New technologies such as AI, new connectivity powered by 5G, and new industries responding to environmental challenges, all offer tech companies exciting opportunities. However channel managers in tech have a special challenge, because many of these new markets share three common characteristics:
Ambiguity –Market players enter (and leave) to pursue different business models as they seek to establish a position for future success.
Channel Immaturity – New, technically competent channels emerge lacking business savvy and account relationships. Traditional channels play “catch up” on technical competence. No one is in a solid state of maturity. Moreover, price pressures and proliferation of brands and manufacturers inhibit the emergence of a “channel builder” who can accelerate the journey to stability.
Irrationality – Profitability and sustainable margins take second place to winning deals in a race to survive. Many behaviors simply don’t make economic sense.
Over time new markets become more defined and rational. But how do you navigate in the mean time?
The cardinal rule for new market entry is: ASSUME NOTHING!!
Don’t assume that the paths, channel partners and channel programs you already have in place will meet the requirements of your new markets. In many instances, you may find yourself evolving from tech channel relationships to industrial ones. You will have to adapt – and often make bets. From this base, good preparation includes the following “to do’s”.
Top Considerations Before Entering a New Market
Understand how your product or service will be bought and THEN build your go-to-market system
As tech becomes embedded in increasingly complex solutions, the routes to market for different solution components can be different. And often determined by their degree of importance. Is the component “mission critical”? If so, it is likely to be purchased “direct” with high value placed on customization and a high level of brand preference and loyalty. Moreover, as in many solution sales, the customer leaves these decisions to the solution provider channel.
In the U.S. solar market model, we discovered that major components – panels, inverters and mounting – drove purchasing. Everything else – the “balance of system” – was purchased from a distributor on price and availability. The brand decision for these components was usually left to the installing channel (ex. an electrical contractor). Clearly the power position of a “mission critical” component supplier is very different from that of a “balance of system” vendor. Understand where you play and set your expectations, strategy and tactics accordingly for these new markets.
Know the Key Functions your go-to-market system must perform AND how closely these map to the functions performed by your existing partners
Before you send your existing sales teams and channel partners off into the new market, be sure you know how closely their existing skills and relationships meet the new market’s requirements. Regardless of where your offer sits on the “mission critical” scale, it’s important to understand a) what should be accomplished to get your product to the customer, b) “who does what,” and c) who the leaders for the particular market you are targeting are. If the skill gap – including key account relationships – is very large, chances are the economics of your go-to-market system will put you at a competitive disadvantage. It’s often better to recruit a new set of partners who already perform the functions the market requires – and who already have access to target accounts.
Know the Decision Makers and Influencers AND develop a strategy for each
In the solar market example, the major brand decisions get made by EPC’s (Engineering, Procurement and Construction companies), ESCO’s (Energy Service Companies) and solar retailers. Brand influencers fall into three categories. The customer (ex. the government or a utility), the installers (ex. electrical contractors) and the logistics channel (e.g. electrical or solar distributor). To succeed in a market with this degree of complexity, you will have to “know” and “touch” each of the relevant players with an appropriate and relevant value proposition.
Know what your Decision Makers and Influencers care about AND adapt your program accordingly
Channels will be able to articulate basic vendor requirements for product, sales, technical support and delivery. And they will tend to focus on technical and logistical (vs. marketing) program components. Some markets will have only a handful of very large players. Depending on the number, you may not need tiers in your program design for these partners. Instead, it’s increasingly important to identify, recruit and support the leaders in a very “high touch” model with broad policy guidelines.
Assess the Strengths and Weakness of the emerging go-to-market structure AND manage your risks
Remember that you may be working with an “experimental” channel. One that may only be around for the short term, as it may not have the right business model for the long term. In our solar example, our client already had strong relationships with electrical distributors who had sophisticated businesses processes and systems and strong relationships with decision makers who were moving to solar.
The problem was that these partners were not willing to play the low margin game instituted by the new “upstart” – the solar distributors. This group had technical competence but, in their rush to win market share, were selling below cost. There was a stand off! And we had to make some bets! The actual strategy involved a detailed analysis of major players’ business models in order to make an informed decision on who to recruit and support for the long term, while keeping enough presence in the short term market.
Understand AND acquire new Organizational Capabilities, where needed
Key areas to assess include:
– Your Sales Force. Are they credible in the new market? Do they have the required technical and industry expertise to be considered “trusted advisors”?
– The Back Office. Is it equipped to manage the level of complexity of RFI’s and RFP’s? Can it operate within the expected turnaround time? Can it provide the required training?
– The Logistical Backbone. How will you manage inventory to make sure it meets the delivery and lead time requirements of your new partners?
Entering new markets will mean that your partner ecosystem will most likely expand. Don’t be surprised to learn your new partners will have different business models and vendor expectations than your current partners. Therefore, managing this expanding ecosystem can be a bit of a new challenge. Channel Mechanics can help you address these new challenges with our robust basket of channel enablement programs. If you are already a Channel Mechanics customer, you may find that some of the programs you have yet to utilize are particularly relevant for your new market. So talking to your account manager will help. Moreover, Channel Mechanics helps your sales and channel management teams profile, target, support and track new channels in real-time. This means you can easily assess how you’re doing and make needed adjustments quickly. A critical competence to have in an emerging and evolving market!