Of course there will be academic nomenclatures for some of the more common scenarios exhibited, however we have provided a slightly more descriptive categorization of those we come across commonly, all have something missing in the relationship.
“Dump and Run’ Model
Mr Vendor recruits Mr Channel Partner, seemingly with all the right criteria followed for selecting the perfect partner. The agreement is negotiated, the contract is signed, hand shakes and bows exchanged. Mr Vendor hands over a box of collateral, some CD’s and manuals, a help desk number, a web address and gets on the next plane returning home, heading straight for the fax machine to collect the flood of orders. Obviously a slight exaggeration, yet not an uncommon approach to partner recruitment.
Clearly partnerships require commitment from both parties. On one side the commitment to enable and transfer skills and knowledge, on the other a commitment to provide capable resources and focus, and a mutual commitment to agree a business plan, with continued review and measurement.
“Show Me Yours First – Stand Off” Model
These agreements take a form where Mr Vendor won’t provide anything or make any significant commitments until Mr Channel Partner first shows some commitment to the ‘cause’, maybe hiring dedicated staff, allocating marketing budget or opening the ‘kimono’ up to the customer list.
Mr Channel Partner on the other hand hesitates to provide or commit precious funds and resources until Mr Vendor shows an active desire to support through supplying qualified leads, committing to free training or allocating resources to work with Mr Channels Partner resources. After a time with each waiting for the other to make the first move and not living up to expectations, little if any business is written and the partnership fades with both parties moving on to other pastures.
‘Indirect Is Cheaper’ Model
Many unfortunately still look to the indirect channel model as a free or cheap entry into a market with an expectation of huge success. The indirect model in any of its forms requires discounts, infrastructure and support, by implication there is a cost to this. It should NEVER be considered free.
What should be expected from any indirect channel model is a broader reach into previously unavailable markets with access to domain expertise and or regional experience at a better return for each dollar of outlay. Straight forward, right? Not for all unfortunately.
One all too common example is relatively successful and established organizations making the decision to change to the ‘cheap’ indirect model, significantly downsizing or closing local operations, not implementing a channel enablement and support infrastructure, nor managing the customer expectations. The expectation being revenue and maintenance renewals will continue and grow and the partners would carry on business as usual. The results, not surprisingly, are usually massive drops in revenue, defection of customers, partner dissatisfaction, low staff morale and competitor successes.
‘The Silver Bullet’ Model
Many organizations enter a market such as Asia Pacific looking for the ‘silver bullet’ channel partner, the one that has the contacts, the relationships, technical and sales skills, support infrastructure to sell and support their products – the obvious choice for the desired market segment. Of course this is the perfect scenario. What is often missed is that these channel partners (likely larger organizations) will have a sales force paid on gross profit, already committed to selling known products from multiple vendors with targets like any other sales force.
Ask yourself the question: Will a salesperson focus on a new, unknown, difficult to sell product with a slightly higher margin or will they go and achieve their quota with what they know and what is currently selling, even though the margin may be slightly lower?
‘Committed Start-Up’ Model
Relative to the above, seemingly a reasonable approach. Mr Start Up Partner will be keen to prove themselves, hungry for revenue, eager to impress, often with a specific domain expertise and driven to build their business. Everything that one could want in a sales force. Sometimes. What about resource availability and quality? What about scalability? Smaller organizations will be juggling issues like cash-flow, breadth of relationships, depth of contacts? Again, there are numerous examples of these well intentioned ‘partnerships gone wrong’.
‘You Need Us More Than We Need You’ Model
Typically either Mr Vendor or Mr Channel Partner are a recognized brand in their specific market, sometimes even both. The one more recognized in the market to which the other wants access plays hard ball, or more often, an individual charged with the relationship, suddenly wants to show their value and plays hard ball. A relationship built on animosity from the outset, destined for the ‘seemed like a good idea at the time’ pile. These relationships do have much to offer when executed correctly but can be difficult to manage or negotiate if either party believes they are in the dominant position with little to gain.
If all of these scenarios sound unfamiliar … then credit to your channel people, they should be rewarded handsomely as your channel is most likely working well for you, with mutual benefit.
But if any sound a little too familiar then … the big question! “What IS missing in my indirect channel?”
It’s not difficult to search out the plethora of material on the ‘4 things’ or ‘6 things’ or maybe even ’12 things’ you must do to make a channel partnerships work. Or, on how to select your channel partners with what criteria etc. All these will have valid guidelines, all will have important aspects you should take note of and incorporate in your channel approach. Most will highlight aspects of company alignment, market segmentation, sales processes, clear rules of engagement and documentation of mutual expectations combined with constant, open communications, some identify a need to support your channel partner through resources and infrastructure, even funding of direct sales support during the enablement stage. All of which is correct and important.
Personally I like to boil things down to their simplest level, a common denominator or two. In this instance there is a fundamental state of mind that determines whether the partnership will succeed or fail, the one thing in the scenarios above that is missing.
A level of desire and ability to INVEST.
Each of the scenarios fail due to a lack of investment and we are not talking only of financial investment. We are talking about investment in all its forms – time, resources, focus, commitment and financial.
The ‘dump and run’ model lacks investment in support and commitment; ‘show me yours first’ lacks investment in the relationship and building trust; ‘indirect is cheaper’ lacks investment in many areas and so on. I’m sure you get the point.
Think of it this way, you would not expect your bank to pay you a dividend or interest income if you have zero dollars invested in your account. So it is amusing and somewhat worrying when speaking with seasoned and generally successful executives who seek to expand into Asia Pacific, actively avoiding investment in their channel development, yet they maintain high expectations of results. This is no more important than in Asia Pacific, a region accepted as requiring a strong indirect channel strategy to succeed, built on commitment, relationships and mutual trust.
The key to a successful channel partner strategy and in turn a business that will grow and gain strength year on year is simply, a commitment to invest appropriately based on the returns required and expected. Namely in the areas of:
• Understanding the market through research and segmentation.
• Partner selection and due diligence.
• Partner enablement (resource allocation & execution support).
• Support infrastructure and partner management.
• Communication, relationship and trust building.
• Regular and focused reviews.
Like all good things, successful, mutually beneficial relationships require commitment, focus and effort – there are no short cuts, there is no money for nothing. Your outcomes, returns and profit is directly proportional to your desire and ability to invest in your channels.
Richard Batka is Managing Director and co-founder of Anthony Alexander Partners, providing accelerated market entry, expansion and transformation for organizations across the Asia Pacific region.