Companies are more dependent than ever on their partners for extended sales and services. As a result, managing your channel ecosystem is directly correlated to driving results and winning over new customers.
In this blog, we’ll outline five different strategies for how you should build and manage your channel ecosystem.
Are your partner investments delivering a competitive advantage?
It’s not enough to seek operational excellence from your partner efforts. You must seek a 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? Here are some of the telltale 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. Your channel investments should focus on how you will win with partners in a competitive context.
Many channel management efforts fail because they are run as an operational program, rather than a competitive program. But with the right approach, channel management is not only an asset, it can be the key to competitive success. 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.
5 Disciplines Of Channel Management
If your sales channels aren’t performing at their true potential, the solution is to adopt the following five disciplines:
- 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 path for all channel management activities.
- Conduct Business Proposition Assessments. Manage your partner business proposition to gain a 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.
Discipline #1: Manage your strategies to align to specific business results.
Obviously, your company’s channel management efforts need to reflect your corporate objectives. 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?
Many companies lack the necessary clarity and alignment. That’s why you must approach channel management in a manner that drives out ambiguity. You need to document your growth plan for each business objective:
- Recruit. Add partners or direct sales and services resources to your existing routes to market.
- Develop. Establish a new route-to-market either through a 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.
Creating a robust plan provides the foundation for channel management success. A successful 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.
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. Channel managers need to fully understand the resulting ecosystem model, and how to adjust it for optimal performance.
These four levers allow channel managers to make a significant number of adjustments to their ecosystem:
- Coverage: Number Of Partners By Segment. Ecosystem capacity is influenced by the mix of partner types and number of partners in each segment, as well as partner attributes such as customers served, business models and solutions offered.
- Capability: Knowledge Needed To Sell And Support Your Offerings. Without this knowledge, partners cannot be effective in the market.
- Contribution: Velocity Of Sales Per Partner, Per Year. It is a function of the size, frequency and number of transactions the partner completes each year.
- Commitment: Percentage Of Partner Deals That Include Your Offerings. Most partners work with multiple vendors, so partner loyalty is a key determinant of channel revenue.
The ecosystem model forms the roadmap for all channel management activities. These activities should include:
- Creating actionable, data-driven targeting models for partner recruitment and development
- Ensuring balanced engagement based on business models, partner motivations and different performance requirements
- Mapping necessary credential programs for full ecosystem training and enablement
- Creating a predictive model for program investment
- Validating partner business propositions across necessary partner segments
Discipline #3: Manage your partner business proposition to gain a competitive advantage.
Your partner business proposition shows the value a partner receives from selling and servicing your company’s products and solutions. Partners use these propositions as competitive filters when determining which vendor they will sell and support with their customers.
An effective partner business proposition consists of 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.
- 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 vendor; and judges 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 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 isn’t enough: You must also understand your competitors’ business propositions. A truly effective business proposition assessment benchmarks a company’s business proposition relative to its key competitors with each targeted partner segment. This helps you avoid costly missteps in channel management.
- If you have poor market momentum, then you must either re-position 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:
- Are partners concentrating on the customers and solutions you want?
- Are partners meeting your requirements and receiving sufficient rewards to stay satisfied?
- Are partners driving the business results you require?
- 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 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.
- Attainments: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.
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 the effectiveness of their execution, but they often lack an objective scale against which to reference that intuition.
There are four distinct levels of execution excellence:
- Ad-Hoc Execution: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 Execution:There is a basic operational structure in place. Regular meetings and communications occur but are not always effective. The staff generally follows a defined process, but not always. Knowledge is compartmentalized within teams.
- Working Execution: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 Execution: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.
The bottom line
Through the right partnerships, these five disciplines will help drive and align your partners’ performance to company objectives that create value. A well-engineered channel management system provides a stable framework that can intelligently respond to changing market conditions. If done well, channel management is an asset and a catalyst for delivering competitive advantage through your partner.