Tuesday, March 1, 2016

Four Methods of Avoiding Channel Conflict

Channel conflict occurs when companies try to reach end customers through multiple channels and those channels compete with one another. Most carriers or cloud service providers use a direct sales force, a wholesale channel, and a partner channel.

As you know, I come from the partner channel so it should be understood I have a bias. Direct vs. partner conflict is referred to as vertical channel conflict. Channel conflict can also occur among participants in the same channel, such as the partner channel wherein participants are independent. This is known as horizontal channel conflict. Occasional channel conflict is a good indication the service provider has adequate market coverage. Constant conflict means the provider may have saturated the market and the consequences can be dire.
Managing channel conflict is critical for a multi-channel sales organization because if left unmanaged channel conflict will hurt the customer experience, erode profit margins, and cause channels to disengage.

RULES OF ENGAGEMENT

avoid channel conflict.pngThe best way to avoid channel conflict is to have only one channel. Because that isn’t an option for companies that seek greater market coverage, the next best way to minimize channel conflict is to establish clear rules of engagement. No matter how good or bad those rules may be, published rules will set clear guidelines for conduct and channel participants will have an understanding of what they can expect.

Rules of engagement indicate which channel may sell to which customer and under what terms. Channel participants can deal with rules that aren’t ideal and determine whether or not they will engage, but partners are quickly disaffected when an expectation is set or simply assumed and that expectation is not met.
Clear and published rules of engagement allow partners to decide upfront whether or not they will pursue a particular customer and avoid disappointment.

MECHANISMS FOR MINIMIZING CHANNEL CONFLICT

The following are mechanisms I find favorable in the IT services channel:

  • Pricing consistency. This minimizes competition based on pricing which affects vertical and horizontal channel conflict. Channels all seek the easiest way to gain a customer and if one channel can use superior pricing to win a customer, they’ll do it. This generates lower margins for the provider and also alienates the channel that isn’t able to offer the superior price. Maintain consistent pricing for channel parity.
  • Dual compensation. Creating a mechanism to compensate both channels helps eliminate conflict and encourages channels to work together. Dual compensation doesn’t necessarily mean “double compensation.” It means more parties will participate in getting credit and/or compensation for the sale. As long as the mechanism doesn’t cause the channels to over engage, seeking to maximize compensation, this can be a very effective method to eliminate conflict.
  • Activity-based compensation. Increasing compensation based on sales volume encourages focus among channel partners and helps to differentiate channel participants. This creates an advantage for the partner and for the provider.
  • Constrained distribution. Selling through fewer channel participants creates a perception of exclusivity and encourages channel partners to invest. When services are overly distributed, channel partners will not lead with the product because it’s doesn’t make them unique in the eyes of the customer. Overly distributed services tend to suffer price erosion because this is the basis on which channel participants will compete.

The following are mechanisms I find less favorable to the IT services channel:

  • Deal registration. Accounts get locked and this isn’t always favorable. This may become necessary if multiple channels have access to the active opportunity through internal systems, but isn’t preferable for smaller opportunities. This should be used only on larger opportunities. Smaller opportunities should be on an “ink wins” basis.
  • Named accounts. Providers often want to reserve large accounts for their internal teams. It’s understandable a provider would want to do this, but restricting an independent sales partner from servicing a customer with which they may have a pre-existing relationship causes the partner to seek an alternate service for the customer and locks the provider out of the opportunity to engage the partner in winning or saving the customer.
  • Geography. Limiting sales geography, much like a franchise, is a method used to manage conflict, but this is increasingly rare as services are not restricted by geography and partners likely have customers in multiple regions.
Ultimately the customer will decide how they want to use your service and favor one channel over another. It’s easy to decide one channel is better than another, however companies that favor one channel without considering the customer’s buying preferences risks missing significant opportunities. Operating multiple channels and working to minimize the resulting conflict maximizes a provider’s opportunities to attract and retain both customers and channel partners.

