Partner Relationship Management (PRM): The Ultimate Channel Sales Podcast

09 - 3 Expert Tips on Building a Successful Partner Channel

May 10, 2022 Magentrix Season 1 Episode 9
Partner Relationship Management (PRM): The Ultimate Channel Sales Podcast
09 - 3 Expert Tips on Building a Successful Partner Channel
Show Notes Transcript Chapter Markers

Our guest today, Hans Peter Bech, has been involved in the channel space for over 3 decades. With more than 25 years in executive roles growing global market shares for information technology companies under his belt, he decided to focus all his energy on strategic business development projects and founded TBK Consult. And as if that wasn’t enough, throughout this time, he has also written not one but 3 published books on channel-related topics. 

Topic summary: 

Channel sales is a great way to reach the end consumer and so you establish a channel. Now, how do you build that channel to be successful? 

What if you’re experiencing great success already but now, how do you expand your channel globally? 

Hans discusses what your channel sales strategy should include: 

  1. A clear definition of the goals for your channel from day 1 – what you hope to achieve. Keep goals realistic and be sure to track and measure progress. 
  2. A complete channel partner program, defining everything from selecting the best partners to guidelines for partners to expectations from partners. 
  3. A plan for managing channel partners and all their ongoing requirements. 

Listen to the episode for all of Hans’ expert tips on building a successful partner channel.

Read the blog: https://www.magentrix.com/articles/blog/3-Expert-Tips-on-Building-a-Successful-5-5-2022

(0:00) Introduction
(2:14) Hans Peter Bech’s background in channel sales
(4:00) Mapping out a channel strategy: how it impacts the success of the channel 
(7:23) Planning for a successful channel: the biggest misconception
(8:39) What makes an exceptional channel partner?
(09:20) 1st Tip: Define goals from day 1
(16:14) 2nd Tip: The channel partners 
(29:19) 3rd Tip: Managing the channel partners 
(36:06) When does building a successful channel pay off?
(37:12) What results can you expect?
(39:09) Conclusion 

Paul Bird 00:05  

This is Partner Relationship Management: The Ultimate Channel Sales Podcast.

Welcome to another episode of the Ultimate Channel Sales Podcast. I'm your host, Paul Bird.

Gartner defines a go-to-market strategy as “a plan that details how an organization can engage with customers to convince them to buy their product or service and to gain a competitive advantage.” You may decide channel sales is a great way to reach the end consumer and so you establish a channel.

Now, how do you build that channel to be successful? 

And what if you’re experiencing great success now, but you really want to go for gold. 

How do you expand your channel globally? 

Your channel sales strategy should include: a clear definition of the goals for your channel from day 1 – what you hope to achieve. Keep goals realistic and be sure to track and measure progress.

A complete channel partner program, defining everything from: selecting the best channel partners to guidelines for partners to expectations from partners. 

A plan for managing channel partners and all their ongoing requirements.

Our guest today has been involved in the channel space for over 3 decades.

With more than 25 years in executive roles growing global market shares for information technology companies under his belt, he decided to focus all his energy on strategic business development projects and founded TBK Consult –  where consultants advise clients on how to become global market leaders in their selected target market segments.

And as if that wasn’t enough, throughout this time, he has written not one but three published books on channel related topics. He has authored: Building Successful Partner Channels, 5,460 Miles from Silicon Valley, and, Going Global on a Shoestring.

He’s here with us today to tell us about: 3 Expert Tips on Building a Successful Partner Channel. 

Please welcome Hans Peter Bech. Welcome to the show Hans Peter, it’s great to have you here!

Hans Peter Bech 02:10 

Thank you very much. I've been looking very much forward to this conversation, Paul.

Paul Bird 02:14

It's a pleasure and definitely an honor.

So maybe you can give us some highlights of your career in the channel so far.

Hans Peter Bech 02:22

Yeah, I believe I've been on all sides of the table. I've had all the hats on.

I've been on the vendor side, building partner channels from scratch. Taking a new product to a new market through a new channel.

I've taken over a suffering channel, repaired it, and grown it even further.

And I have launched a new product through an established channel.

And then I have been a channel partner myself. Some years ago, I acquired a share of a reseller of Microsoft Dynamics and was the CEO of that for about three years. And we sold it to someone else.

