New game – new rules. Trust replaces control.
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This post is about the shift from a traditional indirect partner channel model towards a network-oriented ecosystem. This transformation requires different management approaches. Trust will replace current control mechanisms. I am exploring five important disciplines that help to gain and increase trustworthiness in The Grid.
The previous discussion in Orlando popped up in my head again and again. So, I started to figure out the most important business development disciplines. What immediately came to my mind was: the Route to Market (RTM).
It is all about how products or solutions are sold and delivered to customers, also known as distribution channels. Either selling directly to the customer, and or selling through indirect partner channels.
Even as direct sales still is a valid and important Route to Market, I in my Sustainable Business Development posts I will focus on the indirect channel only.
Firstly, the definition:
An indirect partner channel includes the vendor and its sales and delivery channel, i.e., distributors, resellers, value adding partners, implementation, and service partners, etc. The partner eco system includes the customer into the channel.
Juergen L Sommer
The current management of an indirect partner channel
The indirect channel is a complex construct of multi-tiered types of partners. Every partner type plays a different role at a different stage in the business development and in the sales process. To address this, each vendor has designed its own partner program to manage its partners in the within the partner channel. The distinct categories of partner types could be either defined by the partners business model, like distributors, resellers, or influencers, or by the business area of the partners, hardware, software, and services.
Modern partner programs are referring now to the activity partners have in the ecosystem, like innovating, building, selling, service management or training.
According to their financial commitments the partners ranked into different tiers, usually in three tiers, like silver, gold and platinum. The higher the tier, the higher the benefits a partner enjoys, however combined with higher requirements on their side, i.e., certified sales and technical professionals, etc.
Managing these different Routes to Market without bigger conflicts between them can be difficult.
Three risks within the current approach of managing partner channels
First risk is that a partner can have multiple roles, for example as implementation partner (build) can also act as managed service provider (manage).
The second risk is that usual partner programs are designed to work only in one direction. But there is a natural dependency between the partners, they need each other. The smaller companies often provide innovation. This enables the bigger vendor to complement the solution, adding value to it and selling it via established sale channels. Vice versa this helps the smaller company to scale.
The third risk is the customer perspective. A customer typically has to solve a business problem. Technology is an enabler or outdated technology is an obstacle. I have never seen companies replacing existing technology just for the sake of implementing new technology. Solving a business problem, it is not only implementing new technology, but also reengineering business processes, connecting data and managing the resistance of employees towards change.
In the end a customer needs various types of vendors for design, implementation and management of the sold solution. This is the reason why vendors have to look outside their own partner channel for critical solutions and skills, which are usually found in very small and specialized companies. Especially in the Internet of Things (IoT) area numerous smaller companies provide very specialized services and technologies, which are needed for a complete customer solution.
In the end, in order to deliver valuable end-to-end solutions to customers, the various partner channels need to come together for the benefit of a great customer solution.
The fear of losing control
So why develop and operate complex partner programs if the borders and types of partnerships blur into each other?
Most vendors are convinced that they can control their partner channels with partner programs. Partners who are signing up to the vendor’s program, have to operate according to the vendors rules, to gain the promised benefits.
How does this resonate with reality?
Especially in Edge, Internet of Things (IoT) and Artificial Intelligence (AI), there are very few specialized companies out there. Google is leading in the AI space, but even they need a number of smaller companies to collaborate with for various purposes.
Today’s channel business is growing to become a very agile network. This development is expected to increase further and will provide a multi-purpose, multi-dimensional and multi-directional future channel business.
The Grid
Only a very few companies are taking these new requirements into consideration, because they fear losing control. However, adopting this ongoing change of the structure can create a competitive future advantage.
The first step into that direction is already made. Industry networks and platform providers have already started on this path. Examples are the Appstores of Apple, SAP, Microsoft, AWS, Google and others. Suppliers get connected to buyers, including the customers. A new set-up evolved, the partner eco system, or how I call it, The Grid.
Shifting away from the traditional vendor and partner relationship
Anyone can choose any role. A vendor can be a seller – or a buyer and vice versa. Specific – unidirectional – partner agreements are not necessary any more. The vendor offers, the customer buys.
You might say that the app stores are under control of the big vendors. To publish services and solutions the seller must sign up to the big vendors terms and conditions. And you are right to a certain point. In the end, however this reduces the number of partner ecosystems, towards a couple of specialized platforms. So companies have to choose to continue their own partner channel or to join the platforms.
First, it seems that platform providers are the winners because they charge the solution suppliers on their platforms. Diving a little bit deeper into that it turns out to be a win-win-win situation. The platform provider makes money by providing the platform. The supplier has a much broader reach and can extend its business. The customer has a much bigger choice.
To avoid customer getting locked on one platform only, interoperability is the key. Customers can buy solutions on one platform and run it anywhere. On other platforms or in their own data center. Providing interoperability is a growing demand for customers.
This means that bespoke partner channels become more irrelevant because they blur into each other anyway. A new construct is evolving, a network, The Grid.
Reducing dependencies and gaining flexibility
The Grid can be compared to roots of a tree. The more widely distributed the roots of a tree are, the more stable it is in stormy times and the better it can absorb environmental challenges like dryness. The better a company is integrated in the network, The Grid, the easier it is to leverage different Routes to Market if an existing one breaks. The challenges that companies faced during the pandemic situation are a vivid example. Another adjustment is seen on the buying side. Companies try to minimize the risk of becoming dependent on one or few suppliers.
New game, new rules
Operating successfully in the new environment requires different rules, openness, and flexibility. The shift is from ‘controlling the own partner channel’ towards ‘being an integrational part of The Grid’ is essential.
