What do IT Vendors/Distributors/Resellers want?

What do you want? Poster

Off the top of my head, what are the expectations of the various folks along the flow of vendor to end user of a typical IT Product or Service? I’m sure i’ve probably missed some nuances, and if so, what is missing?

Vendors

  • Provide Product and/or Services for Resale
  • Accountable for Demand Creation
  • Minimise costs at scale by compensating channels for:
    • Customer Sales Coverage and Regular Engagement of each
    • Deal Pipeline, and associated activity to increase:
      • Number of Customers
      • Range of Vendor Products/Services Sold
      • Customer Purchase Frequency
      • Product/Service Mix in line with Vendor objectives
    • Investment in skills in Vendor Products/Services
    • Associated Technical/Industry Skills useful to close vendor sales
    • Activity to ensure continued Customer Success and Service Renewals
    • Engagement in Multivendor components to round out offering
  • Establish clear objectives for Direct/Channel engagements
    • Direct Sales have place in Demand Creation, esp emerging technologies
    • Direct Sales working with Channel Partner Resources heavily encouraged
    • Direct Sales Fulfilment a no-no unless clear guidelines upfront, well understood by all
    • Avoid unnecessary channel conflict; actively discourage sharing results of reseller end user engagement history unless presence/relationship/history of third party reseller with end user decision makers (not just purchasing!) is compelling and equitable

Distributors

  • Map vendor single contracts/support terms to thousands of downstream resellers
  • Ensure the spirit and letter of Vendor trading/marketing terms are delivered downstream
  • Break Bulk (physical logistics, purchase, storage, delivery, rotation, returns)
  • Offer Credit to resellers (mindful that typically <25% of trading debt in insurable)
  • Centralised Configuration, Quotation and associated Tech Support used by resellers
  • Interface into Vendor Deal Registration Process, assist vendor forecasting
  • Assistance to vendor in provision of Accreditation Training

Resellers

  • Have Fun, Deliver Good Value to Customers, Make Predictable Profit, Survive
  • Financial Return for time invested in Customer Relationships, Staff knowledge, Skills Accreditations, own Services and institutional/process knowledge
  • Trading terms in place with vendor(s) represented and/or distributor(s) of same
  • Manage own Deal Pipeline, and associated activity to increase one or more of:
    • Number of Customers
    • Range of Vendor Products/Services Sold
    • Customer Purchase Frequency
    • Product/Service Mix in line with Vendor objectives
    • Margins
  • Assistance as needed from Vendor and/or Distributor staff
  • No financial surprises

So, what have I missed?

I do remember, in my relative youth, that as a vendor we used to work out what our own staffing needs were based on the amount of B2B revenue we wanted to achieve in each of catalogue/web sales, direct sales, VARs and through IT Distribution. If you plug in the revenue needs at the top, it gives the number of sales staff needed, then the number of support resources for every n folks at the layer before – and then the total advertising/promotion needed in each channel. It looked exactly like this:

1991 Channel Mix Ready Reckoner

Looking back at this and comparing to today, the whole IT Industry has gotten radically more efficient as time has gone by. That said, I good ready reckoner is to map in the structure/numbers of whoever you feel are the industry leader(s) in your market today, do an analogue of the channel mix they use, and see how that pans out. It will give you a basis from which to assess the sizes and productivity of your own resources – as a vendor at least!

Avoiding the strangling of your best future prospects

Escape Velocity Book Cover

I’m a big fan of the work of Geoffrey Moore, whose seminal work “Crossing the Chasm” i’ve cited before (in fact, the one page version is the #1 download from this blog). However, one of his other books is excellent if you’re faced with a very common issue in High Technology companies; having successful, large product line(s) thats suck all the life out of new, emerging businesses in the same enterprise. The book is “Escape Velocity”:

Unlike Crossing the Chasm, i’ve not yet summarised it on one sheet of A4, but have outlined the major steps on 14 slides. It sort of works like this:

The main revenue/profit engines in most organisations occur between the early and late majority consumers of the product or services; that can last a long time, denoted by the Elastic Middle:

