It seems to take a long time for organizations to develop a ‘channel centric’ reputation; to be regarded by their partners as excellent vendors to work with. However, it seems to take much less time to lose this status when they drift away from the goal. Is this hard won reputation worth it? Some of the world’s leading high-tech vendors seem to think so. Recently, some high profile Channel Executives from some of the world’s leading channel companies have been quoted in the press expressing their firm’s on-going commitment to the channel and determination to be well regarded by partners. Some organizations achieve this and are regarded as ‘channel-centric vendors’, while others promise much but deliver little.
In this article, Philip Moon, executive vice president Training and Intellectual Property Development, Channel Enablers examines the results of research conducted by the channel consulting company on the key characteristics of ‘channel-centric vendors’. How have the leaders achieved this reputation for channel excellence?
Characteristics of channel-centric vendors
Partner Choice
A good place to start is with the partner. Executives in channel-centric vendors understand that partners also choose to do business with them, so it is important to understand the partner’s basis of choice. While each partner will of course have their own unique needs and drivers of choice, we have found that the following six criteria apply to the vast majority of vendor choice decisions made by partners:
Consistency. Vendors deal with partners in a consistent way, so the partner can understand their risk and make measured investment decisions.
Customer value. Partnering with the vendor brings additional value to the partner’s customers. Most partners will generate a high percentage of their revenue from their existing customer base, so protecting this asset and continuing to satisfy customers is a top priority. Partners are nervous of vendors whose products may not perform, or vendors who may compete with them for a share of their customer’s wallet.
Synergy. Together the partners must be able to achieve more than they could apart and both should recognize that they need each other to achieve their goals. Partners choose vendors who clearly articulate why they need partners and how partnering can help all three parties - vendors, partners and end-user customers - be more successful. Clear and proven value propositions are important. Partnership synergy may spring come from a number of sources – but in reselling relationships it most commonly comes from the combination of products and services that vendors and partners contribute to create competitive, market leading solutions for end-users.Channel Enablers refers to this joint solution as the ‘whole product’ - which is everything an end user needs to make a buying decision. Whole product will include tangible elements such as software, hardware or services, and may also include less tangible items such as market presence, packaging and reputation.
Ease and cost of doing business. Channel Centric vendors are very conscious of the costs that their partners must bear in order to do business with them. They do all they can to keep partner costs low and remain highly responsive to partner requests.
Easy to sell. Really part of the point above, but worth highlighting on its own, partners choose vendors whose product is in demand and whose differentiation is clear. The length of the sales cycle is a key factor in the partners cost of doing business. Channel-centric vendors have the data they need to demonstrate the size of the market opportunity for partners, and the systems, processes and marketing support partners need to quickly satisfy customer needs and provide additional benefits to customers. Clear references, on-demand competitive information and efficient ordering and tracking systems are just some of the things that contribute to lowering the difficulty and cost of sale.
Achieves financial goals. Contrary to popular belief, partners don’t always choose the vendor that offers the biggest promised return. Closely linked to the first point in this list – consistency – partners choose vendors who offer a solid and dependable return on investment. That means a clear business case, an achievable business plan, consistent engagement, and partnering with vendors who don’t compete with them in areas where the partner makes the majority of their revenue.
Channel DNA and executive commitment
A focus on channel excellence has to be deeper than just words; as one vendor executive put it “Channel champions have to have channel DNA”. This means that a focus on the channel has to start at the top – with the CEO – and pervade all departmental silos, not just the head of channels.
Executives in channel-centric companies ‘walk the walk’ not just ‘talk the talk’. Departmental executives are the sponsors of the channel strategy and culture – their behavior and attitudes establish the environment. Being actively involved with the channel route to market includes such activities as:
- Visiting channel partners as well as end users on subsidiary and regional tours
- Giving appropriate focus to channel public relations as well as investor, analyst, customer and event press
Channel champions ensure that their people understand the channel route-to-market, and value it appropriately; a consistent approach and consistent focus becomes the norm. When we talk of organizational norms we are talking about an appropriate set of channel oriented values that define the organizational culture. Put differently, ‘culture’ can be described as ‘the way things are done around here’ and ‘values’ as ‘the way things ought to be’. When values are consistent with channel objectives, and organizational behaviors are consistent with values, the organization can be said to have a channel-centric culture. Top management establishes this culture and demonstrates it in action.
