Transformation Is Everyone’s Job, but Maybe Not Yours
Vendors are increasingly concerned that partners aren’t evolving to meet future market needs. The concern is real, but the responsibility to transform partners is not the vendors’.
By Larry Walsh
We hear much about the need for businesses to transform. Businesses must adopt new technologies, methodologies, processes, and models to meet the evolving and future expectations of commercial and consumer buyers.
The pace of change is something of great concern to channel chiefs. As the pace of technology development and emergence of new business models increases, they look for partners that can deliver the new products and services to market. Unfortunately, they don’t see enough partners making the great leaps forward.
In the forthcoming 2112 Channel Forecast: Vendor Edition report (coming February 12), channel chiefs say the biggest threat that could disrupt the existing channel is partners failing to evolve their business models. As such, many vendors talk loud about the need to help their partners transform and remain viable in the future technology market.
My question: Why?
Transformation Is Your Responsibility, Unless It’s Not
Whatever you call change – transformation, evolution, development – the act of continuous improvement to meet customer needs is an imperative. Businesses that fail to keep pace with their customers find themselves on the ash heap of history. How many Yahoos, MySpaces, Motorolas, Palms, Novells, Nortels, Gateways, etc., will there be?
Over the past year, 2112 heard more than a few channel chiefs bemoan the need for partners to evolve their business models. On conference stages and behind closed doors, vendors’ channel leaders talk about the need for partners to adopt new technologies, evolve their business models, and lead with services to continue to meet customers’ needs and expectations.
The short script: Remain relevant and viable.
Partners aren’t transforming their businesses fast enough for vendors’ taste. Or, to put it another way, partners aren’t evolving their businesses the way vendors think they should. The evolutionary steps are often half-hearted, underfunded, and incomplete. Partners continue to do well with half-measures and legacy models, making risky evolution difficult to swallow.
The response from channel chiefs concerning their laggard partners: “We must help them transform their businesses to remain relevant.”
The reaction is a natural one. Vendors need partners to take their products to market. Vendors need partners to support their technologies, ensuring customers get the maximum value from their purchases. Vendors without qualified, engaged partners will lose market power and relevancy. Therefore, vendors feel the need to help partners evolve their businesses so they can help themselves.
The problem is that it’s not the vendor’s job to help transform – or save – their partners’ businesses. The vendor’s job is creating an opportunity for partners to engage and thrive. Vendors do this through the creation of products and services that partners can resell and add value to through their pre- and post-sales support. Partners that take advantage of these opportunities thrive. Partners that don’t will fail.
Vendors absolutely need to transform their own businesses to meet the evolving and dynamic market needs. They should create the mechanisms through which partners can engage in their future models. And vendors can provide support to aid partners on their transformation journey. What vendors should stop doing is feeling obligated to drag partners into the future or, worse, underwriting transformation efforts that aren’t fully embraced or supported by their partners.
At a certain point, partners need to recognize that it’s their responsibility to determine their go-to-market strategies, business processes, and profit models. Partners that fail to keep pace with market and technology changes will find themselves with decreasing opportunities. They’ll evolve out of necessity or they’ll fall by the wayside.
Channel Darwinism Is Productive
Vendors often lament the limited number of “the right partners.” Vendors will often point to the 80/20 rule, or Pareto principle, as evidence of this limited partner supply, saying 80 percent of the channel revenue is generated by 20 percent of the channel partners.
The fact is, that ratio is more skewed than vendors think. In assessments of channel performance, 2112 has often found that as much as 90 percent of the channel revenue is generated by less than 5 percent of active partners. The numbers improve slightly when we count only partners with status in a channel program, but rarely does the ratio move beyond 90/10.
Vendors need to lose their sense of obligation to partners based on personal and legacy relationships. They need to focus less on what partners have done in the past and more on what partners are doing now to bring value to their customers and their companies. If a partner fails to evolve and ultimately fails entirely, it may be doing the vendor a favor by not diverting resources from partners that are delivering value.
Here are some questions vendors should ask when looking at partners for the future:
- Is the partner investing in its own development?
- Is the partner seeking support, resources, and counsel in its evolutionary development?
- Is the partner adopting new technologies to augment capabilities?
- Is the partner training staff and adding new talent to change its value proposition?
- Is the partner developing its own intellectual property and processes to deliver new value?
- Is the partner maintaining or increasing sales volume?
Now, these aren’t the only indicators as to whether a partner will remain viable in the future. However, they’re pretty good indicators of whether a partner will become less valuable if the answers are negative.
And if a partner isn’t investing and putting itself at risk? Well, the vendor should shift favor to the partners that are, and to new partners entering the market with greater skills and capabilities. In a sense, vendors should let Darwinism take its course to clean up their channels and right-size their indirect routes to market.
The important thing to recognize is that transformation and business improvement are imperative. As a vendor, you can help create the conditions in which partners can thrive. But you can’t take the first step for partners; nor should you carry them into the future. Vendors already complain about the unproductive partners they carry in and around their channel programs. Taking on the transformation responsibility is just continuing to reward bad behavior by disengaged partners.
The 2112 Group can help identify partners with potential for change and develop profiles for pinpointing new partners that can contribute to the future technology economy. In addition, 2112 offers services for developing strategies and programs to encourage partner investment and evolution. For more information about how 2112 can help your channel program, contact [email protected].