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| 12/12/2005 07:30 AM |
By Ed Chapman
Many technology companies, especially small to medium-sized companies, think they must turn to venture capitalists or outside investors to grow their company to the next level. But there are other approaches to funding that can work in the high-tech marketplace. Boosting sales is an obvious choice, but how should companies go about optimizing their sales channels?
The best opportunities come from seeking out new business opportunities rather than squeezing benefits from matured positions in core markets. Few organizations, especially those developing new business opportunities, can develop these capabilities internally with sufficient speed to gain exponential growth in net new revenue.
Channels give companies a way to use their existing skills while they quickly and flexibly access the capabilities of others. In addition, channels often involve less capital commitment and risk than do acquisitions — a big advantage when developing new markets in which a company’s management capabilities are unproven. As a result, channels are a preferred vehicle for building a new business.
What is the channel gap?
The divide between potential net new revenue from well-formed channel partnerships and the actual results from underperforming channel partnerships is the “channel gap.” On one side is the need to efficiently and rapidly penetrate new markets, to drive sales and to lock up key channel partners. On the other side is the channel’s need to take orders, minimize cost of sales, and avoid vendor cannibalization.
The channel gap will remain a barrier until both sides can create an optimal economic model based on a joint venture framework with maximum value delivered to the right target market — all of which will give the partnership a competitive advantage to rapidly capture market share.
In order to build that joint venture partnership framework and bridge the channel gap, it is essential to establish best practices and benchmark metrics for channel partner performance.
Avoiding the channel gap
Best practices in channel management dictate a multipronged approach for avoiding the channel gap: Segmentation, positioning, targeting, channel establishment, and performance implementation. Applying best practices to each of these areas allows companies to:
• Define customer segments for channel value add and determine market micro-segments most likely to add that value;
• Develop the right channel model and establish the best channel flow to the end customer to ensure value;
• Establish the right channel strategy and framework. Determine how to best leverage channel value and identify potential “joint venture-like” relationships;
• Deploy program to reach out to potential channel partners to attract, educate, qualify, and enroll partners;
• Catalyze channel partnerships to identify and produce new revenue and customers through pipeline development.
If top technology companies derive 45 percent of revenue from channels, why can’t any technology company do the same? With the correct timing in a product’s sales life cycle and the right joint venture-like channel partners, a company of any size can expect to profit from channel partnerships in the same way that top technology companies do. Through this collaborative approach to partner channel management, both organizations will be able to “create their own venture capital” through significantly increased ROI and continue to realize optimal results from an ongoing joint venture-like partnership.
Ed Chapman is managing partner and co-founder of VizQuest Ventures of Concord, a revenue performance firm partnering with clients worldwide to grow their businesses. For more information, please visit www.vizquest.com. |
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