And then I've also sold directly. And finally, I've been a customer.

So I think I've seen all the challenges and all the opportunities from all angles.

Paul Bird 03:09

Absolutely.

So tell us a little bit about where you are now, TBK Consult.

Hans Peter Bech 03:15 

Yeah. Today, I'm an author and a management consultant and TBK Consult, that is the name of my company. And TBK publishing is our publishing activity. And TBK Academy is the name of our training and workshop activities.

And it may sound as we are running a big company, but that's not the case. It's me and my partner, Steen Helmer.

But we're very focused on international business development in the software industry. That is our sweet spot. And essentially, that is, we are helping software companies grow faster than that market. 

So that's what I do. I help software companies organize and scale their revenue generation capability.

Paul Bird 04:00

Very good. So let's start with the basics today.

Tell us why it's important for vendors to map out their channel strategy properly and what role it can play in the success of their channel outcomes?

Hans Peter Bech 04:11

Paul, I actually do get that question a lot, and my answer after working with the channel for more than 40 years now is that a good channel strategy starts with the product.

If you want to serve the market through a channel of independent resellers, your chance of success improves significantly if your product is designed for such a go-to-market approach.

So what does that mean? It means that you should have a channel friendly product. And a channel friendly product that means a product or service which is a value creator.

It creates value over and above just the margin that you offer your resellers.

Let me give some examples. If the product can be customized and extended by the resellers, then it becomes a platform for generating professional services revenue.

And if the product can be bundled with other products to form a solution, then the revenue and the profit opportunity for the resellers increases dramatically.

So my rule of thumb is that a reseller friendly product will generate $10 of revenue for each dollar of your product.

Paul Bird 05:27

Wow.

Hans Peter Bech 05:27

So such a product becomes very attractive to the reseller because it generates a lot of value not only for him, but also for the customer, of course. And it becomes very sticky.

So on the revenue generation side, your strategy should be based on the fact that channel partners operate under their own name and at their own expense.

And it means that they invest in a capability to sell and support a vendor's product.

So if you as a vendor want to attract channel partners, then you must develop sort of an investment prospectus.

You must explain what the channel partners investment in the capability of selling and supporting your product, what that capability, what that looks like and what you must do and what does it cost? What is required to invest?

And then obviously, what will you do to support that business case? When can the partner expect to reach a break even? And what is the profitability of such a venture?

Because normally, if you become, if you resell someone else's product, it takes a while to get started and to get onboarded. So profitability is down the road. So you as a vendor have to show what fantastic business opportunity that investment can result in.

So a channel strategy should be designed to make partners successful as fast as possible. And only then can you recruit and onboard the number of partners that you need to achieve your market share, or at least the market share that you believe you deserve.

But it often takes more time than you expect. And that's why I often, I always suggest that you view it as an investment opportunity and that you talk with the potential partner about this opportunity as an investment.

Paul Bird 07:23

What do you think the number one misconception that you've seen time and time again and what people often forget when it comes to planning for a successful channel?

Hans Peter Bech 07:32

When you are building a channel, so when you're starting from scratch and you are building the channel, you are recruiting the first partners. In that situation, the vendor needs the partners much more than the partners need the vendor.

And that is always the case when you are building a channel, because the potential partners, they always have a running business. 

They're producing revenue with somebody else's portfolio and the vendor doesn't have anything and she won't show a profit or any revenue or profit before she has created a productive channel.

So building a partner channel requires an attractive product, that I just talked about, for which there is a need and a demand in the market. But that's not sufficient for attracting resellers.

The vendor needs to show the potential partner the roadmap for commercial success. And as I mentioned before, that the partners must make an investment in a capability.

So why is your proposal better than investing the same amount of money and energy in her existing business? You must be able to answer that question convincingly.

Paul Bird 08:39

Very good.

And maybe in a nutshell, we can, before we kind of take a bigger dive into the discussion, on the other side, what really makes a truly exceptional member of your channel?

You know, the best channel partners, what's kind of that make up for one of those partners?

Hans Peter Bech 08:56

Yeah. As I indicated, it requires a product that can generate more value for the partner than just the margin on the vendor's product.

The more value and ancillary revenue streams a product can generate, the more attractive and the more stickier it becomes.

So the vendor must understand this value creating opportunity and present that convincingly to the potential partners.

