Channel strategies and partnering are important tools for entrepreneurs to use in today’s marketplace, and those are topics that will be addressed in the “Engage: Sales and Marketing” program from the Council for Entrepreneurial Development on Thursday afternoon.
Monica Doss, president of the CED, recently taked with Donna Peek, manager of Outsourcing Business Development, Customer Solutions and Alliances Division, at SAS Institute, who will be leading one of the panel discussions.
MDoss: Donna, thanks for taking a few minutes to talk with me in advance of CED’s Engage: Sales and Marketing program. At Engage you’ll be leading a panel discussion on channel strategies and partnering in today’s marketplace. Why should high-growth companies consider partnering?
Peek: There are several key reasons. An effective partnering strategy can increase a company’s valuation, provide access to complementary technologies, jumpstart brand awareness and provide a ready sales channel. In addition to these benefits, partners can provide an additional source of capital through equity investments or by providing marketing funding. The bottom line is that partnering can increase your speed to market and jumpstart your company’s success. In fact, in the high tech and biotech fields, these benefits are well understood. Most companies are not asking “should we partner?” but “how do we partner effectively?”
It sounds like the list goes on and on for why companies should consider partnering. Despite all of these benefits, what are some potential challenges to keep in mind when partnering?
Too often companies approach strategic alliances not sufficiently focused on strategy. Job number one in developing a channel or partner strategy is establishing a clear product and market strategy. If you don’t know who your customers are (industry, size, pain) and what your unique value proposition is, you are going to have a very difficult time figuring out the appropriate channels and partners to address your target market. Further, you’ll have a difficult time recruiting quality partners. From a recruitment point of view, your marketing strategy helps determine your partner selection criteria and partner targets. Marry this with what I call a “constellation map” (a map of your competitors and their partner relationships) and you have what you need for partner selection. Then you’ve got to recruit them, negotiate the best deal, and manage the ongoing relationship. These processes all require skill, experience and discipline.
Should early-to-mid-stage companies prioritize potential partners based on their market strength?
Going after the market leader isn’t always the best approach. If you’re a small company, the #1 player in the market you’re targeting probably isn’t as motivated to talk to you. But the #2 or #3 or #4 firm in the market could be “hungrier” and more willing to take risks. You might often find success in partnering with companies that are looking to be the best, rather than those firms that are already at the top.
How do you go about managing multiple partners?
Managing multiple partners is part of the process. Unless that partner is a huge multinational firm, a single partner is not going to be as effective as a network of partners in getting you the market reach and breadth of complementary capabilities you are likely seeking. Additionally, even if you do hit the jackpot and sign up a huge multi-national firm as a strategic partner, you will run into trouble if you wind up becoming overly dependent on one partner for your survival. I’ve experienced this first hand. So managing a network of partners is expected and desirable. No one expects to have an exclusive relationship (unless they’re prepared to pay big bucks for it), so as long as you have clear field rules of engagement and appropriate “firewalls” in place between partners you can manage it.
What are some key trends that you see with channel partnerships?
There’s even more focus on alliances in recent years. The down economy has intensified the competition for both customer $$ and investor $$. This, combined with the increasingly global marketplace and increased importance of the mid-market as a growth opportunity, is fueling the focus on channels and alliances. In fact, in a recent survey by PricewaterhouseCoopers’ Transaction Services group, nearly two-thirds of executives were more willing to strike alliances now than they were three years ago – citing new sources of growth, risk sharing, greater agility and new product development, and gaining access to new distribution channels as their primary reasons. Alliances are less risky than an acquisition, and/or they can serve as a good precursor to an acquisition. If you partner, you spread the pain and share risks. Companies need to be agile in today’s market, and partnering allows you to access the market more quickly. It’s definitely something you should have in your arsenal.
Can you briefly share a best-base or worst-case scenario of partnering, from your own professional experience?
I actually have an example that encompasses both scenarios in one. Recently I helped work on a strategic alliance with a major systems integrator. It was a revenue sharing, joint development deal of strategic importance to the execs on both sides. We set out very detailed plans for how to develop our offering and go to market. We laid the partnering foundation extremely well. Unfortunately, we had to walk away from the partnership a few months later because the systems integrator was not executing and lacked the same sense of urgency we had. Often times, partners don’t know when to walk away, but because we were clear at the beginning in laying out the expectations for this agreement, we knew when and how to walk away. It’s a good example of making sure your goals and objectives are clear up front. The upside was that we were able to leverage this framework with another partner.
What’s the most difficult aspect of partnering, in general?
The hardest thing in partnering is knowing when to say “no.” Sometimes you need to say “no.” A company gets in trouble when they don’t have a defined strategy, and as a result, they never know when to say “no.” Other challenges in partnering include: managing projects and expectations across two different companies and measuring success.
How should companies balance a direct sales approach with a channel strategy?
There’s no easy answer because it depends on the company’s stage, product and strategy. A hybrid approach — a mix between the two — is the best approach. According to IDC, in North America the direct/indirect split for software spending is 51%/49%. The key is to manage channel conflict by putting in place the right field incentive plans and always be talking with your end customers and your strategic alliance partners to make sure you are addressing their needs. There is no general formula to follow, but if you lay the groundwork with a strong market and product strategy, then your channel decisions will flow from there.
Thanks, Donna. I look forward to an intriguing panel discussion at Engage.
Donna Peek is manager of Outsourcing Business Development, Customer Solutions & Alliances Division, SAS Institute. Donna has over 20 years of experience in channel and market development in the high tech industry including 12 years at IBM and positions as VP of Business Development at several local startups. She is currently responsible for SAS’ partnering strategy for outsourcing service provider partners. She is a frequent speaker at CED’s FastTrac Tech classes and is also a guest lecturer on Alliances at UNC Law School’s course on Entrepreneurial Finance.
Since 1986, Monica Doss has served as President of the Council for Entrepreneurial Development (CED), a non-profit organization founded in 1984 to stimulate the creation and expansion of high-growth entrepreneurial businesses in the Research Triangle region of North Carolina. Doss is responsible for spearheading the direction, operation, and overall management of the organization. During her 18-year tenure, the CED has grown from a 125-member organization with an annual operating budget of $35K, to become the largest entrepreneurial support organization in the United States, with more than 1,000 member companies, and a budget of $1.8 million.
About CED’s Engage Series: The third in a new program series, CED’s Engage: Sales and Marketing will offer a mix of panels, speakers and networking opportunities. The program is set for Thursday, June 24, from 4:30-8 p.m. at UNC Kenan-Flagler Business School. Peek’s panel, “Sales Channels — Leveraging Channels and Alliances to Drive Shareholder Value,” is one of five concurrent panels on the agenda at Engage: Sales and Marketing. Peek’s panel features executives from Peopleclick, StrikeIron and Technology Communications Group. Visit www.ced.org/engage for details.