The blog titled Four Methods of Avoiding Channel Conflict originally appeared on Telarus.com on January 21, 2015 http://www.telarus.com/blog/the-top-four-methods-of-avoiding-channel-conflict.php

Wednesday, February 17, 2016

The Future of Master Agents


ICI Explosives was in the business of selling, you guessed it….explosives. Mining companies need these materials to blast rock, but the explosive materials were sold as a commodity. The Australian division of ICI was stuck in a losing battle, when it came to price...until they realized the customer was more concerned with the risk of using explosives incorrectly. They were concerned about potential accidents and the likelihood the blast may not produce the uniformly sized rocks the mining company required.

In his book TiltNiraj Dawar outlined the approach ICI took to become more than a commodity to its customers. How they took their customer’s greater concerns, collected data from blasts, and used their expertise to change the conversation. They were able to not just advise customers on the way to use their explosives, but to provide aggregate rock to specifications, meaning ICI shared in the risk and provided an outcome.

outcomes.png

MASTER AGENTS EVOLVE
This story resonates because this is where master agents are headed. The future must be fully focused on outcome, meaning the success of sales partners. At a base level, master agents provide security of payment by aggregating sales volume and they provide clout with suppliers for issue escalation. This service is a commodity, much like the explosives in the ICI example. In the future, this will not be enough to compete for the business of sales partners. Master agents must build the capabilities and resources to help partners where they want help. Partners will want services that increase their odds of success. That may take many forms, including marketing assistance, solution design, sales assistance, project management, and, ultimately, customer lifecycle management.

Sales partners are unique and have different strengths. They will work with a master agent who has the resources available to complement those strengths. I can see a day in the future when master agents will be able to guarantee an outcome because they have aggregated the data on many successful partner businesses and will understand how to assist a partner in any phase of the customer lifecycle. Much like ICI, master agents will be able to not just supply the resources, but guarantee an outcome for partners.


This post orignially appeared on Telarus.com on January 7, 2016 http://www.telarus.com/blog/the-future-of-master-agents.php

Monday, August 25, 2014

Focus and Specialization

A year and a half ago I gave myself a present.  I found a handyman named Randy and had him take care of my entire list of repair projects around the house.  He fixed a broken fence post, hung bike racks in my garage, fixed a doorjamb, fixed a leaky faucet, and replaced a heater vent.  He did it all and for a reasonable price too.

At about the same time my wife and I decided we needed an entertainment consol.  We shopped everywhere and found most consoles are 30” high or lower which means they’re a perfect height for our toddlers to climb up and hit the TV with their instrument of choice.  We also wanted magnetic door latches we could easily open but the kids could not.  We were referred by a friend to carpenter named Phil.  Phil came to our home, assessed our needs, showed us a drawing and built a custom console. 


Premium Pricing

I was pleased with both services, however when I estimate the time and materials Phil put into the job I believe he charged at least triple what Randy charged for his time.  It’s counterintuitive.  You’d think the tradesman who knows everything would be able to charge the premium, but what people really want and are willing to pay a premium for is a specialist. 


Mindshare

In addition to paying more to Phil, I also find myself referring Phil to friends more often.  Randy presented many more skills than Phil but because Phil is a specialist he occupies a space in my mind for “custom woodwork”.  When friends ask about an electrician or plumber I don’t think of Randy because he is neither an electrician nor a plumber even though he was able to help me with those types of projects. 

It’s a paradox, but the more we focus, the greater presence we have in our customer’s mind.  “We do everything for everyone any time any place” makes us interchangeable with others and people don’t know where to place us.  When you occupy a piece of someone’s mind you open up yourself to new business from them, and also to referrals.

Friday, March 28, 2014

How to Hire the Best

"And, I sooooooo enjoy my job -- this HAS to be the BEST company -- EVER!!!!"  That was a quote from one of our employees emailing another employee.  It was forwarded to me as an example of one of the things we’ve done right. Can you imagine your employees saying that?  Would you like them to say that?  As a business owner it’s one of the most rewarding feelings to know you’ve created an environment where people can be happy and productive but it’s not just the environment that matters, the trick is to find the people who will thrive in the environment.