Paul Bird 09:20

Very good.

So in your book, Building Successful Partner Channels, you make the following statement: If you have enough money, you should go direct, but if you have enough time, you can build a channel.

What did you mean by that?

Hans Peter Bech 09:31

Yeah. The situation I'm referring to here, Paul, is that when you as a startup must decide which go-to-market model you should choose.

I think you face the same question when you want to enter a new country or new market: should you go direct or should you operate through a channel of independent partners or resellers?

And many startups believe that going through channel partners is the fastest route to the market.

And I understand the logic because the logic is that they assume that channel partners already have the organization in place and that they have established relationships with potential partners. 

And that logic holds, that's true. But there are a few caveats, because you must first find those potential partners, that takes time. 

Paul Bird 10:24

Yes. 

Hans Peter Bech 10:24

Then you must convince those partners to invest in a capability to sell and support your product, that takes time. Then you must onboard them, that takes time. 

Paul Bird 10:35

Yes, it does. 

Hans Peter Bech 10:35

Then you must make them productive, that takes time.

And in the process, you must offer them a margin on your product. Plus, obviously, all the auxiliary revenue stream that's cost you money. 

Paul Bird 10:49

Yes, it does. 

Hans Peter Bech 10:49

And even when you've done all that there is no guarantee that the partner will become successful.

And you do not have the controls, with an indirect channel, you do not have the control to adjust their behavior. They are independent businesses.

Paul Bird 11:03

Absolutely.

Hans Peter Bech 11:04

And on top of that, as a startup, you do not enjoy any brand awareness and there is little captive demand from your market. I mean, that's the situation for a startup.

So my point is that if you have the money, you can build that initial revenue generation capability faster, yourself.

Paul Bird 11:23

That makes sense. 

Hans Peter Bech 11:22

And that's why I say if you have enough money, you can go direct.

Paul Bird 11:26

For sure.

Hans Peter Bech 11:26

Now to the second part, if you have enough time, you can build a channel. And I think I just explained that it does take time.

A channel is not, in my perspective, is not a shortcut to the market. I would say it's rather the opposite. 

It takes more time and it is more complicated because you must design and execute two value propositions, one for the customer and one for the resellers. And it takes time to do so.

You don't generate any revenue until the partners are in place and can generate that revenue for you. 

However, when you have built the channel, then it becomes a fantastic scaling machine.

Paul Bird 12:05

Yes, absolutely.

Hans Peter Bech 12:06

When you have that momentum, it grows almost by itself and it can expand into all corners of the market.

So to cut it short, what I mean with that statement is that building a channel is not the fastest and it's not the cheapest route to the market.

It takes longer. It may even cost more than going direct.

But what you get in return for your patience and investment is a scaling machine with incredible momentum.

Paul Bird 12:35

Fantastic.

And what do you recommend for vendors to do right from day one when they're planning to build this channel?

Hans Peter Bech 12:42

My number one recommendation for companies that plan to build a channel is to design and execute a program that generate the leads that the channel partners then take over, develop and close.

And there are plenty of other things that they need to do, such as develop a business partner program and set up a business partner portal and develop a business partner agreement. But all those are only necessary conditions for success. They are not sufficient.

Feeding the channel with qualified leads will make partner’s recruitments much more effective. And there's nothing that is more attractive to a potential partner than an actual lead.

Paul Bird 13:27

That's true.

Hans Peter Bech 13:28

It will accelerate the onboarding and make the partners productive much faster.

So in short, vendors that want to build an indirect channel, they need to pull at the partners upfront by feeding them qualified leads rather than trying to push them from behind with a whip. That doesn't work as well, so well.

Paul Bird 13:50

Now, do you find that most vendors consider the global, you know, going global when they first set up the channel program?

Or do you think this is an afterthought? And later on, they find themselves just unprepared for it?

Hans Peter Bech 14:02 

Most companies that serve their customers indirectly in the first place, through business partners, domestically, they normally, I would say, always choose that route to global markets. However, many of them are not very well prepared for that.

And the major channel I see is that they don't know or they don't understand how to establish the distributor role or the distributor role. And what do I mean by that?

I mean that, who should assume responsibility for localization, marketing, partner recruitment and partner management?

Now, domestically, that's what you do. You do that as an integrated part of being the vendor. But when you move into a new country, who's going to do that?

