategies for each desired through field-based coverage and support. business outcome. It is possible to optimize commitments and  Cascade accountability throughout your goal management through standard organization. program structure, but ultimately the Creating a robust channel management plan provides relationships fail when account the foundation for channel management success. management and joint sales activities become strained. Discipline 2 Breadth or programmatic relationships are Manage your ecosystem to maintain the right supported through operations efficiency but mix of partners. truly gain scale through shared value. These The partner ecosystem represents the extended reach partners need to be self-sufficient and self- of a company. serving. This requires constant With successful channel management this reach can be communication and motivation. As value broad and effective. diminishes, scale fails, partnerships become unpredictable and return rapidly diminishes. Through four levers, channel managers can create an almost infinite set of adjustments to their ecosystem. Vendors can scale across one or more of Understanding these four levers is critical. these relationship types but each adds a unique set of resources and extra  Partner coverage. The number of partners by segment. Ecosystem capacity is influenced by the requirements to a company’s channel mix of partner types, number of partners in each management effort. segment, and partner attributes such as customers served, business models, and solutions offered. How effective is your ability to scale? 4 | Touch Business Consulting
  5. 5. Building An Ecosystem Model  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.  Partner capability. The required knowledge to sell They provide the competitive filter a partner will use and support the company's offerings. Without this when determining which vendor they will sell and knowledge, partners cannot be effective in the support with their customers. market. Surprisingly, a large number of companies fail to  Partner capacity. The velocity of sales per partner develop a core competency in this area. They focus all per year. It is a function of the size, frequency and their efforts developing a powerful customer value number of transactions the partner completes proposition and spend little time thinking through why 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. The Five Disciplines of Channel Management | 5
  6. 6. a partner should sell their great product. The result is sale, the required investment costs and all benefits slow or lack-luster adoption by the channel, frustration received through the relationship. within the company with partners and sluggish success It is unusual for a single company to have strength in in the marketplace. all areas of the business proposition. All companies will These companies need to create partner business have soft areas within their business proposition with propositions with three main elements: 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  Market Momentum. Partners naturally migrate to regular business proposition assessments is critical to products and services that are in high demand by driving effectiveness in your channel management. their customers. A company's market momentum is composed of customer demand, market share and leadership position. Discipline 4  Joint Alignment. Partners seek companies that Manage your investments to drive specific complement their strategic objectives. Partners behaviors. assess alignment based on vendor fit against their Every channel management investment you make strategic objectives and the reputation, either should be for the explicit purpose of driving partner experienced or perceived, of the potential vendor. behavior.  Partner Economics. Partner economics is the financial return a partner can gain from the vendor relationship. It factors in the profits around the 6 | Touch Business Consulting
  7. 7. You should measure the success of each investment Relevant behavior can be categorized into four buckets: based on its ability to drive desired behavior in an  Focus. Are partners concentrationing on the economical manner. customers and solutions you want?  Performance. Are partners driving the business The Four Levels Of Execution Excellence 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 Five Disciplines of Channel Management | 7
  8. 8. require significant time and effort to change underlying occur but are not always effective. Staff generally systems and processes. follows defined process, but not always. Knowledge is compartmentalized within teams. The key is to architect a set of “levers” into your partner program:  Functional. Standard processes are identified and followed. There is a regular rhythm of the  Segment. Allows clear identification and outreach business. Structured corporate planning exists but for specific partner types. Optimizes all channel is often disconnected from individual or team communications and engagement. commitment setting.  Expertise. Documents and tracks partner  Robust. Processes are followed and documented. enablement activities. Allows for tight alignment A culture of learning is pervasive with deep of company sales resources with competent and feedback collected along essential processes. The capable partners. focus of execution excellence has shifted from  Requirements. Provides performance "are we able to execute" to one of continuous measurement against specific goals. Creates and improvement. Strong alignment exists between maintains essential executive alignment around goals, investments and commitments. channel objectives. Channel management execution excellence is easily  Rewards. Establishes and delivers against partner benchmarked and should be measured and managed expectations of the relationship. Provides an ROI in seven areas: framework for driving retention activities.  