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Business Transformation as a solution to Channel Conflict

Business Transformation as a solution to Channel Conflict
January 17, 2020 Tom Clark

Things are changing in the world of channel partners. Market forces are forcingchannel partners to move beyond the traditional reseller business to the model of solution providers. But in many cases, the changes required are not easy for channel partners that have been doing business in a specific way for a long duration.

Similarly, the move from transactional licensing to SAAS, PAAS and other recurring revenue structures has turned business models inside out. Similarly many channel partners are also developing their own solutions, while distributors are merging and it is clear that the landscape has been significantly disrupted. Many channel partnershave no choice but to grow their businesses from product sales to more comprehensive solutions built on a richer set of services and recurring revenue models.This changing landscape has created the perfect conditions for serious conflict between manufacturers or software vendors and their channel partners to occur.

How canchannel managers and channel partners resolve these issues? What are current best-practices in business transformation, especially as they apply to the technology reseller? And what role can be played by implementing best practices in managing channel conflict? Most of the writing on this topic to date has focused on the operational execution of a business transformation program for channel partners. However, for resellers that are significantly transforming their business this is far too simplistic. Research from the Boston Consulting Group confirms that the formulation of Vision and Strategy which drives the transformation must be addressed before tactical execution.

Technology Vendors must share the blame in this. While most have produced content and programs to help resellers transform their business, these programs have been entirely tactical in emphasis and their message is typically “instead of selling this product, start selling this one”. Such a simplistic approach is an abdication of their responsibility to support their reseller’s success. It is time for more enlightened Vendors to step forward and provide a leadership role in their reseller’s transformation strategies for mutual benefit.

The Boston Consulting Group’s research into business transformations identified two common trajectories dictating success or failure in business transformation programs.

While both trajectories involved initial cost-cutting and “Operational Transformation”, the true differentiator between long-term success and failure came down to Vision and Innovation.

A review of manufacturer programs to support channel partner business transformation reveals common themes:

  • “Understand the new market opportunity and cloud offerings”
  • “Tell a different story to your clients”
  • “Identify the impact on your cash flow and bottom line”
  • “Adapt your sales process”
  • “Leverage our assets to adapt your Go-to-Market strategy”

All of these fall entirely within the sphere of “Operational Transformation”. While they are important in the short term, they are a nonsense for the channel partner seeking long-term success. Worse, they lead the channel partner to believe that they are undertaking true transformation, while in reality they are simply tinkering around the edges.

Most channel sales managers and their channel partners have a good understanding of their current “Mission”. They know what they want to do over the next three years. But the High Performers are already looking (and investing) way beyond that horizon. They have a clear understanding of their COMPANY MISSION and Values and they use these as the basis for deciding the direction and focus of their business transformation.

Strategy development is the key to long-term success and profitability. While “operational transformation” enables the channel partner to adapt to new products and pricing models, strategic transformation is how High Performers change the game entirely. Strategic transformation requires the leadership team of High Performance channel partner’s to decide where they will play to win in the medium to long term, and what strategic investments in resources are required to get them there.

If manufacturers and their channel partners are to avoid constant disturbances they will need to learn how to manage channel conflict. One of the first steps to this is getting the channel partners business strategy and business transformation focused on clear differentiation. This will enable the channel partner to carve out a distinct market segment that will minimise competitive disruption. It also requires channel account managers to receive professional channel management training on best practices in managing channel conflict.