Friday, January 30, 2004

TREND: Small Business is HOT -- once again

Small business initiatives are sprouting everywhere. In the press it seems like everyone is hot again on the small business (See related news stories about Microsoft, Salesnet, SAP, IBM and Symantec.) And that will mean everyone is going to be hot on channels. You cannot cover the small business market in the US without channels. Do the math: 8 million small businesses. To claim to cover The US small business marketplace would take 80,000 sales reps assuming you had a hundred accounts per rep. Hence the need for channels.

The interest in small business is occurring for two reasons, the economic recovery and the technology life cycle. For the economic recovery to continue in 04, small and medium businesses have to participate. In 03, enterprises started refreshing technology. The DOW, S&P and NASD are at 52 week highs if not 156 week highs.

But unless we get the rest of the economy on board, this bull market will run out of power.

Unlike previous technology growth spurts (LAN, WAN, Internet), today's growth will be driven by business growth and investments in productivity, not new revolutionary technology. The technology life cycle dictates that as technologies mature, they have to be sold to a broader market for the vendors to maintain revenue growth. Furthermore, the technolgoy life cycle is correlated to the channel life cycle. Dominant channels shift from specialized, consultative channels to broad, infrastructure channels as a technology matures. Oracle, IBM, Microsoft all are subject to these channel laws, hence the urgency for small business sales.

Scott Karren, The Channel Pro

STRATEGY: Leveraging Web Tools and Services to Improve Account Coverage

As I drove back to the airport in Sacramento yesterday, I had an interesting discussion with Bill Weir, Channel Ventures' VP of Technology and managing partner of Light and Motion, about the opportunity for increasing account intimacy by taking advantage of a growing set of web tools and conversationsl marketing techniques. One thing that struck us was that regardless of the software or tool used, companies needed active, outside facilitation to succeed. Many great tools exist, but the expert is what makes the tool useful. More important than the tool is the strategy and tactics you choose when designing the web experience you want for your channel and customers. Below are three specific areas to consider when implementing your channel internet initiatives.

Internet Account Coverage Model. I see three phases for implementing a strong web presence with the channnel. CRM for web administration, web interaction for mindshare, and Reps for business development. While ther is overlap, each has a specific role in the CP's (Channel Professional's) strategic converage model:

Many companies are starting to use CRM to administer their channel programs. Several I have talked to even have strategic initiatives to implement a solution in 04. Beyond the ability to track POS for each channel member, regardless of source, CRM tools put account history and profile information in an accessable database. Further CRM will allow the account to more easily conduct many of the administrateve tasks such as co-op paymets, certifications, RMAs, shipping and support that currently burn up much of the field's time.

Channels have become too impersonal. The problem is rampant in managed accounts, but acute in the broad channels. I call it The Channel Paradox: Account intimacy is required to engage providers successfully but automated account breadth is required for market coverage. Major vendors have world wide programs with over 100K menbers. Is it any wonder that people feel neglected. You cannot have a deep meaningful relationship with a program or a department. New web tools such as blogs and social networking offer the promise to resolve The Channel Paradox by putting people back in contact with people. But only if the right strategy and planing are developed. A few companies, such as Microsoft, are pioneering the use of conversational marketing. (Check out The Scobleiser Weblog for an example.) However this seems to be a bottom-up approach versus a top-down directive. Microsft, with its 'Math Club Culture' may succeed with this approach, but most vendors will succed only if executives embrace Channel Ventures' Internet Account Converage Model.

Managed accounts are not empowered. Too often the programs, support, and field coverage are reactive. Instead of developing new opportunities and growing tomorrow's market, the majority of resources are spent maintaining legacy committments and internal constituantcies. Web tools can help build a channel into an orgnaized, disciplined community instead of a mob or gathering. Furthermore the same tools can extend the coverage to a much wider group of channel providers than can be managed under traditional field sales models. A strong web strategy is the key to making the field more productive and the program more meaningful.

