Channel Development and Management for Software Companies Syllabus v. 3.0 Copyright © TBK Consult Holding ApS 2013. All rights reserved. Any distribution or copying is subject to prior written approval by TBK Consult Holding ApS, CVR: DK31935741. © TBK Consult Holding ApS June 2013
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Hans Peter Bech has written this syllabus for TBK Consult Holding ApS. This document is provided for educational purposes. TBK Consult Holding ApS does not warrant that it is suitable for any other purpose and makes no expressed or implied warranty of any kind and assumes no responsibility for errors and omissions. No liability is assumed for incidental or consequential damages in connection with or arising out of the use of the information contained herein. Terms of use: 1. Individuals and training providers may only use this syllabus as the basis for training and education, provided they have written agreements with TBK Consult Holding ApS. 2. Any individual or group of individuals may use this syllabus as the basis for articles, books or other derived publications, provided that the copyright of the authors and TBK Consult Holding ApS as the source and owners of this document is acknowledged in such publications. Any inquiries regarding this publication, request for usage rights for the material included herein, or corrections should be sent by email to Emma Crabtree: ecr@tbkconsult.com.
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Preface The objective of TBK Consult is to assist software companies with local and global growth. The objectives of the TBK Academy® are to share approaches and experiences with various go-‐to-‐market strategies and frameworks and to give software executives an opportunity to build an international network of peers. The objective of the workshop “Channel Development and Management in the Software Industry” is to give software executives an opportunity to review and discuss the issues related to growing local and global market share through a channel of independent business partners.
The purpose and structure of the syllabus The syllabus is the basis for the workshop and explains the learning objectives, the structure and the content. A summary of the “Channel Development and Management in the Software Industry” workshop can be found in the fact sheet TBK-‐AKA-‐004.
Software market segment
The workshop primarily addresses issues related to B2B software with “medium and long value chains”, complex sales situations and the requirement for some customer specific services in sales as well as in implementation (value-‐add). Long value chains The length of the value chain refer to the number of steps and activities involved in finding, winning and keeping happy customers. The more steps the longer the value chain and the average sales cycle. Complex sales situation A complex sales situation is defined as a situation with more than one decision maker. Value-‐add When software requires complementary services to be sold and implemented we define this as value-‐add or situations where a product serves as the door opener allowing a reseller to up and cross sell other products and services.
Course participant prerequisites The workshop and learning of the syllabus assumes general knowledge of and some experience with sales and marketing of software. The workshop also assumes experience with general business financial concepts such as revenue, Cost of Goods Sold, Operational Expenses and return on investment considerations. Knowledge about the Alexander Osterwalder Business Model Generation and Value Proposition principles will be an advantage.
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“Channel Development and Management in the Software Industry” -‐ Agenda
Day 1 Time 08:30 09:00 09:40 10:30 10:45 12:15 13:30 14:35 14:50 15:55 16:30
Agenda item Arrival, coffee and registration Welcome, objectives, agenda and presentation of participants Partner types and general rules for when to partner and when not to partner Break The partner approach in a business model context Case study 1 Lunch Case study 2 Break Case study 3 Wrap up End of day
Day 2 Time 08:30 09:00 10:15 10:30 12:00 13:30 14:45 15:00 16:00 16:30
Agenda item Arrival, coffee The value chain concept and the AIDA process Break The partner program Lunch Partner recruitment Break Partner management Wrap up End of day
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Partner definition and partner types This module starts off by defining the concept of the partner channel. It explains the various Go-‐to-‐Market models including direct, OEM, white labelling, distribution (3-‐tier), VAD, VAR and franchising. Which are channels and which are not will be discussed.
The channel and the business model In this module we will discuss the impact on the nine business model elements of choosing an indirect approach to get to and/or serve the customers.
Figure 1: Business Model Canvass
Most software companies choose the direct channel approach in their domestic markets. As they grow and embark on penetrating international markets the idea of using independent business partners as a channel emerges. This module of the workshop will review the fundamental differences between the direct and the indirect model and how the choice of channel has substantial impact on all other business model elements. The module will also discuss the implications of entertaining hybrid models of direct and indirect approaches. Finally the module will introduce the concept of the partner-‐based eco-‐system.