Organizations typically comprise a set of departments and teams that must cooperate with each other. If the team culture is sound and teamwork skills are established, this organization will evolve into a ‘team of teams’. A clearly defined set of ‘channel values’ can help this evolution; discussion by individual teams about which of their behaviors are in accord with channel values, and which are not, helps build ownership and commitment at the team level.
Despite being channel champions, channel centric executives are not ‘channel bigots’. Channel is only one potential route to market, it is the right choice when market maturity, cost of sale, and whole product factors make it so. The best value route to market is always used.
Organization structure, measurement and alignment
The way organizations are structured, measured, and compensated is a key driver of behavior. Channel-centric organizations ensure that channel strategy goals are reflected in the organization chart and that the right key performance indicators (KPI’s) are measured. Some common best practices include:
- The global head of channels is a peer of the regional GEO leaders – he/she has a seat at the table when important issues are being discussed and decisions made
- Channel teams report “hard line” in country and “dotted line” regionally/globally
- Channel share objectives are set and published for the whole company and cascaded into each geography and territory
- Channel KPI’s flow down from a global set to all managers (GEO and HQ)
- All sales people have channel neutral compensation – no exceptions
- Both channel and end-user satisfaction are measured
Channel-centric organizations don’t depend solely on their channel managers for communication and engagement with partners. When all departments understand how and why they need to engage with partners, and compensation plans are channel neutral, channels are no longer an afterthought but are always included in business plans and initiatives. In these organizations, channel partners have multiple points of contact with the vendor (role and function) without the need for everything to be filtered through a channel manager.
Clear focus on the customer
We often have to remind vendors that reseller partners are not ‘customers’. There are important differences between partners and customers; the end-user customer is the person who pays for everything and channels are a way to efficiently and effectively provide the end-user with what they want to buy.
Remember, not everyone is a potential end-user customer. Channel-centric vendors have a clear picture of the ‘perfect customer’ and choose routes to market, and partners with this ideal customer in mind. When channel-centric vendors introduce new products or updates, they follow a repeatable process that involves all relevant stakeholders to develop a route-to-market plan; channel selection and capacity is never an afterthought.
When focus markets are well defined and market maturity and whole product requirements are understood, route-to-market decisions are based on data, and not on ‘gut-feel’ or by simply sticking to current practice.
- Each quarter market opportunity is researched and partner coverage calculations are done using available data.
- When market maturity is assessed, partner selection screens are developed for each type of partner that is required, and these are annually reviewed. Typically mature products in mature markets are best served by indirect and other low cost channels, whereas brand new products in new markets are often best served by vendor direct sales or very closely tied VAR partners.
- The right number of partners required in each market segment is known and not exceeded.
- To get the right number of right partners on board, and focused on the markets and products you need them to be, it is important that each step in the partner recruitment process is clearly defined and high-potential partners are screened and recruited effectively.
- Leads are the raw material of indirect sales and are treated accordingly. Channel-centric vendor marketing teams understand the exact quantity and type of leads that they need to create. Leads are measured, tracked and valued.
Clear and consistent engagement
We’ve already mentioned the importance of consistency a few times in this article – but let’s examine this further to understand what kinds of behaviors are typical of channel-centric vendors.
Where multiple routes-to-market are employed accounts are very clearly segmented into direct and indirect, and the list of accounts that can be sold to directly only changes once a year at the start of Q1. The best performing vendors we spoke to all stuck to this rule and documented and enforced account segmentation and rules of engagement. When inevitable ‘exceptions’ arise escalation and conflict resolution processes are clearly defined, and partners know they will be treated fairly. We found that it doesn't matter how successful a salesperson is at a channel-centric vendor – if they break the sales rules of engagement there are significant consequences and sometimes dismissal. Partners of these channel-centric vendors openly share their opportunities and account plans with their vendor.
