Seeing the forest for the trees

September 13, 2011 Leave a Comment

It is too easy to forget that channel management is really all about economics. And that means it’s really all about building and managing an investment model.  Make sure you can answer three critical questions.

Why should I invest here instead of there?

Weigh your opportunities as part of a portfolio of investments rather than just as an isolated investment.  You can build a great business case for why you need more partner training.  You can probably even demonstrate how the extra investment will be returned with increased sales.  But that isn’t the central question.

Are the dollars you are spending here going to yield a better return than dollars spent over there?  When you have the dollars to invest, it is about opportunity costs.

Make sure you have a strongly capable model for running pilots, isolating investment variables and measuring success.  Run every major investment through this model.  Not just to get the kinks out of the operational requirements, but to quantify the return on investment and benchmark success verses other investments.

How does my investment change my costs-to-serve?

Ability to scale is the speed governor for channel programs.  Almost every partner performs better with an account manager but you simply can’t afford to give one to every partner.

Model your cost to serve as part of every investment decision.  Does the suggested investment reshape you tiering structure? Are you maintaining or exceeding your general ROI level guidelines?  Do you need to disinvest from another area to keep your costs to serve balanced as you ramp up the new investment?  All of these questions are easily addressed with the right cost-to-serve model and should inform your investment decisions.

Will my investment drive partners behavior?

On paper, the investment idea may look sound. You won’t change partner behavior if partners are not using, or see little value in, the investment area.

Categorizing your investment impacts in terms of partner usage (or awareness) and perceived value lets you build an investment value model. Plagiarizing the famous BCG four-quadrant model:

  • Cash Cows are benefits partners use and attribute value to
  • Rising Stars have high perceived value but low awareness or usage
  • Dogs have low usage and low perceived value.
  • Question Marks have high usage but low perceived value.  (The question – why do people use it if the value is low?)

Fuel investment in rising stars and cash cows by killing dogs and most question marks.

The key– build an investment model

George Box wrote that “essentially, all models are wrong, but some are useful” in his groundbreaking book on predictive statistics.  Build an investment model that lets you weigh one investment area verses another, maintain the right cost-to-serve balance and measure investment impact.

Only then can your investment decisions be data driven.  And when your decisions are data driven, getting senior executives to understand your funding requests relies less on persuasion and more on common sense.

Filed Under: Channel Incentives, Channel Management, Partner Programs, Posts

Is your channel incentive program a money pit?

September 9, 2011 Leave a Comment

For many vendors, channel incentives are perhaps the single largest line item of cost for channel management.  The costs are often so large, they require the program to be contra-revenue to be funded.  This becomes a double edged sword.  It lets you reward your partners, but it also makes understanding the value of your investment hard to measure.

This holds true whether the channel incentives are MDF, solutions investment funds or some other form of business development assistance.

The purpose of an incentive is to change behavior

Don’t start with your sales goals.  Having X% revenue growth is the governor on your investment, it is not the business outcome you base your decision on.  The real key is understanding what behavior do you need to drive.  It is a question of cause and effect.  Of course the goal is to increase revenues, but what is the problem you are hoping the money will remove that enables the increase in sales.

Effective channel investment programs are ALWAYS built around this tenet.  They understand their real purpose is to get the partner to train their staff, conduct specific demand generation activities, implement specific proofs of concept with clients, etc.

Your operational support needs to focus on this behavior

There are many vendors that can manage payments and validate activity with very good or better customer service.  This is table-stakes and should not be your sole criteria for picking the vendor that will manage your program.

Also focus on a vendor’s ability to understand the behaviors you really want to drive.  Reporting, decision making criteria, success metrics should all focus on these behaviors.  The value add you should seek from vendors is insight as to how the incentive program is driving these behaviors and whether the performance measures you are basing payment on adequately reward the effort reflected.

This will dramatically improve your return

Most incentive programs only pay on performance.  Ironically, this means they only pay when business results meet revenue or profit goals.  The trap is whether the program drove the performance or just paid for results that would otherwise have already happened.