Scott Karren, The Channel Pro

Monday, January 26, 2004

TREND: Community Building and Social Networking

Two topics that are hot right now are “social networking” and “conversational marketing.” I wrote about some of my ideas on conversational marketing on 14 January, The Power of Conversationsal Marketing. This week I want to comment on social networking. Although neither term has a clear definition, I have been working with my clients on both topics since the mid nineties. Further, when applied to channels, both are related topics dealing with creating and sustaining community.

Over the last few weeks I have been invited to join LinkedIn and Ryze. Both communities have something to offer. Ryze is like a coctail party or virtual bar. You check someone out (via thier profile) and decide if they are someone you want to talk to. If so, you leave them a note in thier gusetbook and they can respond. Ryze also is breaking down the barrier between the virtual and the real world with local meet and great sessions. Great for meeting new people, but like any cocktail party, you may not want to meet everyone. LinkedIn is more like a country club. You need existing contacts to vouch for you to meet new people. This cuts down on unwanted conversations, but may exclude the cool new person you need to meet. Both extend the power of your networking efforts.

What about a private version of socal software that takes the best elements of a LinkedIn or Ryze and uses it to drive community and loyalty in a reseller community? In addition to the membership aspect, it would have to have facilitated topics, support and some Q and A. This would be a great place for company employees and channel blogs to be aggregated. Although the software is important, the most vital thing is leadership. Communities do not spontainiously form. They need someone to lead them and to document the accomplishments.

Scott Karren, The Channel Pro

Friday, January 23, 2004

TACTIC: Measuring Channel Performance

Together with VenLogic, a Seattle company that helps start up companies prepare to raise venture capital, we are launching a Chanel Performance Maturity Index CPMI to objectively score channel providers (VARs, SIs and ISVs) abiltiy to deliver as channel partners. This index is an outgrouth of Channel Ventures Channel Performance Index (CPI) and PCAT (Provider Capability Assessment Tool) benchmarking studies and VenLogic's Venture Maturity Index (VMI) that rates start up business like the VC would before investing in a new venture. I am not sure whether the vendors or the providers will benefit more from the CMPI.

In our preliminary product development and testing of PCAT, we have found that channel providers also place a high value on comparative performance data. Last year we did in-depth analysis of provider business issues for 10 hardware centric providers for a major vendor looking to improve its relationship with strategic accounts. Participants said that the PCAT evaluation would form the basis of their strategic planning, changed how they reviewed and managed their businesses and was among the most valuable things their vendors ever did with them.

The impact on the channel sales force was just as big. With the PCAT data, executive sales training and executive discussion guides, channel account managers dramatically improved the relationships with key providers. Executives also valued the reports because it gave a concise business issue centric overview of the provider rather than the traditional last quarter/last year sales in data. Armed with business model benchmarks, executive were able to have more productive strategic review sessions.

A customer centric approach to channel management requires vendors and channel providers to openly discuss business issues. We have found that objective standardized data is the best way to get past the emotions and legacy issues that interfere with trust and openness.

Scott Karren, The Channel Pro

Tuesday, January 20, 2004

STRATEGY: Bridge the Gap Between Product Marketing and Field Sales

The Factory and Sales do not understand each other. These are not just departmental silos within a company, they are completely different farms. The Factory (composed of product groups, operations, and even corportate marketing) do not speak the same languare as Sales (composed of channel sales, direct sales and field support personnel.) The COO of a Regional Bell Operating Company once told me I was the first and only one to ever satisfactorily explain channels to him. Another senior software engineer friend often quips “What do you channel people do anyway? And, do you really expect us to show up at that 8:00 AM meeting?” Let’s face it, The Factory and Sales may as well live on separate planets.