Governance and organizational design. Where are A well engineered partner program provides a stable decisions made and how do you get them to stick? and predictable operational framework for channel Do you have alignment with all stakeholders? Do management activities, while allowing agility and you operate as a cross-functional group or in silos? responsiveness to changing market conditions.  Metrics and scorecard. Is a single set of measures used throughout the channel management Discipline 5 process? Is business intelligence and data-driven modeling the basis for decision-making? Are Manage your team to drive execution excellence. revenue and cost projections modeled or guesses? Strategy defines the right things to do. Doing things well – execution – is what sets companies apart. The Four Levels Of Execution Excellence 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 8 | Touch Business Consulting
  9. 9. Failing to view channel management as a competitive selling strategy weakens the leverage a company would normally gain through partnering.  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, The Bottom Line 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? If companies are ineffective with partners, they will never be  Communication and feedback. Are best practices as successful with customers as they could be. identified and shared? Is execution feedback collected and acted upon? Is information It is the channel partner’s drive, capabilities and skills that communicated and understood effectively? will determine whether customers buy and how they will feel about you.  Territory design and account management. Are rules of engagement between direct sales, Unfortunately, the traditional approach to channel partners and cross-channel clearly defined and management has been to run it as an operations program. enforced consistently? Does account management “Cost-to-serve” and “how-to-scale” become the important map to the guidelines of the partner program? Are mantras. While operational elements remain important, responsibilities between customer and partner companies cannot afford to continue with this approach. As reps well understood? dependencies on partners and alliances increase, winning  Project prioritization and implementation. Is with partners becomes the key to winning with customers. there a process for prioritizing and sun-setting projects? Do projects maintain momentum or This requires effective channel management to approach the stall? Is accountability for success shared and problem differently. Channel management must drive understood? performance around company objectives, through the right partnerships, in a manner that guides behaviors, creates Ultimately, channel management execution value, and is operational for the company. excellence becomes a keystone in the company’s sales operations model. The sales operations model must With the right approach, channel management is not only an define the company’s management system and set asset, it can be the key to competitive success. the rigor required for execution excellence. The Five Disciplines of Channel Management | 9
  10. 10. Concluding Summary Following five channel management disciplines increases your ability to compete and win with partners We Are The Experts Are you satisfied with your level of success with partners? Touch Business Consulting is an expert on building and managing the Your channel management investments should be about how you will channel. win with partners in a competitive context. Our clients have one thing in Follow a five discipline plan to make that happen: common. They want to gain business advantage through partners. They  Create a channel management plan. Manage your channel include Fortune 100 firms like strategies methodically to align to specific business results. This Microsoft, Novell, Dell, Starbucks and provides the foundation for channel management success. others.  Build a partner roadmap. Manage your ecosystem to maintain the Our unique approach of collaborative right mix of partners. The roadmap lays out the roadmap for all consulting works with your team to channel management activities. form strategy, implement operations and drive communication.  Conduct business proposition assessments. Manage your partner business proposition to gain competitive advantage. This drives We listen. We apply discipline. We competitive effectiveness with your channel management. focus. We deliver results.  Architect your program to drive behaviors. Manage your In other words, we help you become investments to drive specific ecosystem actions and results. You more successful. need stability and predictability while enabling agility and responsiveness. For more information, please visit Touch Business Consulting at  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 About the authors, Ray Rasmussen, Chris McCall and Richard Flynn are the Principals of Touch Business Consulting and are based in Redmond, Washington. 10 | Touch Business Consulting
  11. 11. Touch Business Consulting Visit to find out more about how Touch Business 4016 148th Avenue NE Consulting can help you generate Building N better results from your channel Redmond, WA 98052 management. 888.732.6777 email: Copyright © 2009, Touch Business Consulting