When “to partner” and when “not to partner” In this module we will discuss the fundamental characteristics, which makes an indirect channel-‐based approach appropriate. Some value propositions and business models are by definition not suited for an indirect market approach, while others are designed for an indirect channel from its’ first conception. This module will also discuss how the issues change over time as the awareness of the brand increases. Figure 2: Partner Channel Appropriates © TBK Consult Holding ApS June 2013
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Passing the “tipping point”1 the channel may even be pulling at the product offering opportunities we didn’t think of in the early days.
Three case stories
We will apply the business development principles to three real life case stories. The case stories will demonstrate the issues we will have to face in an operational context. We will discuss how to deal with the main issues associated with taking the indirect channel approach. The case stories will help the attendees prepare their own decisions on taking the channel route or not and also prepare the attendees for the key issues to be aware of.
The Value Chain and the AIDA process
The module introduces the value chain and the AIDA2 process. The Value Chain explains what it takes to find, win, make and keep happy customers. The AIDA process is the operational marketing and sales process reflecting how customers find our products and how they make the decision to purchase.
Figure 3: Sample Value Chain
Having a proven Value Chain and AIDA process is a prerequisite for building and growing a successful partner channel. This module will enable the attendees to design and document their own Value Chains and AIDA processes.
1 The tipping point is reached when market share passes the 20% mark. Beyond 20% the dynamics change and demand becomes self reinforcing. 2 AIDA: Awareness -‐> Interest -‐> Desire -‐> Action. © TBK Consult Holding ApS June 2013
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The Partner P&L and the Partner Value Proposition Building a channel of independent partners through which we are to grow and expand our market shares requires intimate understanding of the dynamics of the channel partner “DNA.” The features and benefits of our product do not motivate a channel. The channel is motivated by the business our Partner Value Proposition can drive. A partner channel is using the vendor’s software as an enabler for selling services and building customer loyalty. Recruiting, enabling and management partners must be based on the Partner P&L model. This module will introduce the Partner P&L and its’ components. We will discuss the learning curve, the bootstrapping, the time to revenue and the time to profit. From understanding the Partner P&L we can design our Partner Value Proposition. The workshop will review which elements to include in the P&L model and how the P&L model is used in the partner recruitment and account management processes. The module will enable the attendees to design their own Partner P&L models and their own Partner Value propositions.
The Partner Program The Partner Program is the portfolio of activities, which gets a partner started and which supports his continued growth. This module will discuss the three phases of market penetration and how our Partner Value Proposition and Partner Programs need to change over time. Scaling for dominance
Bootstrapping
Bridgehead
The Partner Agreement The Partner Agreement is the formal and legal agreement between the software vendor and the partner. The workshop will review the function and content of the Partner Agreement.
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The start-‐up roadmap
This section will discuss the issues associated with and initiatives required for getting new partners started. The workshop will discuss how to reduce “time to revenue” and “time to profit.”
Partner discounts This section will discuss partner margins. The workshop will start with a review of industry praxis and discuss the impact of partner margins on partner behaviour. This module will enable the attendees to develop productive partner programs.
Partner Recruitment In this module we will review issues relating to partner recruitment. Again we need to distinguish between the three main stages of growth. The module will primarily focus on the issues related to partner recruitment in the bootstrapping stage. The module will introduce the Ideal Partner Profile. The module will review the steps of the partner recruitment process and discuss the resources and time required to recruit quality partners. The module will also discuss the issues related to “exclusivity,” which is always a delicate matter in the early days of new market penetration through a channel of independent partners. This module will enable the attendees to design and execute effective channel partner recruitment activities.
Partner Management
The main bottlenecks to growth in partner-‐based business models are: 1. Availability of new partners 2. Learning curve for new partners 3. The growth potential of the individual partner This module will review the challenges associated with managing and growing the partners. As you recruit more and more partners you will learn that they fall into three groups: © TBK Consult Holding ApS June 2013
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A – The Stars: Partners who are capable of running and growing a professional business on their own and also do so (<5%). B – The hidden Potential: Partners who – with some assistance – can grow their business (5-‐15%). C – The Majority: Partners who will never be able to grow their business (85%). The module will discuss the instruments you can use to manage and grow your individual partners. The module will introduce ValuePartner®. ValuePartner® is a tool to assist group A and group B partners with defining and implementing aggressive growth strategies. This module will enable the attendees to design and execute effective channel partner management activities.
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