Resellers, by definition, compete with each other. So they're not going to build the market for you. And they probably also have competing products.

So they are reluctant to build the market. They will engage in closing leads, but they will not do the, sort of, the groundwork in establishing your brand.

So the question is, can you do those jobs from the outside into a new country?

Is that a sign of a strong commitment to a market that you don't have your own operation to build brand awareness and to recruit partners and to manage the partners?

Sometimes you are able to, out of your domestic headquarter, to recruit a few partners in another country, but without a local distributor in place, it cannot grow.

So you need to establish a distribution role, and that can be your own subsidiary. That is obviously very capital intensive and require management resources. 

But there are other ways you can do it. You can outsource it to someone that operates on your behalf via franchise or joint venture. 

Or, if you can find a local value added distributor that is already there, and if you can attract that one, then that's an opportunity. But without the local distributor in place, there are very limited opportunities for growth.

Paul Bird 16:14

So what are some kind of general best practices that you'd recommend for vendors when they're looking for those partners that are best suited for a global channel?

You talk about, you know, the value added distributors and things like that. But what best practices when you're first getting started to make sure you've got the right people so you're set up for success?

Hans Peter Bech 16:35

Yeah. So when we're talking about selling globally, we're actually talking about selling locally in a lot of places.

There are very few, so to say, global partners that can sell all over the world. There are some, and I'm referring to the software industry where I'm active.

So selling globally means that you sell locally and in many countries or several countries.

So building a channel in other countries requires a framework that can be adapted to the local market requirements. To the local language and to the local competitive situation, which very often is quite different.

But you cannot design a go-to-market approach for each country. You need to have sort of 75% of the framework should be generic and then 25% should be localized.

So you should have the same business model for all markets. You do have the same success criteria and the same go-to-market approach. But you need to localize it, obviously, depending on whether they speak French or German or Dutch or English.

Now, your question was what vendors can do to find and recruit the best suited partners in other countries.

Paul Bird 17:54 

Exactly. 

Hans Peter Bech 17:55

And part of the business partner value proposition is the ideal partner profile. Just as when you want to hire somebody, you have a job description and you have a profile of what you're looking for. You will also have an ideal partner profile.

So wherever you decide to expand, you will search for resellers that match that profile.

Now, that is, that's all theory. 

Paul Bird 18:19 

True.

Hans Peter Bech 18:19

It's much easier said than done. And you will have to kiss a lot of frogs before you find a prince or a princess.

And that's not any different from finding new customers. You may find some that match the profile perfectly, but for some reason, they're not ready now. They're engaged with other activities.

So you must build a pipeline of potential partners, and then over time, some of them may become resellers. Some of them may be in a situation where there is a match with what you offer, and you can then engage.

But even when you find some that match and are ready, they may not become successful and there are many reasons why that may be the outcome. And unfortunately, they're not all foreseeable.

Paul Bird 19:09 

That’s true. 

Hans Peter Bech 19:09

In my experience, predicting partner success is very difficult.

So my best advice if you want to move into a new market and do that indirectly by recruiting resellers, is recruit more partners than you actually need.

Now, the partners don't want to hear that because it sounds like over penetration, but you can't be too picky. And only time will tell which partners take off and grow and which won't. And often you'll be surprised.

Paul Bird 19:41

Very true.

Do you see ways that companies can accelerate that recruitment of business partners to make them hit that successful path faster?

Hans Peter Bech 19:52

Yes. Obviously, they can read my book. That would be my first advice.

No, it's, planning, I used to say planning is cheap. It's the execution that is expensive. And therefore, vendors should invest more time in the preparation.

By moving a little slower in the beginning, I think you can move faster later.

So map and understand the reseller's business model and the environment in which they are to operate and then design the business partner program to support the investments the partners must make. Because becoming a partner requires investment. 

People need to get trained, they need to invest in revenue generation activities. And especially, implement a lead generation program so that you can feed the partners with business opportunities. I know I said that before, but I don't mind repeating it.

Lead generation is so important to get the partners going because here we are talking about building a partner channel, we're not talking about managing an existing partner channel.

So if you want to build a partner channel and also in a foreign country, lead generation is by no means, it's the most motivating component of such a program.

Paul Bird 21:14

Absolutely. 