In the last few months I sat through several sales team sessions where The Factory (product team) came out to the field to tell them about the upcoming products. Even face-to-face the sales people checked out, nodded off and/or SMSed others. Virtual sessions via videoconference or teleconference were even worse. Despite the expense of taking the sales people out of the field, flying product people around the world and developing reams of PowerPoint, the message was poorly communicated. This is not a case of poorly trained or inexperienced sales people. This is a case of bad implementation and poor execution.

Product launches fail most often because of lack of coordination between The Factory and Sales. The Factory fails to change Sales behavior and Sales fails to fully leverage new Factory capabilities. This type of miscommunication is compounded when you have even one layer of channel provider involved. Almost no amount of advertising can recoup the momentum lost when the field is not adequately prepared. The Factory fails because the information is not positioned correctly, there is no clear call to action, there is a lack of an on-going management process and there is little measurement of results or accountability besides sales out (when it is available). Just as the RBI is a flawed metric for measuring a batter’s performance (See my December 4th, 2003 review of Michael Lewis' "Moneyball, the Art of Winning an Unfair Game"), sales out data may overstate a sales persons true contribution because of the economy, product availability, end user demand and/or legacy relationships.

Product groups have asked me to help prepare coursework translating the material that comes out of product marketing into customer-centric sales pitches. Although my clients are looking for a single course, “How to explain (insert your proprietary technology acronym here) to the Channel,” what they need is a process to take Factory messages and deliver Sales readiness. This means translating Factory messages, researching customer requirements, developing sales materials, training sales personnel, communicating the product positioning, and measuring individual results.

The key word here is process. What is needed is a process to improve sales execution, not just annual sales training or market research. The process does not take the place of strategic sales training, such as Executive Focused Selling for Channels, Executive Conversation’s business acumen program which I frequently facilitate. Nor is it a replacement for product positioning or collateral design work created by corporate marketing, branding or marcom teams. Instead it is a bridge between two very different organizations.

It does not matter whether the VP Channel Sales or the Product Group VP/GM initiate the initiative. Both have a responsibility to increase the productivity of the massive corporate investment in field headcount.

Scott Karren, The Channel Pro 

Wednesday, January 14, 2004

TACTIC: The Power of Conversational Marketing

Conversational marketing is hot right now. Robert Scoble, in his blog The Scobleizer Weblog, even graciously referred to me as a practitioner of conversational marketing. Fair enough. I will admit to being a conversational marketer even if I am not completely sure of what it is. My friends Jim Melillo and Suzanne Sheppard, are probably also early practitioners. In the early 90’s they named their sales acumen company Executive Conversation. Their materials are based on conversational selling: having the right conversation with the right person.

Communication is foundational to marketing and relationships are the bedrock of sales. The concept does not seem all that new, but technologies like blogs, social networks, virtual trade shows, etc. are creating opportunities to use these concepts more broadly. Since I view “conversation” as interaction between people (versus companies) and “marketing” as message positioning (versus news), I see “conversational marketing” as personalized positioning.

I tend to agree with John Porcaro that business is personal: “When it all comes down to it, I'm not sure we can (or should even try to) disconnect the personal from the business. Brands are about reputation. Business is about trust and reciprocation. Contracts are covenants. Marketing is communication. Selling is a dialog. Business partnerships, even at a transactional level are about shared goals, common vision, commitment to each other."

Every time I go through customs, they ask if the trip is business or pleasure. I often do not know how to answer. I like the people I work with. In addition to work we eat at great restaurants, visit historic sites, and sit around in bars debating strategy till all hours of the night. Is that work or pleasure? Mark Twain in Tom Sawyer said “Work consists of what you are compelled to do and leisure consists of what you are not compelled to do.”

A potential client e-mailed me the other day about an engagement. Included in the e-mail were the scope, price and terms. I quickly e-mailed back that I would be glad to do it. Next we spent three or four weeks e-mailing each other and set up a phone call. Not until we had a chance to talk was I given the go ahead to do the work. Most of the call was personal. We had to get to know each other better before we could work together.

Look at the software battle between Microsoft and IBM for another current example of the use of conversational marketing.

