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Myth-Stakes of Partner Building 105

Myth-Stakes of Partner Building 105: (a) PLM VAR channel partners thinking that traditional forms of “value added” will protect their business model from being disrupted, then disintermediated, and finally obsoleted.  (b) Software solution providers believing that channel partners can successfully add all the value needed if their partners act just like a smaller cloned version of themselves.

In my last Alliance Alchemy post I claimed that the traditional VAR business model was suffering if not collapsing within many maturing solution segments (e.g. CAD, PDM, CAM, CAE, PPM, EDA, etc.) of the $40B global PLM market. I also submitted that this is not all bad news, but an opportunity for the channel to evolve its value proposition to a higher level that is more profitable and sustainable over the long run than just “selling” a product.

Since then I have heard several reasonable challenges to my claim with examples cited of solution providers celebrating growth in their channel programs and indirect revenues. I have no doubt there are numerous successful partnerships in many PLM markets, whether they be Value-Added Resellers (VAR), System Integrators (SI), Consulting Service Providers (CSP) or new hybrids that I have coined as Value-Added Collaborators (VAC). In future posts I will be examining what makes some of these channels more productive than others.

Yet, I maintain that successful partners who meet or exceed the business expectations of their ownership, customers, and solution providers are relatively rare, and the trend is not good. The evidence speaks for itself when you look under the hood of the PLM economy and see much consolidation and merger activity within the channels. The reasons for this aggregation are not surprising. Most believe that larger scale is needed for financial viability of partners, even with the risk of loss of focus and diluted value added.

In my last post I shared just a few of the organizational functions and technical competencies in which solution providers and customers alike expect their partners to be proficient if not exceptional. These are all considered the classic elements of value added that partners bring to the dance in one form or the other. A more complete list includes the following:

•  Expert knowledge of the products they resell and support

•  Familiarity with underlying technologies and trends behind these products

•  Digital infrastructure and skills for supporting and training users

•  Consulting methodologies and best practices for implementation and integration

•  Sales savvy and pre-sales skills

•  Commercial account management acumen

•  Territory familiarity and access to it

•  Relationships with targeted customers at multiple levels

•  Intimacy with business drivers, trends, pains, and needs of key industries

•  Proficiency and reach of field marketing

•  Financial agility to survive through long investment and procurement cycles

• Sensitivity to global business culture norms with international partners and customers

Wow, are we kidding ourselves? Many large enterprise solution providers struggle to master and perform in all of these functions with any consistency. Yet, somehow they have convinced their investors, partners, customers, and analyst media to believe that most of these competences can be acquired and then scaled up or down to match whatever size the partner may be for whatever their customer base requires.

Ironically, solution software providers and their reseller partners who grossly underestimate the competencies required to be successful may actually be accelerating the disintermediation of the channel. Providers across PLM markets have spent years investing in partner recruitment, product training, sales enablement programs, and other forms of channel education and empowerment. Yet the results have been very mixed.

Often, the cost and time required to make a channel deliver at even modest levels is so huge that executives often ask why they are trying to sell thru a channel at all. A frequently cited reason is that the cost of sales is lower and margins higher when letting the channel take down small to midsize business  (SMB). This is very vulnerable value added. There are many tales of conflict not just between different channel partners but between partners and the hungry sales force of their own solution providers who often claim as the deal gets closer that the partner does not have what it takes to win competitive business.

An exception of course are wise solution providers who chose from the start to sell all or part of their product portfolio exclusively through the channel. Ditto for those providers who use channel partners as their sole agent in international territories instead of operating wholly owned subsidiaries. But SaaS and cloud delivery platforms may still have the last word.

It is no secret that many small to mid-size partners are being consolidated with the match-making encouragement of their OEM solution providers who know the channel business model is very difficult to make work, especially at a small scale. The hope is that scaling up a partner’s size will allow them to invest in mastering all the competencies required. However, scaling down the aperture of market focus to develop greater expertise in fewer domains may prove to be more achievable than scaling up to chase all things for everyone.

