Relaunching Channels? Start With the Customer

Relaunching Channels

Transformational trends are driving vendors to rethink their channel programs, but channel chiefs struggle with finding the right starting point. The answer: Start at the end and work backward.

By Larry Walsh

You can’t walk down the streets of Silicon Valley without hearing someone utter the word “transformation.” The world is evolving rapidly. The way businesses utilize and consume technology is changing. And the channel – as well as corresponding vendor channel programs – must change to meet these ever-evolving market dynamics.

In our 2112 Channel Chief Outlook report for 2018, we find out that channel leaders are struggling to get their partners to adopt new business models and technologies. Forty percent of channel chiefs say they’re challenged in convincing partners to adopt new technologies, products, and services. About one-quarter – 26 percent – say their biggest obstacle is getting partners to adopt new business models.

Another challenge that many channel chiefs are grappling with is transforming their channel programs to align with contemporary and future market conditions. Many vendors that 2112 supports are wondering not just how to adjust their channel program for the coming year but also how to craft the foundations for adaptive and evolving channel routes to market.

Many channel chiefs tell 2112 they want programs that encourage partners to invest in next-generation technology capabilities, services models, and sales capacity. They want more than just partners that can deliver products; they want partners that can deliver value – that is, they want partners that can market, sell, deploy, support, and add to the base technology.

Getting to that nirvana isn’t easy. The vast majority of partners are not ready for the next-generation technology marketplace. While many partners talk about cloud computing as an opportunity, most treat it as a destination they play a limited role in arriving at. Most partners are unprepared for or apathetic to the emerging opportunities in security, advanced cloud computing, automation, Big Data, blockchain, Internet of Things, and cognitive computing.

So, where does a channel chief start in transforming its program for the future?

The mistake many channel chiefs make is taking an inside-out approach. They see the world through their own lens. They must sell certain products in prescribed volumes. They must deliver more services. They must generate more revenue. They must preserve or expand margins. They need partners that can generate sales and consume less support.

Consequently, the inside-out approach causes channel chiefs to return to the carrot-and-stick approach to channel development. A channel chief may say, “If we want to sell more of product X, we need to train our partners on the technical capabilities and attached service opportunities. We’ll need to provide them with new incentives to drive them to sell more.” This reasoning causes channel chiefs to return to their old tricks, focusing on incentives to rejigger existing programs.

The transformation mistake many channel chiefs make is thinking of themselves first, and then making changes in the existing program. They’ll attack the program structure, add training and certifications, and then jump to the recruitment of new partners. Some chiefs will even invest heavily in new systems.

Is this the right starting point? No.

The right starting point is the end – the customer.

A few years back, I had a meeting at NetApp when Julie Parrish was still the storage vendor’s chief marketing officer. They had me wait in a marketing conference room that Parrish and her team were using to craft messaging. Most of the notes on the whiteboard were unintelligible to the uninitiated. But one term caught my eye and stuck: “What do we want the customer to do five years from now?”

The customer should be the starting point for channel chiefs in crafting their next-generation programs. We can define the trends that will reshape the world around us. We have a pretty good idea of how customers will acquire and pay for technology over the next few years. We all understand that services will dominate the technology landscape by 2023. And we know complexity impedes technology adoption and return on investment.

If we start with the customer – what the B2B customer needs to run its business better, the help businesses require in acquiring and deploying new technologies, and where customers do and don’t want to invest in fixed costs – we can start to reverse-engineer new routes to market. In doing so, we can identify types of partners, their roles and value propositions, and their required skills to fulfill those roles.

By taking an outside-in approach – a customer-centric approach – vendors will have a better understanding of the direction in which they must drive their channels, the kinds of partners they must engage with, the sales and economic models for driving different partner behavior, and the value outcomes that customers will gain from each channel route.

Reshaping and tuning existing program elements may produce some measure of growth, but history shows that such gains are often temporary. Channel chiefs are better off solving problems for the customer and thinking of their channel partners as a means of crafting value-producing outcomes. Programs structured around this philosophy are the path to the future.

Larry Walsh, The 2112 Group

Larry Walsh is the founder, CEO and chief analyst of The 2112 Group. Follow him on social media channels: Twitter, Facebook, LinkedIn.