“People are our greatest asset” goes the cliché.  While that’s true, I believe it’s the “right people” who are our greatest asset.  We used to be very causal about how we hired.  Sometimes we got lucky and sometimes we didn’t. One of these “not so lucky” incidents took place when we hired someone to write a training manual for new partners.  I reviewed her work after a week and found she hadn’t written anything.  She spent her time on a doodle pad drawing sketches to pass the time. I sat with her and created an outline to get her started.  A week later she still had nothing written but she did have more sketches in her doodle pad as she passed the time. After we let her go, Patrick said we should frame the sketches since we effectively paid her to doodle.  Looking back, I wish we had framed those sketches as a reminder of poor hiring practices. 

People want to do what they want to do.  Earth shattering, I know, but it just so happens that when people do what they enjoy they’re not only happier, they’re also more productive.   A somewhat famous job ad was posted in 1914 by Ernest Shackleton who was recruiting crew members for an expedition to the South Pole.  His ad stated, “Men wanted for hazardous journey. Low wages, bitter cold, long hours of complete darkness. Safe return doubtful. Honor and recognition in event of success.”  While this may not sound appealing to you it speaks directly to a personality type.  Shackleton just had to appeal to the people with this personality type and he had a line around the block to sail on his ship.

Set up a profile for the role

 Several years ago we surveyed the top channel managers with whom we worked.  We found they had similar attributes which included “achiever”, “competitor” and a few other notable attributes.  We then set up a profile as we were hiring our own channel manager and created questions around those attributes.  These are open ended questions, not “are you a competitor”” but rather, tell us about a time you won and were recognized for that.  If the person struggles or speaks in generalities they don’t likely have the attribute.  The person with the “competitor” attribute will answer with something like, “and I was on stage in front of everyone and they handed that award to me and I held it above my head while everyone applauded and to this day that’s still the biggest sale that company has ever seen!”   Think I’m exaggerating?  I’ve met three people from the same company who claim to have sold the largest deal.  A person can’t help being who they are and that competitive person is going to excel when they’re put in a position where they can compete and win. 

When interviewing for behaviors rather than looking at past work experience we are more likely to match the right person to the right role and enable them to thrive. 

Testing

It’s easy to “fall in love” with a candidate.  Once you find common interests and backgrounds you may really hit it off.  It’s important to have objective tests to be sure the candidate fits the role you’re seeking to fill and is not just someone you like.  We use the DISC assessment for personality and also the Wonderlic test for aptitude assessment. These are helpful in adding an objective measure and will either confirm or contradict our findings. 

Culture Interview

We conduct a culture interview last.  This consists of a panel of 8-10 people who will interview the candidate to determine whether they’re a cultural match.  We place on the panel a few people we feel exemplify our culture and a few people with whom the candidate will be working should they be awarded the position.  The culture interview helps us:
  1.  Determine whether the candidate will have the supportive attitude we require in our employees.
  2. Gives a voice to those who will be working with the candidate should the candidate be hired.  By making co-workers a part of the hiring decision they are now invested in the success of the new candidate and are more likely to help them in their new role. 
The hiring process is pretty lengthy which also helps us gauge whether a candidate really wants to work with us.  You’d be surprised at how many people self select out of the process.  The rigor of the process also sends a message to prospects that we’re very serious about who comes through the door. 

Our hiring process isn’t perfect and we continue to work on it but we’ve improved our success rate over time.  We counted on luck early on and frankly we got very lucky with the employees we were able to attract.  A lucky streak won’t last forever so this process helps us push luck in our favor in meeting fantastic people and aligning their attributes with their responsibilities. 

It turns out Ernest Shackleton’s voyage to the South Pole ended in disaster.  They were stuck in ice for over a year through periods of complete darkness as their wooden ship was crushed by colliding ice flows. Every person on the crew survived.  That’s the power of putting the right people in the right positions.  I hope wherever you are in your business development that you have a hiring process and come to find that people really are your greatest asset.