It did not use to be this way. In the early stages of many PLM market segments, just a willingness by a partner to call back a small customer and demonstrate one product out of a portfolio of many on the price list was all that was needed to secure a purchase order. Those days are over, though some have not gotten the message.

Our PLM industry needs to surrender the fantasy that partners can master all the competencies needed for success as if they were a small clone of their OEM solution providers. As soon as we let go of that myth both sides of the channel can be freed to innovate and evolve to a more sustainable business model. One that rewards right-size partners who have hyper-focus on a limited number of targeted industries, solution markets, technical competencies, and software products, including those new or yet proven from unknown ISVs. This in turn will incubate a level of expertise that fuels partners with the deep insights to deliver greater value to their customers than even their OEM solution providers can imagine.

Read more in this series of Alliance Alchemy posts from PLM Alliances by

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Myth-Stakes of Partner Building 104

Myth-Stakes of Partner Building 104: Expecting that channel partners will be eager to invest in a new PLM market segment, a new technology, or a new product introduction from a new company, even when it would improve the partner’s own business viability as traditional channel models are being disrupted if not failing.

It is no revelation that VARs seek to sell products for solution providers that are already well-known, in demand by users, and so mature they require little market-creating missionary work. In this traditional VAR model, partners like to think their customer facing value added is in user training, customer support, account management, and relationship building.  The value add that they hope to bring to their solution providers is in field marketing, customer acquisition, territory development, and account maintenance.

But this legacy thinking is now a mistake as both sides of the channel value equation are being threatened if not obsoleted across many PLM solution market segments.

An inconvenient truth for the PLM channel is that customers can now obtain technical support from numerous sources, including social communities, and have little patience for anything less than quick deep expertise when they have a question or problem. Training in most engineering applications rarely requires lengthy on-site classes as in yesteryear, and many users expect software to be so intuitive that learning by trial and error through use is the norm. Account management, ordering, and software maintenance has become a virtual self-serve function, especially over the cloud.

For those applications that are well-known and in demand, which VARs want to represent, solution providers don’t need VARs for the reasons the VARs want to believe. Providers believe they can reach deep into remote territories and vertical markets to identify prospects, then educate and motivate customers remotely, and develop accounts all without having a field-based direct sales force of their own, much less needing that of a partner’s.  It is undeniable that many large providers want VARs simply because they lower the cost of sales for selling into the SME market which they themselves can no longer afford to do efficiently or profitably.

Smart partners have realized the game is up on the traditional channel model. Being a traditional partner in PLM market segments is a very tough business model to make work. Success requires a staggering command of functional competencies and technical expertise in customer requirements, industry applications, solution selling, territory knowledge, underlying technologies, product portfolios, technical support, and the list goes on. Even enterprise solution providers can’t do all of this well, so why do we expect that a small or even large channel partner can?

For these reasons and others to be covered in a future post, traditional PLM channel models are unlikely to be sustainable or even viable for the long-term. Having spent much of my career on one side of the channel or the other, I wish it wasn’t so, but solution providers don’t need partners – and customers don’t either – as much as they once did.

However, that does not mean that there is no future for the PLM channel. Quite the contrary, the future will offer more opportunities to contribute greater value to our industry as the business pressures on customers, technical requirements of users, and complexity of solution spaces all accelerate. But that future is not in “selling” application software nor even in supporting them.

The future is in serving up what customers and providers both value and increasingly seek more of: partners of collaboration and innovation. That is, partners who have intimate industry experience combined with deep vertical application expertise to become co-innovators with their customers. As solution suites have become ever more complex, it is increasingly rare that software developers themselves possess the bandwidth to be experts in their technology base, product offering, and all of the many different applications across so many different industries around the globe.

In the next Alliance Alchemy post we will explore how small nimble partners who are hyper-focused on collaborating with their customers in a small set of industries can become the preferred channel model of the future. For these innovative partners, they don’t run away from new products, new technologies, or from new unknown providers, but seek them out as opportunities to differentiate themselves as value added collaborators.