IBM on Sunday bombarded the football games with its Linux ads, directly linking IBM to Linux. IBM is using traditional marketing to drive sales in a current technology with lots of momentum. And IBM will probably get a great return off its ads from businesses buying solutions. Additionally, ISVs and channel providers can partner with IBM and drive revenue today. Even without blogs, this can create profitable, loyal channel relationships.

Microsoft, on the other hand, needs to convince ISVs to port their economically viable Linux and Java solutions to .NET. Many of these ISVs are delaying because of the high investment needed to port and no urgent, compelling need to change. (See my Channel Zone Column next week for a more detailed discussion of .NET migration economics.) Additionally, without support from the developer community, .Net and Longhorn will not reach their potential.

Yet, instead of relying only on traditional media to get that commitment, they are opening Microsoft up to the developers. Microsoft is heavy into empowering its employees to establish connections with developers on a personal basis using blogs, e-mail, telephone and any other media. I recall a developer at a hardware client of mine a few years ago who excitedly told me about how he had spent the prior evening decoding and modifying the Linux drivers on his VCR. If developers get as hot on Microsoft as this kid was on Linux, it can easily overcome the short-term economic barriers such as capital allocation.

Just because conversational marketing is a soft approach does not preclude its strategic use and just because conversational marketing is used strategically does not have to reduce its authenticity or genuineness.

Scott Karren, The Channel Pro 

Tuesday, January 13, 2004

NEWS: The Channel Pro is Writing A New Column for Ziff Davis' Channel Zone

Ziff Davis’s Channel Zone will begin publishing my new column focusing on channel performance next week. As in The Channel Professional, my new column will focus on the topics of performance, measurement, and methodology, but from the point of view of the provider. The Channel Professional will continue to describe the other side of the coin, the needs and strategies of the channel manager.

Obviously there is overlap between my new Channel Zone column and my blog. That is good. Questions posed on The Channel Professional will be answered by discussing their impact on the provider and vice versa. For vendors looking to improve the performance of their channel, both sites will provide strategic perspective.

Early topics will be the economics of major vendor product launches, how to get more out of vendor relationships, industry benchmarking, business model reviews, best business practices, and undervalued opportunities. Read my first column next week about the capital required by an ISV, VAR or SI to launch a new product, Fueling the .NET Migration. and let me know what you think.

Scott Karren, The Channel Pro 

Thursday, January 08, 2004

TACTIC: Up the Ante on Channel Programs

Despite the investment, channel programs fail to differentiate vendor offerings. Worse, they may not build community or loyalty. In a recent review (Dec. 2003) of program offerings, we found that program documentation lacked any significant differences. Each program offered the usual array of CAMs, technical support, allocation, issue escalation and BDF. If the official spin on the program benefits has no visible differentiating feature, how much actual differentiation will be produced in the field?

Look at any comparison of channel programs and you see a glaring lack of creativity. Why is it that so many well meaning channel managers and directors fail to drive meaningful change into the channel they inherit?

Sometimes it is lack of experience. I am amazed at how companies will assign multi-million dollar budgets and responsibility for billions in sales to people with no channel background. "Hey, its only channels, how hard can it really be?"

Sometimes it is lack of resources. The program looks fine on paper, but support is inefficient and slow. New products do not get into the hands of the capable, motivated provider. Field personnel stretch to cover too many accounts. Distribution fails to cover existing demand.

Most often it is lack of accountability. Real performance is not measured well in channel programs. Ineffective Marcom is created and distributed because someone was given the job rather than because it was used by providers. Obsolete programs continue much like government entitlements. Field personnel are given vague MBOs due to the lack of POS data.

Last year’s (or even last decade’s) promotions are recycled and served up like cafeteria leftovers just because they exist, not because they are desired. Effective programs must be custom designed from scratch.

Scott Karren, The Channel Pro 

This page is powered by Blogger. Isn't yours?