Having worked with many startups in the HYPERDRIVE accelerator at Communitech and elsewhere, I have consistently seen one after another looking to develop the channels to scale their business.
Ask the leadership of any company that has successfully achieved this, and they will tell you that partners are essential to success. Few companies, however, have a focused and disciplined approach on managing their partners.
One reason is that partnership management is often not built to answer the right question. We’re all familiar with the traditional value proposition question, “Why should I buy your product?” This question is often applied to partners when really the superior question is actually, “Why should we bet our resources and reputation on you?”
This universal question can be applied to all partners, but, as Professor Lynda Kate-Smith of Stanford points out in her webinar, Best Practices for Measuring Partner Relationships, it is also useful to group partners into three general categories: supply, distribution and influence. The first step in building a successful partner strategy is understanding these categories and grouping existing partners accordingly.
Supply partners: The supply partner can provide your company with a broad range of products – everything from paper and pens to integral components of the end solution you sell to your customers. Some companies will manage all these relationships through a procurement function. More advanced programs will distinguish between supply partners whose products are used in the regular course of business operations (think paper and pen vendors) and the supply partners whose products have direct implications on product strategy.
The strategic analysis when managing these partners is buy versus build. Successful management of these vendors will create cost reductions and increased focus on your company’s core competency and will enable a faster time to market. It may also allow you to offer a more complete product offering to the market by including third party technology or products which complement your company’s own.
Distribution (or channel) partners: Channel partners extend the sales reach of your organization. They can be direct or indirect and generally help to accelerate time to market (though they may be absolutely necessary to even operate in some markets where significant barriers to entry exist). Channel partnerships are particularly important for early-stage companies that can quite often get caught in the chasm of needing to grow sales capabilities while not having the resources required to hire and manage a dispersed sales force.
My next blog entry will provide more focus on channel partners and applying basic portfolio principles for the effective development of a partner portfolio.
Influence partners: This is admittedly a bit of an “other” category, but it is important nonetheless. The strategic analysis with these partners generally focuses on the delta of achieving a defined goal alone versus in partnership. Examples can include marketing partners, association partners, co-selling partners, ecosystem partners and government partners.