The answer is to focus on the behaviors you want to drive.  Then you can correlate whether changing the behavior results in the performance rewarded or if there is a different unrewarded cause.

Filed Under: Channel Incentives, Channel Management, Posts

The channel management and execution excellence link

April 18, 2011 Leave a Comment

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
  • 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.
Filed Under: Channel Management, Channel Marketing, Posts

Why it’s all about driving partner performance

April 4, 2011 Leave a Comment

Manage your channel management 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 concentrating on the customers and solutions you want?
  • Performance. Are partners driving the business results you require?
  • Activity. 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 partner performance measures, should compel desired behaviors.

A company needs to engineer its partner programs 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 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 partner 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.
Well engineered partner programs provide a stable and predictable operational framework for channel management activities, while allowing agility and responsiveness to changing market conditions.
Filed Under: Business Propositions, Capacity Planning, Channel Incentives, Channel Management, Partner Programs, Posts

Your partner business proposition is key

March 28, 2011 Leave a Comment

Manage your partner business proposition to gain competitive advantage.

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

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

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

  • Market Momentum. The channel naturally migrates 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.
  • Relationship. Partners align to vendors when they see long-term value in the relationship.  Partners assess alignment based on vendor fit against their strategic objectives; the reputation, either experienced or perceived, of the potential vendor; and judge their satisfaction with engaging the 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. All companies will have soft areas within their proposition with some channel 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 partner 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 economics or joint alignment to offset your market position.
  • If you are recruiting solution providers with poor alignment, your targeting or messaging is ineffective and your efforts are unlikely to yield the desired results.
  • If your channel 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.
Filed Under: Business Propositions, Channel Management, Posts

Use partner capacity planning to measure your impact within the partner ecosystem

March 14, 2011 Leave a Comment

Effective channel capacity planning lets you manage your ecosystem to maintain the right mix of partners.

The partner ecosystem represents the extended reach of a company.  Through successful channel management this reach can be broad and effective.

With four simple levers, partner managers can create an almost infinite set of adjustments to their ecosystem.  Understanding these levers lets you determine your true channel capacity and is of priceless value when determining your best channel strategy.

Understanding these four levers is critical.

  • Coverage. The number of partners by segment. Ecosystem capacity is influenced by the mix of channel types, number of partners in each segment, and core attributes such as customers served, business models, and solutions offered.
  • Capability. The required knowledge to sell and support the company’s offerings. Without this knowledge, the channel cannot be effective in the market.
  • Capacity. The velocity of sales per partner per year. It is a function of the size, frequency and number of transactions completed each year.
  • Commitment. The percentage of deals that include the company’s offerings. Most partners work with multiple vendors, so loyalty is a key determinant of revenue.

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

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

  • Create actionable, data-driven targeting models for recruitment and development
  • Ensure balanced engagement based on business models 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 capacity planning model forms the road map for all channel management activities.

Filed Under: Capacity Planning, Channel Management, Posts

Growth through excellent channel planning

February 28, 2011 Leave a Comment

Your channel management strategies need to align to specific business outcomes.

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 planning 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.
  • 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.

Successful channel planning 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.

Robust channel planning provides the foundation for channel management success.

Filed Under: Capacity Planning, Channel Management, Posts

It is not luck. It is method.

February 14, 2011 Leave a Comment

Channel management. It is not luck. It is method. Do you know whether you channel management is working. Understand the five core disciplines of effective channel management. Make you partner effort a competitive asset and not just an operational expense.

Filed Under: Channel Management, Posts

Are you approaching scale the right way?

January 31, 2011 Leave a Comment

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? You need to know.

Filed Under: Business Propositions, Capacity Planning, Channel Management, Partner Programs, Posts

Is your channel management working?

January 17, 2011 Leave a Comment

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 under-performing:

  • 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.

Filed Under: Channel Management, Posts
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