Product Lifecycle

That said, there are normally products that sales will focus on to drive the current years Revenue and Profit targets; these routinely consume a majority of the resources available. Given a fair crack of the whip, there are normally emergent products that while not material in size today, are showing good signs of growth, and which may generate significant revenue and profits in the 1 to 3 year future. There are also likely to be some longer term punts which have yet to show promise, but which may do so in a 3 to 6 year timeframe:

3 Horizons

The chief way to categorise products/services against the relevant Product Horizon is to graph a scatter plot of revenue or profit for each line on one axis, against growth on the other (10% growth is a typical divider between the High and Low growth Quadrants):

3 Horizons to Category Power

Any products or services on Horizon 0 needs to be shielded from core resources and to be optimised to be cash generative while it lasts. The other product/service horizons are segregated and typically have a different go-to-market team (with appropriate Key Performance Indicators) assigned to each:

Focus Areas

The development pattern for Horizon 2 products are typical of the transition from “Chasm” into the “Tornado” stage on the normal Chasm lifecycle diagram. It’s a relentless learning experience, ruthlessly designing out custom services to form a standard offering for the market segments you target:

Free Resources to Context

As you execute through the various sales teams and move between financial years, there’s a lot of introspection to ensure that the focus on likely winners continues is appropriately ruthless:

Action

The sales teams driving Horizon 2 offerings should be seeking to aim high in customer organisations and drive strategies to establish a beachhead, then dominate, specific focus segments. In doing so, be mindful that a small supporting community tends to cross reference each other. Good salespeople get to know the people networks that do so, and work diligently to connect across them with their colleagues.

Trusted Advisor

The positioning of your Horizon 2 offers tend to vary depending on price and benefit; this in turn looks about like the findings from another seminal work, “The Discipline of Market Leaders”. That book suggested that really successful companies put their relentless effort into only one of three possible core competences; to be the Product Innovator, to be Customer Intimate or to be Operationally Excellent:

Benefit Sensitivity

Once you have the positioning, the Horizon 2 sales team relentlessly focus on the key people or organisations that make up their target market segment(s):

Drive to Share of Segment

The number of organisations they engage differ markedly between Enterprise (Complex) and Consumer (Volume) markets:

Target Customers

So the engagement checklist needs to address all these areas:

Target Market Initiatives

The sales team need to be able to articulate “What makes their offer different”:

Differentials

Then pick their targets:

Growing Horizon 2

Above all, be conscious who your competitors are and where you’re positioned against them:

From Whom

That’s largely it. Just a process to keep assessing the source of future revenue and profits, and ensuring you segment your sales teams to drive both this years business, and separately working on the green shoots that will provide your future. And avoiding what often happens, which is that the existing high revenue or high profit lines demand so much resources that they suffocate your future.

You can probably name a few companies that have done exactly that. Yours doesn’t need to be the next one now!

Police, Metrics and the missing comedy of the Red Beads

Deming Red Bead Experiment

I heard a report on Friday related to the Metropolitan Police possessing an internal “culture of fear” because of a “draconian” use of Performance targets, based on an interview and survey with 250 police officers. The report author went on to say that officers who missed targets were put on a “hit list”, with some facing potential misconduct action. Some of the targets were:

  • 20% arrest rate for stop and searches
  • 20% of stop and searches should be for weapons
  • 40% for neighbourhood property crime
  • 40% for drugs

and some for one policing team in 2011:

  • PCs to make one arrest and five stop and searches per shift
  • Special Constabulary officers to make one arrest per month and perform 5 stop and searches per shift
  • Police Community Support Officers (PCSOs) to make five stop-and-accounts per shift, and two criminal reports per shift

But Metropolitan Police Assistant Commissioner accused the reports authors of “sensationalising” the issue. He also then said something that threw the red flag up in my simple brain – that “it was the Met’s job to bring down crime“. Then said that since it had a “more accountable way of doing things”, rates were down by nearly 10%”.

One officer told the report: “Every month we are named and shamed with a league table by our supervisors, which does seem very bullying/overbearing.”

Another officer refers to a “bullying-type culture”.

The report says: “There is evidence of a persistent and growing culture of fear spawned by the vigorous and often draconian application of performance targets, with many officers reporting that they feel almost constantly under threat of being blamed and subsequently punished for failing to hit targets.”