Hans Peter Bech 21:14

So feeding the partners leads is the most effective accelerator I can think of.

Paul Bird 21:20

Do you think there are ways, you talk about the investment of, you know, onboarding and training and, you know, all of the effort, are there any ways to kind of minimize that upfront investment?

Hans Peter Bech 21:29

Yeah. The way you can do it is that you as a vendor can participate in that investment. 

And I know, for instance, that HubSpot, I don't know if you're familiar with HubSpot, but they're sort of a marketing automation company. 

And some years ago, they decided to build a channel, and there wasn't there was no captive channel for what they did. So they wanted to develop, sort of, marketing agencies. They wanted to develop them as a channel and enabling them to implement HubSpot with their clients.

And in order to do that, they actually invested in the first partners to design a proof of concept that they then could show to other partners.

Now, today, they have a huge partner channel all over the world and they don't have to make that investment anymore. But in the beginning they actually did. 

And that's a concept we called a funded head. They simply paid a part of the salary for those people that were engaged with the HubSpot activities by the resellers.

Is that capital intensive? Yes, it is.

But if you want to minimize investments that are required that's the way you can do it and it pays off in the long run.

So that's some of the things that you can do.

Paul Bird 22:50

And once you've recruited what kind of, some of the guidelines that you'd put in place for partners to follow? You know, what's it most importantly that you need to include when you're growing that channel?

Hans Peter Bech 23:02

Okay, so now we want to see the world from the reseller's perspective. What should the resellers do to become successful?

And I've seen resellers become immensely successful, even do IPOs and grow international businesses. And I've seen some that didn't quite make it.

And it seems to me that successful partners understand that they must invest in their relationships with the vendors.

And I'm very fond of a business model terminology that was developed by a guy called Alexander Osterwalder. And he also developed what we call the Business Model Canvas.

And in that canvas, there is a little box, which is called strategic partners, strategic partnerships.

And successful partners understand that their vendors are strategic partners, even though that relationship is seldom reciprocated.

And so, to do so, because over time, the power balance between them shifts, as I just indicated earlier, that in the beginning the vendor needs the partners more than they need the vendor.

But at a certain point that flips. The partners become more, they become reliable on the vendors because they had invested in that business. It becomes sticky.

So the vendor will have many resellers to choose from while the individual partner becomes dependent on one or a few vendors.

So I believe that having a warm and productive relationship with your vendor, it will always pay off. And you will get more leads and you will get better support.

When I was the CEO of this Microsoft Dynamics reseller, we were constantly approached by other vendors that wanted us to add their software to our portfolio and we always declined. And it was names like SAP or Infor, big names.

And the first reason was that such an investment was very hard to justify. And we always compared, okay, if we take, if we invest in representing SAP, what would be the outcome if we took the same amount of money and invested it in our current business with Microsoft?

And it always turned out that it was more profitable to invest more in our current business. But we also didn't want to risk our relationship with Microsoft.

And it's not that Microsoft could do anything formally about it. But we just didn't want to undermine that position because Microsoft was feeding us leads, they were giving us very favorable terms and conditions, and we didn't want to jeopardize that relationship.

So my best advice to partners, if they want to be successful, that's to keep a very warm and friendly relationship with their vendors.

Paul Bird 25:53

Yes. You don't want to bite the hand that feeds you, that's for sure. 

Hans Peter Bech 25:56

No.

Paul Bird 25:58

What about the expectations from channel partners? What are some of the things that you should expect, you know, in terms of ROI, training levels, engagement?

Where can we expect them to be in certain areas? So just looking at it, you know, setting those expectations.

Hans Peter Bech 26:15

As a rule of thumb, channel partners have a much shorter return on investment expectation than the vendor.

And if you cannot make a new partner productive within a year, then I don't think it's going to happen.

A partner simply cannot afford having resources allocated to activities that doesn't produce any revenue.

Paul Bird 26:36

True.

Hans Peter Bech 26:36

Also, they will not get the routine required to represent your product professionally.

So the best way to secure success is to provide them, I think I said it before, a steady stream of leads and help the partners go with and be on site, shoulder to shoulder, help them develop and close it.

It's like teaching a kid to ride a bicycle. You need to run behind the kid for some rounds until they get the feeling. It's the same kind of analogy that I can use with partners.