Thursday, January 30, 2014

Defining Your Company Culture

I’m a numbers guy.  I’ve been an auditor, a controller, a financial officer, and I’m a CPA.  I’ve known for years it’s all about the bottom line and that’s been my focus; at least it was my focus until a competitor accused us of being a “cult”.  It may not have been meant as a compliment but I took it as one.  I took it to mean we had something that captivated people and created a loyalty among our partners and employees.  What I had to find out was how to nurture and grow that “something” which it turned out was our undefined culture.

Culture is powerful.  It’s the accepted norm of behavior; the rules of the road if you will, with any group of people.  It’s stronger than any org chart, strategy statement or directive from management.  This is because each of us is wired to perceive what is socially acceptable and what is not.  Don’t believe me?  Observe children for a few minutes.  They’ve figured out when to take a parent seriously and when to ignore them. A parent will say over and over, “clean up that mess”, “get in the car”, “do your homework” and the child completely ignores them, but somehow that child knows exactly when their parent is about to snap and will respond at that moment (and sometimes slightly afterward).  We are adept at reading social cues and those social cues take priority over written or verbal instructions.  Our desire to belong to a group encourages conformance with those social cues or culture. 

Intentional Culture

Whether we proactively create our culture or just happen into it we all have a culture in our workplace. The problem with an accidental culture is it may not be good for your customers or for your workplace.  Whether you’re a sole proprietor, a staff of 3 or a large organization you need to assess your culture and decide if it’s right for your intended service to your customers.  If it’s the right culture, document it and reinforce it.  If it’s the wrong culture, define your intended culture, document it and reinforce it.  Here’s how:

Define

There is no perfect culture.  Apple, Zappos, and Harley Davidson have extremely different cultures but are all very successful.  The most important thing to consider when defining your culture is the alignment between your customers, your staff, and your leadership.  If you claim to offer a caring, supportive service to customers but your culture is highly competitive, you’ll send a very mixed message to employees and customers. True Alignment by Edgar Papke offers great insight into this topic and identifies the different culture types and the customers to whom those cultures speak. 

Your culture must also be authentic.  The people with whom you partner or hire will sense whether or not it’s authentic so if it’s not, change it. 

Document

Whether you stumbled into a great culture or defined it in the step above, you must document it.  This means writing down the aspects of your culture and specifically the “values”.  Patrick Lencioni outlines this in his article Make Your Values Mean Something

We found we stumbled on a great culture because we had people who cared deeply about our partners and kept their best interest in mind. We attempted to break that down into a set of “values” or attributes.  Rather than impose a definition we surveyed everyone we could to identify those values.   We had a very long list but narrowed it down to the following 8 values that made us who we are and that we could not abandon.  They are:
  1. Supportive at all levels
  2.  Innovative and creative
  3. Seek learning and personal improvement
  4. Have fun along the way
  5. Integrity in all we do and say 
  6. Accountable
  7. Extra Effort
  8. Legendary Service

Reinforce

Many companies have written values but they become meaningless if they’re not actively reinforced.  We took a page from the Zappos playbook and gave each employee $400 per year to award other employees for exhibiting one of our values.  We also set up the “Culture Club” which meets to discuss the furtherance of our values.  Our value of “innovative and creative” is so important we set up the “Innovation Team” to spread innovation throughout the organization and create an environment where everybody could try something new.  We changed our hiring process to include a culture interview. It’s important new employees fit our culture and don’t take it in a different direction.  The above tools help reinforce culture but wouldn’t be complete if there wasn’t a consistent message from leadership.  As long as cultural development is valued and encouraged by leadership these tools are impactful.

We’ve made a lot of progress but we have a long way to go.  The magic we discovered early on was the passion each person had for helping our partners succeed.  That passion is what people inside and outside the company felt.  Our cultural development won’t be complete until every employee shares that passion and all of our partners sense that passion, not because we say it but because it’s the way we think, act and feel. 