Myth-Stakes of Partner Building 103

Myth-Stake of Partner Building 103:  Channel partners won’t invest in a relationship, or even invest in their own performance as a partner, if they don’t have something in which they can take ownership.

In this series of PLM Alliance Alchemy posts we are examining the more common myths and mistakes in partner, alliance, and channel building within the many technology market segments of PLM.  I call these “myth-stakes” because they are mistakes based on often widely held myths of partner-making.

In last month’s Myth-Stake 102 we referenced that channel partners, once aligned in a shared vision and strategy for pursuing a market opportunity, should not be expected to invest to fill in the missing holes in each other’s business model, strategy plan, or go-to-market execution. They will invest only in their own business, and only when it is to their own advantage for their own self-interest.

The most direct path to creating an empowering self-interest for partners is not that surprising: give them ownership in something in which they can invest! After all, why would anyone invest in something they cannot claim a long-term ownership stake in? A sense of ownership will motivate investment for the partner’s reasons which are infinitely more sustainable than your own.

Unfortunately, I often meet ISV’s that are so overly protective of everything they touch that they are reluctant to give their partners an opportunity to own something of long-term value. This is true not only of small ISV’s that may own very little themselves, but also large ISV’s who think they already own everything that could possibly be important.

In my experience, ownership can be derived from any one of a number of partnership terms. Examples include ownership of a geographic region, sales territory, specific industry, customers, add-on solutions, training programs, events, thought leadership, and even newly created intellectual property from consulting with a customer. And there is nothing wrong with encouraging ownership opportunities that can always be dialed back if goals are not achieved.

A question I often hear is why give away an ownership opportunity of something that you may already have or hope to create some day. My usual response is to take an ISV through a tour of all the components of a traditional “ISV-push” channel sales enablement program. (The myths embedded in many of these sales enablements, which have turned them into underperforming entitlements, will be covered in a future post.) They then begin to appreciate all that they must invest in to motivate partners who are reactive because they have no investment reasons to be proactive. In the long run it is often much less expensive to bestow a level of ownership that creates “partner-pull” magic.

A final cautionary note that partners who don’t have an ownership stake, and thus who won’t invest at levels beyond those that produce a hollow impression, can still appear to be successful in the short-term. However, upon deeper inspection it becomes obvious that their success is fleeting, derived from taking the low hanging fruit off the sales tree that did not require much investment, talent or work, but only timing and luck to be in the path of the falling fruit. Some partners will argue that is still a valid role of the channel, but the lack of any value-added is a topic for a future Myth-Stake.

Partner & Alliance Building Myth-stake 103:  For partners to be successful and sustainable they must have reasons and opportunities to invest.  To invest with confidence and enthusiasm they require a sense of ownership. The best-in-class ISV’s, large and small, understand this and create opportunities for their partners to earn a level of ownership which will fuel a mutually rewarding long-term relationship.

Myth-Stakes of Partner Building 102

Myth-stake of Partner Building 102:  Collaborating as partners does not mean suspending reality or believing in the fantasy that each partner does not have their own special self-interests which will always be far more important than those of the partnership.

In this series of Alliance Alchemy© posts on the myth-stakes of partner building, we are examining some of the more common myths –  and frequent mistakes based upon them – witnessed in partner, alliance, and channel building across the many technology market segments of PLM.  I call these “myth-stakes” because they are quite often understandable mistakes based on widely held myths of partner-making, as opposed to avoidable blunders based on the unforgiving reality of competitive markets.

In Myth-stake 101 we explored the imperative of having a shared understanding and aligned vision for the market opportunity both parties hope to pursue as partners, and which they presumably can’t do as well independently. This prerequisite business vision quest is applicable whether the partnership type is one of channel reseller, system integrator, service provider, alliance member, technology OEM, or R&D consortia.