And then over time, then they can perform on their own. But in the beginning, you really need to be shoulder to shoulder and help them get going.

Paul Bird 27:18

And, you know, if they are lacking in expectations and performance that you've kind of set for them, what can you do to help them perform better?

You talk about, you know, being there hand in hand, but how can we make them perform better and how can we choose, you know, what a partner is going to focus on?

Hans Peter Bech 27:37

Yeah, that's a good question.

Obviously, your business partner program should clearly lay out what you offer and the terms and conditions associated with that offer.

However, beyond a sort of minimum threshold that you want, in terms of revenue or activities, I don't think the vendor should set the revenue expectations. I think that's the partner's job to make such commitments.

And I know that when you're building a business, you need to have some kind of certainty of what revenue you can generate.

But we can offer all types of programs for improving their performance in all steps of the revenue process, revenue generation process.

But we cannot force them to use them. Partners are independent. They run their own business.

And according to my experience, if we look at partners that do not perform well, that doesn't perform according to our expectations, we can divide them into two groups. 

Group A: those that want to improve and can. And those that cannot.

And it's the job of the vendor to figure out which partner belongs in group A and then invest in them.

And group B partners, you can invest all the money you want, but they cannot grow because they don't have the management capability to do it.

Sorry, but there is a group of companies that belong in that group.

Paul Bird 29:01

For sure. 

Hans Peter Bech 29:02

You need to design a virtual support program, some kind of support program where the transaction cost is low. So you can free up the resources to help those that will and can.

So that would be my best advice.

Paul Bird 29:19

Now, let's talk about getting into managing these channel partners.

So what are your general thoughts on how to best manage these partners globally?

Hans Peter Bech 29:28

Yeah. Now we are having habit troubles.

The big job is to build the channel. So now we have the channel and we want to manage the channel. And that's a completely different set of challenges we are now facing.

According to my expectation, over time, any partner channel will gravitate towards a pyramid distribution.

So in the top of the channel and in the top of the pyramid, we will have about 5% of the partners. They are the rockstars. They have the management capacity to grow and they even outgrow the market.

So the next layer in the pyramid, representing about 15% of the partners, they have the potential for growing, but they need a helping hand.

And the remaining 80%, maybe this is bad news for some, but this is my experience after being many years in this game, the remaining 80%, and we have the famous 80/20 rule applied here, the remaining 80% don't have the management capacity for growth.

Some of them would like to but they simply don't have the skills and some of them, for all good reasons, are happy with what they have and they want to run a small shop. They have no ambition of running a big shop.

The revenue split between the 20/80 is 50/50.

So it's not that you can neglect the 80% that doesn't have a growth potential. And we're talking about a growth potential over the market growth. So they should be able to outgrow the market.

So for the group, the top group, the 5%, the stars, you really need to treat them as the stars they are.

So they will tell you what they want and you will give it to them. It's very individual partner account management. 

They're more clever than you are. They can outgrow the market. So you will support them with whatever they want to do.

In the group B, the 15%, you will develop programs that will help them get into a growth mode. And the partner manager is sort of the management consultant helping the partners, setting up strategic programs and becoming more professional in how they run the business.

And for the remaining 80%, you implement a reactive and virtual support desk. You must set up a system where you can bring down the transaction cost. 

You want to serve them, but as they have no sort of growth potential over the market average, you want to reduce the resources you spend so that you can allocate those to the two top layers.

And that would be my recommendation for managing the partner channel.

It also means that the people you have in your organization, to manage those different levels, should have different skill sets.

Paul Bird 32:37

For sure.

Hans Peter Bech 32:37

And you probably will assign some executive attention to your top 5% partners because they produce, those and the next 15%, those 20% produce 50% of your revenue.

So you want to give them some management or executive attention.

Paul Bird 32:56

Now, do you think managing channel partners becomes more difficult once a vendor expands to a global scale?

Hans Peter Bech 33:03

No, I wouldn't say it becomes more difficult, but it does require a different skill set. Well, maybe that is a word for difficult. I don't know.

But once you master those skills, then it's not so difficult.

Operating globally will mean that you must manage a larger organization that operates across different time zones with different cultures, and different languages.

You will have more layers of management in your own organization, and you need to manage more diversity, that comes from the language, the time zones and the cultures.

These challenges, they are the same for any company operating globally. So skills to manage that are available in the market. 

