- February 17, 2022
- Posted by: lmaziejka
- Categories: Industry Trends, Strategy
The pandemic economy created unnatural growth and spikes for many vendors, creating a hangover effect that challenges performance and growth. The solution? Get boring.
By Larry Walsh
The most prescient comment a channel chief made to me at the beginning of the month was this: “A twelfth of the year is over, but I haven’t made a twelfth of my number.”
Many chief revenue officers (CROs) and channel chiefs find themselves in this situation. Expectations are high, as they often are going into a new year. But 2022, like the two years before it, is no ordinary year. Despite strong economic indicators, low unemployment, and strong demand for goods and services, many technology vendors and partners find themselves in challenging performance and growth situations.
The challenges facing vendors and partners are numerous. Supply-chain disruptions and inventory shortages will persist through 2023. Inflation, which rose to 7.5% in the United States in 2021, is at a rate not seen since the gloomy days of the Carter administration. And, of course, uncertainty caused by the threat of war in Ukraine, tensions in the Far East, and the ongoing COVID-19 pandemic (now entering its third year) looms large.
A factor that’s being overlooked, though, is the “big numbers hangover.”
Though many businesses and people were displaced and harmed economically by the pandemic, technology companies fared well and, in many cases, saw record growth. Demand for personal computers, accessories, cloud-based infrastructure and applications, security, and expert services drove record results at many technology vendors.
“Technology companies fared well economically in the pandemic and, in many cases, saw record growth.”
Growth comes with costs. Capitalizing on opportunities means investing in people, infrastructure, logistics, partnerships, and customer success. As the numbers climb, the need for resources to capture every dollar in the total addressable market climbs too.
Under normal conditions, vendors can plan their growth path forward. They can add people and resources as they hit milestones and targets. Plans dictate when they initiate their next expansion and investment in the next set of objectives.
The pandemic changed that equation. Many companies found themselves reacting to growth, adding resources to keep up with unplanned and unanticipated demand. Some vendors found themselves doing unnatural things, such as air-shipping inventory from Asia or repatriating products from Europe to keep up with orders.
All this unplanned and unbudgeted activity resulted in the creation of big numbers. While everyone acknowledges that 2022 and 2021 were anomalous years, all those expenses and revenue are on the books. And numbers and resources create expectations. No one likes to see decline even when they know they’re on a peak.
The law of big numbers, in this context, means that CROs and channel chiefs have big expectations from their leadership to keep the good times rolling. Direct- and indirect-sales teams are trying to repeat their 2021 numbers – if not grow them to even higher levels. The growth expectations are coming as inflation bites into demand, addressable markets for many products and services hit saturation, supply chains remain unreliable, and Wall Street looks for safe harbors.
“CROs and channel chiefs have big expectations from their leadership to keep the good times rolling.”
The better bet going into 2022 was resetting expectations and targets based on 2019 rather than 2021. The circumstances going into 2020 – before we knew about the disruptions COVID-19 would cause – looked more as they do now. The indicators then were that the U.S. and developed markets would go into a mild recession, interest rates would rise moderately, and consumer spending would slow. The growth targets were more realistic.
Unfortunately, that type of thinking rarely happens when it comes to revenue and budget planning.
For CROs and channel chiefs finding themselves in this compromising situation, the bad news is that there’s no quick fix. New channel programs and markets take time and investment to develop. And time is the enemy of performance expectations.
The good news is that future trends point to opportunities in optimization. The development of new channels, routes to market, digital sales platforms, and automated systems can generate growth and cost savings that contribute to long-term performance.
At the intersection of high expectations and high pressure is the temptation to deviate from the norm; seeking to do something radical or different in the pursuit of results. But now is the time to be boring, to double down on fundamentals: business planning, realistic goal-setting, strategic engagement with select partners, collaborative go-to-market activities, and enablement of customer success.
The data and experience is clear: A focus on the fundamentals produces better results than any scramble to replicate past glory or jump on the latest flashy trend.
Larry Walsh is the CEO, chief analyst, and founder of Channelnomics. He’s an expert in the development and execution of channel programs, disruptive sales models, and growth strategies for companies worldwide. Follow him on Twitter at @lmwalsh_CN.