Managing Sales channel relationships -Step 3. Creation of Value proposition framework

Definition of Business Value

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Basically, when we are defining Business Value for it is always a result of various factors which can be put into two categories. Some factors, when seen in context with current Business Increase Business Value and some Decrease. The resulting Business Value will be a driving force for any Business; therefore, it will be also a driving force for Channel owners and Partners businesses in the context of their relationship.

What are the Benefits for the Partner?

?So, let’s start with using common sense and identifying some benefits for the Partner in the context of the existing business relationship with the Partner. When looking into benefits for the Partner, Channel owner should not fall into trap and evaluate them based on influence those potential benefits have on its own business. By own means it should try to get into the Partner’s shoes.

List of benefits

Revenue

Credit limit

Marketing funds

Consistency

Repeatable business

…

?It is necessary to discuss this list with the Partner and get a wider context on each of the items.

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What are Risks, Costs and Consequences?

?Again, let’s make an Ad Hoc list of negative impacts on Partners Business in the context of the relationship with Channel owner.

?List of Risks, Costs & Consequences

Impact on other suppliers

Impact on cashflow

Loss of flexibility

…

As above, make sure the list is agreed and confirmed by the Partner’s stakeholders.

Creating Business Value

The Products and Services that Channel owner is trying to push into the Channel will be evaluated by the Partner and the success will clearly depend on the aspect ratio of Benefits and Risks, Costs and Consequences for the Partner business. On the other side, any Intervention that Channel owner is trying to push into the Channel, must have positive impact on the Risks, Costs and Consequences and Provide Benefits as well. Therefore, before any changes are implemented it is important to re-evaluate business impact on current business.

Business Drivers

Every Business Driver at the end impacts the P&L or Balance Sheet. Every initiative should have the same impact as well.

Business Drivers in the context of the Evolution of Business

?Business drivers heavily depend on the current state of Maturity of Business. They are not constant and should be evaluated in the context of the Partner’s maturity level. There are certain stages through lifecycle of every business that will influence how businesses perceive Benefits, Risks, costs, and consequences of actions. In the figure bellow, one can see a typical lifecycle of business in today’s environment.

Typical Business Profiles depending on current stage of evolution

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Business initiatives and Critical Success Factors

?Business initiatives are building parts of the Partner’s Value proposition Framework. The results of Business initiatives will heavily depend on Critical Success factors.

Business initiatives

Business initiatives are the projects, programs or plans a company implements to address business drivers. Business drivers are key pillars of Value proposition framework.

Critical success factors

Critical Success factors must be met (things that must happen, resources that must be in place), to ensure the initiative is successful.

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Examples of the initiatives part of Value proposition framework

To summarize, it is necessary to Identify the Partner’s Business drivers to focus Business initiatives on the right issues and improvements. Following process can be utilized:

1.????Collect all necessary information about the Partner (not just web site data) and create a brief executive summary of its business,

2.????Identify the Partners business drivers and associated Business initiatives if any. If not discuss with partner and help them create Business drivers associated with your joint business,

3.????Create list of ideas and discuss potential initiatives with the Partner team. Note the list of initiatives and critical success factors,

4.????Agree on the execution and tracking of action results.

5.????Execute.

?Value Map

Value map can be created and used when working on the list of initiatives and their prioritization. Basically, we can create a 4 quadrant system with vertical axis representing Value for the Channel owner and horizontal axis representing value for the Partner.

Prioritization should be done based on Value that initiative holds on Value map. Some tips on how to create relevant value map:

1.????Channel owner should work with the Partner stakeholders and exchange of Views should be done for every initiative. Every initiative should be evaluated from both sides,

2.????Some quantification should be added to each initiative, for the Value to be determined. It could be monetary Value like investment needed (resources, time, …). It could be current revenue or margin impact etc.

?Uncovering Opportunities

Even with the great focus on definition of all existing Business drivers, there is a great chance that not all Business drivers will be defined at the first step. Partner Value Proposition framework should be living document and therefore, evaluations should be done periodically and especially when some significant changes in Business process are implemented on any sides of Business relationship. Opportunities could appear with every change or even with deeper understanding of Business relationship that can happen with time.

Decision Process

A clear and transparent decision process should be defined as a part of Value Proposition framework for both sides in the Business relationship to be clear on initiatives and how they will be implemented in the Value Propositions framework.

A simple process could look as an in the figure below.

Summary

To summarize the Creation of Value proposition framework part, here are some Key points to be taken into consideration for a Channel owner:

1.????The balance of benefits is a good place to start,

2.????Attention must be paid to potential Risks, Costs and Consequences,

3.????Value is created from the complete spectrum of capabilities, not just products or services,

4.????Channel owner should support and respect the existing Partners’ business initiatives and drivers,

5.????Both parties need to agree on effective Decision process.

Next article will be on the step 4. of the channel relationship flow: “Agreement on Mutual Business Goals.”

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