Also from a product perspective, you may now be operating in markets that are different and that may require separate product management, localization resources, as well as dedicated and local revenue generation teams.

So it, maybe it sounds more difficult, but, it's just, no, it's not difficult when you know how to do it. It's obviously more complex.

And so you must hire people that knows how to operate globally and you must develop your current people so that they can take hold on the complexity.

I wouldn't say it's more difficult, it’s just a more complex job.

Is that the same, difficult and complex, I don't know? 

Paul Bird 34:37

Yeah, it does sound like operating the channel resellers is more complicated than doing everything yourself. Do you see it the same way?

Hans Peter Bech 34:35

No, I don't. I don't see it that way.

Operating the channel once it has been established is not the big issue. It's not more complicated than if you were to serve the same number of customers directly. It's building the channel that is the challenge.

Getting the first partners on board and expanding the channel to give you sufficient market coverage across many countries, that is complicated.

Moving into new countries and building the channel from scratch there in a culture you're not familiar with, in a new language, with a new set of competitors, that's challenging.

But once you get the momentum, once you have that channel in place, then it's not more complicated than managing a big organization.

Because the situation is that, let's say that you have a thousand channel partners or even just a hundred, and each of these channel partners, they employ ten people. That's a thousand people in your channel dealing your product.

If you were to assume responsibility for the same things, then you would have an additional thousand people in your organization.

So is that an easier job? No, I don't think so. It's a different job. It's different, but it's not more complicated.

Paul Bird 36:06

So your book describes how to build a successful channel. So why and when does it actually pay off?

Hans Peter Bech 36:13

I will say that there are three requirements for success.

Number one, which I already mentioned to you, your product must be partner friendly.

Number two, there should be a captive channel for your type of product. It's not impossible to build a channel from scratch.

And I mean building a channel of people or finding partners that can take on a product with which they are not familiar, not your particular product, but that family of products. So there should be a captive channel for your type of product.

And you must have the money and time to invest in making the ball roll.

Beyond that, I think there are plenty of guidelines out there, including my books, whitepapers and videos that you can follow.

But unless you have those three necessary requirements in place: partner friendly, captive channel and at least a little funds and some time, then it's not going to happen.

Paul Bird 37:12

So just to wrap up, if you follow these expert tips you provided, what sort of results can people expect?

Hans Peter Bech 37:20

When Microsoft took over Navision in 2002, the total turnover off and around Navision products was in the magnitude of 4 billion U.S. dollars.

Navision then had 2,000 resellers serving more than 100,000 customers across 30 countries. So in total, the Navision ecosystem employed about 20,000 people.

Today, Navision is the core of Microsoft Dynamics product offering. So they acquired Navision, which is with its very big reseller channel back in 2002 for which they pay one and a half billion U.S. dollars. 

And I picked that example because Navision was a Danish company, and Denmark represents less than a quarter percent of global demand for that type of product. And we don't even have English as our first language.

But the Navision product was extremely partner friendly, there was a captive channel, and they didn't have the money, but they had the time to build the channel.

And I know that there are not two companies that are alike. But if you want to build a channel, I can recommend reading those books that you can find on the subject, and especially my book, which is called, 5,460 Miles from Silicon Valley. Which explains how Navision built their business and then sold it to Microsoft.

I think you can expect amazing results from building a channel. It can be really, really successful, but getting there may take a little longer than you thought it would.

Paul Bird 39:09

Well, very good. This has been a great conversation today.

Hans Peter, I want to thank you so much for being today's guest on the show. It has been an absolute pleasure to have you here.

Hans Peter Bech 39:20

It was a pleasure participating and talking to you, Paul.

Thank you very much.

Paul Bird 39:28

Alright guys, thank you for listening to The Ultimate Channel Sales Podcast and please don’t forget to join us next time. For more information, please visit channelsalespodcast.com.

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See you next time on The Ultimate Channel Sales Podcast!

Introduction
Hans Peter Bech’s background in channel sales
Mapping out a channel strategy: how it impacts the success of the channel
Planning for a successful channel: the biggest misconception
What makes an exceptional channel partner?
1st Tip: Define goals from day 1
2nd Tip: The channel partners
3rd Tip: Managing the channel partners
When does building a successful channel pay off?
What results can you expect?
Conclusion