Having a shared vision of the larger opportunity does not mean both partners also share or overlap each other’s role in manifesting the common vision, nor should they. However, the exercise in market vision forces both partners to sit on the same side of the table to view the market opportunity as potential collaborators. Or discover that they are more likely situational coopetitioners if not permanent competitors.

If prospective partners cannot pull off this initial qualifying discussion that should be easy – for whatever reasons which are often more business culture than technology in nature – then they should take a pass. It is not a failure in partner-making to learn early on that you just don’t share the same vision or excitement which can power a relationship for the long distance. Investing in a fundamentally flawed relationship and hoping for the best, however, is a failure. After making this mistake several times myself on both sides of a partnership, I have learned the hard way there is no shame in flushing obstacles out as early as possible before the conversation dives prematurely into the products, people, and processes required to execute, and a deal takes on a life of its own in a race to the finish line.

The next common myth-stake is thinking that partners, once aligned on a shared vision and sufficiently excited without competitive concerns, will invest to fill the missing holes in each other’s business, even if only indirectly.  No, they will likely invest only in their own business and only when it is to their own advantage for their own self-interest. They will not help you to create or complete what is missing in your own business model that should be a must-have regardless of your size. That is the role of equity investors or employee shareholders. This is true whether you are a small niche technology provider missing a viable go-to-market plan or a big enterprise solution provider missing industry-specific competencies.

However, each partner will invest in their own business in ways that can have the effect of extending or magnifying the footprint and value of their partners. And if they do this for the right reasons the partnership can actually be more sustainable over the long haul because it is in their own interest to do so without always having to be convinced or sold any further.

There is nothing wrong with partners acting in their own self-interest first. If fact, a good relationship gets this out on the table early on so each party can plan around an unambiguous definition of what are the must-protect self-interests that are not negotiable. You can’t help each other to win if you don’t know what the wins are or how they fit against your own goals as if an interlocking jigsaw puzzle.

Yet, how many times have channel professionals watched conflicts arise over territory ownership, product direction, account leadership, IP ownership, pricing decisions, and margin sharing as if any of these should be a surprise. The organizations within each partner also act in their own self-interest first, even if they rationalize it later on as having been for the collective good. While I may personally wish this was not always so in life, it is an undeniable fact of our economy. That said, I have observed that partnerships which “get this” inconvenient truth upfront have much better chances of surviving if not thriving long-term to go on to do great things together for the collective good of the industries and professional communities which they serve.

Partner & Alliance Building Myth-stake 102:  Collaborating as partners does not mean suspending reality or believing in the fantasy that partners don’t each have their own special self-interests that are ultimately far more important than those of the partnership. Instead, it requires a mutually self-aware and candid discussion of these market motivations and self-interests not only at the top of their organizations, but throughout them on both sides. Often this discussion can be best moderated and vetted by an outside professional who can see both sides from afresh, but that is my unapologetic declaration of self-interest!

 

Myth-Stakes of Partner Building 101

Myth-Stakes of Partner Building 101

February, 2017

Perhaps like many others who have worked in various PLM market segments throughout their careers, the richness of technology spaces and diversity of business models within the PLM ecosystem continually astounds me. I find it awe-inspiring that there are so many nimble hyper-focused software firms, along with their industry-specific channel partners, that are just as successful and satisfying to work for as the large enterprise solution providers with their cadre of system integrators, albeit on different scales.

It’s not surprising that much of the innovation and disruption across the PLM industry comes from small founder-led independent software providers (ISPs or ISVs), either with or without the benefit (and curse) of investor capital. A do-or-die focus on their maturing technologies, new products, and esteemed customers drives a deep intimacy with their targeted markets. This near fanatic obsession then exposes them to customer pains, needs, and opportunities which often evade larger competitors. The long history of mergers and acquisitions across PLM validates that many companies upon reaching a certain size may find it less costly and more reliable to partner, license, or buy instead of trying to innovate and productize on their own.