As described before, companies are afraid of losing control of their current partner ecosystems. What is the opposite of anxiety?
It is TRUST.
So, the primarily critical success factor when shifting the current partner channel into a grid, is gaining or extending trustworthiness.
How to create trust
I see five key initiatives that can help creating trust
- Specialization
- Co-Innovation
- Enablement
- Success Stories
- Sustainability
Specialization
Customer business problems are getting more complex. Many different types of partners have to work together to deliver an end-to-end solution to the customer. For example, infrastructure providers (hardware or cloud), software vendors and implementation partners. No one can deliver a valuable solution on their own.
To stand out of the crowd companies have to be really great at something. The one and only piece that the company is the best known for, its expertise or capability, like security, interoperability, data insight, etc.. This outstanding expertise will the company automatically pull into the game.
Co-Innovation
Building compelling customer solutions in a complex IT landscape often requires several partners from different disciplines. Combining the various components needs an effort in integration and testing work. So why do not build joint solutions from the beginning? This raises the mutual value of each participant right from the start. A complete solution is more attractive and easier to sell to the customer as single components.
But as enablement, co-innovation requires up front investments which can be monetized only many years later, if ever.
Co-innovation is a good initiative to become and stay a valued partner in the Grid over a longer period. Because the Grid recognizes a company willing to invest first, before it takes. Even without having a guarantee that it will ever get something back for the investment. This creates trust.
Enablement
When you investigate your partner ecosystem organizations, how much time, efforts and resources are spent on enablement versus marketing and sales?
To what extend do your partners and customers really understand the value of your products or solutions? Are your partners able to articulate the value of your solution in front of their/your customers?
Companies typically produce online training and webinars and post it on their partner portals. To access these courses partners typically have signed up and paid for a partner agreement with the vendor. Can you imagine how many potential partners you miss, that never will sign a partner agreement and pay (indirectly with the associates fees) for the courses. How do you plan enablement in The Grid, where solutions will be sold via platforms?
Enablement, done properly, is the most underestimated tool for a successful partner business.
Enablement is not to tell your partners how to sell your products. It is about them understanding it.
Help The Grid to understand your solutions better and let The Grid members be your advocate on the customer side.
The most important success criterion is that enablement, created for partners or customers should come for free at no cost and with no further obligations.
Customer Success Stories
Do something good and let your customer tell others how great you are.
The most effective marketing activities I recognized are built around the customer in the center. E.g., customer roundtables, where customers tell other prospects about their experience with the vendor, the value that was provided and the problem that was solved. Prospects understand your customers often much better than your own sales force. They are in the same industry and face the same challenges. Joint blog posts with vendor-partners and customers are perceived as more trustworthy than pure marketing messages.
Getting public success stories into practice is extremely hard. Customers do not want to talk publicly about their relationships with their suppliers. It will take time and effort until a customer is convinced being a reference. The first factor is a meaningful contribution to the successful resolution of the customer problem. The second factor is an ongoing trustworthy relationship. Do not expect the customer to become a reference after the first sale or implementation.
Sustainability
Sustainability is becoming an obligation.
Firstly, the awareness for sustainability has increased, not only as a marketing message tool, but also as an important social value.
Secondly, legislatures around the world are working on laws to make sustainability mandatory and to achieve a circular economy in the long term. Currently, the European Union is working on a directive on corporate sustainability due diligence. Why is this important for business development and sales as well? First, vendors will have to ensure each of their suppliers are working according to sustainability standards, environmental, legal and ethic. Second, they also need to ensure that their sales and delivery channels work according to those requirements too.
How to measure trust
The Net Promoter Score (NPS) is a tool which is used to measure customer satisfaction. It helps companies to understand if the customer will use the services and solutions of the vendor again or even recommend them. Most of the time the NPS calculates a rating that shows how loyal the customers are, by simply asking only one question: “How likely is it that you will recommend Company X?”
This customer methodology has been adapted for the partner eco systems. Many vendors start a regular survey with their partners to determine the vendors NPS score.
Two critical observations:
First, in the partner eco system of the Grid the customer is an integrational part. Measuring the partner NPS considers only the satisfaction of the partner with the vendor. But the customer satisfaction needs to be considered as well to get the full picture. So, in the end both scores needs to be combined.
Second, who is rating the vendor within the partner organization? This person settles the NPS score for the whole organization. It cannot be excluded that this survey will be sent to a person who has a positive attitude towards the vendor, and by this missing other critical or constructive voices.
A journey companies can’t miss
The move towards a network-oriented structure, The Grid, will be a transformational journey. Depending on the business, its size and capability, companies should already start their journey now. Increasing co-innovation, enablement and sustainability initiatives might be a good start to focus on.
The Grid, only a conceptual model?
In discussions with people, I am often asked: “Do you really believe that will happen one day?”
I typically respond in that way: “In the late 1990s I worked as a key account manager. We had the idea of working and cooperating with other companies to reach more customers. The senior management response was: “working together/cooperating with potential competitors will never happen.”
And may I add one continuing example: “A few years later around 2005 partner sales was becoming more prominent. Most of the sales leaders were not familiar with this new concept. They thought they could reach more customers via partner sales channels and thereby increase revenue without investing anything – more revenue with less sales costs. You guess, this did not work out. So, it took a few years for companies understand, they had to invest in programs and resources, until it became an important Route to Market.”
Closing with an open question: “As in the early 2010s complex customer IT environments requires more integrated solutions. The idea of co-innovate with another vendor was refused from the development organization, because of sharing intellectual property. And now?”
I’m happy to be challenged or proven wrong.
In this post I covered the organizational structure, the next post will focus on the processes. I am looking forward to your further interest.
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