If you follow the high-tech channel press you will have often read statements from top managers in channel leading vendors expressing their organizations commitment to the channel. As an example, recent press articles quote Lance Liden – IBM BPO for Competitive Programs - announce a comprehensive program to enhance the company's reputation among channel partners by publishing and enforcing a Principles of Engagement document which describes what IBM requires from its internal salespeople when dealing with the channel. Lance Liden is reported to have said “the decision tree is deliberately structured in a way that requires the IBM salesperson to push the vast majority of the sales opportunities through the channel”.
Planning too is important. Marketing and business plans are aligned and owned because they are created jointly.
- Partner and vendor personnel have clear roles and responsibilities which are well documented and understood by all.
- Every important partner has a complete and jointly agreed partner plan
Annual territory planning is conducted early in Q1 and partner contribution to territory plans and account plans is valued and sought. Sales people work alongside marketing, channel managers, inside sales and others to build territory and account plans.
The right people
Channels experience is a prerequisite of channel sales success. Channel-centric vendors understand that channel sales requires a different set of skills and competencies to direct sales, and this is reflected in job descriptions, recruitment, training and compensation plans.
Channel experience is sought and valued. Channel managers are considered peers of direct sales people in terms of on-target-earnings, status and career progression. Channel-centric vendors have career development programs for channels staff, the same way they do for sales and technical staff.
When channel sales measures and compensation are properly aligned with channel objectives, channel managers who substantially grow channel capacity are celebrated and used as role models. A high rate of channel manager retention builds a base of channel skills, knowledge and relationships that are hard for competitors to match.
The ‘right people’ means more than just channel sales. Direct sales people too are trained in channel partnering fundamentals and direct sales people who leverage partners effectively are celebrated and used as role models. Working effectively with partners is part of a direct sales person’s job description.
More generally, channel-centric vendors ensure that understating the importance and the role of channel partners is included in all new hire on-boarding programs (for every role)
Ease of doing business
Being ‘easy to deal with’ is not just a nice-to-have – it is a competitive imperative for channel-centric vendors because it drives partner profitability and choice; making it easier for partners to deal with a vendor is like adding margin to a sale.
Ease of doing business starts with the right attitude; everyone in the channel-centric organization understands the importance of being responsive to channel partners. Some characteristics of responsive and operationally excellent organizations include:
- All core partnering processes are indentified, properly funded, and automated whenever possible. Channel -centric vendors don’t just take their direct sales systems and processes and try to force them on channel partners. Systems and processes have to match partnering realities and each time a partner is asked to do something to satisfy the demands of a system – the cost to the partner must be understood.
- Channel operations are centralized and measured for responsiveness, accuracy and satisfaction. Important interdepartmental internal processes (forecasting, compensation, certification tracking, demand creation etc) are documented and function well.
- Partner enablement is treated as seriously as internal enablement. The same quality standards and resource allocation priorities are applied to both. Channel Enablement (training) is never a profit centre. Investment of a partner’s time is recognized as an opportunity cost for the partner.
Creating a channel-centric organization
All change begins with awareness of the need for change. How would your organization rate compared with the best practices and attributes of your competitors and other high-tech organizations?
Address priorities
Action plans must span at least three levels
- At the organizational level, implement the right strategies, processes, funding, systems, infrastructure, HR policies and partnering values
- At the team level. Each team in the ‘team of teams’ has to understand what partnering means to them – and take ownership for improvements. Guide teams to review themselves against clearly defined partnering values, rules of engagement and targets. Build channel excellence into all recruitment, induction and performance evaluation plans. Managers must be role models and should take every opportunity to ‘catch people doing something right’ by celebrating channel champions as ‘heroes and legends’.
- People can’t do a job they don’t know how to do – so it is important to also empower people at the individual level by training them to understand the channel strategy, systems and values, and providing them with the skills they need to execute.
Conclusion
During the course of this research we talked to a number of different vendors and partners. Not all the vendors do all of the things we have described in this article, but they do all share one last attribute of a channel-centric vendor, they are all looking to improve their reputation and success in the channel. We hope this helps!
By Philip Moon, executive vice president Training and Intellectual Property Development, Channel Enablers – http://www.channelenablers.com
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