But Scotland Yard denied officers were being unfairly pressurised. In a statement, the force said it was faced with many challenges, but insisted it did not have a bullying culture.”We make no excuses for having a culture that values performance,” it said.

“We have pledged to reduce crime, increase confidence and cut costs. It’s a big task and we have a robust framework in place to ensure we achieve this. The public expects no less.”

A source of confusion here

I thought that the “it was the Mets job to bring down crime” comment was a very curious thing to say, not least that I traced it’s origin to his ultimate boss, the Home Secretary, who also said the only Police metric important to her was that of reducing crime.

Think about that for a moment. Does the Police have total control to dictate the crime rate? I wouldn’t dispute they have some behavioral, presence and advisory influences, but in the final analysis, there are many external influences (outside their control) that i’d suspect have a much greater impact on that measure. With that, you’re entering into a world where your main control at your disposal – that of diligently recording the statistics to back up a political narrative – is wide open to wholesale abuse.

Meanwhile in Bristol

The private sector is far from immune also. At one stage earlier in my career, I worked out of a company branch office in Bristol, serving IT customers in the South West UK. For the most part, we were very matter of fact, honest and straightforward with customers. And then came the annual customer satisfaction survey, a multiple choice questionnaire sent to the IT Managers at most of the key customers we dealt with in our work.

I remember being in an office with the IT Manager at Camborne School of Mines (we had a big VAX doing scientific work, supporting their drilling for warm underground water as a potential future energy source). The customer satisfaction survey was sitting open on his desk, with the page showing his yet to be filled in customer satisfaction measure for quality of Field Service Maintenance. In walks the Field Service engineer who’d just arrived, said “Hello, i’m here” around the door, and was called back by the IT Manager. The Manager then held the tip of his pen over the 1-10 rating boxes on the survey, and said “When can we have the new disk drive that arrived yesterday installed?”. Field Service engineer said “Is next Wednesday okay?”. Pen moves over to the 1/10 Customer Sat box. “Eh, I can probably do it just after lunchtime today!”. Pen moves over the 10/10 box. “Yes, you’ll have everything working this afternoon”. With that, the 10/10 box was ticked. A wry smile from everyone, and a thought that if genuine feedback was sent back by customers in general, it would result in service improvements that benefitted the company.

As it turns out, very naive on our part.

A missive rolled down from the European HQ in Geneva that said our office was the 3rd worst office for customer satisfaction in Europe, and hence someone in the office would be nominated to enact changes to improve performance for next year – with serious consequences if big improvements weren’t delivered. And with that, the European President said – to all 30,000 staff in Europe – is that the minimum acceptable performance next year would be an overall 8/10.

So, what happened? The guy in the office nominated to manage the transition to high quality (wry smile here) was the same guy who did the large scale benchmarking exercises for prospective customers against competitors of that time. Where the main skill was politically getting things coded into the customers benchmarking spec handed out to every vendor that suited the performance characteristics of our own machines, and in generally playing whatever games he could to win on key measures on which the bidding competition would be judged.

Customers known to be unhappy magically disappeared from the survey mailing list. Anyone visiting customers routinely in their working week were trained on how to set customer expectations that anything under 9/10 was deemed a failure, and that 10/10 was a norm. And everyone knew who was going to get a survey, and worked doubly hard to ensure those customers were as happy as we could make them – with the minimum marking scores in mind. Several thought of it no more than one week when they had more blackmail capital than at any other time of the year, but otherwise complied with the expressed wishes.

End result: Top office in customer satisfaction in the country, and only 3rd among all the branches in Europe (1 and 2 in Austria – suspicious that, but hey).

Were customers any happier? No. Was the survey a useful improvement device? No. Did it suit the back story for the political narrative? You bet! And with that the years continued to roll on.

My own Lightbulb moment

Somewhere along the line between Bristol and more senior roles in the same company, I came upon one W Edwards Deming, and one thing he routinely did to managers to fix this sort of malaise. But a slight detour first (based on what I did after that following my experiencing one of his lessons).

Doing things right (I think)

When I was Director of Merchandising and Operations at Computacenter’s Software Business Unit, the internal Licensing Desk reported into me; a team of five people who dispensed advice about how to buy software in the most cost effective way possible without unwanted surprises. And administering all the large license orders with vendors in support of this. A super team, managed by Claire Hallissey.