Oh, and in case you thought I stopped being a numbers guy, I haven’t.  It turns out culture does translate to the bottom line so we’ll keep investing heavily in it to keep the numbers guy happy.

Friday, May 24, 2013

You're My Density

When George McFly uttered the words, "you're my density" in Back to the Future, it wasn't what he meant to say, in fact it had nothing to do with the conversation.  When it comes to broadband access and pricing, however, it should be a big part of the conversation because density IS destiny when it comes to access and pricing.  Population density is a crucial fact that is sidestepped by the would-be muckrakers who are concerned about monopolies and "lack of investment" in the broadband space.  


David Carr of the New York Times is the latest offender in his article titled Telecom's Big Players Hold Back the Future.  In the article, Mr. Carr sites Susan Crawford, a professor at the Benjamin N. Cardozo School of Law in New York.  Ms. Crawford recently wrote a book titled, “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age”.  I'm not attempting to review her book, just the fact that she and Mr. Carr conveniently sidestep the issue of population density.  

Notice that anyone who argues the U.S. is falling behind in broadband access, speed and pricing likes to point to countries such as Japan, the Netherlands, and especially Korea.  What do these countries have in common?  Their populations are incredibly dense!  


Korea is the most often sited comparison to the U.S. because if it's ranking as #1 in broadband penetration. Population density (people per square mile) i1300 where in the US it's 89.  This means Korea is 15x more densely populated than the U.S.  What really drives the numbers is the city of Seoul which accounts for 20% of the country's population and a population density of...drumroll please.....44,000 per square mile.  In the U.S. we have cities like Dallas, Phoenix, and Los Angeles where we build out and cover large masses of land.  We don't build large residential towers the way they do in Seoul.  

Lack of density means our networks have to cover more distance, we have to dig up more streets and hang more fiber from poles.  When we terminate fiber to a home we may serve a single family whereas terminating fiber to a building in Korea using the same fiber strand and similar equipment and labor to the American home the result is several hundred potential customers.  Can anyone not see why it's more expensive to build and maintain network in the United States?  Ever traveled to the western US where there's even more distance between cities and homes?   

Pundit's are welcome to wag their finger at large telecom and cable companies but in finding support for their arguments they shouldn't site countries with population densities like Korea.  It makes them sound, well....dense.

Wednesday, April 17, 2013

Network Services Go Mainstream


Ingram Micro announced its entry into the network services space on Tuesday 4/9 by adding Time Warner Cable and Centurylink as suppliers.  While some master agents view this as a threat, I view this as exciting news for the following reasons. 

Validation of the Network Services Space
The entrance of Ingram into the network services space validates what we’re doing as an integral part of cloud solutions.  It’s hard to ignore the infrastructure on which cloud solutions are built.  Many VARs and Solution Providers have come to this realization.  Ingram’s launch further validates this fact.

Marketing to the IT Channel
There is no better evidence of the convergence of the IT and Telecom channels than this announcement from Ingram.   Ingram Micro is the world’s largest technology distributor at $37B in revenue.  The launch of network services signals to all VARs and Solution Providers that they need to provide this service to offer a complete solution.  This is has been our message for years and telling that story just got a whole lot easier!

Strengthened Channel Programs
With Ingram pushing network services, carriers and cables will be able to justify additional resources for their channels.  Many carriers have internal battles over what role the partner channel should play and as Ingram and other IT distributors join these network services channel programs we should see more attention and resources given to these channels.

I’m excited by Ingram’s announcement and expect to see more IT distributors follow suit.  One of the traits I've seen in VARs and solution providers is that they seek the best product or service for their customers and are agnostic to distributors unless they see additional value being given.  This is why I think it’ll take more than sheer size to have an overwhelming presence in this space.  It’ll take the right tools, the right support, and some additional value mixed in the equation to dominate in the network services space.