What does surprise me is the observation that many small and big prospective partners, along with their young or senior executives, often share a mirror image of what the other party lacks. That deficiency is a better understanding and appreciation for what makes an exceptional long-term strategic partnership in contrast to an adequate short-term transactional relationship.

A common myth of partner-making that innovative ISVs often believe in is that their technology, products, or customer successes make them instantly interesting and valuable to new channel partners as well as in larger technology alliances. I often advise and unintentionally shock my clients – after they have given me a most impressive product overview – that successful partnerships for them will simply not be about their products or even about themselves, no matter how different or outstanding they may be!

On the other side, the prospective partners often mistakenly believe that their own marketing prowess, sales force reach, and customer base are what the ISV desperately seeks to exploit out of the relationship and thus should be zealously guarded. These partners often assume a somewhat arrogant protective posture, directly related to the size of their market capitalization, until they learn that their prospective new partner cares little about these attributes, at least in the exploratory discussions.

Resting on the offering or receiving end of the most hyped partner contributions does not lay a foundation for a resilient relationship that can survive the ups and downs that inevitably come around. While there are many reasons this is so, the most obvious one is that all of these elements will change quite frequently due to the very nature of our industry. This includes the products, people, strategies, and desired customers to name just a few. In fact, if these don’t change, one or the other partners is probably dying, but they just don’t know it yet.

My experience from working with numerous ISVs across several different PLM solution spaces is that a shared vision of both the immediate and long-term market opportunity is what it takes to fuel then sustain a mutually successful partnership. In retrospect, that overlapping vision looks obvious and easy to achieve, yet I find it to be rare. The evidence speaks for itself that so many partnerships, small and big deals alike, are announced with great fan-fare but lead to few results. Arriving at a shared vision of what can be possible and how it can be accomplished – thus why you do what you do which becomes why we do what we do – is not a trivial exercise for a single enterprise much less two partners, but that’s a topic for another Alliance Alchemy post.

Partner & Alliance Myth-Stake 101: The most successful partnerships do not revolve around technology and products, nor sales capacity and marketing might. Neither are they based initially on shallow respect and trust which must be earned over the long-term. Instead, partnerships are best formed from an aligned, shared vision of market trends and emerging opportunities. Everything else that is needed for success can follow.

The Alchemy of Alliance Making

The Alchemy of Alliance Making

January, 2017

All those who have spent their career creating partnerships, alliances, and channel communities within the many market segments of Product Lifecycle Management (PLM) know that our profession is much more a wily situational craft than an easily repeatable or scalable management science. As evidence, the history of PLM is full of enthusiastic press releases from respected firms and successful executives announcing new partnerships which failed to live up to the expectations of anyone, including customers and investors.

While there are many principles and best practices for creating satisfactory alliances, the insights and ingredients which allow each new partnership to perform at its full potential are almost always unique if not elusive.  I have chosen the term “alliance alchemy” to describe the practice of what it takes to manifest those great partnerships.

 

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Alchemy, after all, is the seemingly magical process of combining or connecting rather common materials in a way that transforms them into something truly outstanding. When business goals align and corporate cultures mesh, allowing global partnerships to soar, it is truly magical to observe even when not directly participating.

During 2016, the first year of PLM Alliances, I fully immersed and dedicated myself to the partner development needs of an initial set of independent software vendor (ISV) clients who were innovating in their respective, non-competing PLM market segments. As 2017 begins I will be sharing lessons learned and exploring the alchemy of alliance making not just from a top-down strategy, but from the bottom-up reality of working in the trenches to make partnerships produce. Along the way I will be profiling the successes of others I have witnessed, as well as what I have learned both the easy and hard way through my own successes and challenges.

We’ll start in the next post by looking at the common myths and mistakes in partnership, alliance, and channel (PAC) building. The first “myth-stake” should be obvious, but often it is not when I start working with a new ISV client and candidly tell them that “partnerships are not about you, your technology, or product offering!”

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