Claire had one member of her team consolidating data collection on the number of calls coming into the team and how long each enquiry was taking to handle; not something i’d imposed on the team at all, but I suspect for her own management use. It became pretty obvious from the graphs that growth in demand to use her team was far outpacing the revenue growth of the Business Unit, at a time when we were likely to be under pressure not to increase headcount.

So, what did we do? I indicated that the data collection was brilliant, and didn’t want to see effort or accuracy of that compromised in any way. However, if they managed to work out any way of reducing the volume and length of calls into her team by 15% by the next quarter end, i’d put a £150 bonus in each of their pay packets. The thinking here is that they were the folks who could ask “why” most effectively, and enact changes – be it local office new sales support hire training, simplifying documentation, and generally tracing back why people were calling in the first place. And then relentless putting their corrective actions into play.

In the event, they got overall call volume down by 25%, the source data quality stood up to my light scrutiny, and all duly got the £150 bonus each – plus senior accolades for that achievement. One of the innovations was adding a sentence or two to standard template response emails they’d built to answer common secondary questions too – and hence to take out repeat calls with better content in the first email answer sent back. With that, the work volume growth trailed the sales volume increases, and the group more productive – and less bored by the same repeat questions, ad nauseum.

Then in Southend

Likewise on day 2 of my job at Demon Internet, when a group of us walked into the Southend Tech Support Centre to see a maxed out floor of people on the phones to customers, and a classroom with 10 new recruits being trained. The Support Centre manager, looking very harassed, just said “that’s this weeks intake. We’ve got another 10 next week, and another 10 the week after that”. I think I completely threw him when I said nonchalantly “But why are customers calling in?”. He just looked at me as if i’d asked a very stupid question, and replied “We just haven’t got enough staff to handle the phone calls”.

Fortunately, his deputy was able to give us a dump of their Remedy system, so a couple of us could sample the call reasons and what specifically was requiring technical assistance. In the event, 27% of the calls related to setting up the various TCP/IP settings; we then changed the product and simplified it’s supporting documentation to work those issues away. At least some respite until Microsoft shipped Internet Explorer 6, which resulted in the Customer Services Director admitting later as having “fundamentally broken my call centre”. But that’s another story.

W Edwards Deming

W Edwards Deming Quote

But back to metrics. The one thing in all my career that made my light bulb go on related to measures and metrics was an experiment conducted by W Edwards Deming. Deming was an American statistician who was sent to Japan after World War 2 to assist in it’s reconstruction, and found himself teaching motorcycle and car manufacturers on how to improve the quality of their products. As quality improved, they also found prices went down, and companies like Honda, Suzuki, Kawasaki, Datsun (now Nissan) and Toyota went from local to worldwide attention with motorcycles, then cars. The products from which, unlike their western counterparts, rarely broke down and remained inexpensive – so much so, western governments instituted quotas to arrest the siege on their own manufacturing industries. To this day, the highest accolade for excellence of quality in Japan remains “The Deming Prize”. It was only much later that the work of Deming was widely acknowledged, and then used, by western manufacturers as well.

During his training seminars, Deming conducts what is known as “The Red Bead” experiment. Unfortunately, the comedy of promoting good workers, firing underperformers, and urging improved performance with no control over the components of a process is largely lost in videos of him running this himself, given that he was well into his 90’s when recorded. His dry humour is a bit harder to spot than it would have been earlier in his career – when he openly acknowledged that some Japanese managers routinely imposed the same class of bad metrics on their staff as those of the worst examples he found in the West.

If you can buy a copy of his seminal book Out of the Crisis, you can see the full description between pages 109-112, in Chapter 3, “Diseases and Obstacles”, following the subtitle “Fair Rating is impossible”. Something the Home Secretary, and all echelons of Managers in the Public Sector, should read and internalise. If they did, I think the general public would be pleased with the changes i’m sure they’d enact based on his wise knowledge.

In the absence of an original Deming version, a more basic version of the same “your job security depends on things outside your control” sentiments can be found on this (it’s around 2 minutes long):

or a longer 24 minute version, truer to the original real McCoy: